FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

(Mark One)

[X]  Annual Report  Pursuant to Section 13 or 15(d) of the  Securities  Exchange
     Act of 1934

For the fiscal year ended December 31, 1996
                                       or

[]   Transition  Report  Pursuant  to  Section  13 or  15(d)  of the  Securities
     Exchange Act of 1934

For the transition period from ________________ to ________________

Commission File Number         0-23134

                    PEOPLES BANK CORPORATION OF INDIANAPOLIS
             (Exact name of registrant as specified in its charter)


                   INDIANA                                   35-1681096
         (State or other Jurisdiction                      (I.R.S. Employer
       of Incorporation or Organization                   Identification Number)
130 East Market Street, Indianapolis, Indiana                    46204
   (Address of Principal Executive Offices)                    (Zip Code)

Registrant's telephone number including area code:
                                 (317) 237-8059

Securities Registered Pursuant to Section 12(b) of the Act:
                                      NONE

Securities Registered Pursuant to Section 12(g) of the Act:

                   Nonvoting Common Shares, without par value
                                (Title of Class)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  reports)  and  (2)  has  been  subject  to such  filing
requirements for the past 90 days. YES |X| NO |_|

Indicate by check mark if disclosure of delinquent  filers pursuant to Item 405,
Regulation S-K (ss. 229.405 of this chapter) is not contained  herein,  and will
not be contained,  to the best of Registrant's knowledge, in definitive proxy or
information  statements  incorporated by reference in Part III of this form 10-K
or any amendment to this Form 10-K. o

The  aggregate  market value of the 17,628  shares of the issuer's  voting stock
held by non-affiliates,  as of March 24, 1997, was $758,004 (assuming the Voting
Common Shares have a value equal to the Nonvoting Common Shares).

The number of  Nonvoting  Common  Shares of the  Registrant,  without par value,
outstanding  as of March 24, 1997,  was 1,431,042  shares.  The number of Voting
Common Shares of the Registrant, without par value, as of such date was 140,000.


                            Exhibit Index on Page 62
                               Page 1 of 50 Pages



                                        1

<PAGE>

                                     PART I

Item 1.  Business

Overview

         Peoples Bank Corporation of Indianapolis  (the "Company") is a one bank
holding company which owns Peoples Bank & Trust Company ("Peoples"). Peoples has
operated continuously since 1891 and its business activities are concentrated in
the greater Indianapolis, Indiana area. Peoples offers a broad range of lending,
deposit,  loan  servicing and trust  services to  individual,  governmental  and
commercial  customers.  Peoples  conducts  its  business  through  its  downtown
Indianapolis  headquarters and through 12 offices located throughout the greater
Indianapolis  area.  Peoples  is  the  largest  and  oldest  locally  owned  and
headquartered commercial bank in Indianapolis.

         The Company operates under a conservative  management philosophy and is
dedicated to providing  personal service coupled with  competitive  products and
pricing.   Management  believes  that  the  acquisition  of  the  three  largest
Indianapolis-based commercial banks by out-of-state holding companies during the
last several years enables the Company to  distinguish  itself from  competitors
based on its established  reputation,  local ownership and local decision making
authority.

         Focusing on  developing  strong,  primary  banking  relationships  with
businesses and  individuals  in its market area,  Peoples  generally  limits its
lending  activities  to the  greater  Indianapolis  area.  Peoples  focuses  its
commercial lending efforts on small and medium-sized  independent  companies and
its real estate lending on owner-occupied  commercial properties and one-to-four
family residential  properties.  Peoples' loan underwriting and review functions
are centralized to provide consistency and timely asset quality monitoring.
Peoples' loan portfolio is  diversified,  locally  oriented and does not include
any foreign loans.

         The Company's  principal  office is located at 130 East Market  Street,
Indianapolis, Indiana, 46204.

Market Area

         Peoples'  market area is the greater  Indianapolis  area which includes
Marion  County,  Indiana  and certain  contiguous  townships.  Indianapolis  has
experienced significant employment growth in recent years. According to the 1990
Census,  Marion  County  had  a  total  population  of  approximately   800,000,
representing  an increase of over 4% since 1980.  Employment in Marion County is
concentrated  in  the  following   industries:   durable  and  nondurable  goods
manufacturing, retail, financial and real estate services, health, education and
professional services, public administration and transportation.

         Peoples' service area is highly competitive.  The four largest banks in
Marion  County,  each of which is controlled  out-of-state,  carry a substantial
majority of the total  deposits  of banks and thrifts in the County.  Management
estimates that Peoples' market share is currently  between 2% and 3% of deposits
with financial  institutions in Marion County.  In addition to competition  from
commercial banks and savings  associations,  Peoples also competes with numerous
credit unions,  finance  companies,  insurance  companies,  mortgage  companies,
securities  and brokerage  firms,  money market mutual  funds,  loan  production
offices and other providers of financial  services  generally.  Some of Peoples'
competitors,  including  certain  regional  bank  holding  companies  which have
operations in Peoples' market area, have  substantially  greater  resources than
Peoples,  may have  higher  lending  limits  and may offer  other  services  not
available  through  Peoples.   Peoples  also  faces   significant   competition,
particularly  with  respect to  interest  rates paid on deposit  accounts,  from
certain  local thrift  institutions.  Peoples  competes on the basis of rates of
interest   charged  on  loans,  the  rates  of  interest  paid  for  funds,  the
availability,  quality and diversity of services and responsiveness to the needs
of its customers.

Lending Activities

         Focusing on  developing  strong,  primary  banking  relationships  with
businesses and  individuals  in its market area,  Peoples  generally  limits its
lending  activities  to the  greater  Indianapolis  area.  Peoples  focuses  its
commercial  lending  efforts on small and  medium-sized  companies  and its real
estate lending on owner-occupied  commercial  properties and one-to-four  family
residential properties.



                                        2

<PAGE>



Loans

         Peoples provides loans to both  individuals and businesses  principally
within the greater  Indianapolis area. Peoples has no material  concentration of
loans to any single borrower or industry nor does it have any foreign loans.

         The amount of loans outstanding (excluding loans held for sale) and the
percent  of the  total  represented  by each  type on the  dates  indicated  are
reflected in the following table.

