<PAGE>
                         1 9 9 7  A n n u a l  R e p o r t

                                    [PHOTOS]

                                     [LOGO]

             N a t i o n a l  C i t y  B a n c s h a r e s,  I n c .

                    BUILDING FOR TOMORROW IN ALL WE DO TODAY.
<PAGE>

[INSIDE FRONT COVER]

CORPORATE PROFILE

NATIONAL CITY BANCSHARES, INC. (NASDAQ: NCBE), HEADQUARTERED IN EVANSVILLE, 
INDIANA, HAS BEEN RANKED AS ONE OF THE MOST SOUND FINANCIAL ORGANIZATIONS IN 
THE NATION. IN THE JUNE 1997 ISSUE OF USBANKER, NATIONAL CITY WAS RANKED 
TENTH NATIONALLY AMONG MID-SIZED BANKING COMPANIES. WITH ASSETS OF 
APPROXIMATELY $1.5 BILLION, AS OF MARCH 9, 1998, NATIONAL CITY OWNS THIRTEEN 
FULL-SERVICE FINANCIAL INSTITUTIONS IN THIRTY-THREE COMMUNITIES AND FORTY-FOUR 
LOCATIONS THROUGHOUT SOUTHWESTERN INDIANA, WESTERN KENTUCKY, AND SOUTHEASTERN 
ILLINOIS. NATIONAL CITY'S NON-BANKING SUBSIDIARIES INCLUDE NCBE LEASING 
CORP., TWENTY-ONE SOUTHEAST THIRD CORPORATION, AND UNIFED, INC.

<TABLE>
<CAPTION>
CONTENTS                                          
<S>                                              <C>
Financial Review                                   1
Message to Shareholders                            2
Year in Review                                     4
Management's Discussion                            6
Management's Report                               18
Independent Auditor's Report                      19
Statements of Financial Position                  20
Statements of Income                              21
Statements of Cash Flows                          22
Statements of Shareholders' Equity                24
Notes to Financial Statements                     25
Official Organization                             38
    Subsidiaries                                  38
    National City Bancshares, Inc.                40
Shareholder Information            INSIDE BACK COVER
</TABLE>

<PAGE>

FINANCIAL REVIEW


<TABLE>
<CAPTION>

                                                                                            As Of And For The Year Ended December 31

(Dollar Amounts Other Than
 Share Data in Thousands)                           1997              1996              1995               1994                1993
------------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>               <C>              <C>                 <C>                <C>
FOR THE YEAR
Net interest income                            $   51,995        $   48,606       $    44,433         $   39,933         $   38,010
Provision for loan losses                           1,891             2,704               399                 78                736
Noninterest income                                 10,088             8,606             7,117              5,209              6,707
Noninterest expense                                34,390            29,966            28,968             28,644             28,343
------------------------------------------------------------------------------------------------------------------------------------
  Income before income taxes                       25,802            24,542            22,183             16,420             15,638
Income taxes                                        7,451             8,046             7,784              5,668              4,861
------------------------------------------------------------------------------------------------------------------------------------
  Net income                                   $   18,351        $   16,496           $14,399            $10,752         $   10,777
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------

PER COMMON SHARE*
Earnings - Basic                               $     1.72        $     1.52       $      1.30          $    0.97         $     0.97
Earnings - Diluted                                   1.69              1.52              1.30               0.97               0.97
Book value                                          13.69             12.12             11.71              10.47              10.23
Cash dividends declared by
  National City Bancshares,Inc.                      0.64              0.55              0.40               0.40               0.38

TOTALS AT YEAR-END
Loans                                          $  916,356        $  800,622       $   736,997         $  645,235         $  579,556
Allowance for loan losses                           7,969             7,189             6,176              5,750              5,528
Securities                                        279,328           282,894           258,895            268,103            269,098
Total assets                                    1,298,260         1,172,057         1,081,921          1,004,160            993,468
Deposits                                          964,046           913,350           864,136            849,306            844,808
Shareholders' equity                              146,803           129,694           130,606            114,750            113,975

SELECTED FINANCIAL RATIOS
Net income to average assets                         1.47%             1.48%             1.40%              1.09%              1.09%
Net income to average equity                        13.42             12.89             11.74               9.39               9.76
Cash dividend payout                                36.74             37.05             30.05              36.77              31.65
Average equity to average assets                    10.98             11.48             11.93              11.59              11.17
Tangible equity to tangible assets                   9.95             10.46             11.85              11.32              11.35
Total capital to risk-weighted assets               14.25             15.84             17.99              17.92              19.09

OTHER DATA
Number of shares*                              10,727,247        10,702,198        11,152,316         10,960,405         11,143,701
Number of shareholders                              2,541             2,396             2,239              2,238              2,174
Number of full-time equivalent employees              510               490               490                489                511
Weighted average number of common
  shares outstanding:*
   Basic                                       10,679,448        10,843,295        11,095,116         11,040,906         11,146,280
   Diluted                                     10,832,943        10,843,295        11,095,116         11,040,906         11,146,280

</TABLE>

*RESTATED TO REFLECT ALL STOCK DIVIDENDS AND THE TWO-FOR-ONE STOCK SPLIT ISSUED
IN 1996.

                                                [THREE BAR GRAPHS]


<TABLE>
<CAPTION>
 
            NET INCOME
<S>           <C>     
1993          $10,777 
1994          $10,752 
1995          $14,399 
1996          $16,496 
1997          $18,351 
</TABLE>

<TABLE>
<CAPTION>

                 LOANS
<S>           <C>     
1993         $579,556
1994         $645,235
1995         $736,997
1996         $800,622
1997         $916,356
</TABLE>

<TABLE>
<CAPTION>

      RETURN ON EQUITY
<S>           <C> 

1993            9.76%
1994            9.39%
1995           11.74%
1996           12.89%
1997           13.42%
</TABLE>


                                                                              1
<PAGE>

MESSAGE TO SHAREHOLDERS
March 9, 1998

By almost any measure, 1997 marked an extraordinary year for National City
Bancshares, Inc. Record earnings, the near completion of our new downtown
Evansville headquarters, and the new affiliates joining us, put the Corporation
in an excellent position to continue to excel in the future.

I am pleased to report that for the year ended December 31, 1997, the 
Corporation completed its most profitable year. The Corporation earned a 
record $18.4 million in 1997, an increase of $1.9 million over the prior 
year. Basic earnings per share grew from $1.52 in 1996 to $1.72 in 1997. This 
13% increase in earnings per share was the result of an increase in net 
interest income, non-interest income, and our continued efforts to control 
expenses.

                                    [PHOTO]

MICHAEL F .ELLIOTT
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
 
The Corporation's assets grew in 1997 to $1,298,260,000 at year-end, compared 
with $1,172,057,000 in 1996. In addition, deposits increased from 
$913,350,000 in 1996 to $964,046,000 in 1997. The loan portfolio increased 
from $800,622,000 to $916,356,000 for the same periods.

Our plan to improve shareholder value continues to show results. Return on 
shareholder equity improved from 12.89% in 1996 to 13.42% in 1997, and return 
on average assets remained steady. Management is pleased with these ratios; 
however, we believe we can improve both measurements. We believe that a 
consistently sustained, high earnings performance and earnings growth rate 
remain the key elements in delivering shareholder value over time.

The Corporation's stock continues to be well received by the market. We 
experienced marked improvement over the year, as our year-end stock price 
increased from $27.86 in 1996 to $44.75 in 1997. Total cash dividends declared
in 1997 increased to $.64 per share, compared to $.55 per share in 1996. We 
experienced an 11% increase in participants in the Corporation's dividend 
reinvestment plan. As always, we encourage eligible shareholders to 
participate in the plan.

During the year, we completed the purchase of First Federal Savings Bank of 
Leitchfield, Kentucky,and First National Bank of Bridgeport, Illinois. Both 
transactions were accounted for as purchases on the Corporation's books. The 
third transaction of 1997 was completed with the acquisition of First Bank of 
Huntingburg, Indiana. This transaction was accounted for as a pooling of 
interests.


2
<PAGE>

Since the end of 1997, the Corporation has completed two additional purchases 
and we currently have three more mergers pending. In January, our subsidiary 
First Kentucky Bank acquired a branch office in Mayfield, Kentucky, which 
included $66 million in deposits. In March, we completed the purchase of the 
Bank of Illinois in Mt. Vernon, which has assets of approximately $163 
million. Definitive agreements have been signed with Illinois One Bancorp, 
Inc., Trigg Bancorp, Inc. and Community First Financial, Inc. If these 
transactions are completed, the Corporation will have approximately $1.9 
billion in assets.

Management is continuing to aggressively pursue acquisition opportunities. 
Each transaction must fit with the Corporation's long range strategic plan 
and must be in the best interests of the Corporation and the institution that 
is acquired. Our ability to acquire and improve the operating performance of 
community banks is the key to our continued success and growth.

At year-end, we saw the retirements of Chairman John D. Lippert and Executive 
Vice President Benjamin W. Bloodworth. And in June of this year, Harold A. 
Mann, Senior Vice President and former Secretary and Treasurer, will retire 
after 42 years with the organization. Their knowledge and leadership were a 
cornerstone in building the Corporation as we know it today. We wish them a 
long, healthy retirement. We are pleased that we will continue to benefit 
from John's counsel as he continues to serve on the Corporation's Board of 
Directors.

Prior to their retirements, our planned succession of key management 
positions offered us the opportunity to hire Curtis D. Ritterling as 
Executive Vice President. Curtis joined us with over 20 years of financial 
management experience and a track record of improving performance. His 
experience as Chairman, President and CEO of Boatmen's Bank of South Central 
Illinois, will fit with the responsibilities he will undertake with 
affiliate operations and acquisitions. Stephen C. Byelick, Jr., who joined us 
in 1996, was named Secretary and Treasurer of the Corporation in January.

                                    [PHOTO]

EXECUTIVE OFFICERS
ROBERT A. KEIL, PRESIDENT, AND CURTIS D. RITTERLING, EXECUTIVE VICE PRESIDENT

National City Bancshares,Inc. is one of the nation's premier banking 
organizations, staffed by dedicated and talented employees. The Corporation 
is in excellent financial health and remains committed to delivering 
increased earnings growth and shareholder returns.

On behalf of the Board of Directors, I would like to thank you, our 
shareholders, customers, and employees, for your continued confidence and 
support.

                                           [SIGNATURE]


                                           Michael F. Elliott
                                           Chairman of the Board and
                                           Chief Executive Officer


                                                                              3
<PAGE>

1997 YEAR IN REVIEW
(ALL NUMBERS ARE PRESENTED AS ORIGINALLY STATED.)

JANUARY


JANUARY 23

The restructuring of four NCBE affiliates was announced. This move allowed 
The National City Bank of Evansville to expand into Gibson County by merging 
with The Farmers and Merchants Bank, Ft. Branch and acquiring United Federal 
Savings Bank's Princeton office. United Federal Savings Bank and State Bank 
of Washington merged to form Alliance Bank with offices in 
Vincennes, Washington, and Odon, Indiana. 

[LOGO] ALLIANCE BANK
          WORKING TOGETHER FOR YOU

JANUARY 27

NCBE announced its highest annual earnings in a news release reporting 1996 
figures. Earning more than $15 million for the year, NCBE reported income of 
$1.59 per share for the year. This was an increase of 19% from the previous 
year. Total assets were approximately $1.1 billion.

FEBRUARY        


FEBRUARY 19

A quarterly cash dividend in the amount of sixteen cents per share payable
April 7, 1997, was announced. 

MARCH 


MARCH 1

NCBE completed the acquisition of First Federal Savings Bank of Leitchfield. 
First Federal, with assets of $43 million as of December 31, 1996, has two 
offices in Leitchfield and Hardinsburg, Kentucky. 

[PHOTO]

APRIL   


APRIL 14

NCBE announced record earnings of $4.37 million for the first quarter of the 
year. Total assets increased to approximately $1.12 billion. 

APRIL 21

NCBE agreed to acquire Bridgeport Bancorp, Inc., a one-bank holding company for
the First National Bank of Bridgeport. First National, with one office in
Bridgeport, Illinois, had total assets of $39.9 million at March 31, 1997. 

MAY        


MAY 21

A quarterly cash dividend in the amount of sixteen cents per share payable
July 7, 1997, was announced. 

JUNE      


JUNE 3

NCBE announced that it had reached an agreement to acquire Fourth First 
Bancorp, a one-bank holding company for the First Bank of Huntingburg, 
Indiana. First Bank, with two offices in Huntingburg and one in Ferdinand, 
Indiana, had total assets of $105 million as of March 31, 1997. 

[PHOTO]

[PICTURE]

JUNE 26

As published in U.S. Banker's June 1997 issue, NCBE was ranked tenth in the 
top 200 banking companies listed according to five areas of 
performance-driven criteria. This was an improvement over the eleventh place 
ranking from the prior year. 



<PAGE>

JULY


JULY 16

NCBE announced record second quarter earnings of $4.58 million. Total assets
increased to approximately $1.14 billion. 


JULY 31

The acquisition of Bridgeport Bancorp, Inc. was completed. 

AUGUST


AUGUST 20

A quarterly cash dividend in the amount of sixteen cents per share payable
July 7, 1997, was announced. 


[PHOTO]

AUGUST 28

First Kentucky Bank agrees to purchase the Mayfield, Kentucky banking center and
its $65 million in deposits from Republic Bank and Trust Company.

The National City Bank of Evansville agrees to purchase the Mount Vernon, 
Indiana banking center of First Federal Savings Bank.

SEPTEMBER


OCTOBER


OCTOBER 16

NCBE announced record third quarter earnings. NCBE had income of $4.43 
million, an increase of 16% over the the third quarter in 1996. Total assets 
increased to approximately $1.18 billion. 

OCTOBER 23

The NCBE Board of Directors declared a five percent stock dividend. In 
addition, the board announced a two cent per share (12.5 percent) increase in 
its regular quarterly cash dividend. 

NOVEMBER


NOVEMBER 5

Illinois One Bancorp, Inc., a one-bank holding company for Illinois One Bank, 
National Association, agrees to join NCBE. Illinois One Bank, with offices in 
Shawneetown, Elizabethtown, and Golconda, Illinois, had assets of $79 million 
as of June 30, 1997.

DECEMBER


DECEMBER 2

Vernois Bancshares, Inc. agreed to affiliate with NCBE. The one-bank holding
company for Bank of Illinois in Mt. Vernon had assets of $163 million as of
September 30, 1997. 


DECEMBER 31

After 46 years in banking, and 18 years with the National City organization, 
NCBE Chairman John D. Lippert retired. Michael F. Elliott was appointed as 
Chairman and CEO.

[PHOTO]


                                  DECEMBER 31


                              [MAP OF AFFILIATES]


NCBE completed the acquisition of Fourth First Bancorp. This increased total
assets for NCBE to $1.3 billion.

As of year-end, NCBE owned 11 commercial banks and one savings bank with 40 
banking offices in 31 communities.


<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
(DOLLAR AMOUNTS OTHER THAN SHARE DATA IN THOUSANDS)

INTRODUCTION
 
The discussion and analysis which follows is presented to assist in the 
understanding and evaluation of the financial condition and results of 
operations of National City Bancshares, Inc. and its subsidiaries as 
presented in the following consolidated financial statements and related 
notes. The text of this review is supplemented with various financial data 
and statistics. All information has been restated to include bank 
acquisitions accounted for using the pooling of interests method and to give 
effect to all stock dividends and the two-for-one stock split issued in 1996.

BUSINESS DESCRIPTION

National City Bancshares, Inc. (Corporation) is an Indiana corporation based 
in Evansville, Indiana, which was established in 1985 to engage in the 
business of a bank holding company. As of March 9, 1998, the Corporation had 
fifteen wholly-owned subsidiaries, including twelve commercial banks and one 
savings bank with a total of forty-four banking centers serving thirty-three 
communities, a leasing corporation, a property management company, and a 
financial services company (which is a subsidiary of a subsidiary bank). Each 
subsidiary, its location, number of offices, year founded, date of 
affiliation with the Corporation, and size in assets and equity is shown 
below. On June 17, 1997, The Farmers and Merchants Bank, which was acquired 
by the Corporation January 30, 1989, was merged into The National City Bank 
of Evansville. On June 30, 1997, United

<TABLE>
<CAPTION>

SUBSIDIARY
                                                                                                     12/31/97 (millions)
                                              Number of          Year      Date of Affiliation       ------------------
Home Office and Other Cities                    Offices       Founded      with the Corporation       Assets     Equity
------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>             <C>          <C>                       <C>         <C>
THE NATIONAL CITY BANK OF EVANSVILLE                 11          1850        May 6, 1985              $487         $43
   EVANSVILLE, NEWBURGH, FORT BRANCH,                                                            
   PRINCETON, AND MOUNT VERNON, IN
THE PEOPLES NATIONAL BANK OF GRAYVILLE                1          1937        May 16, 1988               38           3
   GRAYVILLE, IL                                                                                
FIRST KENTUCKY BANK                                   6          1916        November 30, 1990          99           9
   STURGIS, MORGANFIELD, POOLE, MAYFIELD, AND                                                   
   UNIONTOWN, KY                                                                                
LINCOLNLAND BANK                                      5          1904        December 17, 1993         128          11
   DALE, CHRISNEY, GRANDVIEW, HATFIELD,                                                         
   AND ROCKPORT, IN                                                                             
THE BANK OF MITCHELL                                  4          1882        December 17, 1993          66           7
   MITCHELL, BEDFORD, AND PAOLI, IN                                                            
PIKE COUNTY BANK                                      3          1900        December 17, 1993          54           5
   PETERSBURG, ARTHUR, AND SPURGEON, IN                                                        
ALLIANCE BANK                                         3          1910        December 17, 1993         126          11
   VINCENNES, WASHINGTON, AND ODON, IN                                                          
WHITE COUNTY BANK                                     1          1904        June 30, 1995              59           5
   CARMI, IL                                                                                   
THE FIRST NATIONAL BANK OF WAYNE CITY                 1          1902        August 31, 1996            50          10
   WAYNE CITY, IL                                                                               
FIRST FEDERAL SAVINGS BANK OF LEITCHFIELD             2          1961        March 1, 1997              49           7
   LEITCHFIELD AND HARDINSBURG, KY                                                              
FIRST NATIONAL BANK OF BRIDGEPORT                     1          1906        August 1, 1997             48          15
   BRIDGEPORT,IL                                                                              
FIRST BANK OF HUNTINGBURG                             3          1907        December 31, 1997         108          13
   HUNTINGBURG AND FERDINAND,IN                                                                
BANK OF ILLINOIS IN MT.VERNON                         3          1965        March 6, 1998             163          13
   MT. VERNON, IL                                                                               
NCBE LEASING CORP.                                    1          1994        November 1, 1994           15           1
   EVANSVILLE, IN                                                                               
TWENTY-ONE SOUTHEAST THIRD CORPORATION                1          1996        May 22, 1996               16           2
   EVANSVILLE, IN                                                                               
UNIFED, INC.                                          1          1980        August 31, 1995             -           -
   VINCENNES, IN

</TABLE>


6
<PAGE>

Federal Savings Bank, which was acquired by the Corporation August 31, 1995, 
was merged into The State Bank of Washington with the name changed to 
Alliance Bank.

The Corporation's subsidiary banks provide a wide range of financial services 
to the communities they serve in Southwestern Indiana, Western Kentucky, and 
Southeastern Illinois. These services include various types of deposit 
accounts; safe deposit boxes; safe keeping of securities; automated teller 
machines; consumer, mortgage, and commercial loans; mortgage loan sales and 
servicing; letters of credit; accounts receivable management (financing, 
accounting, billing, and collecting); and complete personal and corporate 
trust services. All deposits are insured by the Federal Deposit Insurance 
Corporation.

The Corporation continues to grow rapidly by acquiring community banks. The 
financial results of the acquisitions can best be assessed from the 
Corporation's financial statements on a quarterly, as-reported basis. After 
each acquisition accounted for as a pooling of interests, the Corporation's 
financial statements are restated to include the results of the acquiree. 
From the beginning of 1995 to the end of 1997, the Corporation acquired 
assets of $278,209 (measured at the time of each acquisition) in 3 
transactions accounted for as poolings of interests.

Since the beginning of 1995, the Corporation has also acquired $172,581 
(measured at the time of each acquisition) in assets through transactions 
accounted for as purchases. Financial statements are not restated following a 
transaction accounted for as a purchase; instead, the Corporation's financial 
statements include the results of each acquiree following acquisition. 
Transactions accounted for as purchases typically result in the Corporation's 
recording intangible assets, including goodwill, which the Corporation 
amortizes on a straight-line basis. The Corporation has recorded $19,716 
(measured at the time of each acquisition) in intangible assets as the direct 
result of purchases consummated between the beginning of 1995 and the end of 
1997.