<TABLE>
<CAPTION>
                                                                          December 31,
                          ----------------------------------------------------------------------------------------------------------
                                   1996                   1995                 1994                  1993                1992
                          --------------------    -------------------   -----------------     -----------------   ------------------
<S>                       <C>            <C>      <C>          <C>      <C>          <C>      <C>         <C>     <C>         <C>
Construction............. $ 23,644       7.10%    $ 31,965     11.79%   $ 19,162     8.94%    $ 9,978     5.81%   $ 6,522     4.30%
Mortgage.................   75,247      22.60       72,852     26.87      48,021    22.40      34,287    19.95     35,999     23.74
Commercial loans.........  156,755      47.08       97,914     36.12      78,870    36.79      68,394    39.80     57,173     37.70
Consumer.................   75,187      22.58       66,132     24.40      65,722    30.66      56,094    32.64     48,372     31.90
Tax-exempt loans.........    2,120      0 .64        2,230      0.82       2,615     1.21       3,080     1.80      3,573      2.36
                            ------     ------       ------     -----      ------    -----    --------    -----     ------     -----
     Total loans.........  332,953     100.00%     271,093    100.00%    214,390   100.00%    171,833   100.00%   151,639   100.00%
                                      =======                 ======               ======               ======              =======
Less:  Allowance for
     loan losses......... $  3,900                   3,290                 2,704                2,513               2,288
                            ------                  ------                ------             --------              ------
Net loans................ $329,053                $267,803              $211,686             $169,320            $149,351
                          ========                 =======               =======              =======             =======

</TABLE>

                                        3

<PAGE>



         The loan portfolio, excluding loans held for sale, at December 31, 1996
was comprised of approximately  54.82% commercial  loans,  22.60% mortgage loans
and 22.58% consumer loans.  Peoples had no "highly  leveraged  transactions," as
defined by the banking regulators,  and no foreign loans. Peoples generally does
not lend outside its market area and historically has not acquired participation
interests  from other  financial  institutions.  State law  restricts the amount
Peoples can loan to one  borrower,  generally  to 15% of capital and  unimpaired
surplus, or $6.2 million at December 31, 1996.

         Commercial  Loans.  Commercial loans account for the largest portion of
the loan portfolio.  Commercial  lending is generally  considered to have higher
credit  risk than other  forms of credit  because of the higher  average  dollar
amount of individual  credits and the risk associated with potential  diminution
of the value of special  purpose  collateral  (which often serves as security on
commercial loans) in economic downturns.  Commercial loans are made to a diverse
group of professional,  industrial,  and service business customers.  Commercial
loans include  working  capital lines of credit,  revolving  credit loans,  term
loans  (generally not to exceed 7 years),  single  payment or short-term  loans,
Small Business Administration loans (on which the SBA guarantees between 75% and
90% of the principal of the loans made to eligible borrowers) and, occasionally,
commercial  letters  of credit  and  lease  financing.  Commercial  loans may be
secured or unsecured depending on the quality of the credit.

         The Company's  commercial  loan category also includes  commercial real
estate  loans.  Such  loans are loans to  businesses  or  individuals  where the
Company relies upon the underlying real estate for collateral and repayment. The
basis for  these  loans  includes  income-producing  properties,  such as office
buildings,  warehouses, shopping centers or apartment buildings and construction
loans.  The Company will also provide land  acquisition and  development  loans,
such  as  loans  to  purchase  land  for the  development  of a  subdivision  or
condominium  project.  Interest  rates on loans in excess of five  years must be
adjustable. Construction loan terms are limited to one year and land development
loan terms are limited to two years.  Peoples' policy  establishes limits on the
loan-to-value  ratio for loans on improved  properties,  construction  loans and
land development loans.

         Residential Real Estate Loans. Residential real estate loans consist of
loans secured by one-to-four  family residential  properties.  During the twelve
months ended December 31, 1996,  Peoples originated $59.3 million in real estate
mortgage  loans.  Residential  real estate  loans do not  include  loans made to
businesses to develop residential real estate,  which are considered  commercial
real estate loans.

         Residential  real estate loans  originated  for Peoples'  portfolio are
generally adjustable rate mortgages and certain fixed rate loans. Peoples offers
one-,  two-,  three- and five-year  adjustable  rate mortgage loans with initial
fixed rate periods of one, two, three, and five years.  Certain fixed rate loans
may be considered for the portfolio from time to time. These could include loans
with one rate adjustment  after seven years (7/23) and 15-year fixed rate loans.
Peoples also offers residential  construction loans. The  construction/permanent
loan program offers  combined  construction  and permanent  financing  through a
single closing.  Other construction loans are made in which the borrower obtains
permanent financing through another lender.

         Peoples'   residential   lending  department  is  responsible  for  the
origination  and closing of all of Peoples'  residential  real estate loans.  In
addition to the loans described  above  originated for Peoples'  portfolio,  the
bank  originates  fixed-rate  loans with terms up to 30 years,  adjustable  rate
mortgage loans with terms up to 30 years and,  occasionally,  seven-year balloon
loans for resale into the secondary  market,  generally to the Federal  National
Mortgage Association ("FNMA"). Peoples retains servicing rights on substantially
all the mortgage loans it sells.  At December 31, 1996,  Peoples  serviced,  for
both its own portfolio and for others,  $179.9 million in  residential  mortgage
loans.

         In 1996,  Peoples'  restructured its residential  lending department in
order to improve  profitability within the residential mortgage loan origination
process. The staff was reduced from 22 to 9 employees,  two offices were closed,
and the  remaining  staff was  relocated  to  existing  space at the  Operations
Center.

         Consumer  Loans.  Consumer loans offered by Peoples include home equity
line of credit loans, home improvement loans, automobile and motor vehicle loans
and other secured and unsecured personal loans. Consumer loans generally involve
a higher level of risk than residential mortgage loans, and have correspondingly
higher  yields.   Home  equity  loans  are  generally   initiated  on  the  same
underwriting  standards as portfolio real estate mortgage loans.  They generally
bear interest at adjustable  rates and will only be made on the basis of a first
or second mortgage.  Peoples directly reviews all loan applications and does not
engage in indirect lending through auto dealers, building contractors or similar
third parties.

Asset Quality and Provision for Loan Losses

         Loan  Quality.  Peoples seeks to maintain a high level of asset quality
through careful  underwriting and by emphasizing loan originations in its market
area.  Peoples focuses its commercial lending efforts on small and medium-sized,
local, independent,  commercial and professional firms,  manufacturing companies
and  individuals  who are the owners and  principals  of such firms.  Commercial
loans  are  subjected  to  a  detailed   review  of  the  borrower's   financial
performance,  the  value  of  the  collateral  and  guarantees.  Appraisals  are
generally required for all real estate loans including residential mortgages and
home  equity  loans  exceeding  $10,000.  Commercial  loans may be  approved  by
Peoples' officers up to their established loan limits.  Beyond these limits, the
officer  responsible  for the  account  will  recommend  the loan to one or more
senior executive officers.

         The primary  functions of loan  portfolio  management are assuring loan
quality,  maintaining portfolio diversification and monitoring potential problem
loans.  Each  of  Peoples'  commercial  loan  officers  is  accountable  for the
performance of his or her loan

                                        4

<PAGE>

accounts.  Each loan officer  monitors  his or her  borrowers'  performance  and
compliance  and receives a daily report of any loan payment on which  payment is
past  due.  On the  basis of these  reports  they  proceed  to make  appropriate
contacts  with any  delinquent  borrowers.  A weekly  report  to  management  is
prepared  showing the past due loans for which each officer is responsible.  The
commercial  loan department then meets each month to discuss the status of every
loan that is more than 15 days past due.

         Through a loan rating process  monitored by the credit  analysis staff,
and the loan officers'  ongoing  monitoring of borrowers,  Peoples  develops its
loan  "watch  list." A loan may be  placed on the  watch  list for a variety  of
reasons,  including an existing or continuing  past due status,  a change in the
borrower's  financial  condition,  a change in an industry which could adversely
affect a borrower,  a loan  mentioned or  classified  by a regulatory  agency or
independent  auditor,  a loan in which the  collateral  has been affected or any
other loan that management desires to monitor specifically.