In 1997, First Federal Savings Bank of Leitchfield and First National Bank of 
Bridgeport became subsidiaries of the Corporation in transactions accounted 
for as purchases. As a result of the purchases, the Corporation's assets 
increased $97,335 and it recorded intangible assets of $12,142. First Bank of 
Huntingburg also became a subsidiary of the Corporation in 1997. This 
acquisition was accounted for as a pooling of interests; accordingly, 
financial results for periods prior to the acquisition reported in the 
following sections and in the financial statements have been restated to 
include the results of First Bank of Huntingburg, including $108,109 in 
assets. Footnote 2 to the financial statements includes additional 
information about each transaction.

Since the end of 1997, the Corporation has acquired Bank of Illinois in Mt. 
Vernon and a subsidiary of the Corporation has acquired a branch office in 
Mayfield, Kentucky. Both transactions were accounted for as purchases. Bank 
of Illinois in Mt. Vernon had assets at December 31, 1997 of $163,450. The 
branch purchase increased the Corporation's deposits by $65,639. The 
Corporation will record approximately $19,601 in intangible assets as a 
result of both transactions.

As of March 9, 1998, the Corporation had entered into definitive merger 
agreements with Illinois One Bancorp, Inc., Trigg Bancorp,Inc., and Community 
First Financial, Inc. Together, the potential acquirees have assets of 
approximately $315,000. The acquisitions remain subject, among other things, 
to regulatory approval, shareholder approval of the acquirees, and other 
customary conditions. The Corporation intends to account for these
transactions as poolings of interests; however, any or all may be accounted 
for as purchases if they fail to qualify for pooling treatment. Footnote 21 
to the financial statements provides additional information about these 
pending acquisitions.

Management expects to continue to pursue acquisition opportunities as they 
arise. Management believes other community banks located in the Corporation's 
general geographic area (which may extend beyond the tri-state region 
currently served) will find the Corporation an attractive partner because the 
Corporation shares a commitment to local communities and provides the 
opportunity to retain much of the operational decision making in those 
communities while recognizing the efficiencies of affiliation with a larger 
organization.

FINANCIAL CONDITION

Basic earnings per share for 1997 were $1.72, representing a 13% increase over
the 1996 results. The increase in earnings per share was the result of a
combination of increased net interest income, improved non-interest income, and
continued cost control. During 1997, book value per share increased by $1.57 to
$13.69 and resulted in a ratio of average equity capital to average assets of
10.98%.

Average earning assets increased $112,207, or 10.7%, and $78,141, or 8.1%, in 
l997 and 1996, respectively. Growth in average assets in 1997 was $130,254, 
or 11.7%, compared to $87,238, or 8.5%, in 1996. During 1997, average 
interest bearing deposits in banks decreased $925, or 19.7%, and average 
federal funds sold decreased $1,401, or 26.0%. Average securities increased 
$24,124, or 9.1%, with the largest

                                                                               7
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, CONTINUED
(DOLLAR AMOUNTS OTHER THAN SHARE DATA IN THOUSANDS)

FINANCIAL CONDITION, CONTINUED

increase being in tax-exempt municipals which increased by $63,042, or 71.4%. 
Taxable municipals increased $355, or 11.8%. U.S. Government and agencies 
decreased $33,674, or 22.8%, and all other types of securities decreased 
$7,249, or 28.3%. The average market value adjustment on securities available 
for sale increased to an unrealized gain of $1,227 from an unrealized loss of 
$423 in 1996. Average loans increased $90,409, or 11.7%. All types of loans 
increased during the year. Average commercial loans increased $36,820, or 
13.5%; average consumer loans increased $4,879, or 3.2%; and average mortgage 
loans increased $45,253, or 13.5%. All other types of loans increased $3,457, 
or 31.2%. The growth in the loan portfolio was due mainly to purchase 
acquisitions in which average loans increased by $41,784. The remaining 
growth in the loan portfolio was attributable to a strong loan demand. The 
change in the earning asset mix was intended to and did result in improved 
earnings in 1995, 1996, and 1997.

Average certificate of deposit and other time deposit balances increased by 
$62,192, or 12.9%, in 1997. Average balances of money market accounts 
decreased $361, or 0.5%. Savings and interest bearing checking accounts 
increased $3,540, or 1.6%. Average federal funds purchased and securities 
sold under agreements to repurchase increased $14,735, or 33.7%. Average 
other borrowings increased $32,510, or 76.9%. Average noninterest-bearing 
deposits increased $7,548, or 7.1%. 

SECURITIES PORTFOLIO

Securities comprised 24.9% of the 1997 average earning assets compared to 
25.2% and 26.1% in 1996 and 1995, respectively. They represent the second 
largest earning asset component after loans. The Corporation holds various 
types of securities, including mortgage-backed securities. Inherent in 
mortgage-backed securities is prepayment risk, which occurs when borrowers 
prepay their obligations due to market fluctuations and rates. In an effort 
to reduce this risk, management monitors the amount of mortgage-backed 
securities contained in the portfolio. The Corporation has no securities of 
any single

SECURITIES PORTFOLIO

<TABLE>
<CAPTION>

                                                             Carrying Value at December 31
                                         -----------------------------------------------------------------------------------------
                                             1997                       1996                                    1995
                                         -------------     -------------------------------       ---------------------------------
                                           AVAILABLE          Held to          Available            Held to            Available
                                           FOR SALE          Maturity           For Sale           Maturity            For Sale
----------------------------------------------------------------------------------------------------------------------------------
<S>                                      <C>               <C>                 <C>                <C>                 <C>
Debt Securities:
   U.S. Treasury securities              $   9,915         $        -           $13,598           $    500            $  33,880
   U.S. Government agencies                 29,067             21,877            38,662              5,448               61,568
   Taxable municipals                        3,473              2,775                 -              3,120                    -
   Tax-exempt municipals                   170,301            120,805                 -             64,250                    -
   Corporate securities                      5,986             11,161             3,056             17,165                4,638
   Mortgage-backed securities               47,860              7,985            56,082              6,459               56,096
----------------------------------------------------------------------------------------------------------------------------------
     Total debt securities                 266,602            164,603           111,398             96,942              156,182
Equity securities                            1,355                  -             1,402                  -                1,500
----------------------------------------------------------------------------------------------------------------------------------
     Total securities                    $ 267,957         $  164,603          $112,800           $ 96,942            $ 157,682
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>


MATURITY ANALYSIS
DECEMBER 31, 1997

<TABLE>
<CAPTION>
                                                          After 1 Year        After 5 Years
                                                              but                 but
                                      Within 1 Year      Within 5 Years      Within 10 Years      After 10 Years          Total
                                --------------------- ------------------- -------------------- -------------------  ----------------
                                   Amount     Yield    Amount    Yield     Amount     Yield     Amount    Yield      Amount    Yield
------------------------------------------------------------------------------------------------------------------------------------
<S>                             <C>           <C>     <C>        <C>     <C>        <C>        <C>        <C>       <C>        <C>
SECURITIES CLASSIFIED AS
   AVAILABLE FOR SALE:
U.S. Treasury securities         $  5,314     6.60%   $  4,601    6.84%  $      -        -     $      -       -     $ 9,915    6.71%
U.S. Government agencies           14,078     5.88%     11,272    6.32%     3,455     8.09%         262    9.38%     29,067    6.34%
Taxable municipals                    970     5.60%      2,098    6.93%       405     7.80%           -       -       3,473    6.66%
Tax-exempt municipals               9,725     7.43%     28,406    8.17%    45,075     8.30%      87,095    8.62%    170,301    8.39%
Corporate securities                5,687     7.42%        299    5.76%         -        -            -       -       5,986    7.34%
------------------------------------------------------------------------------------------------------------------------------------
   Total maturing securities     $ 35,774     6.64%   $ 46,676    7.52%  $ 48,935     8.28%    $ 87,357    8.62%    218,742    7.99%
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Mortgage-backed securities                                                                                           47,860    6.32%
Equity securities                                                                                                     1,355    6.69%
                                                                                                                  ---------  -------
   Total securities                                                                                                $267,957    7.69%
                                                                                                                  ---------  -------
                                                                                                                  ---------  -------

</TABLE>


8
<PAGE>

issuer, with the exception of the U. S. Government, exceeding 10% of 
shareholders' equity. The Corporation manages the quality and risk of 
securities through its Asset/Liability Committee, which recommends and 
monitors the composition of the overall security portfolio as approved by the 
Corporation's Board of Directors. Among other things, the investment policy 
establishes guidelines for the level, type, quality, and mix of securities 
appropriate for the portfolio. The securities portfolio at December 31, 1997, 
included $1,748 in structured notes, which were comprised of $1,000 in an 
indexed amortizing note, $500 in a delevered floating note, and $248 in a 
capped floating rate note. These securities have risk characteristics which 
are well within the constraints of the non-structured securities held in the 
securities portfolio.

Securities classified as held to maturity are carried at amortized cost, 
and those classified as available for sale are carried at fair value. The 
available-for-sale securities included unrealized gains of approximately 
$6,283 and unrealized losses of $540 at December 31, 1997. At December 
31, 1997, available-for-sale securities included $47,860 in 
mortgage-backed securities, or 17.9% of the available-for-sale portfolio. The 
weighted average maturity of the available-for-sale portfolio at December 31, 
1997, was 9.3 years. The weighted average maturity of the available-for-sale 
and the held-to-maturity portfolios at December 31, 1996 was 7.3 years and 
7.9 years, respectively. The weighted average yields on municipal securities 
that are tax-exempt have been computed on a federal-tax-equivalent basis 
using a 35.0% tax rate.

LOANS

Each subsidiary bank follows loan policies approved by its board of 
directors. These policies are compatible with the Corporation's loan policy 
approved by its Board of Directors. The lending policies address risks 
associated with each type of lending, collateralization, loan-to-value 
ratios, loan concentrations, insider lending, and other pertinent matters. 
These functions are monitored by subsidiary and corporate loan review 
personnel and by the loan committees of the subsidiaries' boards of directors 
for compliance and loan quality. Management believes that careful loan 
administration and high credit standards minimize credit risk, as evidenced 
by the ratio of underperforming loans to total loans. Speculative loans are
prohibited and the loan portfolio contains no foreign loans.

The Corporation's loan portfolio is diversified by type of loan and industry, 
and, within its market area, by geographic location, which minimizes economic 
risk. The loan portfolio contained 29% commercial loans, 55% real estate 
loans (primarily residential), and 16% consumer loans at December 31, 1997.
The Corporation's subsidiary banks lend to customers in various industries 
including manufacturing, agricultural, health and other services, 
transportation, mining, wholesale, and retail.

Commercial and industrial loans increased $24,830, of which approximately 30% 
was due to acquisitions accounted for under the purchase method. The 
remaining increase was due to a general increase in business among the 
communities the Corporation's banks serve. Growth in consumer lending was 
primarily due to acquisitions accounted for under the purchase method.

LOAN PORTFOLIO AT YEAR END, FIVE-YEAR SUMMARY

<TABLE>
<CAPTION>

                                                  1997             1996               1995             1994             1993
-------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>               <C>               <C>              <C>               <C>
Real estate loans                              $501,882          $425,507          $393,082         $368,989          $342,616
Agricultural loans                               31,788            31,154            30,345           29,297            28,112
Commercial and industrial loans                 201,402           176,572           165,217          127,389           109,880
Economic development loans and
  other obligations of state and
  political subdivisions                         13,997            11,214             9,887           13,138            10,011
Consumer loans                                  149,505           143,485           131,477          105,812            89,387
Direct lease financing                           13,146            12,331             6,960              518               503
Leveraged leases                                  4,661                 -                 -                -                 -
All other loans                                     415               582               344              396             1,398
-------------------------------------------------------------------------------------------------------------------------------
   Total loans - gross                          916,796           800,845           737,312          645,539           581,907
Less: unearned income                               440               223               315              304             2,351
-------------------------------------------------------------------------------------------------------------------------------
   Total loans - net of unearned income         916,356           800,622           736,997          645,235           579,556
Less: allowance for loan losses                   7,969             7,189             6,176            5,750             5,528
-------------------------------------------------------------------------------------------------------------------------------
   Total loans - net                           $908,387          $793,433          $730,821         $639,485          $574,028
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                                                              9
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, CONTINUED 
(DOLLAR AMOUNTS OTHER THAN SHARE DATA IN THOUSANDS)

LOANS, CONTINUED

LOAN MATURITIES AND RATE SENSITIVITIES AT DECEMBER 31, 1997 ON AGRICULTURAL,
COMMERCIAL, AND TAX-EXEMPT LOANS 

<TABLE>
<CAPTION>

                                                                 After
                                                            1 Year But
                                              Within            Within           Over 
                                              1 Year           5 Years          5 Years            Total
<S>                                        <C>              <C>                 <C>              <C>
Rate sensitivities:
---------------------------------------------------------------------------------------------------------
   Fixed rate loans                         $ 38,128           $41,572          $20,596          $100,296
   Variable rate loans                       141,161             4,090              770           146,021
---------------------------------------------------------------------------------------------------------
     Subtotal                               $179,289           $45,662          $21,366           246,317
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
      Percent of subtotal                     72.79%            18.54%            8.67%

Nonaccrual loans                                                                                      870
                                                                                                 --------
     Total loans net of unearned income                                                          $247,187
                                                                                                 --------
                                                                                                 --------
</TABLE>

Real estate loans increased $76,375, of which approximately 40% was due to 
purchase acquisitions. The remaining increase was a direct result of strong 
loan demand in the markets served by the Corporation's banks supported by a 
favorable interest rate environment. This portfolio primarily consists of 
single-family, owner-occupied housing. The Corporation's guidelines for 
residential mortgage lending were followed and advances normally did not 
exceed 80% of appraised value.

At December 31, 1997, there was no concentration of credit risk from borrowers 
engaged in the same or similar industries exceeding 10% of total loans. 
Geographic diversification is provided by the Corporation's policy to extend 
credit to customers in its geographic market areas in and around the 
subsidiary banks' banking offices in Southwestern Indiana, Southeastern 
Illinois, and Western Kentucky.

UNDERPERFORMING ASSETS

Underperforming assets consist of nonaccrual securities and loans, 
restructured loans, loans past due 90 days or more, and other real estate 
held. Nonaccrual securities are those which have defaulted on interest 
payments. Nonaccrual loans are loans on which interest recognition has been 
suspended because of doubts as to the borrower's ability to repay principal 
or interest. Loans are generally place on nonaccrual status after becoming 90 
days past due if the ultimate collectibility of the loan is in question. 
Loans which are current, but as to which serious doubt exists about repayment 
ability, may also be placed on nonaccrual status. Restructured loans are 
loans where the terms have been changed to provide a reduction or deferral of 
principal or interest because of the borrower's financial position. Past-due 
loans are loans that are continuing to accrue interest but are contractually 
past due ninety days or more as to interest or principal payments. Other real 
estate owned represents properties obtained for debts previously contracted. 
Management is not aware of any loans which have not been disclosed as 
underperforming assets that represent or result from unfavorable trends or 
uncertainties which management reasonably believes will materially adversely 
affect future operating results, liquidity, or capital resources, or 
represent material credits as to which management has serious doubt as to the 
ability of such borrower to comply with loan repayment terms.

Past due 90 days or more, nonaccrual, and restructured loans were 0.5% of 
total loans at the end of 1997 and 1996. Of the loans in these categories, 
$2,102, or 46.3%, were secured by real estate at the end of 1997, compared to 
$1,977, or 53.3%, at the end of 1996. Additional interest income that would 
have been recorded, if nonaccrual and restructured loans had been 

UNDERPERFORMING ASSETS AT YEAR END, FIVE-YEAR SUMMARY

<TABLE>
<CAPTION>

                                                 1997              1996            1995               1994            1993 
----------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>               <C>              <C>               <C>              <C>
Underperforming loans:
   Nonaccrual                                  $3,672            $2,438           $1,049            $1,274           $2,441
   Restructured                                    75               114              143               223              222
   90 days past due                               794             1,155            1,001               783              340
----------------------------------------------------------------------------------------------------------------------------
     Total underperforming loans                4,541             3,707            2,193             2,280            3,003
Nonaccrual municipal securities                    61                31                -                 -               81
Other real estate owned                            79                66              383               671            1,148
----------------------------------------------------------------------------------------------------------------------------
     Total                                     $4,681            $3,804           $2,576            $2,951           $4,232
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
</TABLE>


10
<PAGE>

current in accordance with their original terms, was $324, $218, and $134 in 
1997, 1996, and 1995, respectively. The interest recognized on nonaccrual 
loans was approximately $56, $23, and $58 in 1997, 1996, and 1995, 
respectively.

In addition to those loans classified as underperforming, management was 
monitoring loans of approximately $38,460 and $46,386 as of the end of 1997 
and 1996, respectively, for the borrowers' abilities to comply with present 
loan repayment terms. All impaired loans discussed in Note 6 to the financial 
statements in this report are included in underperforming or closely monitored 
loans.

The Corporation monitors credit quality through a periodic review and 
analysis of each subsidiary bank's loan portfolio. On a quarterly basis, each 
subsidiary bank performs an evaluation of the adequacy of its allowance for 
loan losses. The evaluation includes an analysis of past due loans, loans 
criticized during regulatory examinations, internally classified loans, 
delinquency trends, and other relevant factors. The results of these 
evaluations are used by the Corporation to determine the adequacy of the 
consolidated allowance for loan losses.

RISK MANAGEMENT

As of December 31, 1997, management considered the allowance for loan losses 
adequate to provide for potential losses in the loan portfolio. Management 
reviews delinquent and problem loans weekly. Loans which are judged 
uncollectible are charged off on a timely basis. The allowance for loan 
losses is reviewed quarterly in order to evaluate and maintain its adequacy 
based on an analysis of the entire loan portfolio. Some of the factors used 
in this review include current economic conditions and forecasts, risk by 
type of loan, previous loan loss experience, and evaluation of specific 
borrowers and collateral. The Corporation and its banks monitor loan 
portfolios using models designed in part by regulatory agencies.

Total loans charged off during 1997 decreased $119, or 4.6%,

<TABLE>
<CAPTION>

SUMMARY OF LOAN LOSS EXPERIENCE (ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES)

 
                                                       1997              1996              1995             1994             1993
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>               <C>               <C>              <C>               <C>
Allowance for loan losses, January 1                 $7,189            $6,176            $5,750           $5,528            $5,986
Allowance associated with purchase acquisitions         516               379               140                -                 -
Loans charged off:
   Commercial                                           624               879               263              239             1,345
   Real estate mortgage                                 355               483                88              267               248
   Consumer                                           1,486             1,155               393              222               308
   Direct lease financing                                 -                67                 -                -                 -
------------------------------------------------------------------------------------------------------------------------------------
     Total                                            2,465             2,584               744              728             1,901
------------------------------------------------------------------------------------------------------------------------------------
Recoveries on charged-off loans:
   Commercial                                           255               115               320              215               393
   Real estate mortgage                                 327               229               197              227               188
   Consumer                                             256               165               114              430               126
   Direct lease financing                                 -                 5                 -                -                 -
------------------------------------------------------------------------------------------------------------------------------------
     Total                                              838               514               631              872               707
------------------------------------------------------------------------------------------------------------------------------------
         Net charge-offs                              1,627             2,070               113             (144)            1,194
Provision for loan losses                             1,891             2,704               399               78               736
------------------------------------------------------------------------------------------------------------------------------------
Allowance for loan losses, December 31               $7,969            $7,189            $6,176           $5,750            $5,528
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
Total loans at year end                            $916,356          $800,622          $736,997         $645,235          $579,556
Average loans                                       861,778           771,369           689,514          606,206           569,313

As a percent of year-end loans:
   Net charge-offs                                     0.18%             0.26%             0.02%           -0.02%             0.21%
   Provision for loan losses                           0.21              0.34              0.05             0.01              0.13
   Year-end allowance balance                          0.87              0.90              0.84             0.89              0.95

As a percent of average loans:
   Net charge-offs                                     0.19%             0.27%             0.02%           -0.02%             0.21%
   Provision for loan losses                           0.22              0.35              0.06             0.01              0.13
   Year-end allowance balance                          0.92              0.93              0.90             0.95              0.97

Allowance for loan losses as a percent
   of underperforming loans                          175.49%           193.93%           281.62%          252.19%           184.08%
</TABLE>


                                                                              11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, CONTINUED 
(DOLLAR AMOUNTS OTHER THAN SHARE DATA IN THOUSANDS)


RISK MANAGEMENT, CONTINUED 

and recoveries were $324, or 63.0%, higher than in 1996. The provision for 
loan losses for 1997 was decreased based on the Corporation's periodic 
analysis of the subsidiary banks' loan portfolios. The provision for loan 
losses for 1996 was increased as a result of the increase in net charge-offs 
and growth of the loan portfolio. In 1995, the provision for loan losses was 
increased due to increased loan volume. In 1994, the provision for loan 
losses was decreased as a result of significant reductions in underperforming 
loans and net charge-offs.

ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES AT DECEMBER 31

<TABLE>
<CAPTION>
                               Allowance Applicable to                          Percent of Loans to Total Gross Loans
------------------------------------------------------------------------------------------------------------------------------
Loan Type               1997      1996     1995     1994     1993         1997      1996       1995       1994        1993   
------------------------------------------------------------------        ----------------------------------------------------
<S>                    <C>       <C>      <C>      <C>      <C>           <C>       <C>        <C>        <C>         <C>
Commercial             $2,599    $2,189   $2,395   $2,006   $1,670         29%        29%        29%        27%         26%
Real estate mortgage    1,576     1,622    1,571    1,579    1,511         55%        53%        53%        57%         59%
Consumer                1,887     1,444      986      635      668         16%        18%        18%        16%         15%
------------------------------------------------------------------        ----------------------------------------------------
   Allocated            6,062     5,255    4,952    4,220    3,849        100%       100%       100%       100%        100%
Unallocated             1,907     1,934    1,224    1,530    1,679        ----------------------------------------------------
------------------------------------------------------------------        ----------------------------------------------------
   Total               $7,969    $7,189   $6,176   $5,750   $5,528
------------------------------------------------------------------
------------------------------------------------------------------
</TABLE>

DEPOSITS

The Corporation's Asset/Liability Committee manages the deposits of its banks 
to achieve short-term and long-term benefits of deposit growth. Average 
deposits increased $72,919, or 8.2%, during 1997, compared to $31,129, or 
3.6%, in 1996. Of the increase in 1997, $43,549 was due to purchase 
acquisitions. Average time deposits of $100,000 or more increased $20,683, or 
16.3%, compared to $24,653, or 24.2%, in 1996. The increase in time deposits 
of $100,000 or more in 1996 included $13,000 in brokered deposits. As of 
December 31, 1997, the Corporation had no brokered deposits. Management uses 
brokered deposits to supplement local deposits under guidelines and limits 
established by the Corporation's Asset/Liability Committee. Time deposits of 
$100,000 or more are not considered to present an undue risk. 

AVERAGE DEPOSITS

<TABLE>
<CAPTION>
                                                  1997                 1996                1995 
                                            ----------------    ----------------    -----------------
                                             AMOUNT    RATE      Amount    Rate      Amount     Rate
------------------------------------------------------------------------------------------------------
<S>                                         <C>        <C>      <C>        <C>     <C>          <C>
Noninterest-bearing demand                  $113,616      -     $106,068      -    $ 98,109        -
Money market accounts                         79,397   3.62%      79,758   3.55%     74,079     3.79%
Interest-bearing demand                      142,063   1.65%     140,183   1.86%    145,107     2.30%
Savings                                       80,119   2.29%      78,459   2.45%     83,525     2.61%
Time deposits of $100,000 or more            147,339   5.14%     126,656   5.38%    102,003     5.71%
Other time deposits                          397,827   5.40%     356,318   5.30%    353,490     5.13%
------------------------------------------------------------------------------------------------------
   Total                                    $960,361            $887,442           $856,313
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
</TABLE>

TIME DEPOSITS OF $100,000 OR MORE AT DECEMBER 31

<TABLE>
<CAPTION>
                                                  1997             1996              1995
------------------------------------------------------------------------------------------
<S>                                            <C>              <C>               <C>
Maturing:                                                                          
   3 months or less                             $60,652          $60,705           $34,892
   Over 3 to 6 months                            29,239           29,358            45,968
   Over 6 to 12 months                           20,029           20,599            15,210
   Over 12 months                                19,469           18,872             5,057
------------------------------------------------------------------------------------------
     Total                                     $129,389         $129,534          $101,127
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
</TABLE>

CAPITAL RESOURCES

At the end of 1997, shareholders' equity totaled $146,803, an increase of 
$17,109, or 13.2%, from 1996. The average equity to average asset ratio was 
10.98% and 11.48% for 1997 and 1996, respectively. The decrease is 
attributable to the Corporation's repurchase of 426,508 shares of its common 
stock for approximately $16,200, during 1997. The dividend payout ratio for 
1997 was 36.74%, compared to 37.05% in 1996.

12

<PAGE>
In 1995, The National City Bank of Evansville committed to build an addition 
to its main office to be completed in the second quarter of 1998. The 
approximate cost of the addition and renovation of the main office of The 
National City Bank of Evansville is $18,000. The National City Bank of 
Evansville and the Corporation will occupy three floors of the facility, at a 
cost of approximately $10,000, with the other six floors being sold as 
condominiums. Four of these six floors have been sold to non-affiliated 
entities. The Corporation, through its subsidiary Twenty-One Southeast Third 
Corporation, funded the project, including financing for the purchasers of 
the condominiums, through the proceeds of a $15,000 term loan. Payments from 
the purchasers will be used to repay the term loan. As of December 31, 1997, 
there were no other material commitments for capital expenditures.

Guidelines for minimum capital levels have been established for the 
Corporation by the Federal Reserve Board. Tier I (core) capital consists of 
shareholders' equity less goodwill, other identifiable intangible assets, and 
unrealized losses on marketable equity securities. Total capital consists of 
Tier I capital plus allowance for loan losses. Minimum capital levels are 4% 
for the leverage ratio which is defined as Tier I capital as a percentage of 
total assets less goodwill and other identifiable intangible assets; 4% for 
Tier I capital to risk-weighted assets; and 8% for total capital to 
risk-weighted assets. The Corporation has exceeded each of these levels. Its 
leverage ratio was 9.74% and 10.52%; Tier I capital to risk-weighted assets 
was 13.39% and 14.96%; and total capital to risk-weighted assets was 14.25% 
and 15.84% at the end of 1997 and 1996, respectively. In addition, each 
subsidiary bank has exceeded minimum regulatory capital guidelines.

SHORT-TERM BORROWINGS

Federal funds purchased are borrowings from other financial institutions 
maturing daily. Securities sold under agreements to repurchase are secured 
transactions with customers. Securities sold under agreements to repurchase 
generally mature within six months. Notes payable U.S. Treasury are demand 
notes created by treasury tax and loan account funds transfers. Short-term 
borrowings increased $9,552, or 14.2%, during 1997. At December 31, 1997, 
federal funds purchased were $55,000, reflecting an $825, or 1.5%, increase 
over 1996. Securities sold under agreements to repurchase and notes payable 
U.S. Treasury increased during 1997 by $4,532, or 39.5%, and $4,195, or 
243.8%, respectively.

SHORT-TERM BORROWINGS AT DECEMBER 31

<TABLE>
<CAPTION>
                                                           1997              1996             1995
--------------------------------------------------------------------------------------------------
<S>                                                     <C>               <C>              <C>
Federal funds purchased                                 $55,000           $54,175          $34,500
Securities sold under agreements to repurchase           16,001            11,469           18,329
Notes payable U.S. Treasury                               5,916             1,721            2,769
--------------------------------------------------------------------------------------------------
   Total                                                $76,917           $67,365          $55,598
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------

<CAPTION>
                                                                                   Securities
                                                                                   Sold Under           Notes
                                                                    Federal        Agreements         Payable
                                                                      Funds                to            U.S.
                                                                  Purchased        Repurchase        Treasury
---------------------------------------------------------------------------------------------------------------
<S>                                                               <C>              <C>               <C>
1997
Average amount outstanding                                          $42,588           $15,924          $2,064
Maximum amount at any month end                                      69,400            26,146           5,916
Weighted average interest rate:
   During year                                                         5.67%             4.00%           5.36%
   End of year                                                         6.74%             3.48%           5.25%

1996
Average amount outstanding                                          $26,329           $17,448          $1,378
Maximum amount at any month end                                      54,175            28,153           3,270
Weighted average interest rate:
   During year                                                         5.50%             4.35%           5.17%
   End of year                                                         6.65%             3.66%           5.15%

1995
Average amount outstanding                                          $ 4,665           $17,064          $2,655
Maximum amount at any month end                                      34,500            20,649           6,647
Weighted average interest rate:
   During year                                                         5.90%             4.64%           5.67%
   End of year                                                         5.90%             4.10%           5.15%
</TABLE>

LIQUIDITY

Liquidity of a banking institution reflects the ability to provide funds to 
meet loan requests, to accommodate possible outflows in deposits, and to take 
advantage of interest rate market opportunities. Funding loan requests, 
providing for liability outflows, and managing interest rate fluctuations 
require continuous analysis in order to match maturities of specific 
categories of short-term and long-term loans and investments with specific 
types of deposits and borrowings. Bank liquidity is thus normally considered 
in terms of the nature of mix of the banking institution's sources and uses 
of funds.

For the Corporation, the primary sources of short-term liquidity have been 
federal funds sold, interest-bearing deposits in banks, and U.S. Government 
and agency securities available for sale.

                                                                            13

<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, CONTINUED 
(DOLLAR AMOUNTS OTHER THAN SHARE DATA IN THOUSANDS)

LIQUIDITY, CONTINUED 

In addition to these sources, short-term liquidity is provided by maturing 
loans and securities. The balance between these sources and needs to fund 
loan demand and deposit withdrawals is monitored by the Corporation's 
asset/liability management program and by each subsidiary bank to provide 
liquidity without penalizing earnings. When these sources are not adequate, 
the Corporation utilizes federal funds purchased, brokered deposits, and its 
lines with Federal Home Loan Banks as alternative sources of liquidity. The 
increased loan demand throughout the year was funded by an increase in 
deposits and other borrowings. Additionally, the Corporation's underwriting 
standards for its mortgage loan portfolio comply with standards established 
by government housing agencies; as a result, a portion of the mortgage loan 
portfolio could be sold to provide additional liquidity. At December 31, 1997 
and 1996, respectively, federal funds sold were $1,500 and $600, 
interest-bearing deposits in banks were $2,485 and $2,983, and U.S. 
Government and agency securities available for sale were $38,982 and $52,260.

These sources and other liquid assets also satisfy long-term liquidity needs. 
Long-term liquidity is managed in the same way, only with longer maturities, 
to provide for future needs while maintaining interest margins.

The Corporation (parent company) maintains credit lines to provide an 
alternative source of liquidity. At December 31, 1997, the Corporation had a 
$10,000, unsecured, revolving credit agreement with a bank. On January 22, 
1998, the line was increased to $45,000. The Corporation intends to use the 
line to provide short-term funding for acquisitions and other corporate 
purposes.

The ability of the Corporation to pay cash dividends to its shareholders is 
dependent on the receipt of cash from its subsidiary banks. Banking 
regulations impose restrictions on the ability of subsidiaries to pay 
dividends to the Corporation. The amount of dividends that could be paid is 
further restricted by management to maintain prudent capital levels.

INTEREST RATE SENSITIVITY

The Corporation's exposure to market risk is reviewed on a regular basis by 
the Asset/Liability Committee. Interest rate risk is the most significant 
market risk affecting the Corporation. Other types of market risk do not 
arise in the normal course of the Corporation's business activities. Interest 
rate risk is the potential economic loss due to future interest rate changes. 
This economic loss can be reflected as a loss of future net interest income 
and/or a loss of current fair market values.

The Corporation's net income is dependent, to a significant degree, on its 
net interest income. Net interest income is susceptible to interest rate risk 
to the degree that interest-bearing liabilities reprice or mature on a 
different basis than interest-earning assets. When interest-bearing 
liabilities reprice or mature more quickly than interest-earning assets, an 
increase in market rates could adversely affect net interest income. 
Similarly, if interest-earning assets reprice or mature more quickly than 
interest-bearing liabilities, a decrease in market rates could adversely 
affect net interest income. Changes in market rates can also cause losses in 
the current fair values of financial instruments.

In order to manage its exposure to changes in interest rates, the Corporation 
monitors interest rate risk through analysis of standard gap reports and 
interest rate shock simulation reports on the effect of changes in interest 
rates on net interest income and on the economic value of equity (the present 
value of expected cash flows from existing assets minus the present value of 
expected cash flows from existing liabilities). The following table sets 
forth, at December 31, 1997, an analysis of the Corporation's interest rate 
risk as measured by the estimated change in economic value of equity (EVE) 
following parallel shifts in the yield curve.

<TABLE>
<CAPTION>
                                        Estimated Increase
                                         (Decrease) in EVE
Change in             Estimated         -------------------
Interest Rates        EVE Amount         Amount    Percent
-----------------------------------------------------------
<S>                   <C>               <C>        <C>
(Basis Points)
         +200          $176,695          $(6,479)   (3.54)%
            -           183,174                -        -
         -200           186,814            3,640     1.99
</TABLE>

Certain assumptions were employed in preparing data in the preceding table. 
These assumptions relate to interest rates, loan prepayment rates, deposit 
decay rates, and the market values of certain assets under the various 
interest rate scenarios. Even if interest rates change in the designated 
amounts, there can be no assurance that the Corporation's assets and 
liabilities would perform as set forth. In addition, a change in U.S. 
Treasury rates in the designated amounts accompanied by a change in the shape 
of the Treasury yield curve would cause significantly different changes to 
the EVE than indicated above.

Derivative financial instruments include futures, forwards, interest rate 
swaps, option contracts, and other financial instruments with similar 
characteristics. The Corporation does not enter into futures, forwards, 
swaps, or options. In the normal course of business, however, the Corporation 
is a party to financial instruments with off-balance-sheet risk to meet the 

14

<PAGE>
financing needs of its customers. These instruments involve, to varying 
degrees, elements of credit and interest rate risk in excess of the amount 
recognized in the balance sheet. The contractual or notional amounts of those 
instruments reflect the extent of involvement the Corporation has in 
particular classes of financial instruments. Financial instruments with 
off-balance-sheet risk at December 31, 1997 are discussed more throughly in 
Note 17 of the Financial Statements.

Corporate asset liability gap positions are targeted at plus or minus 15% at 
the six-month and one-year horizons. At December 31, 1997, all subsidiary 
banks were within, or close to, their targeted spreads. The cumulative gap 
position through one year of negative $133,852 at the end of 1997 was 10.3% 
of total assets, which management believes is a relatively balanced position.

RESULTS OF OPERATIONS

Net income for 1997 was $18,351, reflecting a $1,855, or 11.2%, increase over 
1996. Net income for 1996 increased $2,097, or 14.6%, over 1995. Basic 
earnings per share in 1997 were $1.72, compared to $1.52 in 1996 and $1.30 in 
1995. Increases in both rates and volumes of earning assets resulted in 
growth in net interest income of $3,389, or 7.0%, in 1997 and $4,173, or 
9.4%, in 1996. Noninterest income increased $1,482, or 17.2%, in 1997 and 
$1,489, or 20.9%, in 1996. Noninterest expense increased $4,424, or 14.8%, in 
1997 and $998, or 3.4%, in 1996. The provision for loan losses decreased $813 
in 1997 due to lower net charge-offs, and increased $2,305 in 1996 due to 
higher net charge-offs and loan growth.

Changes in net interest income for the last two years are presented in the 
following schedule with dollar changes allocated to rate and volume 
variances. The combined rate-volume variances are included in the total 
volume variances. In addition to this schedule, at the end of Management's 
Discussion is a three-year balance sheet analysis on an average basis and an 
analysis of net interest income.

The following discussion of results of operations is on a 
federal-tax-equivalent basis. Average loans increased 11.7% during 1997 
compared to an increase of 11.9% during 1996. Approximately 46% of the growth 
in average loan balances was attributable to acquisitions accounted for as 
purchases. Loan income increased 11.6% in 1997 and 12.4% in 1996, principally 
due to increased loan volumes. The average yield on loans decreased slightly 
from 9.13% in 1996 to 9.12% in 1997. 

Average securities before market value adjustments increased 8.5% in 1997 and 
4.1% in 1996. Approximately 33% of the increase in average securities 
balances in 1997 was due to two purchase acquisitions. Securities income 
increased 14.7% and 11.0% in 1997 and 1996, respectively. The yield on 
securities increased from 6.91% in 1996 to 7.30% in 1997. During 1997,61.2% 
of the increase in interest income on securities was due to volume increases 
and 38.8% was attributable to rate increases, while in 1996, 60.1% of the 
increase was due to rate and 39.9% was due to volume. Average earning assets 
increased $112,207, or 10.7%, in 1997 and $78,141, or 8.1%, in 1996. Purchase 
acquisitions accounted for 44.4% of the increase in 1997 and 20.9% in 1996. 
The average yield on total earning assets increased from 8.53% in 1996 to 
8.63% in 1997, due principally to increased in yields on securities in 1997. 
Increase in volumes of earning assets accounted for 90.6% and 85.4% of the 
growth in interest income in 1997 and 1996, respectively.

Average total interest-bearing deposits increased 8.4% during 1997 and 3.1% 
during 1996. Internal growth of average deposits accounted for 35.9% of the 
increase, while 64.1% was due to purchase acquisitions. The average cost of 
interest bearing deposits decreased from 4.26% to 4.23% in 1996 and increased 
from 4.23% to 4.27% in 1997. Interest expense on deposits increased $3,077, 
or 9.3%, in 1997 and $750, or 2.3%, in 1996. In 1997, 90.6% of the increase 
in interest expense on deposits was due to volume increases. In 1996, 
interest expense on deposits increased due to volume increases which were 
partially offset by rate decreases. Interest expense on federal funds 
purchased and 

CHANGES IN NET INTEREST INCOME
(INTEREST ON A FEDERAL-TAX-EQUIVALENT BASIS)
<TABLE>
<CAPTION>
                                               1997 COMPARED TO 1996                     1996 Compared to 1995
                                              --------------------------------        --------------------------------
                                               CHANGE DUE TO                           Change Due to
                                                A CHANGE IN                             a Change in
                                              ---------------                         ---------------
                                              VOLUME     RATE     TOTAL CHANGE        Volume     Rate     Total Change
                                              --------------------------------        --------------------------------
<S>                                           <C>      <C>        <C>                 <C>        <C>      <C>
Interest income increase (decrease)
   Loans                                      $8,243   $  (66)       $8,177            $7,470    $  285       $7,755
   Securities                                  1,641    1,040         2,681               721     1,086        1,807
   Other short-term investments                 (129)      35           (94)             (811)     (114)        (925)
----------------------------------------------------------------------------------------------------------------------
     Total interest income                     9,755    1,009        10,764             7,380     1,257        8,637
----------------------------------------------------------------------------------------------------------------------
Interest expense increase (decrease)
   Deposits                                    2,788      289         3,077               980      (230)         750
   Borrowings                                  2,663      (50)        2,613             2,744        38        2,782
----------------------------------------------------------------------------------------------------------------------
     Total interest expense                    5,451      239         5,690             3,724      (192)       3,532
----------------------------------------------------------------------------------------------------------------------
Net interest income increase (decrease)       $4,304     $770        $5,074            $3,656    $1,449       $5,105
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
</TABLE>


                                                                              15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, CONTINUED 
(DOLLAR AMOUNTS OTHER THAN SHARE DATA IN THOUSANDS)


RESULTS OF OPERATIONS, CONTINUED

other borrowings increased $2,613 in 1997 and $2,782 in 1996. The increases 
were principally due to increases in volumes. The Corporation uses federal 
funds purchased and Federal Home Loan Bank advances, selectively, as 
alternative funding sources to meet short and intermediate-term funding needs.

In 1997 and 1996, net interest income increased $5,074 and $5,105, 
respectively. Increases in volumes accounted for 84.8% of the increase in 
1997 and 71.6% in 1996. The net interest income of purchase acquisitions 
accounted for $2,137, or 42.5%, of the increase in net interest income in 
1997 and $693, or 13.6%, in 1996.

NONINTEREST INCOME

Noninterest income increased $1,482, or 17.2%, during 1997 and $1,489, or 
20.9%, during 1996. Service charges on deposit accounts, the largest item in 
this category, increased $331, or 9.1%, during 1997 and $691, or 23.4%, 
during 1996. Other service charges and fees increased $273, or 11.6%, in 1997 
and $544, or 30.0%, in 1996. Trust fees increased $179, or 10.2%, during 1997 
and $245, or 16.3%, during 1996. Trust fees fluctuate with changes in the 
number of estates managed each year and with changes in the market value of 
assets under management. Security gains increased from $42 in 1996 to $794 in 
1997. Other types of noninterest income decreased $53, or 6.6%, during 1997 
and $7, or 0.9%, during 1996.