         Any loan with a rating of five  through  eight or with any other  basis
for concern as to security or collectibility, is placed on the watch list, which
is updated weekly.  Each loan officer with a loan that appears on the watch list
is responsible for preparing a plan of action for such loan. The commercial loan
department  then meets  quarterly  to review the status of handling the past due
loans. Based on this meeting, allowance for loan losses is reviewed to determine
its  adequacy.  The  allowance for loan losses is also reviewed by the President
monthly and the adequacy of the allowance for loan losses is evaluated quarterly
by the Board of Directors. The ongoing evaluation of potential losses includes a
review of the current  financial  status and credit  standing of  borrowers  and
their prior  history,  an evaluation of available  collateral,  a review of loss
experience  in relation to  outstanding  loans and  management's  judgment as to
prevailing and anticipated economic conditions, among other relevant factors.

         To provide  assurance  that the watch list is complete  and loan grades
assigned are  reasonable and  consistent,  Peoples  engages an independent  loan
review  provider to annually  review a sample of  commercial  loans  larger than
$350,000.  During 1996, 36.05% of commercial loan dollars were subject to such a
review (using the 1996 beginning portfolio balance as the denominator).

          Peoples'  collection  department is responsible  for past due mortgage
and consumer loans.  Telephone contact is made once such loans are between 5 and
10 days past due. The senior vice president for loan administration, the manager
of consumer  lending and the supervisor of  collections  meet monthly to discuss
delinquent real estate and consumer loan accounts.  At this meeting they discuss
potential  foreclosures.   Following  this  meeting  the  collection  department
prepares  plans of action for all cited problem loan  accounts.  Recommendations
for charge-offs based on collateral value versus loan balance and the likelihood
of continued  non-payment are prepared and the decision  whether to foreclose is
made.

         In 1996, Peoples recorded net charge-offs of $515,000 (0.17% of average
loans) as  compared to net  recoveries  of $50,000  (0.02% of average  loans) in
1995.  Peoples'  ratio of  nonperforming  loans to total loans  improved and was
0.09% of total loans at  December  31,  1996  compared to 0.47% at December  31,
1995.  At December 31, 1996 and December 31, 1995,  Peoples'  allowance for loan
losses was 1.17% and 1.20%, respectively, of total loans. The allowance for loan
losses as a percentage of nonperforming  loans at December 31, 1996 and December
31,  1995 was  1,378.09%  and  256.43%,  respectively.  See  "Item  6.  Selected
Consolidated  Financial Data" and "Item 7. Management's  Discussion and Analysis
of Results of Operations and Financial Condition" for supplemental information.

         Loans.  During 1996,  total loans  increased  $61.86 million or 22.82%.
During that period, commercial loans increased $50.4 million or 38.16%, consumer
loans  increased  $9.06  million or 13.69% and mortgage  loans  increased  $2.40
million or 3.29%.  During 1995,  total loans  increased  $56.7 million or 26.4%.
During  that  period,  commercial  loans  increased  $31.46  million  or 31.26%,
mortgage  loans  increased  $24.83  million or 51.7%,  and  consumer  loans were
relatively flat.

<PAGE>

         A classification of amounts due in the periods indicated for commercial
and real estate  construction  loans is indicated in the  following  table as of
December 31, 1996.  Amounts due are based on remaining  scheduled  repayments of
principal.  Amounts due after one year are also  classified  according  to their
sensitivity to changes in interest rates.


                                               After 1
                                                 But
                                    Within      Within    After
                                    1 Year     5 Years   5 Years     Total
                                    ------     -------   -------     -----
                                                 (In thousands)
Commercial.......................   $59,033    $61,161   $36,561   $156,755
Real estate -- construction......    20,407      3,237         0     23,644
                                     ------    -------   -------   --------
     Total                          $79,440    $64,398   $36,561   $180,399
                                     ======     ======    ======    =======
Interest sensitivity:
     With fixed rates............               26,945     5,824
     With variable rates.........               37,453    30,737
                                                ------    ------
          Total..................              $64,398   $36,561
                                                ======    ======


         Allowance for Loan Losses. The allowance for loan losses is a valuation
allowance providing for losses inherent in the loan portfolio. The allowance for
loan losses is reduced by the charge-off of loans and increased by the provision
for loan losses and by

                                        5

<PAGE>



recoveries  of  loans  previously  charged-off.  The  appropriate  level  of the
valuation  allowance is  determined in an ongoing  process  involving the credit
analysis  staff,  the loan officers and senior  management.  Specific  loans are
monitored on an on-going basis and included on the watch list.

         The allowance for loan losses is determined based upon  characteristics
of particular groups of loans. Those  characteristics  include past due amounts,
historical loss trends and any other  determinations made by management,  credit
analysis and the loan officers.  For larger loans,  when any reasonable  concern
exists as to the  collectibility  of interest or principal,  the potential  loss
exposures are estimated as part of the reserve analysis  process.  The allowance
for loan losses also  includes an amount that is not  specifically  allocated to
particular loan categories in the event of unanticipated  losses.  An evaluation
of the  adequacy of the level of the  allowance  for loan losses is performed by
the loan review  officer at least  quarterly.  That  analysis is reviewed by the
Board and senior  management and an appropriate  level of monthly  provision for
loan losses is  identified.  The senior  manager of lending  reviews  delinquent
loans with loan officers monthly or more frequently if deemed necessary.



                                                         6

<PAGE>



         The following table presents information concerning the activity in the
allowance for loan losses for the periods indicated.


<TABLE>
<CAPTION>
                                                                           December 31,
                                       ------------------------------------------------------------------------------------
                                             1996            1995             1994             1993              1992
                                             ----            ----             ----             ----              ----
                                                                      (Dollars in thousands)
<S>                                          <C>            <C>             <C>               <C>               <C>
Balance of allowance at
     beginning of period..............      $3,290          $2,704          $2,513            $2,288            $1,710
Recoveries of loans previously
     charged off:
     Commercial loans.................          36              83             113                98               225
     Consumer loans...................          41              92              66                69                78
     Mortgage loans...................          15               0               0                 0                 0
                                             -----          ------          ------            ------            ------
          Total recoveries............          92             175             179               167               303
Loans charged off:
     Commercial loans.................         257             103             275               199               470
     Consumer loans...................         350              74             136               292               365
     Mortgage loans...................           0             (52)            105                57                 0
                                           -------          ------          ------            ------            ------
          Total charge-offs...........         607             125             516               548               835
                                            ------          ------          ------            ------            ------
          Net charge-offs.............        (515)             50            (337)             (381)             (532)
     Provision for loan losses........       1,125             536             528               606             1,110
                                             -----          ------          ------            ------            ------
     Balance of allowance at
     end of period....................      $3,900          $3,290          $2,704            $2,513            $2,288
                                             =====           =====           =====             =====             =====
Net charge-offs to average
     loans outstanding for period.....        0.17%          (0.02)%          0.18%             0.23%             0.36%
Allowance at end of period to
     loans at end of period...........        1.17            1.20            1.26              1.42              1.48
Allowance to nonperforming
     loans at end of period...........    1,378.09          256.43          164.38            117.98            148.48
</TABLE>

<PAGE>

         As part of its evaluation process, management allocates portions of the
allowance for loan losses to certain  segments of the loan portfolio  based upon
the specific  review of credits and historical  loss  experience.  The following
table  presents a breakdown  of the  portions of the  allowance  for loan losses
allocated  to each  category of loans,  the  percentage  of total loans that the
category  comprises at the dates indicated,  and the percentage of the allowance
for loan losses allocated to that category.

<TABLE>
<CAPTION>
                                                                       At December 31,
                     ---------------------------------------------------------------------------------------------------------------
                                    1996                                1995                                  1994
                     ------------------------------------  -----------------------------------  ------------------------------------
                                             Percent of                           Percent of                            Percent of
                                  Percent       Loan                   Percent       Loan                    Percent       Loan
                       Reserve       of      Category to    Reserve      of      Category to     Reserve       of       Category to
                      Allocated   Reserve    Total Loans   Allocated   Reserve   Total Loans    Allocated    Reserve    Total Loans
                                                                   (Dollars in thousands)
<S>                    <C>         <C>        <C>          <C>          <C>         <C>         <C>           <C>          <C>
Commercial loans...    $1,124      28.82%     54.82%       $  839       25.50%      48.73%      $  709        26.22%       46.94%
Consumer loans.....       398      10.21      22.58           350       10.64       24.40          594        21.97        30.66
Mortgage loans.....       378       9.69      22.60           377       11.46       26.87          121         4.47        22.40
Unallocated........     2,000      51.28        N/A         1,724       52.40         N/A        1,280        47.34          N/A
                       ------      -----      -----        ------     -------      ------       ------       ------       ------
Total..............    $3,900     100.00%    100.00%       $3,290      100.00%     100.00%      $2,704       100.00%      100.00%
                       ======     ======     ======         =====      ======      ======        =====       ======       ======

</TABLE>


<TABLE>
<CAPTION>

                                                                      At December 31,
                                 ----------------------------------------------------------------------------------------
                                                    1993                                           1992
                                 ------------------------------------------     -----------------------------------------
                                                                Percent of                                    Percent of
                                                  Percent          Loan                        Percent           Loan
                                   Reserve           of         Category to       Reserve         of         Category to
                                  Allocated       Reserve       Total Loans      Allocated     Reserve       Total Loans
                                                                  (Dollars in thousands)
<S>                                 <C>             <C>             <C>       <C>               <C>               <C>
Commercial loans..............      $  784          31.20%          47.41%    $   891           38.94%            44.36%
Consumer loans................         589          23.44           32.64         677           29.59             31.90
Mortgage loans................         194           7.72           19.95         196            8.57             23.74
Unallocated...................         946          37.64             N/A         524           22.90               N/A
                                    ------        -------          ------      ------         -------            ------
Total.........................      $2,513         100.00%         100.00%     $2,288          100.00%           100.00%
                                     =====         ======          ======       =====          ======            ======
</TABLE>

         Management  allocates  the largest  portion of the  allowance  for loan
losses to the commercial loan portfolio.  The unallocated reserve increased from
$1,280,000  at December 31, 1994 to  $1,724,000  at December  31,  1995,  and to
$2,000,000 at December 31, 1996. This unallocated portion was 47.34% at December
31, 1994, 52.40% at December 31, 1995 and 51.28% at December 31, 1996.

         Other Real Estate.  Other real estate  ("ORE") are  properties of which
Peoples has taken possession. The carrying value of ORE was $236,000 at December
31, 1996,  $240,000 at December  31, 1995 and $0 at December  31,  1994.  ORE is
carried at the lower of

                                                         7

<PAGE>



cost (fair value at foreclosure) or fair value, less expected  disposition cost.
All carrying costs (e.g., taxes, insurance) are expensed.  Peoples generally has
annual  appraisals  performed  on all ORE. An amount  required to write down the
carrying  value to appraised  value is charged to income.  Peoples  utilizes the
services of an outside  manager for ORE  properties.  That person  maintains the
properties, provides for repairs and improvements and pursues the disposition.

         Nonperforming  Loans.  Loans on which the  Company  no  longer  accrues
interest  are referred to as  "nonaccrual  loans."  Management  places a loan on
nonaccrual  status when  collection of  additional  interest is unlikely and the
loan is not considered to be well secured and in the process of collection. When
a loan is placed on nonaccrual status,  interest  recognized but not received is
reversed from interest  income to the extent the interest was recognized  during
the current year. Interest recognized but not received in prior years is charged
against the allowance for loan losses. For the year ended December 31, 1996, the
Company  recorded $3,119 of interest on loans that were on nonaccrual  status at
December 31, 1996, and would have recorded  approximately  $27,481 had they been
accruing all year at their contractual rates.

         Nonperforming  loans are those loans that are on nonaccrual status, are
90  days or more  past  due as to  principal  or  interest  or  those  that  are
restructured.  Nonperforming  assets consist of nonperforming loans and ORE. The
following table shows the principal balance of nonperforming assets at the dates
indicated.

<TABLE>
<CAPTION>

                                                                           December 31,
                                       ------------------------------------------------------------------------------------
                                             1996            1995             1994             1993              1992
                                             ----            ----             ----             ----              ----
                                                                      (Dollars in thousands)
<S>                                        <C>             <C>             <C>               <C>               <C>
Nonaccrual............................     $    234        $    838        $    970          $  1,762          $  1,232
Contractually past due 90
     days or more as to
     principal or interest............           49             445             675               368               309
Restructured..........................            0               0               0                 0                 0
                                           --------        --------        --------          --------          --------
Total nonperforming loans.............          283           1,283           1,645             2,130             1,541
Other real estate.....................          236             240               0               101               302
                                                ---         -------        --------           -------           -------
Total nonperforming assets............      $   519        $  1,523        $  1,645          $  2,231          $  1,843
                                            =======         =======         =======           =======           =======
Total loans, including loans
     held for sale....................     $333,374        $273,650        $215,151          $176,840          $154,537
Allowance for loan losses.............        3,900           3,290           2,704             2,513             2,288
Nonperforming loans to total loans....         0.09%           0.47%           0.76%             1.20%             1.00%
Nonperforming assets to total
     loans plus other real estate
     owned............................         0.16            0.56            0.76              1.26              1.19
Allowance for loan losses
     to nonperforming loans...........     1,378.09          256.43          164.38            117.98            148.48
</TABLE>


         As of December 31, 1996,  nonperforming loans have decreased $1,000,000
or 76.93% to $0.3 million from $1.3 million at December 31, 1995. When a loan is
determined to be of such concern that nonaccrual status is warranted, management
will charge off any portion of the loan  believed  to be  uncollectible  at that
time.


<PAGE>

         At December 31, 1996,  excluding  nonaccrual loans, loans which were 60
days or more past due were as follows:


                                                  December 31, 1996
                                  ----------------------------------------------
                                  Commercial        Mortgage           Consumer
                                               (Dollars in thousands)
60-89 days past due.........          $583             $178              $101
More than 90 days
     past due...............            49                0                 0


         Nonperforming loans have deteriorated to the point that the borrower is
no  longer  paying as  agreed  and has  become 90 days or more past due or where
management,  as a result of delinquent  status or significant  concern about the
ultimate  collectibility  of the loan, has ceased  recognizing  interest  income
(nonaccrual status) on the loan. Management typically evaluates loss exposure on
these credits based on the liquidation value of the underlying collateral.