NONINTEREST EXPENSE

Noninterest expense increased $4,424, or 14.8%, during 1997 and $998, or 
3.4%, in 1996. Salaries and other employee benefits increased $2,785, or 
16.7%, during 1997 and $117, or 0.7%, in 1996. Occupancy expense of bank 
premises increased $121, or 6.1%, during 1997 and $13, or 0.7%, during 1996. 
Furniture and equipment expense increased $152, or 6.5%, during 1997 and 
$263, or 12.6%, in 1996. The FDIC assessment decreased $623, or 78.1%, during 
1997 and $284, or 26.2%, during 1996 due to lower premium requirements. The 
1996 FDIC expense included $595 representing the cost of a special assessment 
on Savings Association Insurance Fund (SAIF) insured deposits to recapitalize 
the SAIF. Other types of noninterest expense increased $1,989, or 24.4%, 
during 1997 and $889, or 12.3%, during 1996.

YEAR 2000 COMPLIANCE

The year 2000 has posed a unique set of challenges to those industries 
reliant on information technology. As a result of methods employed by early 
programmers, many software applications and operational programs may be 
unable to distinguish the year 2000 from the year 1900. If not effectively 
addressed, this problem could result in the production of inaccurate data, 
or, in the worst cases, the inability of the systems to continue to function 
altogether. Financial institutions are particularly vulnerable due to the 
industry's dependence on electronic data processing systems.

In 1996, the Corporation started the process of identifying the hardware and 
software issues required to be addressed to assure year 2000 compliance. The 
Corporation began by assessing the issues related to the year 2000 and the 
potential for those issues to adversely affect the Corporation's own 
operations and those of its subsidiaries.

Since that time, the Corporation has established a Year 2000 Compliance Team 
(the Team) composed of representatives from key areas throughout the 
organization. It is the mission of this Team to identify areas subject to 
complications related to the year 2000 and to initiate remedial measures 
designed to eliminate any adverse effects on the Corporation's operations.

The Team has identified all mission-critical software and hardware that may 
be adversely affected by the year 2000 and has required vendors to represent 
that the systems and products provided are or will be year 2000 compliant. 
The Corporation expects that all mission critical software will be upgraded 
to achieve year 2000 compliance and tested by December 31, 1998. In addition, 
the Team is developing contingency plans to address systems which do not 
become year 2000 compliant by December 31, 1998.

The Corporation is committed to a plan for achieving compliance, focusing not 
only on its own data processing systems, but also on its customers. The Team 
has taken steps to educate and assist its customers with identifying their 
year 2000 compliance problems. In addition, the Team has proposed policy and 
procedure changes to help identify potential risks to the Corporation and to 
gain an understanding of how customers are managing the risks associated with 
the year 2000.

Management believes that the expenditures required to bring systems into 
compliance will not have a materially adverse effect on the Corporation's 
performance. However, the year 2000 problem is pervasive and complex and can 
potentially affect any computer process. Accordingly, no assurance can be 
given that year 2000 compliance can be achieved without additional 
unanticipated expenditures and uncertainties that might affect future 
financial results.

16

<PAGE>

<TABLE>
<CAPTION>

AVERAGE BALANCE SHEET AND ANALYSIS OF NET INTEREST INCOME

                                                    1997                          1996                         1995
                                       ----------------------------   ---------------------------   ---------------------------
                                        AVERAGE    INTEREST  YIELD/    Average   Interest  Yield/    Average   Interest  Yield/
                                        BALANCES   & FEES    COST      Balances  & Fees    Cost      Balances  & Fees    Cost 
                                       ----------------------------   ---------------------------   ---------------------------
<S>                                    <C>         <C>       <C>      <C>        <C>       <C>      <C>        <C>       <C>
EARNING ASSETS:
Interest-bearing deposits in banks     $    3,780  $    214   5.66%     $  4,705   $  273   5.80%   $   9,533   $    509   5.34%
Short-term money market investments             -         -      -             -        -      -        1,317         87   6.61%
Federal funds sold                          3,985       218   5.47%        5,386      253   4.70%      14,807        855   5.77%
Securities:
  U.S. Government and agency              113,748     7,267   6.39%      147,422    9,276   6.29%     173,960     10,312   5.93%
  Taxable municipals                        3,359       222   6.61%        3,004      203   6.76%       2,806        182   6.49%
  Tax-exempt municipals                   151,316    12,174   8.05%       88,274    7,199   8.16%      48,018      4,235   8.82%
  Other                                    18,393     1,286   6.99%       25,642    1,590   6.20%      29,127      1,732   5.95%
---------------------------------------------------------------------------------------------------------------------------------
  Securities before market value
   adjustment                             286,816    20,949   7.30%      264,342   18,268   6.91%     253,911     16,461   6.48%
  Market value adjustment on
   securities available for sale            1,227                           (423)                      (1,844)
---------------------------------------------------------------------------------------------------------------------------------
      Total securities                    288,043                        263,919                      252,067             
Loans:                                                                                                                    
  Commercial                              308,803    28,341   9.18%      271,983   25,378   9.33%     234,167     21,864   9.34%
  Consumer                                157,924    16,251  10.29%      153,045   15,147   9.90%     124,877     12,392   9.92%
  Real estate mortgage                    380,512    32,623   8.57%      335,259   28,847   8.60%     320,315     27,359   8.54%
  Economic development and                                                                                                 
   other municipal loans                   14,539     1,358   9.34%       11,082    1,024   9.24%      10,155      1,026  10.10%
---------------------------------------------------------------------------------------------------------------------------------
      Total loans                         861,778    78,573   9.12%      771,369   70,396   9.13%     689,514     62,641   9.08%
---------------------------------------------------------------------------------------------------------------------------------
      Total earning assets              1,157,586   $99,954   8.63%    1,045,379  $89,190   8.53%     967,238    $80,553   8.33%
                                                    -------                       -------                        -------
                                                    -------                       -------                        -------
NON-EARNING ASSETS:
Allowance for loan losses                  (7,621)                        (6,516)                      (5,939)
Cash and due from banks                    32,423                         32,822                       31,089
Premises and equipment                     28,420                         19,178                       15,550
Other assets                               34,469                         24,160                       19,847
---------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS                           $1,245,277                     $1,115,023                   $1,027,785
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------

INTEREST-BEARING LIABILITIES:
Savings and interest-bearing demand    $  222,182  $  4,182   1.88%   $  218,642 $  4,533   2.07% $   228,632   $  5,517   2.41%
Money market accounts                      79,397     2,875   3.62%       79,758    2,831   3.55%      74,079      2,809   3.79%
Certificates of deposit and other time    545,166    29,061   5.33%      482,974   25,677   5.32%     455,493     23,965   5.26%
---------------------------------------------------------------------------------------------------------------------------------
  Total interest-bearing deposits         846,745    36,118   4.27%      781,374   33,041   4.23%     758,204     32,291   4.26%
Federal funds purchased and securities
  sold under agreements to repurchase      58,512     3,054   5.22%       43,777    2,206   5.04%      21,729      1,067   4.91%
Other borrowings                           74,790     4,461   5.96%       42,280    2,696   6.38%      16,155      1,053   6.52%
---------------------------------------------------------------------------------------------------------------------------------
  Total interest-bearing liabilities      980,047   $43,633   4.45%      867,431  $37,943   4.37%     796,088    $34,411   4.32%
                                                    -------                       -------                        -------
                                                    -------                       -------                        -------
NONINTEREST-BEARING LIABILITIES
  AND SHAREHOLDERS' EQUITY:
Noninterest-bearing demand deposits       113,616                        106,068                       98,109
Other liabilities                          14,866                         13,508                       10,971
Shareholders' equity                      136,748                        128,016                      122,617
---------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND
  SHAREHOLDERS' EQUITY                 $1,245,277                     $1,115,023                   $1,027,785
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------

Interest income/earning assets                      $99,954   8.63%               $89,190   8.53%                $80,553   8.33%
Interest expense/earning assets                      43,633   3.77%                37,943   3.63%                 34,411   3.56%
---------------------------------------------------------------------------------------------------------------------------------
  Net interest income/earning assets                $56,321   4.87%               $51,247   4.90%                $46,142   4.77%
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note:   Income is on a federal-tax-equivalent basis using a 35% tax rate.
        Average volume includes nonaccrual loans.
        Loans are classified by department.


                                                                              17

<PAGE>
REPORT ON MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS

[LOGO]    NATIONAL CITY BANCSHARES, INC.
          ----------------------------------------------------------------------
          227 Main Street, P.O. Box 868, Evansville, Indiana  47705-0868  
          (812) 464-9800 - Fax (812) 464-9825


March 9,1998

The management of National City Bancshares, Inc. is responsible for the 
preparation, integrity, and objectivity of the consolidated financial 
statements and other financial information presented in this Annual Report. 
The financial reports have been prepared in accordance with generally 
accepted accounting principles and properly reflect the effects of amounts 
that are based on the best judgments and estimates made by management.

The Corporation maintains a system of internal controls which, in the opinion 
of management, provides reasonable assurance that its financial records can 
be relied on in the preparation of financial statements and that its assets 
are safeguarded against loss or unauthorized use. The careful selection and 
training of qualified personnel, the use of written policies and procedures, 
and an audit program carried out by a professional staff of internal auditors 
contribute to the effectiveness of this system.

The consolidated financial statements of the Corporation have been audited by 
McGladrey & Pullen, LLP, independent certified public accountants. These 
audits were conducted in accordance with generally accepted auditing 
standards and included a review of the financial controls and such other 
procedures and tests of the accounting records as they considered necessary 
under the circumstances.

The Audit Committee of the Board of Directors, composed solely of directors 
who are not officers or employees of the Corporation, meets regularly with 
the internal auditor and with the independent certified public accountants, 
and management, when appropriate, to review auditing, accounting, reporting, 
and internal control matters. Both the internal and external auditors have 
direct and private access to the Audit Committee.


/s/ MICHAEL F. ELLIOTT                      /s/ ROBERT A KEIL

Michael F. Elliott                          Robert A. Keil
Chairman of the Board                       President, Chief Financial Officer,
and Chief Executive Officer                 and Chief Administrative Officer


18

<PAGE>
INDEPENDENT AUDITOR'S REPORT


                                      [LOGO]
                             McGLADREY & PULLEN, LLP
                   --------------------------------------------
                   CERTIFIED PUBLIC ACCOUNTANTS AND CONSULTANTS



To the Shareholders and Board of Directors
National City Bancshares, Inc.
Evansville, Indiana

We have audited the accompanying consolidated statements of financial 
position of National City Bancshares, Inc. and subsidiaries as of December 
31, 1997 and 1996, and the related consolidated statements of income, 
shareholders' equity, and cash flows for each of the years in the three-year 
period ended December 31, 1997. These financial statements are the 
responsibility of the Corporation's management. Our responsibility is to 
express an opinion on these financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above 
present fairly, in all material respects, the consolidated financial position 
of National City Bancshares, Inc. and subsidiaries as of December 31, 1997 
and 1996, and the results of their operations and their cash flows for each 
of the years in the three-year period ended December 31, 1997, in conformity 
with generally accepted accounting principles.


/s/ McGLADREY & PULLEN LLP

Champaign, Illinois
February 5, 1998 except for Note 21 as to which the date is March 9, 1998


                                                                              19
<PAGE>

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

<TABLE>
<CAPTION>

(DOLLAR AMOUNTS OTHER THAN SHARE DATA IN THOUSANDS)                         DECEMBER 31
                                                                         1997          1996
---------------------------------------------------------------------------------------------
<S>                    <C>         <C>                              <C>            <C>

ASSETS
Cash and cash equivalents                                           $   36,329     $   40,884
Time deposits in banks                                                   2,485          2,983
Federal funds sold                                                       1,500            600
Securities held to maturity (fair value: $166,745 in 1996)                   -        164,603
Securities available for sale                                          267,957        112,800
Nonmarketable equity securities                                         11,371          5,491
Loans - net of allowance for loan losses of $7,969 in 
  1997 and $7,189 in 1996                                              908,387        793,433
Premises and equipment                                                  30,959         23,692
Intangible assets                                                       19,590          7,913
Other assets                                                            19,682         19,658
---------------------------------------------------------------------------------------------
TOTAL ASSETS                                                        $1,298,260     $1,172,057
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------

LIABILITIES
Deposits:                   
  Noninterest-bearing demand                                        $  123,719     $  124,489
  Interest-bearing:                                          
   Savings, daily interest checking, and money market accounts         313,269        293,520
   Time deposits of $100,000 or more                                   129,389        129,534
   Other time                                                          397,669        365,807
---------------------------------------------------------------------------------------------
     Total deposits                                                    964,046        913,350
Short-term borrowings                                                   76,917         67,365
Other borrowings                                                        95,185         50,694
Dividends payable                                                        1,931          1,698
Deferred income taxes                                                    4,349          1,159
Other liabilities                                                        9,029          8,097
---------------------------------------------------------------------------------------------
  Total liabilities                                                  1,151,457      1,042,363
---------------------------------------------------------------------------------------------

COMMITMENTS, CONTINGENCIES, AND CREDIT RISK

SHAREHOLDERS' EQUITY
Common Stock - $1.00 stated value:
                         1997         1996
                      ----------   ----------
  Shares authorized   20,000,000   20,000,000
  Shares outstanding  10,727,247   10,230,426                           10,727         10,230
Capital surplus                                                         79,725         57,631
Retained earnings                                                       52,858         61,819
Unrealized gain (loss) on securities available for sale                  3,493             14
---------------------------------------------------------------------------------------------
  Total shareholders' equity                                           146,803        129,694
---------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                          $1,298,260     $1,172,057
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------

</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


20
<PAGE>

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>

(DOLLAR AMOUNTS OTHER THAN SHARE DATA IN THOUSANDS)                YEAR ENDED DECEMBER 31
                                                           1997           1996             1995
--------------------------------------------------------------------------------------------------
<S>                                                      <C>             <C>               <C>

INTEREST INCOME
Interest and fees on loans:
  Taxable                                                $77,215         $69,372           $61,615
  Tax-exempt                                                 924             695               693
Interest and dividends on securities:
  Taxable                                                  8,775          11,069            12,226
  Tax-exempt                                               8,282           4,887             2,859
Interest on federal funds sold                               218             253               855
Interest on other investments                                214             273               596
--------------------------------------------------------------------------------------------------
  Total interest income                                   95,628          86,549            78,844
--------------------------------------------------------------------------------------------------

INTEREST EXPENSE
Interest on deposits                                      36,118          33,041            32,291
Interest on short-term borrowings                          3,165           2,277             1,218
Interest on other borrowings                               4,350           2,625               902
--------------------------------------------------------------------------------------------------
  Total interest expense                                  43,633          37,943            34,411
--------------------------------------------------------------------------------------------------

NET INTEREST INCOME                                       51,995          48,606            44,433
Provision for loan losses                                  1,891           2,704               399
--------------------------------------------------------------------------------------------------
  Net interest income after provision for loan losses     50,104          45,902            44,034
--------------------------------------------------------------------------------------------------

NONINTEREST INCOME
Trust income                                               1,927           1,748             1,503
Service charges on deposit accounts                        3,981           3,650             2,959
Other service charges and fees                             2,631           2,358             1,814
Securities gains (losses)                                    794              42                26
Other                                                        755             808               815
--------------------------------------------------------------------------------------------------
  Total noninterest income                                10,088           8,606             7,117
--------------------------------------------------------------------------------------------------

NONINTEREST EXPENSE
Salaries, wages, and other employee benefits              19,479          16,694            16,577
Occupancy expense                                          2,114           1,993             1,980
Furniture and equipment expense                            2,497           2,345             2,082
Assessments of the Federal Deposit Insurance Corporation     175             798             1,082
Other                                                     10,125           8,136             7,247
--------------------------------------------------------------------------------------------------
  Total noninterest expense                               34,390          29,966            28,968
--------------------------------------------------------------------------------------------------

  Income before income taxes                              25,802          24,542            22,183
Income taxes                                               7,451           8,046             7,784
--------------------------------------------------------------------------------------------------
NET INCOME                                               $18,351         $16,496           $14,399
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------

EARNINGS PER SHARE - BASIC                               $  1.72         $  1.52           $  1.30
EARNINGS PER SHARE - DILUTED                             $  1.69         $  1.52           $  1.30
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------

</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                                                              21
<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

(DOLLAR AMOUNTS OTHER THAN SHARE DATA IN THOUSANDS)                                           YEAR ENDED DECEMBER 31
                                                                                         1997           1996           1995
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>            <C>             <C>

CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                                            $  18,351      $ 16,496        $ 14,399
Adjustments to reconcile net income to net cash provided by operating activities:
  Amortization                                                                              690           518           1,311
  Depreciation                                                                            2,034         1,953           1,777
  Provision for loan losses                                                               1,891         2,704             399
  Write-down of other real estate owned                                                      99            61              69
  Securities (gains) losses                                                                (794)          (42)            (26)
  Originations of loans held for sale                                                   (31,691)      (26,346)        (15,489)
  Proceeds from sales of loans held for sale                                             32,139        26,580          15,604
  (Gain) loss on sale of loans held for sale                                               (448)         (234)           (115)
  (Gain) loss on sale of premises and equipment                                              20           (21)            (15)
  (Gain) loss on sale of other real estate owned                                              -            31              39
  (Gain) loss on sale of subsidiary                                                           -             -            (206)
  Increase (decrease) in deferred taxes                                                   1,029           387             (31)
Changes in assets and liabilities:
  (Increase) decrease in other assets                                                       162        (1,823)           (651)
  Increase (decrease) in other liabilities                                                  138          (410)          1,528
-----------------------------------------------------------------------------------------------------------------------------
   Net cash flows provided by operating activities                                       23,620        19,854          18,593
-----------------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in interest-bearing deposits in banks                             1,892         5,525           7,585
Proceeds from maturities of securities held to maturity                                   6,990        15,097          25,681
Proceeds from maturities of securities available for sale                                63,841        64,248          45,631
Proceeds from sales of securities held to maturity                                        3,509             -               -
Proceeds from sales of securities available for sale                                     22,257         7,355             118
Proceeds from sales of nonmarketable equity securities                                      804             -               -
Purchases of securities held to maturity                                                (26,321)      (61,180)        (33,607)
Purchases of securities available for sale                                              (38,783)      (26,684)        (19,108)
Purchases of nonmarketable equity securities                                             (5,910)       (1,162)         (1,661)
(Increase) decrease in federal funds sold                                                 2,200         4,945            (420)
(Increase) decrease in loans made to customers                                          (57,970)      (41,137)        (81,054)
Capital expenditures                                                                    (10,417)       (8,589)         (3,755)
Proceeds from sale of premises and equipment                                              2,022            26              63
Proceeds from sale of other real estate owned                                               338           260             577
Purchase of subsidiaries, net of cash and due from banks acquired                        (5,191)      (10,808)           (309)
Cash transferred to buyer in sale of subsidiary                                               -             -         (10,370)
-----------------------------------------------------------------------------------------------------------------------------
   Net cash flows provided by (used in) investing activities                            (40,739)      (52,104)        (70,629)
-----------------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits                                                     (16,715)        5,935           8,944
Net proceeds (payments) on short-term borrowings                                          9,352        11,767          26,895
Proceeds from other borrowings                                                          165,234        31,184          17,434
Payments on other borrowings                                                           (124,870)       (2,041)           (195)
Dividends paid                                                                           (6,509)       (5,589)         (3,957)
Repurchase of common stock                                                              (16,198)      (12,890)           (863)
Sale of common stock                                                                      1,705         1,653           1,036
Proceeds from exercise of stock options                                                     565           213               -
-----------------------------------------------------------------------------------------------------------------------------
   Net cash flows provided by (used in) financing activities                             12,564        30,232          49,294
-----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents                                     (4,555)       (2,018)         (2,742)
Cash and cash equivalents at beginning of year                                           40,884        42,902          45,644
-----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year                                              $  36,329      $ 40,884        $ 42,902
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------

</TABLE>

CONSOLIDATED STATEMENTS OF CASH FLOWS ARE CONTINUED ON THE FOLLOWING PAGE


22
<PAGE>


<TABLE>
<CAPTION>

                                                                                                YEAR ENDED DECEMBER 31
                                                                                         1997           1996              1995
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                    <C>           <C>               <C>

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
  Interest                                                                             $ 43,715      $ 37,481          $ 30,294
  Income taxes                                                                            6,791         8,139             6,640

SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS
Change in allowance for unrealized gain (loss) on securities available for sale          $5,721      $   (445)         $  5,090
Change in deferred taxes attributable to securities available for sale                   (2,242)          173            (1,935)
Transfer of securities held to maturity to available for sale                           180,696             -            34,987
Other real estate acquired in settlement of loans                                           425            35               363
Transfer from other real estate owned to other assets                                         -             -                 7
Transfer from premises and equipment to other real estate owned                               -             -                41