         Impaired  Loans.   Beginning  January  1,  1995,  Peoples   implemented
Financial  Accounting Standard No. 114 ("FAS 114") which required recognition of
loan impairment and changed the accounting for such loans.  Loans are considered
impaired when  management  determines that it is probable that the customer will
not  comply  with the  contractual  terms of the  note.  Peoples  evaluates  the
commercial  business  and  commercial  real estate loans  considered  during its
quarterly allowance for loan loss analysis for impairment.  Residential mortgage
loans and consumer  credits are not  typically  individually  considered in that
analysis. Impaired loans are carried at the present

                                                         8

<PAGE>



value of expected cash flows,  discounted at the loan's effective  interest rate
or at the fair value of  collateral  if such  loans are deemed to be  collateral
dependent.  A portion of the  allowance for loan losses is allocated to impaired
loans and changes in that allowance are elements of People's  provision for loan
losses.  During 1996,  Peoples  identified loans with an average balance of $1.1
million as  impaired.  At year end,  $743,000  of loans were so  designated  and
$155,000 of the allowance was  allocated to such loans.  Generally,  only income
received in cash is recorded as interest income after a loan has been designated
as impaired.

         Other Loans of Concern.  Watch  category  loans may include  loans with
loss  potential  that are still  performing  and  accruing  interest  and may be
current  under  the  terms  of the loan  agreement.  However,  management  has a
significant  degree of  concern  about the  borrowers'  ability to  continue  to
perform  according  to the terms of the loan.  Loss  exposure  on these loans is
also, typically,  evaluated based primarily upon the estimated liquidation value
of the collateral  securing the loan. Also, watch category loans include credits
which,  although  adequately secured and performing,  reflect a past delinquency
problem or unfavorable financial trends exhibited by the borrower.

         All watch list loans are subject to additional scrutiny and monitoring.
The Company's  philosophy  encourages  loan officers to identify  borrowers that
should be monitored in this  fashion and believes  that this process  ultimately
results in the identification of problem loans in a more timely fashion.

         At December 31, 1996, the Company had a total of $12.7 million of loans
on its  commercial  loan watch list.  Loans may be placed on the watch list as a
result of delinquent status, concern about the borrower's financial condition or
the value of the collateral securing the loan, substandard classification during
regulatory  examinations or simply as a result of management's desire to monitor
more closely a borrower's financial condition and performance.

Securities

         Peoples'  securities  portfolio is maintained in high quality,  liquid,
short to medium-term  securities.  The goal of Peoples'  investment policy is to
maximize  return  over  the  long  term in a  manner  consistent  with  Peoples'
liquidity requirements, its asset and liability management strategies and safety
of  principal.  Peoples seeks to maintain a relatively  short overall  portfolio
maturity to reflect  interest-earning  characteristics  more consistent with its
deposit base.  Generally,  no securities are purchased with  maturities  greater
than seven years,  except that municipal  obligations with terms up to (or a put
feature exercisable after) 15 years are allowed.

         Peoples' securities policy is established by the Board of Directors and
monitored  by the  Investment  Policy  Committee  consisting  of four  executive
officers and a Board member.

         The Company's  securities  portfolio includes U.S. Treasury securities,
obligations  of U.S.  government  agencies,  obligations of states and political
subdivisions,  corporate  investments and mortgage-backed  investments issued by
U.S.  government agencies and other  intermediaries.  Effective January 1, 1994,
the Company was required by Financial  Accounting  Standard No. 115 to designate
as  "available-for-sale"  securities that might be sold in response to liquidity
needs or for asset/liability  management purposes.  Such securities are required
to be  carried  at  fair  value,  with  the  resultant  unrealized  gain or loss
reflected,  net of tax,  as a  component  of  shareholders'  equity.  All  other
securities are designated as held-to-maturity  securities because management has
the positive  intent and ability to hold such securities  until  maturity.  Such
securities  continue to be carried at amortized  cost. At December 31, 1996, all
securities were considered "available for sale."

         The maturities of securities  are a principal  source of funds for loan
growth and other liquidity needs. The following table illustrates,  based on the
date of maturity or repricing, the amortized cost and the weighted average yield
of securities held as of December 31, 1996. As of such date, the Company held no
securities  with  maturities  over ten years.  The maturity  classification  for
mortgage-backed  investments is determined by the estimated  average life. Refer
to Note 2 of the Company's  consolidated  financial  statements  for  additional
information.

                                                         9

<PAGE>

<TABLE>
<CAPTION>

                                  Less than                1 to 5                5 to 10               More than
                                    1 Year                  Years                 Years                 10 Years
                              ----------------      ------------------      ------------------      -----------------
                              Amount     Yield      Amount       Yield      Amount       Yield      Amount      Yield      Total
                              ------     -----      ------       -----      ------       -----      ------      -----      -----
                                                                       (Dollars in thousands)
<S>                         <C>          <C>       <C>          <C>       <C>          <C>       <C>            <C>        <C>
Obligation of U.S.
     government
     agencies and
     government
     sponsored agencies...  $15,997      5.79%      $  ---      ---%      $  ---        ---%      $  ---         ---%      $15,997
Obligations of states
     and political
     subdivisions.........    4,949        4.65      20,616      5.55       6,650        5.38         ---          ---       32,215

Debt securities issued
     by foreign
     governments..........      75         8.01         ---       ---         ---         ---         ---          ---           75
Corporate securities......    3,507        6.98         ---       ---         ---         ---         ---          ---        3,507
Mortgage-backed
     investments..........    29,711       6.07      12,610      6.51        ---        ---          ---           ---       42,321
                              ------       ----      ------      ----     -------     -------     -------      -------       ------

Total.....................   $54,239      5.92%     $33,226      5.9%      $6,650       5.38%     $    ---         ---%     $94,115
                              ======                 ======                ======                 ========                   ======

</TABLE>


         The  following   tables   present,   by  category  of  investment   and
designation, the carrying value of securities at the dates indicated.


                                                             Carrying Value
                                                              December 31,
                                                        ------------------------
                                                                  1994
Held-to-maturity securities:                              (Dollars in thousands)
Obligations of U.S. government agencies
     and government-sponsored agencies................           $ 29,420
Obligations of states and political subdivisions......             34,702
Debt securities issued by foreign governments.........                 75
Corporate securities..................................              4,412
Mortgage-backed investments:
     Issued by U.S. government agencies...............             42,182
     Issued by other corporate entities...............              3,032
                                                                  -------
          Total                                                  $113,823
                                                                 ========




                                                        10

<PAGE>

<TABLE>
<CAPTION>
                                                                   Carrying Value
                                                                    December 31,
                                             ----------------------------------------------------------
                                                     1996                 1995               1994
                                                     ----                 ----               ----
                                                                   (In thousands)
<S>                                                  <C>                 <C>               <C>
Available-for sale securities:
U.S. Treasury securities....................         $ 7,031             $ 19,100          $46,172
Obligations of U.S. Government
     agencies and government
     sponsored agencies.....................           8,989                8,980              ---
Obligations of states and
     political subdivisions.................          32,634               38,173            9,005
Mortgage-backed investments:
     Issued by U.S. Government
          agencies..........................          41,620               35,589              ---
     Issued by other corporate
          entities..........................             731                2,289              ---
Debt securities issued by foreign
     governments............................              75                   70              ---
Corporate securities........................           3,509                3,544              ---
                                                     -------              -------          -------
          Total securities..................         $94,589             $107,745          $55,177
                                                      ======              =======           ======
</TABLE>


         The Company has no  concentration  in  securities  of any single issuer
except that a majority of the municipal  portfolio  consists of issuers of bonds
with taxing  authority  on  properties  in the State of Indiana.  The  Company's
investment in U.S. Government  securities and government agencies exceeds 10% of
its shareholders' equity.

Sources of Funds

         Deposits.  Deposits  represent the primary source of funds for Peoples.
Deposits are attracted  principally  from within the greater  Indianapolis  area
through  the  offering of a broad  selection  of deposit  instruments  including
non-interest-bearing  and  interest-bearing   checking  accounts,  money  market
accounts, fixed and variable rate certificates of deposit, individual retirement
accounts and regular  savings  accounts.  Peoples  does not actively  solicit or
advertise for deposits outside the greater  Indianapolis  area.  Deposit account
terms vary with principal  differences being the minimum balance  required,  the
amount of time the funds  remain  on  deposit  and the  interest  rate,  if any.
Interest  rates are  established  by Peoples  generally on a weekly  basis.  The
determination  of rates and other terms (such as  maturities,  service  fees and
withdrawal  penalties)  is  predicated  on  rates  paid  and  terms  offered  by
competitors and Peoples' funds acquisition and liquidity requirements.

         The following reflects the  non-interest-bearing  and  interest-bearing
components of deposits at the respective dates indicated.


<TABLE>
<CAPTION>
                                                            December 31,
                                     ----------------------------------------------------------
                                             1996                1995               1994
                                             ----                ----               ----
                                                           (In thousands)
Deposits:
<S>                                         <C>                <C>                <C>
     Non-interest bearing...........        $ 83,911           $ 67,966           $ 74,190
     Interest-bearing...............         327,894            283,796            272,387
                                             -------            -------            -------
Total deposits......................        $411,805           $351,762           $346,577
                                             =======            =======            =======
Total deposits/total assets.........           87.34%             84.35%             81.53%
</TABLE>


<PAGE>

         Peoples   regularly   accepts   interest-bearing   deposits  issued  in
denominations  of  $100,000  or more.  Balances  of  certificates  of deposit of
$100,000 or more were $13.6  million at December  31, 1996 and $15.5  million at
December 31, 1995. The time remaining  until  maturity of time  certificates  of
deposit of $100,000 or more at such dates was as follows:

<TABLE>
<CAPTION>
                                                                              December 31,
                                                                    --------------------------------
                                                                         1996             1995
                                                                         ----             ----
                                                                             (In thousands)
Maturity distribution of time certificates in amounts of $100,000 or more:
<S>                                                                      <C>              <C>
     Three months or less.........................................       $ 5,196          $ 5,361
     Over three months to six months..............................         2,000            2,213
     Over six months..............................................         2,599            2,781
     Over twelve months...........................................         3,811            5,165
                                                                          ------          -------
          Total...................................................       $13,606          $15,520
                                                                          ======           ======
</TABLE>

         Short-Term   Borrowings.   Summary  information   regarding  repurchase
agreements,  which  comprised  the  majority of Peoples'  short-term  borrowings
during 1996, is presented  below.  Such  agreements  provide  customers with the
opportunity  to make  short-term  investments  of sums,  usually  in  excess  of
$100,000,   secured   by   obligations   of  the   U.S.   Treasury   or  a  U.S.
government-sponsored  agency. These agreements are generally short-term and have
been a relatively stable source of funds for Peoples.

<TABLE>
<CAPTION>
                                                                                    December 31,
                                                             ----------------------------------------------------------
                                                                   1996               1995                 1994
                                                                   ----               ----                 ----
                                                                                   (In thousands)
Repurchase agreements:
Average for the year:
<S>                                                               <C>                 <C>                  <C>
Amount outstanding..........................................      $11,964             $26,413              $30,314
     Weighted average interest rate.........................         4.69%               5.95%                4.19%
At year-end:
     Amount outstanding.....................................      $10,266             $16,056              $17,361
     Weighted average interest rate.........................         4.38%               4.95%                5.32%
Maximum amount outstanding at any
     month-end during the year..............................      $14,052             $46,578              $40,910
</TABLE>

Trust Operations

         Peoples'  Trust and  Investment  Management  Group  offers a variety of
fiduciary  and trust  services  and  provides a growing  source of fee income to
Peoples.  Trust fees were $1,342,000 in 1996,  $1,304,000 in 1995 and $1,213,000
in 1994. This reflects increases for 1996 and 1995 of $38,000 (2.9%) and $91,000
(7.5%),  respectively.  Trust  assets were $427  million at December  31,  1996,
$376.1  million at December  31, 1995 and $325.8  million at December  31, 1994.
Peoples'  Trust and Investment  Management  Group serves as trustee or agent for
over 200  employee  benefit  plans,  is  trustee  for over  500  personal  trust
accounts,  estates and  guardianships  and provides a variety of corporate trust
and agency services. The Trust and Investment Management Group obtains referrals
from existing customers,  attorneys and accountants,  and is actively seeking to
develop new business,  especially  among  non-profit  corporations  and employee
benefit plans. The Company believes that opportunities exist for growth in Trust
and Investment Management activities.

Employees

         As of December 31, 1996, the Company and Peoples had  approximately 188
full-time and 27 part-time employees.  During the third quarter of 1995, Peoples
developed  new  procedures  and  reorganized  some  operations  to lower overall
non-interest  expense. The improvements were based on recommendations from staff
members  throughout the  organization,  and resulted in the  elimination of some
positions.  While many of these  positions were vacant,  several  employees were
displaced.  As a  result,  the  overall  number of  employees  has  declined  by
approximately 10% since December 31, 1994. The Company also implemented a profit
sharing initiative during 1995 designed to share increases in profitability with
eligible  employees.  While payment  under the plan is entirely at  management's
discretion, specific goals are established for all departments which are tied to
the overall  profitability  of the bank.  Due to an increase  of  $2,544,000  in
pre-tax  profits  during  1996,  management  paid out  awards  to all  qualified
employees  totaling nearly $263,000.  Bankwide employee turnover  decreased from
32% to 28% in 1996,  with teller turnover  decreasing  from 55% to 45%.  Several
employee benefits were improved upon in 1996, including long-term disability and
health insurance in order to remain competitive in the marketplace and to enable
the bank to attract and retain qualified employees.  Additional improvements are
planned for Peoples' 401(k) Profit Sharing Plan.

         The Company considers its employee relationships to be good.