Purchase of subsidiaries:
  Purchase price                                                                       $  6,797      $ 12,038          $    896
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
  Assets acquired:
    Cash and cash equivalents                                                            $1,606      $  1,230          $    587
    Interest-bearing deposits in banks                                                    1,394         1,488               399
    Securities                                                                           16,066        22,187             3,753
    Federal funds sold                                                                    3,100           100             1,975
    Loans                                                                                59,300        24,214            11,069
    Premises and equipment                                                                  930           364               355
    Deferred taxes                                                                           81             -                 -
    Other assets                                                                         12,801         6,331             2,108
  Liabilities assumed:
    Deposits                                                                            (67,411)      (43,279)          (16,742)
    Short-term borrowings                                                                  (200)            -                 -
    Other borrowings                                                                     (4,127)            -                 -
    Deferred taxes payable                                                                    -             -               (25)
    Other liabilities                                                                      (794)         (597)             (141)
  Common stock issued                                                                   (15,949)            -            (2,442)
-------------------------------------------------------------------------------------------------------------------------------
                                                                                       $  6,797       $ 12,038         $    896
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
Sale of branch:
  Cash paid                                                                                   -              -         $ 10,244
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
  Assets disposed:
    Cash                                                                                      -              -         $   (126)
    Loans                                                                                     -              -              (25)
    Premises and equipment                                                                    -              -              (33)
    Other assets                                                                              -              -             (265)
  Liabilities assumed by buyer:
    Deposits                                                                                  -              -           10,856
    Other liabilities                                                                         -              -               43
  Gain on sale of branch                                                                      -              -             (206)
-------------------------------------------------------------------------------------------------------------------------------
                                                                                              -              -         $ 10,244
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------

</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                                                              23
<PAGE>

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
(DOLLAR AMOUNTS OTHER THAN SHARE DATA IN THOUSANDS)


For the Years Ended                                                                                               Unrealized
December 31, 1997, 1996, and 1995                                                                                Gain (Loss)
                                                                                                               on Securities
                                                              Common       Common      Capital     Retained        Available
                                                              Shares        Stock      Surplus     Earnings         For Sale
----------------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>              <C>        <C>          <C>         <C>
Balances at December 31, 1994,
 as previously reported                                    8,781,264      $ 8,781     $ 42,815     $ 55,633          $(2,594)
Adjusted for pooling of interests                            794,994          795        1,174        8,421             (275)
----------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1994                               9,576,258        9,576       43,989       64,054           (2,869)
----------------------------------------------------------------------------------------------------------------------------
Net income                                                         -            -            -       14,399                -
Cash dividends declared                                            -            -            -       (4,327)               -
Repurchase of outstanding shares                             (39,000)         (39)        (824)           -                -
Shares issued in Dividend
  Reinvestment Program                                        37,684           37          766            -                -
Change in unrealized gain (loss) on securities                     -            -           -             -            3,155
Issuance of common stock related to
  acquisition of subsidiary                                  111,018          111        2,331            -                -
Payment for fractional shares for merger                           -            -           (9)           -                -
Stock dividend                                               447,722          448        9,514       (9,962)               -
Payment for fractional shares for stock dividend              (1,052)          (1)         (24)           -                -
Issuance of stock under United Financial
  Bancorp, Inc. Stock Option Plan                             56,760           57          210            -                -
Amortization of stock award program                                -            -           14            -                -
----------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1995                              10,189,390       10,189       55,967       64,164              286
----------------------------------------------------------------------------------------------------------------------------
Net income                                                         -            -            -       16,496                -
Cash dividends declared                                            -            -            -       (6,112)               -
Repurchase of outstanding shares                            (480,207)        (480)     (12,410)           -                -
Shares issued in Dividend
  Reinvestment Program                                        60,404           60        1,606            -                -
Change in unrealized gain (loss) on securities                     -            -            -            -             (272)
Stock dividend                                               450,656          450       12,279      (12,729)               -
Payment of fractional shares for stock dividend                 (450)           -          (13)           -                -
Exercise of stock options                                     10,633           11          202            -                -
----------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1996                              10,230,426       10,230       57,631       61,819               14
----------------------------------------------------------------------------------------------------------------------------
Net income                                                         -            -            -       18,351                -
Cash dividends declared                                            -            -            -       (6,742)               -
Repurchase of outstanding shares                            (426,508)        (427)     (15,768)           -                -
Shares issued in Dividend
  Reinvestment Program                                        47,781           48        1,678            -                -
Change in unrealized gain (loss) on securities                     -            -            -            -            3,479
Issuance of common stock related to
  acquisition of subsidiary                                  375,000          375       15,574            -                -
Payment for fractional shares for merger                         (84)           -           (3)           -                -
Stock dividend                                               472,866          473       20,097      (20,570)               -
Payment of fractional shares for stock dividend                 (458)           -          (21)           -                -
Exercise of stock options                                     28,224           28          537            -                -
----------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1997                              10,727,247      $10,727     $ 79,725     $ 52,858          $ 3,493
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------

</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


24
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS OTHER THAN SHARE DATA IN THOUSANDS)

NOTE 1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS
National City Bancshares, Inc. (Corporation) is a bank holding company whose
subsidiaries provide a full range of banking services to individual and
corporate customers through its wholly-owned bank subsidiaries located in
Southwestern Indiana, Southeastern Illinois, and Western Kentucky. The
subsidiary banks are subject to competition from other financial institutions
and nonfinancial institutions providing financial products. Additionally, the
Corporation and its subsidiaries are subject to the regulations of certain
regulatory agencies and undergo periodic examinations by those regulatory
agencies.

The consolidated financial statements of the Corporation have been prepared
in conformity with generally accepted accounting principles and conform to
predominate practice within the banking industry.

Following is a description of the more significant of these policies.

BASIS OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
the Corporation and its wholly-owned subsidiaries: The National City Bank of
Evansville, The Peoples National Bank of Grayville, First Kentucky Bank,
Lincolnland Bank, The Bank of Mitchell, Pike County Bank, White County Bank,
Alliance Bank, The First National Bank of Wayne City, First Federal Savings
Bank of Leitchfield, First National Bank of Bridgeport, First Bank of
Huntingburg, NCBE Leasing Corp., and Twenty-One Southeast Third Corporation.
All significant intercompany transactions and balances have been eliminated.

The Corporation and its subsidiaries utilize the accrual basis of accounting for
major items.

In preparing the consolidated financial statements, management is required to
make estimates and assumptions which significantly affect the amounts
reported in the consolidated financial statements. Significant estimates
which are particularly susceptible to change in a short period of time
include the determination of the allowance for loan losses and valuation of
real estate and other properties acquired in connection with foreclosures or
in satisfaction of amounts due from borrowers on loans. Actual results could
differ from those estimates.

CASH FLOWS
For purposes of reporting cash flows, cash and cash equivalents includes cash
on hand, amounts due from banks, and short-term money market investments.
Interest-bearing deposits in banks, regardless of maturity, are considered
short-term investments.

TRUST ASSETS
Property held for customers in fiduciary or agency capacities, other than
trust cash on deposit at the banks, is not included in the accompanying
consolidated financial statements since such items are not assets of the
Corporation or its subsidiaries.

SECURITIES
Securities classified as held to maturity are those securities the
Corporation has both the intent and ability to hold to maturity regardless of
changes in market conditions, liquidity needs, or changes in general economic
conditions. These securities are carried at cost adjusted for amortization of
premium and accretion of discount, computed by the interest method over their
contractual lives.

Securities classified as available for sale are those debt securities that the
Corporation intends to hold for an indefinite period of time, but not
necessarily to maturity, and marketable equity securities. Any decision to
sell a security classified as available for sale would be based on various
factors, including significant movements in interest rates, changes in the
maturity mix of assets and liabilities, liquidity needs, regulatory capital
considerations, and other similar factors. Securities available for sale are
carried at fair value. Unrealized gains or losses are reported as increases
or decreases in shareholders' equity, net of the related deferred tax effect.
Realized gains or losses, determined on the basis of the cost of specific
securities sold, are included as a component of net income.

Nonmarketable equity securities are carried at cost as there is no readily
determinable fair value.

LOANS
Loans are stated at the principal amount outstanding, less unearned interest 
income and an allowance for loan losses. Unearned income on installment loans 
is recognized as income based on the sum-of-the-months digits method which 
approximates the interest method. Interest income on substantially all other 
loans is credited to income based on the principal balances of loans 
outstanding.

The Corporation's policy is to discontinue the accrual of interest income on
any loan when, in the opinion of management, there is reasonable doubt as to
the timely collectibility of interest or principal. Upon discontinuance of
interest accrual, unpaid accrued interest is reversed. Interest income on
these loans is recognized to the extent interest payments are received and
the principal is considered fully collectible. Nonaccrual loans are returned
to accrual status when, in the opinion of management, the financial position
of the borrower indicates there is no longer any reasonable doubt as to the
timely collectibility of interest and principal.

ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is maintained at a level believed adequate by
management to provide for known and inherent risks in the loan portfolio. The
allowance is based upon a continuing evaluation of the risk characteristics
of the loan portfolios, past loan loss experience, and current economic
conditions. The continuing review considers such factors as the financial
condition

                                                                              25
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(DOLLAR AMOUNTS OTHER THAN SHARE DATA IN THOUSANDS)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

of the borrower, fair market value of the collateral, and other
considerations which, in management's opinion, deserve current recognition in
estimating loan losses.  Loans which are deemed to be uncollectible are
charged to the allowance. The provision for loan losses and recoveries are
credited to the allowance.

Loans are considered impaired when, based on current information and events,
it is probable the Corporation will not be able to collect all amounts due.
The portion of the allowance for loan losses applicable to impaired loans has
been computed based on the present value of the estimated future cash flows
of interest and principal discounted at the loan's effective interest rate or
on the fair value of the collateral for collateral dependent loans. The
entire change in present value of expected cash flows of impaired loans or of
collateral value is reported as bad debt expense in the same manner in which
impairment initially was recognized or as a reduction in the amount of bad
debt expense that otherwise would be reported.

PREMISES AND EQUIPMENT
Premises and equipment are carried at cost less accumulated depreciation.
Provisions for depreciation are charged to operating expense over the useful
lives of the assets, computed principally by the straight-line method.

INTANGIBLE ASSETS
Costs in excess of fair value of net assets acquired consist primarily of
goodwill and core deposit intangibles. Goodwill is amortized to expense over
varying periods up to 25 years using the straight-line method. Core deposit
intangibles are amortized over 7 years using the straight-line method.
Amortization for the years ended December 31, 1997, 1996, and 1995, was $932,
$410, and $292, respectively. Intangible assets are reviewed for possible
impairment when events or changed circumstances may affect the underlying
basis of the assets.

INCOME TAXES
The Corporation and its subsidiaries file a consolidated Federal income tax
return with each organization computing its taxes on a separate company
basis. The provision for income taxes is based on income as reported in the
financial statements. Deferred income tax assets and liabilities are computed
annually for differences between the financial statement and tax bases of
assets and liabilities that will result in taxable or deductible amounts in
the future. The deferred tax assets and liabilities are computed based on
enacted tax laws and rates applicable to the periods in which the differences
are expected to affect taxable income. Valuation allowances are established
when necessary to reduce deferred tax assets to an amount expected to be
realized. Income tax expense is the tax payable or refundable for the period
plus or minus the change during the period in deferred tax assets and
liabilities.

ACCOUNTING FOR POSTRETIREMENT BENEFITS OTHER THAN PENSION
The Corporation is recognizing the transition obligation using the
straight-line method over the plan participants' average future service
period of twenty years. Management does not expect this obligation to
increase.

REPORTING COMPREHENSIVE INCOME
Statement of Financial Accounting Standard No. 130, "Reporting Comprehensive
Income" (FAS 130), was issued in June 1997 by the Financial Accounting
Standards Board. The standard establishes reporting of comprehensive income
for general purpose financial statements. Comprehensive income is defined as
the change in equity of a business enterprise during a period and all other
events and circumstances from nonowner sources. The Standard is effective for
financial statement periods beginning after December 15, 1997. The Corporation
does not believe the adoption of the Standard will have a material impact on
the consolidated financial statements.

DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
Statement of Financial Accounting Standard No. 131, "Disclosures about
Segments of an Enterprise and Related Information" (FAS 131), was issued in
June 1997 by the Financial Accounting Standards Board. The standard requires
the Corporation to disclose the factors used to identify reportable segments
including the basis of organization, differences in products and services,
geographic areas, and regulatory environments. FAS 131 additionally requires
financial results to be reported in the financial statements for each
reportable segment. The Standard is effective for financial statement periods
beginning after December 15, 1997. The Corporation does not believe the
adoption of the Standard will have a material impact on the consolidated
financial statements.

RECLASSIFICATIONS
Certain reclassifications have been made to the balances as of and for the
years ended December 31, 1996 and 1995, to be consistent with classifications
adopted for 1997.

NOTE 2.    BUSINESS COMBINATIONS

On March 1, 1997, the Corporation acquired First Federal Savings Bank of
Leitchfield, a $43,000 savings bank located in Leitchfield, Kentucky. This
acquisition was accounted for as a purchase, and results of operations of
First Federal Savings Bank of Leitchfield since the acquisition have been
included in the financial statements. The excess of the acquisition cost over
the fair value of net assets acquired in the amount of $2,807 will be
amortized over 25 years using the straight-line method.

On August 1, 1997, the Corporation acquired Bridgeport Bancorp, Inc., the
parent company of First National Bank of Bridgeport, with total assets of
$39,382 located in Bridgeport, Illinois. This acquisition was accounted for
as a purchase, and the results of operations since the acquisition have been
included in the financial statements. The excess of the acquisition cost over
fair value of net assets acquired in the amount of $9,377 will be amortized
over 25 years using the straight-line method.

26
<PAGE>
The table below presents pro forma combined results of operations for the
Corporation, First Federal Savings Bank of Leitchfield, and First National Bank
of Bridgeport, for the years ended December 31:

<TABLE>
<CAPTION>
                                                                  1997          1996
-------------------------------------------------------------------------------------
<S>                                                             <C>           <C>
Net interest income                                             $97,858       $92,790
Net income                                                       18,517        16,734
Earnings per share - Basic                                         1.73          1.54
Earnings per share - Diluted                                       1.71          1.54
</TABLE>


On December 31, 1997, the Corporation issued 794,994 shares of common stock for
all of the common stock of First Fourth Bancorp, the parent company of First 
Bank of Huntingburg, Huntingburg, Indiana, with total assets of $108,077 and 
total equity of $12,917. The combination was accounted for as a pooling of 
interests. Accordingly, the Corporation's financial statements have been 
retroactively restated to include the accounts and operations of First Fourth 
Bancorp for all periods presented. Certain reclassifications have been made to 
First Fourth Bancorp's historical financial statements to conform to the
Corporation's presentation.

Assets, loans, deposits,interest income, net interest income, and net income of
the Corporation (NCBE) and First Fourth Bancorp (FFB) for the periods prior to
the acquisition are shown in the table below. Due to elimination of intercompany
transactions, the historical data may not aggregate to the consolidated amounts.

<TABLE>
<CAPTION>
                                                                                             NCBE
                                                                 NCBE           FFB      Consolidated
-----------------------------------------------------------------------------------------------------
<S>                                                            <C>             <C>          <C>
DECEMBER 31, 1997:
 LOANS, NET OF UNEARNED INCOME                                 $  832,701      $ 83,655     $   916,356
 DEPOSITS                                                         870,825        93,485         964,046
 ASSETS                                                         1,193,697       108,109       1,298,260

December 31, 1996:  
 Loans, net of unearned income                                 $  723,308      $ 77,314     $   800,622
 Deposits                                                         825,371        87,995         913,350
 Assets                                                         1,069,086       103,239       1,172,057

YEAR ENDED DECEMBER 31, 1997:                                                           
 INTEREST INCOME                                               $   87,253      $  8,392     $    95,628
 INTEREST EXPENSE                                                  39,977         3,673          43,633
 NET INTEREST INCOME                                               47,276         4,719          51,995
 PROVISION FOR LOAN LOSSES                                          1,711           180           1,891
 NET INCOME                                                        17,119         1,232          18,351
 EARNINGS PER SHARE-BASIC                                            1.73          8.63            1.72
 EARNINGS PER SHARE-DILUTED                                          1.71          8.63            1.69

Year ended December 31, 1996:                                                           
 Interest income                                               $   78,640      $  7,909     $    86,549
 Interest expense                                                  34,499         3,444          37,943
 Net interest income                                               44,141         4,465          48,606
 Provision for loan losses                                          2,491           213           2,704
 Net income                                                        15,246         1,250          16,496
 Earnings per share-Basic                                            1.59          8.76            1.52
 Earnings per share-Diluted                                          1.59          8.76            1.52
                                                                                        
Year ended December 31, 1995:                                                           
 Interest income                                               $   71,215      $  7,629     $    78,844
 Interest expense                                                  31,048         3,363          34,411
 Net interest income                                               40,167         4,266          44,433
 Provision for loan losses                                            294           105             399
 Net income                                                        13,115         1,284          14,399
 Earnings per share-Basic                                            1.34          9.00            1.30
 Earnings per share-Diluted                                          1.34          9.00            1.30
</TABLE>

NOTE 3.    EARNINGS PER SHARE

In 1997, the Financial Accounting Standards Board issued Statement No. 128,
"Earnings per Share." Statement 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any 
dilutive effects of options,warrants, and convertible securities. Diluted 
earnings per share is very similar to the previously reported fully diluted 
earnings per share. All earnings per share amounts for all periods have been 
presented, and where appropriate, restated to conform to the Statement 128 
requirements.

Basic earnings per share is computed by dividing net income for the year by the
weighted average number of shares outstanding.

Diluted earnings per share is determined by dividing net income for the year by
the weighted average number of shares of common stock and common stock
equivalents outstanding. Common stock equivalents assume exercise of stock
options and use of proceeds to purchase treasury stock at the average market
price for the period.

The following provides a reconciliation of basic and diluted earnings per share.

<TABLE>
<CAPTION>
                                                                  1997          1996         1995
--------------------------------------------------------------------------------------------------
<S>                                                         <C>           <C>          <C>
Net income                                                  $    18,351   $    16,496  $    14,399
Weighted average shares outstanding
 Basic                                                       10,679,448    10,843,295   11,095,116
 Diluted                                                     10,832,943    10,843,295   11,095,116
EARNINGS PER SHARE-BASIC                                          $1.72         $1.52        $1.30
 Effect of stock options                                          (0.03)            -            -
--------------------------------------------------------------------------------------------------
EARNINGS PER SHARE-DILUTED                                  $      1.69   $      1.52  $      1.30
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
</TABLE>

NOTE 4.    CASH AND DUE FROM BANKS

Aggregate cash and due from bank balances of $10,401 and $8,677 as of December
31, 1997 and 1996, respectively, were maintained in satisfaction of statutory
reserve requirements of the Federal Reserve Bank of St. Louis.