<PAGE>

Electronic Data Processing

         In 1990,  Peoples  purchased  two IBM AS400  computers  and new banking
software  when  it  established  its  Operations  Center  on the  north  side of
Indianapolis.   These  changes  have  enabled  Peoples  to  achieve  substantial
efficiencies  in  electronic  data  processing  ("EDP")  and to keep  pace  with
developments  in the  financial  services  industry by  continuing  to offer new
competitive  financial  services  and  products.  An example is  Peoples'  "Cash
Manager"  account which offers both checking and investment  features  through a
"sweep" arrangement.  Peoples has enhanced this commercial service by adding the
first Windows based PC-based cash management service. This product has proven to
be attractive to business customers.

         The Company has an  established  technology  maximization  committee to
keep abreast of technological developments and to consider new products and more
efficient ways to employ the technological capabilities.

         Peoples offers 24-hour  telephone banking that provides balance inquiry
and funds  transfer.  Peoples  Bank has 12 ATMs and is  affiliated  with the MAC
network which affords  Peoples'  customers access to MAC ATMs nationwide as well
as all Cirrus ATMs  worldwide.  Peoples has  introduced  a check card  affording
customers  the ability to use their ATM cards at all merchants  accepting  VISA.
This  capability  is  expected to  increase  usage of the ATM card and  generate
additional fee revenues.

                                                        11

<PAGE>



         The primary focus in continually improving the Company's  technological
capabilities  is to provide  better  response to customers and those involved in
providing  service  to  customers.  In that  regard,  Peoples  also  continually
develops its  PC-based  technology  so that many  operational  functions  can be
performed  without  utilizing  valuable  mainframe  time.  Peoples   continually
utilizes several PC-based networks and plans to expand "on-line" capabilities in
the future for customer access.

         Peoples owns substantially all of its EDP equipment and performs all of
its own data processing services. Its existing EDP capabilities will accommodate
substantial expansion of Peoples' operations.

Supervision and Regulation

         Bank Holding  Company  Regulation.  The Company is registered as a bank
holding company,  and is subject to the regulations of the Board of Governors of
the Federal  Reserve System  ("Federal  Reserve") under the Bank Holding Company
Act of 1956, as amended  ("BHCA").  Bank holding  companies are required to file
periodic  reports  with and are subject to periodic  examination  by the Federal
Reserve.  The Federal Reserve has issued  regulations under the BHCA requiring a
bank holding  company to serve as a source of financial and managerial  strength
to its subsidiary banks. It is the policy of the Federal Reserve that,  pursuant
to this  requirement,  a bank  holding  company  should  stand  ready to use its
resources  to provide  adequate  capital  funds to its  subsidiary  banks during
periods  of  financial  stress or  adversity.  Additionally,  under the  Federal
Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), a bank holding
company is required  to  guarantee  the  compliance  of any  insured  depository
institution  subsidiary  that may become  "undercapitalized"  (as defined in the
statute) with the terms of any capital restoration plan filed by such subsidiary
with its  appropriate  federal  banking agency up to the lesser of (i) an amount
equal to 5% of the institution's total assets at the time the institution became
undercapitalized,  or (ii) the  amount  that is  necessary  (or would  have been
necessary) to bring the institution into compliance with all applicable  capital
standards  as of the time the  institution  fails to comply  with  such  capital
restoration  plan.  Under the BHCA,  the Federal  Reserve has the  authority  to
require a bank holding  company to terminate any activity or relinquish  control
of a nonbank  subsidiary  (other than a nonbank  subsidiary  of a bank) upon the
Federal  Reserve's  determination  that such  activity or control  constitutes a
serious risk to the financial  soundness and stability of any bank subsidiary of
the bank holding company.

         Under the BHCA, a bank  holding  company  must obtain  Federal  Reserve
approval before: (i) acquiring, directly or indirectly,  ownership or control of
any  voting  shares of  another  bank or bank  holding  company  if,  after such
acquisition,  it would own or  control  more than 5% of such  shares  (unless it
already owns or controls the majority of such  shares);  (ii)  acquiring  all or
substantially  all of the assets of another  bank or bank  holding  company;  or
(iii) merging or consolidating with another bank holding company.

         Prior to September 29, 1995, the BHCA  prohibited  the Federal  Reserve
from approving any direct or indirect  acquisition by a bank holding  company of
more than 5% of the voting shares, or of all or substantially all of the assets,
of a bank  located  outside  of the  state in which the  operations  of the bank
holding company's banking  subsidiaries are principally  located unless the laws
of the state in which the bank to be acquired is located specifically  authorize
such an  acquisition.  Pursuant  to  amendments  to the BHCA which  took  effect
September 29, 1995, the Federal  Reserve may now allow a bank holding company to
acquire  banks  located  in any state of the  United  States  without  regard to
geographic  restriction  or reciprocity  requirements  imposed by state law, but
subject to certain conditions,  including limitations on the aggregate amount of
deposits  that  may be  held by the  acquiring  holding  company  and all of its
insured depository institution affiliates and state law provisions requiring the
target bank to have existed for some period of time (not  exceeding  five years)
prior to the date of acquisition.

         The BHCA also prohibits the Company,  with certain  exceptions noted
below, from acquiring direct or indirect ownership or control of more than 5% of
the voting  shares of any company  which is not a bank and from  engaging in any
business  other  than  that  of  banking,  managing  and  controlling  banks  or
furnishing  services to banks and their  subsidiaries,  except that bank holding
companies  may engage in, and may own shares of  companies  engaged in,  certain
businesses found by the Federal Reserve to be "so closely related to banking . .
 . as to be a proper incident thereto." Under current  regulations of the Federal
Reserve, the Company and any non-bank  subsidiaries it may control are permitted
to engage in, among other  activities,  such  banking-related  businesses as the
operation of a thrift,  the operation of a trust  company,  sales,  and consumer
finance,  equipment  leasing,  the  operation  of  a  computer  service  bureau,
including  software  development,  and mortgage banking and brokerage.  The BHCA
does  not  place   territorial   restrictions  on  the  activities  of  non-bank
subsidiaries of bank holding companies.


<PAGE>

         Capital  Adequacy  Guidelines for Bank Holding  Companies.  The Federal
Reserve is the federal  regulatory  and  examining  authority  for bank  holding
companies.  The Federal Reserve has adopted capital adequacy guidelines for bank
holding companies.

         Bank  holding  companies  are  required  to  comply  with  the  Federal
Reserve's  risk-based  capital guidelines which require a minimum ratio of total
capital to risk-weighted  assets (including certain off-balance sheet activities
such as standby  letters  of credit) of 8%. At least half of the total  required
capital must be "Tier I capital," consisting principally of common stockholders'
equity,  noncumulative perpetual preferred stock, a limited amount of cumulative
perpetual  preferred  stock and  minority  interests  in the equity  accounts of
consolidated subsidiaries,  less certain goodwill items. The remainder ("Tier II
Capital")   may  consist  of  a  limited   amount  of   subordinated   debt  and
intermediate-term  preferred stock, certain hybrid capital instruments and other
debt securities,  cumulative  perpetual preferred stock, and a limited amount of
the  general  loan  loss  allowance.  In  addition  to  the  risk-based  capital
guidelines,  the Federal  Reserve has adopted a Tier I (leverage)  capital ratio
under which the bank  holding  company must  maintain a minimum  level of Tier I
capital to average

                                                        12

<PAGE>



total consolidated assets of 3% in the case of bank holding companies which have
the highest regulatory examination ratings and are not contemplating significant
growth or expansion. All other bank holding companies are expected to maintain a
ratio of at least 1% to 2% above the stated minimum.