NOTE 5.    SECURITIES

Amortized cost and fair value of debt securities classified as held to maturity
are as follows:

<TABLE>
<CAPTION>
                                                                      As of December 31, 1997
-----------------------------------------------------------------------------------------------------------
                                                                            Gross        Gross 
                                                          Amortized    Unrealized   Unrealized         Fair
                                                               Cost         Gains       Losses        Value
-----------------------------------------------------------------------------------------------------------
<S>                                                       <C>          <C>          <C>            <C>
U.S. Government and
 agency securities                                         $ 21,877        $  221       $    -     $ 22,098
Taxable municipals                                            2,775            56           17        2,814
Tax-exempt municipals                                       120,805         2,387          751      122,441
Corporate securities                                         11,161            87           13       11,235
Mortgage-backed securities                                    7,985           192           20        8,157
-----------------------------------------------------------------------------------------------------------
  Total                                                    $164,603        $2,943       $  801     $166,745
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
</TABLE>


                                                                             27
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(DOLLAR AMOUNTS OTHER THAN SHARE DATA IN THOUSANDS)

NOTE 5.  SECURITIES, CONTINUED

Amortized cost and fair value of securities classified as available for sale are
as follows:

<TABLE>
<CAPTION>
                                                                   AS OF DECEMBER 31, 1997
--------------------------------------------------------------------------------------------------------
                                                                         GROSS        GROSS 
                                                       AMORTIZED    UNREALIZED   UNREALIZED         FAIR
                                                            COST         GAINS       LOSSES        VALUE
---------------------------------------------------------------------------------------------------------
<S>                                                     <C>          <C>          <C>           <C>
U.S. Government and
 agency securities                                      $ 38,792       $  238         $  48     $ 38,982
Taxable municipals                                         3,411           63             1        3,473
Tax-exempt municipals                                    164,784        5,640           123      170,301
Corporate securities                                       5,975           13             2        5,986
Mortgage-backed securities                                47,816          263           219       47,860
-----------------------------------------------------------------------------------------------------------
  Subtotal                                               260,778        6,217           393      266,602
Equity Securities                                          1,436           66           147        1,355
----------------------------------------------------------------------------------------------------------
  Total                                                 $262,214       $6,283         $ 540     $267,957
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                                      As of December 31, 1996
-----------------------------------------------------------------------------------------------------------
                                                                         Gross         Gross 
                                                       Amortized    Unrealized    Unrealized         Fair
                                                            Cost         Gains        Losses        Value
-----------------------------------------------------------------------------------------------------------
<S>                                                     <C>          <C>           <C>           <C>
U.S. Government and
 agency securities                                      $ 52,052        $  369        $  161     $ 52,260
Taxable municipals                                             -             -             -            -
Tax-exempt municipals                                          -             -             -            -
Corporate securities                                       3,049             7             -        3,056
Mortgage-backed securities                                56,052           344           314       56,082
-----------------------------------------------------------------------------------------------------------
Subtotal                                                 111,153           720           475      111,398
Equity Securities                                          1,625             1           224        1,402
----------------------------------------------------------------------------------------------------------
Total                                                   $112,778        $  721        $  699     $112,800
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
</TABLE>

The amortized cost and fair value of the securities as of December 31, 1997, by
contractual maturity, are shown below. Expected maturities may differ from
contractual maturities in mortgage-backed securities, because certain mortgages
may be called or prepaid without penalties. Therefore, these securities are not
included in the maturity categories in the following maturity schedules:

MATURITY SCHEDULE OF DEBT SECURITIES AVAILABLE FOR SALE:

<TABLE>
<CAPTION>
December 31, 1997                      Amortized Cost           Fair Value
---------------------------------------------------------------------------
<S>                                    <C>                      <C>
Less than 1 year                             $ 35,702             $ 35,774
1 year to 5 years                              45,822               46,676
5 years to 10 years                            47,215               48,935
Over 10 years                                  84,223               87,357
Mortgage-backed securities                     47,816               47,860
--------------------------------------------------------------------------
  Total                                      $260,778             $266,602
--------------------------------------------------------------------------
--------------------------------------------------------------------------
</TABLE>


Securities gains and(losses) are summarized as follows:

<TABLE>
<CAPTION>
                                              1997           1996           1995
--------------------------------------------------------------------------------
<S>                                           <C>            <C>            <C>
Gross realized gains                          $835           $44            $31
Gross realized losses                          (41)           (2)            (5)
--------------------------------------------------------------------------------
  Total                                       $794           $42            $26
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
</TABLE>

As of December 31, 1997 and 1996, the carrying value of securities pledged as
collateral for public deposits and for other purposes as required or permitted 
by law were $78,236 and $56,940, respectively.

During 1995, the Financial Accounting Standards Board decided to allow all
enterprises to make a one-time reassessment of the classification of
securities made under FAS 115, "Accounting for Certain Investments in Debt and
Equity Securities". The Corporation transferred debt securities with an
amortized cost of $34,987 from held-to-maturity classification to the
available-for-sale classification and recorded, as a component of equity, an
unrealized gain of $205, net of $128 of deferred taxes.

On March 31, 1997, the Corporation transferred $180,696 of securities classified
as held to maturity to the available for sale category and recorded, as a
component of equity, an unrealized gain of $71, net of $38 of deferred taxes. In
accordance with the requirements of Statement of Financial Accounting Standards
No. 115, these securities are now accounted for at fair value, and any 
unrealized gain or loss net of deferred tax effect is reflected as a separate 
component of shareholders' equity.

NOTE 6.    LOANS

A summary of loans as of December 31 follows:

<TABLE>
<CAPTION>
                                                                  1997             1996
----------------------------------------------------------------------------------------
<S>                                                           <C>              <C>
Real estate loans                                             $501,882         $425,507
Agricultural loans                                              31,788           31,154
Commericial and industrial loans                               201,402          176,572
Economic development loans and                            
  other obligations of state and                          
  political subdivisions                                        13,997           11,214
Consumer loans                                                 149,505          143,485
Direct lease financing                                          13,146           12,331
Leveraged leases                                                 4,661                -
All other loans                                                    415              582
----------------------------------------------------------------------------------------
   Total loans - gross                                         916,796          800,845
Unearned income on loans                                          (440)            (223)
----------------------------------------------------------------------------------------
   Total loans - net of                                       
    unearned income                                            916,356          800,622
Allowance for loan losses                                       (7,969)          (7,189)
----------------------------------------------------------------------------------------
   Total loans - net                                          $908,387         $793,433
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
</TABLE>


The following table presents data on impaired loans at December 31, 1997, 1996,
and 1995.


<TABLE>
<CAPTION>
                                                        1997           1996             1995
---------------------------------------------------------------------------------------------
<S>                                                   <C>             <C>              <C>
Impaired loans for which there is a
related allowance for loan losses                     $1,727          $2,139           $2,772
Impaired loans for which there is no
related allowance for loan losses                        102             141               20
---------------------------------------------------------------------------------------------
Total impaired loans                                  $1,829          $2,280           $2,792
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
Allowance for loan losses for
 impaired loans included in the
 allowance for loan losses                            $  639          $  437           $  584
Average recorded investment in
 impaired loans                                        2,013           3,303            2,634
Interest income recognized from
 impaired loans                                          177             323              150
Cash basis interest income
 recognized from impaired loans                           62               7                8
</TABLE>


The amount of loans serviced by the Corporation for the benefit of others is not
included in the accompanying Consolidated Statements of Financial Position. The
amount of unpaid principal balances of these loans were $113,907 and $97,990 as
of December 31, 1997 and 1996, respectively.

                                                                              28
<PAGE>

The Corporation has granted a blanket collateral agreement on qualified mortgage
loans to secure advances from Federal Home Loan Banks.

In the normal course of business, the subsidiary banks make loans to their
executive officers and directors, and to companies and individuals affiliated
with officers and directors of the banks and the Corporation. In the opinion of
management, these loans were made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with unrelated parties. The activity in these loans during 1997 is
as follows:

<TABLE>
<CAPTION>
<S>                                                                   <C>
Balance as of January 1, 1997                                         $24,541
New loans                                                              47,411
Repayments                                                            (45,176)
----------------------------------------------------------------------------
  Balance as of December 31,1997                                      $26,776
----------------------------------------------------------------------------
----------------------------------------------------------------------------
</TABLE>

NOTE 7.    LEASE FINANCING

The Corporation's leasing operations include both direct financing and leveraged
leasing. The direct financing leasing activity involves the leasing of various
types of office, data processing, and transportation equipment. These equipment
leases have lives of three to seven years.

Under the direct financing method of accounting for leases, the total net 
rentals receivable under the lease contracts, initial direct costs (net of 
fees), and the estimated guaranteed residual value of the leased equipment, 
net of unearned income, are recorded as a net investment in direct financing 
leases, and the unearned income on each lease is recognized each month at a 
constant periodic rate of return on the unrecovered investment.

The composition of the net investment in direct lease financing at December 31,
1997 is as follows:


<TABLE>
<CAPTION>
<S>                                                                <C>
Total minimum lease payments to be received                        $16,050
Less: estimated executory costs (property taxes, insurance,
  and maintenance), including profit thereon, included in
  the total minimum lease payments                                       -
--------------------------------------------------------------------------
Minimum lease payments receivable                                   16,050
Add estimated residual values of leased equipment                    2,800
Add initial direct costs                                                63
(Deduct) unearned lease income                                      (5,767)
---------------------------------------------------------------------------
    Net investment in direct lease financing                       $13,146
---------------------------------------------------------------------------
---------------------------------------------------------------------------
</TABLE>

At December 31, 1997, the minimum future lease payments due under the direct
financing leases are as follows:

<TABLE>
<CAPTION>
<S>                                                        <C>
1997                                                       $ 2,661
1998                                                         2,413
1999                                                         1,961
2000                                                         1,597
2001                                                         1,315
Thereafter                                                   6,103
------------------------------------------------------------------
    Total minimum future lease payments                    $16,050
------------------------------------------------------------------
------------------------------------------------------------------
</TABLE>


In 1997, the Corporation's leasing subsidiary, entered into two leveraged leases
with a regional air carrier for aircraft, which have an estimated economic life
of 23 years, were leased for a term of 16.5 years. The equity investment in
the aircraft represented 22% of the purchase price; the remaining 88% was
furnished by third-party financing in the form of long-term debt with no 
recourse against the lessor and is secured by a first lien on the aircraft. At 
the end of the lease term, the aircraft will be turned back to the lessor. The 
residual value at that time is estimated to be 32% of the cost. For federal 
income tax purposes, the lessor receives the benefit of tax deductions for 
depreciation on the entire leased asset and for the interest on the long-term 
debt. Since during the early years of the lease those deductions exceed the 
lease rental income, excess deductions are available to offset other taxable 
income. In the later years of the lease, rental income will exceed the 
deductions which will increase taxable income. Deferred taxes are provided to 
reflect this reversal of tax deductions. The net investment in leveraged leases 
at December 31, 1997, are composed of the following elements:

<TABLE>
<CAPTION>
<S>                                                                  <C>
Rentals receivable (net of principal and interest 
  on nonrecourse debt)                                               $1,841
Estimated residual value of leased assets                             5,722
Less: unearned and deferred income                                    2,902
---------------------------------------------------------------------------
Investment in leveraged lease                                         4,661
Less: deferred taxes arising from leveraged leases                    1,011
---------------------------------------------------------------------------
Net investment in leveraged leases                                   $3,650
---------------------------------------------------------------------------
---------------------------------------------------------------------------
</TABLE>

NOTE 8.    ALLOWANCE FOR LOAN LOSSES

Changes in the allowance for loan losses were as follows during the three years
ended December 31:

<TABLE>
<CAPTION>
                                                              1997       1996       1995
----------------------------------------------------------------------------------------
<S>                                                         <C>        <C>        <C>
Balance at beginning of year                                $7,189     $6,176     $5,750
Allowance associated with
 acquisitions                                                  516        379        140
Provision charged to operations                              1,891      2,704        399
Recoveries credited to allowance                               838        514        631
Loans charged to allowance                                  (2,465)    (2,584)      (744)
----------------------------------------------------------------------------------------
Balance at end of year                                      $7,969     $7,189     $6,176
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
</TABLE>

NOTE 9.    PREMISES AND EQUIPMENT

Premises and equipment as of December 31 consist of:

<TABLE>
<CAPTION>
                                                              1997            1996
----------------------------------------------------------------------------------
<S>                                                        <C>             <C>
Land                                                       $ 2,535         $ 2,401
Buildings                                                   22,401          19,395
Equipment                                                   15,234          13,946
Leasehold improvements                                       2,081           1,216
Construction in progress                                     8,169           5,372
----------------------------------------------------------------------------------
  Total cost                                                50,420          42,330
Less accumulated depreciation                               19,461          18,638
----------------------------------------------------------------------------------
  Net premises and equipment                               $30,959         $23,692
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
</TABLE>

Construction in progress included capitalized interest of $371 and $105 as of
December 31, 1997 and 1996, respectively.
                                                                              29
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(DOLLAR AMOUNTS OTHER THAN SHARE DATA IN THOUSANDS)


NOTE 10.    DEPOSITS

As of December 31, 1997, the scheduled maturities of time deposits are as
follows:

<TABLE>

<S>                                                                <C>
1998                                                               $385,919
1999                                                                 84,353
2000                                                                 30,919
2001                                                                  7,855
2002 and thereafter                                                  18,012
---------------------------------------------------------------------------
Total                                                              $527,058
---------------------------------------------------------------------------
---------------------------------------------------------------------------
</TABLE>


NOTE 11.    INCOME TAXES

The components of income tax expense for the years ended December 31
follows:

<TABLE>
<CAPTION>
                                              1997           1996           1995
--------------------------------------------------------------------------------
<S>                                         <C>            <C>            <C>
Federal:
  Current                                   $5,001         $6,080         $6,222
  Deferred                                     705            225            (62)
--------------------------------------------------------------------------------
    Total                                    5,706          6,305          6,160
--------------------------------------------------------------------------------

State:
  Current                                    1,502          1,579          1,593
  Deferred                                     243            162             31
--------------------------------------------------------------------------------
    Total                                    1,745          1,741          1,624
--------------------------------------------------------------------------------
      Total income taxes                    $7,451         $8,046         $7,784
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
</TABLE>


The portion of the tax provision relating to realized security gains
and losses amounted to $278, $15, and $9 for 1997, 1996, and 1995,
respectively.

A reconciliation of income taxes in the statement of income, with the
amount computed by applying the statutory rate of 35%, is as follows:

<TABLE>
<CAPTION>
                                              1997           1996           1995
--------------------------------------------------------------------------------
<S>                                         <C>            <C>            <C>
Federal income tax computed
  at the statutory rates                    $9,031         $8,590         $7,764
Adjusted for effect of:
  Nontaxable municipal interest             (2,819)        (1,937)        (1,244)
  Nondeductible expenses                       273            362            280
State income taxes, net of
  federal tax benefit                        1,134          1,133          1,058
Benefit of income taxed at
  lower rates                                 (100)          (100)          (100)
Change in deferred tax asset
  valuation allowance                          (80)            52            (25)
Other differences                               12            (54)            51
--------------------------------------------------------------------------------
  Total income taxes                        $7,451         $8,046         $7,784
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
</TABLE>


The net deferred tax asset (liability) in the accompanying balance
sheet includes the following amounts of deferred tax assets and
liabilities:

<TABLE>
<CAPTION>
                                                             1997           1996
--------------------------------------------------------------------------------
<S>                                                       <C>            <C>
Deferred tax liability                                    $(7,378)       $(3,448)
Deferred tax asset                                          3,477          2,817
Valuation allowance for deferred
  tax assets                                                 (448)          (528)
--------------------------------------------------------------------------------
    Net deferred tax asset (liability)                    $(4,349)       $(1,159)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
</TABLE>


The tax effects of principal temporary differences are shown in the
following table:

<TABLE>
<CAPTION>
                                                             1997           1996
--------------------------------------------------------------------------------
<S>                                                       <C>            <C>
Allowance for loan losses                                 $ 2,568        $ 2,105
Property acquired in settlement of loans                        -             35
Direct financing and leveraged leases                         364             55
Prepaid pension costs                                        (892)        (1,375)
Premises and equipment                                     (4,237)        (2,066)
Unrealized gain (loss) on securities
  available for sale                                       (2,249)            (7)
State net operating loss carryforwards                        448            528
Other                                                          97             94
--------------------------------------------------------------------------------
  Net temporary differences                                (3,901)          (631)
Valuation allowance                                          (448)          (528)
--------------------------------------------------------------------------------
  Net deferred tax asset(liability)                       $(4,349)       $(1,159)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
</TABLE>


NOTE 12.  SHORT-TERM BORROWINGS

Information concerning short-term borrowings as of the years ended
December 31 were as follows:

<TABLE>
<CAPTION>
                                                             1997           1996
--------------------------------------------------------------------------------
<S>                                                       <C>            <C>
Federal funds purchased:
Average amount outstanding                                $42,588        $26,329
Maximum amount at any month end                            69,400         54,175
Weighted average interest rate:
  During year                                                5.67%          5.50%
  End of year                                                6.74%          6.65%

Securities sold under agreements
to repurchase:
Average amount outstanding                                $15,924        $17,448
Maximum amount at any month end                            26,146         28,153
Weighted average interest rate:
  During year                                                4.00%          4.35%
  End of year                                                3.48%          3.66%

Notes payable U.S. Treasury:
Average amount outstanding                                 $2,064         $1,378
Maximum amount at any month end                             5,916          3,270
Weighted average interest rate:
  During year                                                5.36%          5.17%
  End of year                                                5.25%          5.15%
</TABLE>


30

<PAGE>

NOTE 13.  OTHER BORROWINGS

Other borrowings at December 31 consist of the following:

<TABLE>
<CAPTION>
                                                             1997           1996
--------------------------------------------------------------------------------
<S>                                                       <C>            <C>
Federal Home Loan Bank advances:
  Due January 2, 1997, 7.15%                              $     -         $1,500
  Due May 25, 1997, 6.33%                                       -          3,000
  Due January 2, 1998, 6.37%                               21,200              -
  Due January 7, 1998, 5.76%                                5,000              -
  Due January 20, 1998, 5.16%                               5,000          5,000
  Due February 20, 1998, 5.80%                                250              -
  Due June 1, 1998, 6.02%                                  10,000         10,000
  Due February 1, 1999, 5.23%                               5,000          5,000
  Due August 6, 1999, 6.03%                                 4,000              -
  Due November 1, 1999, 5.96%                               6,000              -
  Due July 25, 2000, 7.64%                                  3,000              -
  Due February 4, 2002, 7.64%                               2,000          2,000
  Due October 30, 2002, 6.14%                               6,000              -
Fixed and amortizing advances at various
  rates with final maturities ranging from
  July 2003 to March 2012.                                  1,866            988
Notes payable:
  Northern Trust Co., monthly interest
    payments through May 1997, monthly
    principal payments of $83 plus interest
    beginning June 30, 1997 through
    April 30, 2003 with a final balloon
    payment of $9,083 due May 30, 2003,
    8.10%.                                                 14,417         15,000
  Norlease, Inc., quarterly interest payments
    of $68 through July 27, 1997, quarterly
    principal and interest payments of $111
    through July 27, 2002, final balloon
    payment due July 27, 2002, 7.74%,
    collateralized by equipment.                            3,457          3,500
  Norlease, Inc., monthly principal and
    interest payments of $16 through
    June 30, 2003, final balloon payment
    due June 30, 2003, 8.61%,
    collateralized by equipment.                            1,196          1,285
  Norlease, Inc., installment notes maturing
    on various dates through 2003 at
    interest rates ranging from 6.29% to
    8.16%, collateralized by equipment.                     3,171          3,184
  Norlease, Inc., quarterly principal and
    interest beginning June 30, 1997,
    payments through March 30, 2003,
    7.87%, collateralized by an investment
    in a leveraged lease.                                   1,756              -
  Norlease, Inc., monthly principal
    payments beginning January 30, 1997
    through January 30, 2003, 7.94%,
    collateralized by an investment
    in a leveraged lease.                                   1,722              -
  Other                                                       150            237
--------------------------------------------------------------------------------
                                                          $95,185        $50,694
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
</TABLE>


The Federal Home Loan Bank advances are collateralized by a blanket
collateral agreement on qualified mortgage loans.

The terms of the loan agreement with Northern Trust Company require
the Corporation to maintain certain financial ratios and comply with
certain restrictions. These include, maintenance of minimum
consolidated capital levels, limits on debt and guarantees of debt by
the Corporation, restrictions on the ratio of consolidated
non-performing assets to total loans and of the consolidated allowance
for loan and lease losses to total non-performing loans, and certain
other restrictions. Management believes the Corporation has complied
with all of the covenants of this loan agreement.

Aggregate maturities required on other borrowings at December 31, 1997
are due in future years as follows:

<TABLE>

<S>                                                                 <C>
1998                                                                $44,978
1999                                                                 18,294
2000                                                                  5,757
2001                                                                  2,127
2002                                                                 12,581
Later years                                                          11,448
---------------------------------------------------------------------------
                                                                    $95,185
---------------------------------------------------------------------------
---------------------------------------------------------------------------
</TABLE>


NOTE 14.    CAPITAL RATIOS

The Corporation and its subsidiary banks are subject to various regulatory
capital requirements administered by federal and state banking agencies.
Failure to meet minimum capital requirements can initiate certain
mandatory, and possibly additional discretionary actions by regulators
that, if undertaken, could have a materially adverse effect on the
Corporation's financial condition. Under capital adequacy guidelines and
the regulatory framework for prompt corrective action, a bank must meet
specific capital guidelines that involve quantitative measures of assets,
liabilities, and certain off-balance-sheet items as calculated under
regulatory accounting practices. Capital amounts and classification are
also subject to qualitative judgments by the regulators about components,
risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy
require the Corporation and subsidiary banks to maintain minimum amounts
and ratios (set forth in the table below) of total and Tier I capital (as
defined in the regulations) to risk-weighted assets (as defined), and of
Tier I capital (as defined) to average assets (as defined). Management
believes, as of December 31, 1997, that the Corporation and its subsidiary
banks met all capital adequacy requirements to which they were subject.

As of December 31, 1997, the most recent notification from the federal and
state regulatory agencies categorized each of the subsidiary banks as well
capitalized under the regulatory framework for prompt corrective action.
The banks must maintain the minimum total risk-based, Tier I risk-based,
and Tier I leverage ratios as set forth in the table. There are no
conditions or events since that notification that management believes have
changed the categorization of any of the subsidiary banks.

The following table presents the actual capital amounts and ratios for the
Corporation and its bank subsidiaries which have assets in excess of ten
percent of consolidated assets:


                                                                              31
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(DOLLAR AMOUNTS OTHER THAN SHARE DATA IN THOUSANDS)


NOTE 14.  CAPITAL RATIOS, CONTINUED

<TABLE>
<CAPTION>
                                                                                                                  TO BE WELL
                                                                                   MINIMUM RATIOS              CAPITALIZED UNDER
                                                                                    FOR CAPITAL                PROMPT CORRECTIVE
                                                         ACTUAL                  ADEQUACY PURPOSES:            ACTION PROVISIONS:
-----------------------------------------------------------------------------------------------------------------------------------
                                                 AMOUNT          RATIO         AMOUNT          RATIO         AMOUNT          RATIO
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>              <C>           <C>             <C>          <C>              <C>
As of December 31, 1997:
  Total Capital (to Risk Weighted
    Assets)
    Consolidated                               $131,600          14.25%       $73,874           8.0%            N/A             N/A
    National City Bank                           41,916          11.28%        29,720           8.0%        $37,150           10.0%

Tier I Capital (to Risk Weighted
  Assets)
  Consolidated                                 $123,631          13.39%       $36,937           4.0%            N/A             N/A
  National City Bank                             40,244          10.83%        14,860           4.0%        $22,290            6.0%

Tier I Capital (to Average Assets)
  Consolidated                                 $123,631           9.74%       $50,798           4.0%            N/A             N/A
  National City Bank                             40,244           8.22%        19,590           4.0%        $24,489            5.0%
</TABLE>

<TABLE>
<CAPTION>
                                                                                                                  TO BE WELL
                                                                                   MINIMUM RATIOS              CAPITALIZED UNDER
                                                                                    FOR CAPITAL                PROMPT CORRECTIVE
                                                         ACTUAL                  ADEQUACY PURPOSES:            ACTION PROVISIONS:
-----------------------------------------------------------------------------------------------------------------------------------
                                                 AMOUNT          RATIO         AMOUNT          RATIO         AMOUNT          RATIO
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>              <C>           <C>             <C>          <C>              <C>
As of December 31, 1996:
  Total Capital (to Risk Weighted
  Assets)
  Consolidated                                 $128,833          15.84%       $65,065           8.0%            N/A             N/A
  National City Bank                             36,519          11.88%        24,597           8.0%        $30,747           10.0%
  Lincolnland Bank                               11,836          13.33%         7,101           8.0%          8,876           10.0%

Tier I Capital (to Risk Weighted
  Assets)
  Consolidated                                 $121,644          14.96%       $32,533           4.0%            N/A             N/A
  National City Bank                             35,235          11.46%        12,299           4.0%        $18,448            6.0%
  Lincolnland Bank                               10,726          12.08%         3,551           4.0%          5,326            6.0%

Tier I Capital (to Average Assets)
  Consolidated                                 $121,644          10.52%       $46,248           4.0%            N/A             N/A
  National City Bank                             35,235           8.55%        16,484           4.0%        $20,605            5.0%
  Lincolnland Bank                               10,726           8.98%         4,776           4.0%          5,970            5.0%
</TABLE>


NOTE 15.    INCENTIVE STOCK OPTION PLAN

In 1995, the Corporation's board of directors approved a fixed Incentive
Stock Option Plan (Plan) which was approved by shareholders in 1996. The
Plan currently reserves 554,523 shares of common stock for issuance upon
the exercise of options granted as incentive awards to key employees of the
Corporation. Awards may be incentive stock options or non-qualified stock
options. All options granted under the Plan are required to be exercised
within ten years of the date granted. The exercise price of options granted
under the Plan cannot be less than the fair market value of the common
stock on the date of grant.

Grants under the Plan are accounted for following APB Opinion No. 25 and
related Interpretations. Accordingly, no compensation cost has been
recognized for grants under the Plan. Compensation expense of $234, $54,
and $0 was recognized for tax purposes in 1997, 1996, and 1995,
respectively. Had compensation cost for the Plan been determined based on
the grant date fair values of awards (the method described in FASB
Statement No. 123), reported net income and earnings per common share would
have been reduced to the pro forma amounts shown below.

<TABLE>
<CAPTION>
                                              1997           1996           1995
--------------------------------------------------------------------------------
<S>                                        <C>            <C>            <C>
Net income:
  As reported                              $18,351        $16,496        $14,399
  Pro forma                                 17,334         15,736         14,278

Earnings per share:
  Basic
    As reported                              $1.72          $1.52          $1.30
    Pro forma                                 1.62           1.45           1.29
  Diluted
    As reported                              $1.69          $1.52          $1.30
    Pro forma                                 1.60           1.45           1.29
</TABLE>


32
<PAGE>

A summary of the status of the Plan, adjusted for all stock dividends and the 
stock split issued in 1996, as of December 31, 1997 and 1996, and changes 
during the years ending on those dates is presented below:

<TABLE>
Caption
                                                        1997                        1996                        1995
------------------------------------------------------------------------------------------------------------------------------
                                                      WEIGHTED AVERAGE            Weighted Average            Weighted Average
                                              SHARES    EXERCISE PRICE    Shares    Exercise Price    Shares    Exercise Price
------------------------------------------------------------------------------------------------------------------------------
<S>                                          <C>      <C>                <C>      <C>                <C>      <C>
Options outstanding, beginning of the year   375,261            $20.79   289,406            $19.11         -                 -
Options granted                              112,350             41.90    97,020             25.62   289,406            $19.11
Options exercised                             29,635             19.11    11,165             19.11         -                 -
Options forfeited                              6,615             25.62         -                 -         -                 -
------------------------------------------------------------------------------------------------------------------------------
Options outstanding, end of year             451,361            $26.09   375,261            $20.79   289,406            $19.11
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
Options exercisable                          285,005            $21.17   170,229            $19.11         -                 -
Weighted-average fair value of options
  granted during the year                              $14.72                      $7.94                        $5.65
</TABLE>

The following table summarizes information about stock options outstanding at
December 31, 1997.

<TABLE>
<CAPTION>
         Options Outstanding                 Options Exercisable
----------------------------------------------------------------
                         Weighted Average
Exercise        Number          Remaining             Number
   Price   Outstanding   Contractual Life        Exercisable
----------------------------------------------------------------
<S>        <C>           <C>                     <C>
  $19.11       248,606                7.8            194,600
   25.62        90,405                8.8             90,405
   41.90       112,350                9.8                  -
----------------------------------------------------------------
               451,361                8.5            285,005
----------------------------------------------------------------
----------------------------------------------------------------
</TABLE>

Generally accepted accounting principles provide for the use of the
Black-Scholes option pricing model to estimate the fair value of options
which have no vesting restrictions. This model requires the use of subjective
assumptions, including expected stock price volatility. As a result,
management believes the Black-Scholes valuation model may not necessarily
provide the best single measure of option value.

The fair value of the stock options granted under the Plan has been estimated
using the Black-Scholes option pricing model with the following weighted
average assumptions.

<TABLE>
<CAPTION>
                                         1997       1996        1995
---------------------------------------------------------------------
<S>                                   <C>         <C>        <C>
Number of options granted             112,350     97,020     289,406
Risk-free interest rate                  5.86%      6.42%       6.08
Expected life, in years                    10         10          10
Expected volatility                     21.50%     16.41%      14.65%
Expected dividend yield                  1.71%      2.10%       1.99%
Estimated fair value per option        $14.72      $7.94       $5.65

</TABLE>

NOTE 16.   DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table reflects a comparison of the carrying amounts and fair
values of financial instruments of the Corporation and its subsidiary banks
at December 31:

<TABLE>
<CAPTION>
                                   1997                  1996
--------------------------------------------------------------------
                           CARRYING       FAIR   Carrying       Fair
                             AMOUNT      VALUE     Amount      Value
--------------------------------------------------------------------
<S>                        <C>        <C>        <C>        <C>
Assets:                    
 Cash and short-term       $ 40,314   $ 40,314   $ 44,467   $ 44,467
  investments
 Securities                 279,328    279,328    282,894    285,036
 Loans - net of
  allowance                 890,580    912,721    781,102    790,803
 Accrued interest
  receivable                 12,931     12,931     12,326     12,326
Liabilities:     
 Deposits                   964,046    971,410    913,350    913,233
 Short-term borrowings       76,917     76,917     67,365     67,365
 Other borrowings            95,185     93,163     50,694     48,385
 Accrued interest
  payable                     4,732      4,732      4,460      4,460
</TABLE>

The above fair value information was derived using the information described
below for the groups of instruments listed. It should be noted the fair values
disclosed in this table do not represent market values of all assets and
liabilities of the Corporation and, thus, should not be interpreted to represent
a market or liquidation value for the Corporation. In addition, the carrying
value for loans above differs from that reported elsewhere due to the exclusion
of leases receivable of $17,807 and $12,331 in 1997 and 1996, respectively.

CASH AND SHORT-TERM INVESTMENTS
Cash and short-term investments include cash and due from banks, short-term
money market investments, interest-bearing deposits in banks, and federal
funds sold. For cash and short-term investments, the carrying amount is a
reasonable estimate of fair value.

SECURITIES
For securities, fair value equals quoted market price, if available. If a quoted
market price is not available, fair value is


                                                                              33
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(DOLLAR AMOUNTS OTHER THAN SHARE DATA IN THOUSANDS)


NOTE 16. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED

estimated using quoted market prices for similar securities. Fair values for
nonmarketable equity securities are equal to cost as there is no readily
determinable fair value. Carrying amount of accrued interest receivable
approximates fair value.

LOANS
For certain homogeneous categories of loans, such as some residential mortgages,
fair value is estimated using the quoted market prices for securities backed by
similar loans, adjusted for differences in loan characteristics. The fair value
of other types of loans is estimated by discounting the future cash flows using
the current rates at which similar loans would be made to borrowers with similar
credit ratings and for the same remaining maturities. Carrying amount of accrued
interest receivable approximates fair value.

DEPOSITS
The fair value of demand deposits, savings accounts, money market deposits, and
variable rate certificates of deposit is the amount payable on demand at the
reporting date. The fair value of other time deposits is estimated using the
rates currently offered for deposits of similar remaining maturities. Carrying
amount of accrued interest payable approximates fair value.

SHORT-TERM DEBT
Rates currently available to the Corporation for debt with similar terms and
remaining maturities are used to estimate fair value of existing debt. These
instruments adjust on a periodic basis and thus the carrying amount represents
fair value. Carrying amount of accrued interest payable approximates fair value.

LONG-TERM DEBT
Rates currently available for debt with similar terms and maturities are used
to estimate fair value of existing debt. Carrying amount of accrued interest
payable approximates fair value.

COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT
The fair value of commitments is estimated using the fees currently charged
to enter into similar agreements, taking into account the remaining terms of
the agreements and the present creditworthiness of the counterparties. For
fixed-rate loan commitments, fair value also considers the difference between
current levels of interest rates and the committed rates. The fair value of
guarantees and letters of credit is based on fees currently charged for
similar agreements or on the estimated cost to terminate them or otherwise
settle the obligations with the counterparties at the reporting date. Because
all commitments and standby letters of credit reflect current fees and
interest rates, no unrealized gains or losses are reflected in the summary of
fair values.

NOTE 17.   COMMITMENTS, CONTINGENCIES, AND CREDIT RISK

Most of the business activity of the Corporation and its subsidiaries is
conducted with customers located in the immediate geographical area of their
offices. These areas are comprised of Southwestern Indiana, Western Kentucky,
and Southeastern Illinois. The Corporation maintains a diversified loan
portfolio which contains no concentration of credit risk from borrowers
engaged in the same or similar industries exceeding 10% of total loans.

The Corporation and its subsidiaries evaluate each credit request of their
customers in accordance with established lending policies. Based on these
evaluations and the underlying policies, the amount of required collateral
(if any) is established. Collateral held varies but may include negotiable
instruments, accounts receivable, inventory, property, plant and equipment,
income producing properties, residential real estate, and vehicles. The
lenders' access to these collateral items is generally established through
the maintenance of recorded liens or, in the case of negotiable instruments,
possession.

The Corporation and its subsidiaries are parties to legal actions which arise
in the normal course of their business activities. In the opinion of
management, the ultimate resolution of these matters is not expected to have
a materially adverse effect on the financial position or on the results of
operations of the Corporation and its subsidiaries.

The Corporation is a party to financial instruments with off-balance sheet risk
in the normal course of business to meet the financing needs of its customers.
These instruments involve, to varying degrees, elements of credit and
interest rate risk in excess of the amount recognized in the balance sheet.
The contractual or notional amounts of those instruments reflect the extent
of involvement the Corporation has in particular classes of financial
instruments.

The Corporation's exposure to credit loss, in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
standby letters of credit, is represented by the contractual notional amount of
those instruments. The Corporation uses the same credit policies in making
commitments and conditional obligations as it does for other on-balance sheet
instruments. Financial instruments whose contract amounts represent credit risk
at December 31, 1997 follows:

<TABLE>
<CAPTION>
                                                             Range of Rates
                   Variable Rate   Fixed Rate        Total    on Fixed Rate
                      Commitment   Commitment   Commitment      Commitments
---------------------------------------------------------------------------
<S>                <C>             <C>          <C>          <C>
Commitments
 to extend credit       $109,131      $57,230     $166,361     5.40%-20.00%
Standby letters
 of credit                     -            -       13,258          -
</TABLE>


34
<PAGE>

Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements.

Standby letters of credit written are conditional commitments issued by the
banks to guarantee the performance of a customer to a third party. Those
guarantees are primarily issued to support public and private borrowing
arrangements, including commercial paper, bond financing, and similar
transactions. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to
customers.

The Corporation does not engage in the use of interest rate swaps, futures,
forwards, or option contracts.

NOTE 18.    DIVIDEND REINVESTMENT PLAN

The Corporation established a Dividend Reinvestment Plan for its shareholders
in 1989. The plan provides participating shareholders a method of investing
their cash dividends in the Corporation's common stock without payment of any
brokerage commission, service charge, or other expense. In addition,
participating shareholders may also invest up to $10,000 per calendar quarter
in the Corporation's common stock through the optional cash payment feature
of the plan.

The plan permits the issuance of previously authorized and unissued shares or
the repurchase of outstanding shares for reissuance. As of December 31, 1997,
48,925 shares of authorized but unissued common stock were reserved for plan
requirements.

NOTE 19.    EMPLOYEE RETIREMENT PLANS

The Corporation maintained a noncontributory pension plan in which
substantially all full-time employees were eligible to participate upon the
completion of one year of service. No contribution or funding by the
Corporation was required in any of the years reported here. The assets of the
pension plan primarily consist of corporate obligations and equity
securities. The plan does not hold any equity securities of the Corporation.
The plan was curtailed effective December 31, 1997.

In establishing the amounts reflected in the financial statements, the following
significant assumption rates were used:

<TABLE>
<CAPTION>
                                       1997    1996    1995
-----------------------------------------------------------
<S>                                   <C>     <C>     <C>
Discount rate                         7.5%    7.5%    7.5%
Increase in compensation rate         5.0%    5.0%    5.0%
Expected long-term rate of return     9.0%    9.0%    9.0%
</TABLE>

The following summary reflects the plan's funded status and the amounts
reflected on the Corporation's financial statements. Actuarial present values
of benefit obligations at December 31 are:

<TABLE>
<CAPTION>
                                        1997          1996          1995
------------------------------------------------------------------------
<S>                                 <C>            <C>           <C>
Accumulated benefit obligation
 including vested benefits of
 $5,309, $3,899, and $11,350
 in 1997, 1996, and 1995            $(11,350)      $(6,005)      $(4,420)
Effects of projected future
 compensation levels                     N/A        (2,647)       (2,000)
------------------------------------------------------------------------
Projected benefit obligation
 for service rendered to date        (11,350)       (8,652)       (6,420)
Plan assets at fair value             13,550        12,400        10,856
------------------------------------------------------------------------
Plan assets in excess of
 projected benefit obligation          2,200         3,748         4,436
Unrecognized net loss (gain)
 from past experience
 different from that assumed
 and effects of changes in
 assumptions                               -           170          (494)
Prior service cost not yet
 recognized in net periodic
 pension cost                              -          (261)         (108)
Unrecognized net asset at
 January 1, 1987, being
 recognized over 11.11
 years from that date                      -          (259)         (347)
------------------------------------------------------------------------
  Prepaid pension cost
   included in other assets         $  2,200       $ 3,398       $ 3,487
------------------------------------------------------------------------
------------------------------------------------------------------------
</TABLE>

Net periodic pension cost (credit) included the following components for the
years ended December 31:

<TABLE>
<CAPTION>
                                  1997      1996       1995
-----------------------------------------------------------
<S>                            <C>       <C>        <C>
Service cost - benefits
 earned during the period      $   836   $   812    $   618
Interest cost on projected
 benefit obligation                633       590        456
Return on assets                (1,911)   (1,300)    (2,789)
Net amortization and deferral      574       (13)     1,758
Curtailment effect               1,066         -          -
-----------------------------------------------------------
 Net periodic pension
  cost (credit)                $ 1,198   $    89    $    43
-----------------------------------------------------------
-----------------------------------------------------------
</TABLE>

The Corporation also maintains a savings and profit-sharing plan for
substantially all full-time employees who have completed one year of service.
Employees may voluntarily contribute to the plan. The Corporation's
contribution to the plan, which is subject to the discretion of the Board of
Directors, cannot exceed 7% of the net income before income taxes. Corporate
contributions were $1,531, $1,409, and $1,384 during 1997, 1996, and 1995,
respectively.

United Financial Bancorp, Inc. had a Stock Option Plan and a Management
Recognition and Retention Plan for its directors and officers. The cost of
the shares awarded under the retention plan was amortized using an
accelerated method over vesting periods. These plans were terminated when the
Corporation acquired this subsidiary.


                                                                              35
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(DOLLAR AMOUNTS OTHER THAN SHARE DATA IN THOUSANDS)


NOTE 19.  EMPLOYEE RETIREMENT PLANS, CONTINUED

As the result of previous mergers and subsequent amendment of the Corporation's
pension and profit-sharing plans to include employees of the other subsidiaries,
retirement plans previously maintained by those subsidiaries have been 
terminated or frozen.

The plans have been amended to comply with requirements of the Employee
Retirement Income Security Act of 1974 and the Tax Reform Act of 1986.


NOTE 20.  UNAUDITED INTERIM FINANCIAL DATA

The following table reflects summarized quarterly data for the periods described
(unaudited):

<TABLE>
<CAPTION>
                                         1997
----------------------------------------------------------------
                              DECEMBER SEPTEMBER    JUNE   MARCH
                                    31        30      30      31
----------------------------------------------------------------
<S>                          <C>       <C>       <C>     <C>
INTEREST INCOME                $24,756   $24,663 $23,737 $22,472
INTEREST EXPENSE                11,460    11,451  10,778   9,944
----------------------------------------------------------------
 NET INTEREST INCOME            13,296    13,212  12,959  12,528
PROVISION FOR LOAN LOSSES          611       686     228     366
NONINTEREST INCOME               2,649     2,547   2,358   2,534
NONINTEREST EXPENSE             10,213     8,227   8,050   7,900
----------------------------------------------------------------
INCOME BEFORE INCOME TAXES       5,121     6,846   7,039   6,796
PROVISION FOR INCOME TAXES       1,124     2,085   2,119   2,123
----------------------------------------------------------------
 NET INCOME                    $ 3,997   $ 4,761 $ 4,920 $ 4,673
----------------------------------------------------------------
----------------------------------------------------------------
EARNINGS PER SHARE - BASIC     $  0.37   $  0.45 $  0.46 $  0.44
EARNINGS PER SHARE - DILUTED   $  0.36   $  0.44 $  0.46 $  0.43
</TABLE>


<TABLE>
<CAPTION>
                                         1996
----------------------------------------------------------------
                              December September    June   March
                                    31        30      30      31
----------------------------------------------------------------
<S>                          <C>       <C>       <C>     <C>
Interest income                 $22,468  $21,858 $21,153 $21,070
Interest expense                  9,873    9,514   9,310   9,246
----------------------------------------------------------------
 Net interest income             12,595   12,344  11,843  11,824
Provision for loan losses         1,766      342     242     354
Noninterest income                2,644    2,155   1,985   1,822
Noninterest expense               7,841    7,996   7,083   7,046
----------------------------------------------------------------
Income before income taxes        5,632    6,161   6,503   6,246
Provision for income taxes        1,625    2,056   2,190   2,175
----------------------------------------------------------------
 Net income                     $ 4,007  $ 4,105 $ 4,313 $ 4,071
----------------------------------------------------------------
----------------------------------------------------------------
Earnings per share - Basic      $  0.37  $  0.38 $  0.40 $  0.37
Earnings per share - Diluted    $  0.37  $  0.38 $  0.40 $  0.37
</TABLE>


NOTE 21.  SUBSEQUENT EVENTS

The Corporation's subsidiary, First Kentucky Bank, purchased the former 
Mayfield, Kentucky, Branch Office of Republic Bank & Trust Company on January 8,
1998.  First Kentucky assumed $65,639 in deposit liabilities in consideration 
of a deposit premium of $4,601.  First Kentucky also purchased the office 
facility and certain loans of the Branch.

On December 1, 1997, the Corporation entered into a definitive agreement to 
purchase 100% of the common stock of Vernois Bancshares, Inc. in a cash 
transaction. As of December 31, 1997, Vernois Bancshares, Inc.'s wholly-owned 
subsidiary, Bank of Illinois in Mt. Vernon, had assets of $163,450 and equity 
of $13,040. The transaction will be accounted for as a purchase, and the 
excess of cost over the fair value of net assets acquired will be amortized 
over 25 years using the straight-line method. The transaction was consummated 
on March 6, 1998.

On December 15, 1997, the Corporation entered into a definitive agreement to
acquire Illinois One Bancorp, Inc. in a transaction to be accounted for as a
pooling of interests. The Corporation will issue, depending upon the market 
price of its common stock, up to 577,417 shares of its common stock for all 
outstanding shares of Illinois One Bancorp. Illinois One Bancorp is the parent 
company of Illinois One Bank, National Association, Shawneetown, Illinois. As 
of December 31, 1997, Illinois One Bank had assets of $88,069, deposits of 
$76,388, and equity of $9,872. The transaction, which is subject to shareholder 
and regulatory approval, is anticipated to close in the second of 1998.

On February 12, 1998, the Corporation entered into a definitive agreement to
acquire Trigg Bancorp, Inc. in a transaction to be accounted for as a pooling of
interests. The Corporation will issue 736,278 shares of its common stock for all
outstanding shares of Trigg Bancorp. Trigg Bancorp is the parent of the Trigg
County Farmers Bank, Cadiz, Kentucky.  As of December 31, 1997, Trigg County
Farmers Bank had assets of $96,371, deposits of $72,296, and equity of $8,122.
The transaction, which is subject to shareholder and regulatory approval, is
expected to close in the second or third quarter of 1998.

On March 9, 1998, the Corporation entered into a definitive agreement to acquire
Community First Financial, Inc., Maysville, Kentucky, in a transaction to be
accounted for as a pooling of interests. The Corporation will issue 1,441,860
shares of its common stock for all outstanding shares of Community First
Financial, Inc. Community First Financial, Inc., is the parent of Community 
First Bank, N.A., Maysville, Kentucky, and Community First Bank of Kentucky, 
Warsaw, Kentucky. As of December 31, 1997, the two banks had total assets of 
$130,226, total deposits of $114,420, and total equity of $12,781. The 
transaction is subject to regulatory and shareholder approval.


36

<PAGE>

NOTE 22.  FINANCIAL INFORMATION OF PARENT COMPANY

The principal source of income for National City Bancshares, Inc. is dividends
from its subsidiary banks. Banking regulations impose restrictions on the 
ability of subsidiaries to pay dividends to the Corporation. The amount of 
dividends that could be paid is further restricted by management to maintain 
prudent capital levels.

Condensed financial data for National City Bancshares, Inc. (parent company 
only) follows:

CONDENSED STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
                                                                 1997            1996
-------------------------------------------------------------------------------------
<S>                                                          <C>              <C>
ASSETS
Cash and cash equivalents                                    $  4,947        $ 13,260
Investment in subsidiaries                                    139,875         114,699
Securities available for sale                                     151             281
Nonmarketable equity securities                                   388             548
Note receivable                                                   243             300
Property and equipment                                          1,021             955
Deferred income taxes                                              -               37
Other assets                                                    3,923           2,200
-------------------------------------------------------------------------------------
TOTAL ASSETS                                                 $150,548        $132,280
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------

LIABILITIES
Other borrowings                                             $    136        $    215
Dividends payable                                               1,931           1,698
Deferred income taxes                                             859              -
Other liabilities                                                 819             673
-------------------------------------------------------------------------------------
  Total liabilities                                             3,745           2,586
-------------------------------------------------------------------------------------

SHAREHOLDERS' EQUITY
Common stock                                                   10,727          10,230
Capital surplus                                                79,725          57,631
Retained earnings                                              52,858          61,819
Unrealized gain (loss) on securities
 available for sale                                             3,493              14
-------------------------------------------------------------------------------------
  Total shareholders' equity                                  146,803         129,694
-------------------------------------------------------------------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY                                         $150,548        $132,280
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
</TABLE>

CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
                                                     1997            1996            1995
-----------------------------------------------------------------------------------------
<S>                                               <C>            <C>              <C>
Dividends from subsidiaries                       $20,560        $ 32,900         $12,496
Other income                                        5,380           3,456           2,662
-----------------------------------------------------------------------------------------
 Total income                                      25,940          36,356          15,158
-----------------------------------------------------------------------------------------
Interest expense                                       10               6              -
Other expenses                                      6,776           3,710           3,258
-----------------------------------------------------------------------------------------
 Total expenses                                     6,786           3,716           3,258
-----------------------------------------------------------------------------------------
Income before income taxes
 and equity in undistributed
 earnings of subsidiaries                          19,154          32,640          11,900
Income tax benefit                                   (503)            (20)           (274)
-----------------------------------------------------------------------------------------
Income before equity in undistributed
 earnings of subsidiaries                          19,657          32,660          12,174
Equity in undistributed earnings
 of subsidiaries                                   (1,306)        (16,164)          2,225
-----------------------------------------------------------------------------------------
Net income                                        $18,351        $ 16,496         $14,399
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
</TABLE>

CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                     1997            1996            1995
-----------------------------------------------------------------------------------------
<S>                                               <C>            <C>              <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income                                        $ 18,351       $ 16,496         $14,399
Adjustments to reconcile net
 income to net cash provided by
 operating activities:
  Depreciation and amortization                        517            482             451
  Undistributed earnings of
   subsidiaries                                      1,306         16,164          (2,225)
  Securities losses (gains)                           (479)             1             (18)
  Increase (decrease) in deferred taxes                847            (38)            (64)
Changes in assets and liabilities:
 (Increase) decrease in other assets                (2,045)          (113)           (207)
 Increase (decrease) in other liabilities              146             (3)            191
-----------------------------------------------------------------------------------------
  Net cash flows provided by
   operating activities                             18,643         32,989          12,527
-----------------------------------------------------------------------------------------
CASH FLOWS FROM
INVESTING ACTIVITIES
Proceeds from maturities of
 securities available for sale                          -             434             250
Proceeds from sales of securities
 available for sale                                    923              -             118
Proceeds from sales of
 nonmarketable equity securities                       804              -               -
Purchase of securities
 available for sale                                   (650)              -           (340)
Purchase of nonmarketable                 
 equity securities                                    (185)           (11)           (537)
(Disbursements) and repayments        
 on notes receivable                                    57            381            (381)
Capital expenditures                                  (459)          (555)           (446)
Proceeds from sale of premises                                           
 and equipment                                          17              -              -
Investment in subsidiaries                          (6,947)       (13,817)         (1,002)
(Increase) decrease in securities                                         
 purchased under agreements to resell                    -         10,000          (6,900)
-----------------------------------------------------------------------------------------
  Net cash flows provided by
   (used in) investing activities                   (6,440)        (3,568)         (9,238)
-----------------------------------------------------------------------------------------
CASH FLOWS FROM
FINANCING ACTIVITIES
Dividends paid                                      (6,509)        (5,589)         (3,957)
Proceeds from other borrowings                         -              244              -
Payments on other borrowings                           (79)           (29)             -
Repurchase of common stock                         (16,198)       (12,890)           (863)
Sale of common stock                                 1,705          1,653           1,036
Proceeds from exercise of stock options                565            213              -
-----------------------------------------------------------------------------------------
  Net cash flows (used in)
   financing activities                            (20,516)       (16,398)         (3,784)
-----------------------------------------------------------------------------------------
Net increase (decrease) in
 cash and cash equivalents                          (8,313)        13,023            (495)
Cash and cash equivalents
 at beginning of year                               13,260            237             732
-----------------------------------------------------------------------------------------
Cash and cash equivalents
 at end of year                                   $  4,947       $ 13,260         $   237
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE
OF NONCASH INVESTING
ACTIVITIES
Change in unrealized gain (loss) on
 securities available for sale, net               $  3,479       $   (272)        $  3,155
Common stock issued in
 acquisition of subsidiary                          15,949              -            2,442
</TABLE>




                                                                              37
<PAGE>

OFFICIAL ORGANIZATION


SUBSIDIARIES
<TABLE>
<CAPTION>

<S>                   <C>                          <C>                  <C>
                      ALLIANCE BANK                                      FIRST FEDERAL SAVINGS BANK
                      VINCENNES, INDIANA                                 OF LEITCHFIELD
                                                                         LEITCHFIELD, KENTUCKY
                      BOARD OF DIRECTORS
                      Janice L. Beesley                                  BOARD OF DIRECTORS
                      John H. Bobe                                       Howard T. Allgood
                      John N. Clauss                                     Ellis Wendell Armes
       [PHOTO]        Horace A. Foncannon, Jr.         [PHOTO]           Janice L. Beesley
                      Dr. Ralph J. Jacqmain                              Dennis R. Buckles
                      Thomas R. Stephens                                 Robert T. Crawford
                                                                         Thomas C. Glasscock
JANICE L. BEESLEY                                  ROBERT T. CRAWFORD    Frank Wallace
CHAIRMAN & CEO                                     PRESIDENT & CEO

                                                                         FIRST KENTUCKY BANK
      [PHOTO]                                                            STURGIS, KENTUCKY

                                                                         BOARD OF DIRECTORS
JOHN N. CLAUSS                                                           Garland Certain
  PRESIDENT                                                              Charles Hamilton Floyd
                      BANK OF ILLINOIS                                   Charles L. Pryor
                      IN MT. VERNON                    [PHOTO]           Joseph W. Sprague
                      MT. VERNON, ILLINOIS                               Slaton Sprague
                                                                         William R. Sprague
                      BOARD OF DIRECTORS                                 Joe Woodring
                      Gino Federici               GARLAND CERTAIN
                      David Flota                 PRESIDENT & CEO
      [PHOTO]         Kenneth Martin                                     FIRST NATIONAL BANK
                      Michael Mateer                                     OF BRIDGEPORT
                      Sam Mateer                                         BRIDGEPORT, ILLINOIS
                      Caroline Quinn                                     
                                                                         BOARD OF DIRECTORS
SAM S. MATEER                                                            Max D. Elliott
PRESIDENT & CEO                                                          Clifford C. Gray
                                                       [PHOTO]           James M. Lannan
                                                                         Daniel T. Wolfe
                      THE BANK OF MITCHELL                               Jeffrey R. Wolfe
                      MITCHELL, INDIANA           JAMES M. LANNAN        John R. Wolfe
                                                  CASHIER & CEO          R. Tony Wolfe
                      BOARD OF DIRECTORS
                      Christopher W. Burton, Esq.                        THE FIRST NATIONAL BANK
                      John N. Clauss                                     OF WAYNE CITY
                      Dana J. Dunbar                                     WAYNE CITY, ILLINOIS
      [PHOTO]         Brooks Galloway
                      F. Wendell Gooch                                   BOARD OF DIRECTORS
                      James F. King, D.D.S.                              Michael R. Beehn
                      Randall L. Young                                   Noel E. Edmison
                                                       [PHOTO]           Rick V. Huff
RANDALL L. YOUNG                                                         Larry D. Keil
PRESIDENT & CEO                                                          Rodney L. Legg
                                                                         Lee A. Rubenacker
                                                  RICK V. HUFF
                      FIRST BANK OF HUNTINGBURG   PRESIDENT & CEO
                      HUNTINGBURG, INDIANA
                                                                         LINCOLNLAND BANK
                      BOARD OF DIRECTORS                                 DALE, INDIANA
                      Ronald H. Cox
                      Edgar C. Mulzer                                    BOARD OF DIRECTORS
                      Eric R. Olinger                                    Robert M. Arnold
      [PHOTO]         Lee Ray Olinger                                    Eric K. Ayer, Esq.
                      Max R. Olinger                   [PHOTO]           Harvey W. Pinney
                      Norbert E. Olinger                                 Kenneth R. Schaaf, CPA
ERIC R. OLINGER       Glen L. Sakel                                      M. Lon Youngblood
PRESIDENT & CEO       Gene A. Thieman
                      Richard F. Welp             HARVEY W. PINNEY
                                                  PRESIDENT & CEO


38

<PAGE>

                      THE NATIONAL CITY BANK                             WHITE COUNTY BANK
                      OF EVANSVILLE                                      CARMI, ILLINOIS
                      EVANSVILLE, INDIANA
                                                                         BOARD OF DIRECTORS
                      BOARD OF DIRECTORS                                 Dr. Frank Barbre
                      Thomas L. Austerman                                Donald D. Drone
                      Michael F. Elliott                                 Paul D. Hayse
                      Michael D. Gallagher             [PHOTO]           R. Keith Hoskins
      [PHOTO]         Eugene A. Hahn                                     George H. Schanzle
                      Harvey J. Hirsch            R. KEITH HOSKINS
                      John Lee Newman             PRESIDENT & CEO
THOMAS L. AUSTERMAN   Edward E. Peyronnin
PRESIDENT             Peter L. Stevenson, M.D.
                      Richard M. Stivers                                 NCBE LEASING CORP.
                      Joseph J. Vezzoso, Jr.                             EVANSVILLE, INDIANA
                      Robert B. Wright
                                                                         BOARD OF DIRECTORS
                                                                         Thomas L. Austerman
      [PHOTO]                                                            Michael D. Gallagher
                                                                         Dr. H. Ray Hoops
                                                       [PHOTO]           Charles J. Kelly, Jr.
ROGER M. DUNCAN                                                          John Lee Newman 
EXECUTIVE VICE                                                           Richard M. Stivers
 PRESIDENT                                        CHARLES J. KELLY, JR.
                                                  PRESIDENT & CEO

      [PHOTO]
                                                                         TWENTY-ONE SOUTHEAST
                                                                         THIRD CORPORATION
STUART G. HARRINGTON                                                     EVANSVILLE, INDIANA
EXECUTIVE VICE 
 PRESIDENT                                                               BOARD OF DIRECTORS
                                                                         Thomas L. Austerman
                                                                         Stephen C. Byelick, Jr.
                      THE PEOPLES NATIONAL BANK                          Michael F. Elliott
                      OF GRAYVILLE                                       Robert A. Keil
                      GRAYVILLE, ILLINOIS                                Curtis D. Ritterling

                      BOARD OF DIRECTORS
                      Sam Broster                                        UNIFED, INC.
                      Richard L. Elliott                                 VINCENNES, INDIANA
                      Victor R. Gallagher, Jr.
      [PHOTO]         Donald E. Kirkland                                 BOARD OF DIRECTORS
                      Joseph M. Siegert                                  Janice L. Beesley
                      Herbert W. Sutter                                  Horace A. Foncannon, Jr.
DONALD F. KIRKLAND                                                       Patrick W. Lenahan
PRESIDENT & CEO                                                          G. Jeffrey Palmer


                      PIKE COUNTY BANK
                      PETERSBURG, INDIANA

                      BOARD OF DIRECTORS
                      Max D. Elliott
                      Denver Gladish
                      Terry L. Gladish
      [PHOTO]         Anthony P. Uebelhor
                      John E. Yager, Jr.

MAX D. ELLIOTT
PRESIDENT & CEO
</TABLE>


                                                                              39
<PAGE>


OFFICIAL ORGANIZATION, CONTINUED


NATIONAL CITY BANCSHARES, INC.

BOARD OF DIRECTORS

JANICE L. BEESLEY        CHAIRMAN AND CHIEF EXECUTIVE OFFICER, ALLIANCE BANK

MICHAEL F. ELLIOTT       CHAIRMAN AND CHIEF EXECUTIVE OFFICER, THE NATIONAL CITY
                         BANK OF EVANSVILLE AND NATIONAL CITY BANCSHARES, INC.

SUSANNE R. EMGE          EXECUTIVE DIRECTOR, ST. MARY'S MEDICAL CENTER 
                         FOUNDATION

DONALD G. HARRIS         RETIRED PRESIDENT, MEAD JOHNSON WORLDWIDE NUTRITIONAL
                         GROUP

DR. H. RAY HOOPS         PRESIDENT, UNIVERSITY OF SOUTHERN INDIANA

ROBERT A. KEIL           PRESIDENT, NATIONAL CITY BANCSHARES, INC.

JOHN D. LIPPERT          RETIRED CHAIRMAN AND CHIEF EXECUTIVE OFFICER, NATIONAL
                         CITY BANCSHARES, INC.

RONALD G. REHERMAN       CHAIRMAN, PRESIDENT, AND CHIEF EXECUTIVE OFFICER,
                         SIGCORP, INC.; CHAIRMAN, SOUTHERN INDIANA GAS AND
                         ELECTRIC COMPANY

LAURENCE R. STEENBERG    PRESIDENT, BST CORPORATION AND LOT RESOURCES

RICHARD F. WELP          SOUTH REGION MANAGER, COUNTRYMARK COOPERATIVE, INC.


EXECUTIVE OFFICERS

MICHAEL F. ELLIOTT
CHAIRMAN AND CHIEF EXECUTIVE OFFICER


ROBERT A. KEIL
PRESIDENT


CURTIS D. RITTERLING
EXECUTIVE VICE PRESIDENT


SENIOR OFFICERS

STEPHEN C. BYELICK, JR.
SECRETARY AND TREASURER


N. ANN CAVIS
SENIOR VICE PRESIDENT


NANCY G. EPPERSON
HUMAN RESOURCES DIRECTOR


BYRON W. JETT
SENIOR VICE PRESIDENT


HAROLD A. MANN
SENIOR VICE PRESIDENT


GREGORY A. PENCE
DIRECTOR OF MARKETING


[PHOTO]

SENIOR OFFICERS
(Front) Nancy G. Epperson and N. Ann Cavis 
(Back) Harold A. Mann, Stephen C. Byelick, Jr., Byron W. Jett, and 
Gregory A. Pence


<PAGE>

SHAREHOLDER INFORMATION

STOCK AND DIVIDEND INFORMATION

The Corporation's common stock trades on The Nasdaq Stock Market under the
symbol: NCBE.

The following table lists the stock price for the past two years and dividend
information for the Corporation's common stock. Stock prices and dividends have
been retroactively adjusted to reflect all stock dividends and the two-for-one
stock split issued in 1996.

<TABLE>
<CAPTION>

             QUARTER               RANGE OF STOCK PRICE             DIVIDEND
                                   LOW             HIGH             DECLARED
            <S>                  <C>              <C>                <C>
              1996
               1st               $21.54           $27.10             $0.11
               2nd                25.17            26.76              0.14 1/2
               3rd                25.17            26.42              0.14 1/2
               4th                25.40            28.57              0.15

              1997
               1ST               $27.86            $32.26            $0.15 1/4
               2ND                30.24             40.24             0.15 1/4
               3RD                38.57             41.67             0.15 1/4
               4TH                40.00             51.19             0.18

</TABLE>

                           DIVIDEND REINVESTMENT PLAN
 
    As a service to its shareholders, the Corporation provides an easy way for
     a shareholder to acquire additional shares of National City Bancshares,
    Inc. common stock through its DIVIDEND REINVESTMENT PLAN. The plan allows
        a shareholder to purchase this stock without brokerage fees using
    dividends and additional voluntary cash investments. For information about
      this plan, a shareholder can contact the Corporation's TRANSFER AGENT.



                                  MARKET MAKERS
 
              The following firms make a market in the common stock
                       of National City Bancshares, Inc.:

                             The Chicago Corporation
                           Herzog, Heine, Geduld, Inc.
                        J.J.B. Hilliard, W.L. Lyons, Inc.
                          Keefe, Bruyette & Woods, Inc.
                         McConnell, Budd & Downes, Inc.
                            NatCity Investments, Inc.



                             FOR FURTHER INFORMATION
 
                         The Corporation's TRANSFER AGENT
                                 and REGISTRAR is

                      The National City Bank of Evansville
                                Trust Department
                                 227 Main Street
                                  P.O. Box 868
                            Evansville, IN 47705-0868

                            Telephone (812) 464-9665



                  The Corporation's HEADQUARTERS is located at

                         National City Bancshares, Inc.
                                 227 Main Street
                                  P.O. Box 868
                            Evansville, IN 47705-0868

                            Telephone (812) 464-9677

              ALL SUBSIDIARY BANKS OF NATIONAL CITY BANCSHARES, INC.
             ARE MEMBERS OF THE FEDERAL DEPOSIT INSURANCE CORPORATION.


<PAGE>


                                    [PHOTO]


                                    [LOGO]


                          NATIONAL CITY BANCSHARES,INC.
                                 227 MAIN STREET
                            EVANSVILLE, INDIANA 47708
                              WWW.NATIONALCITY.COM