         The  Company  and   Peoples  are   required  to  comply  with   capital
requirements  promulgated by their primary  regulators that affect their ability
to pay dividends and can affect their operations.  Those regulations require the
maintenance  of  specified  levels of capital (as  defined) to total assets (the
leverage  ratio) and to risk weighted  assets (the  risk-based  capital  ratio).
These regulations  require the maintenance of a leverage ratio of at least 3.00%
(only for the most sound institutions, others will be required to maintain 4% or
5%) and a total risk-based capital ratio of at least 8.00%.

         Further,  regulations  promulgated  by the FDIC identify five levels of
capitalization.  A financial  institution's deposit insurance assessment and, in
certain  circumstances,  operations  will be  affected by their  capital  level.
Institutions  with  leverage  ratios of 5.00% or  greater  and total  risk-based
capital  ratios  of  10.00% or more are  deemed  to be "well  capitalized,"  and
accordingly,  pay the lowest deposit insurance assessment and are not subject to
operational  restrictions  as  outlined  within  the  regulation.   Under  those
regulations,  financial  institutions with leverage and total risk-based capital
ratios  less  than  4.00% and  8.00%,  respectively,  are  subject  to  expanded
regulatory oversight.

         The Company and Peoples  were in full  compliance  with all  regulatory
capital  requirements  at December 31, 1996. The following  table  indicates the
Company's actual capital levels at the dates indicated:


<TABLE>
<CAPTION>
                                                                    At December 31,
                                                   ------------------------------------------------
                                                      1996                 1995               1994
                                                      ----                 ----               ----
                                                                 (Dollars in thousands)
<S>                                                <C>                  <C>               <C>
Total assets (1)..............................      $471,192             $416,781          $426,058
Risk-based assets.............................       346,971              301,426           274,940
Tier I capital................................        45,063               41,398            39,460
Total capital.................................        48,963               44,688            42,164
Leverage ratio................................          9.62%                9.93%             9.26%
Tier I risk-based capital ratio...............         12.99                13.73             14.35
Total risk-based capital ratio................         14.11                14.83             15.34
</TABLE>


(1)      Adjusted  to exclude net  unrealized  gain/loss  on  available-for-sale
         securities.

         Bank Regulation.  Peoples is organized under the laws of Indiana and as
such is  subject to the  supervision  of the  Indiana  Department  of  Financial
Institutions  ("DFI"),  whose examiners  conduct periodic  examinations of state
banks.  Peoples is not a member of the Federal  Reserve  System,  so its primary
Federal regulator is the FDIC, which also conducts periodic  examinations of the
bank.  Peoples'  deposits  are  insured  by  the  Bank  Insurance  Fund  ("BIF")
administered  by the  FDIC and are  subject  to  FDIC's  rules  and  regulations
respecting the insurance of deposits. See "--Deposit Insurance."

         Both federal and state law extensively  regulate various aspects of the
banking   business   such  as   reserve   requirements,   truth-in-lending   and
truth-in-savings  disclosure,  equal credit opportunity,  fair credit reporting,
trading in securities and other aspects of banking  operations.  Current federal
law also requires banks,  among other things,  to make deposited funds available
within specified time periods.

         Insured state-chartered banks are prohibited under FDICIA from engaging
as principal in activities  that are not permitted for national  banks,  unless:
(i) the FDIC determines that the activity would pose no significant  risk to the
appropriate  deposit  insurance fund, and (ii) the bank is, and continues to be,
in  compliance  with all  applicable  capital  standards.  The Company  does not
believe  that  these  restrictions  will have a material  adverse  effect on its
current operations.


<PAGE>

         Federal  Home Loan Bank System.  During 1994,  Peoples was approved for
membership in the Federal Home Loan Bank ("FHLB")  System.  FHLB membership will
provide Peoples with a ready source from which to borrow  short-term  funds from
time to time. The FHLB System consists of 12 regional banks. The Federal Housing
Finance  Board  ("FHFB"),  an  independent  agency,  controls  the  FHLB  System
including the FHLB of  Indianapolis.  The FHLB System  provides a central credit
facility  primarily for member savings and loan  associations  and savings banks
and other member financial  institutions.  Peoples is required to hold shares of
capital  stock in the FHLB of  Indianapolis  in an amount at least  equal to the
greater  of 1% of the  aggregate  principal  amount  of its  unpaid  residential
mortgage loans,  home purchase  contracts and similar  obligations at the end of
each  calendar  year,  0.3% of its  assets  or 1/20  (or such  greater  fraction
established by the FHLB) of outstanding  FHLB  advances,  commitments,  lines of
credit and  letters of credit.  Peoples is  currently  in  compliance  with this
requirement.  At December 31, 1996,  Peoples' investment in stock of the FHLB of
Indianapolis was $1.7 million.

         In past years, Peoples has received dividends on its FHLB stock. All 12
FHLBs are  required  by law to  provide  funds for the  resolution  of  troubled
savings associations and to establish affordable housing programs through direct
loans or  interest  subsidies  on  advances to members to be used for lending at
subsidized interest rates for low- and moderate-income,  owner-occupied  housing
projects, affordable rental housing, and certain other community projects. These
contributions and obligations could adversely affect the FHLBs'

                                                        13

<PAGE>



ability to pay dividends and the value of FHLB stock in the future. For the year
ended December 31, 1996,  dividends paid to Peoples by the FHLB of  Indianapolis
totaled $133,708 for an annual rate of 7.83%.

         The FHLB of Indianapolis serves as a reserve or central bank for member
institutions  within its assigned  region.  It is funded primarily from proceeds
derived from the sale of consolidated  obligations of the FHLB System.  It makes
advances to members in accordance  with policies and  procedures  established by
the FHFB and the Board of Directors of the FHLB of Indianapolis.

         All FHLB advances  must be fully  secured by  sufficient  collateral as
determined by the FHLB.  Eligible  collateral includes first mortgage loans less
than 90 days delinquent or securities  evidencing interests therein,  securities
(including  mortgage-backed  securities)  issued,  insured or  guaranteed by the
federal  government  or any agency  thereof,  FHLB  deposits  and,  to a limited
extent,  real  estate  with  readily  ascertainable  value in which a  perfected
security interest may be obtained.  Other forms of collateral may be accepted as
over  collateralization  or, under certain  circumstances,  to renew outstanding
advances.  All long-term  advances must be used to provide funds for residential
home financing and the FHLB has established  standards of community service that
members must meet to maintain access to long-term advances.

         Interest rates charged for advances vary  depending upon maturity,  the
cost of funds to the FHLB of Indianapolis and the purpose of the borrowing.

         Bank  Capital  Requirements.  The FDIC has adopted  risk-based  capital
ratio  guidelines  to which  Peoples is  subject.  The  guidelines  establish  a
systematic  analytical framework that makes regulatory capital requirements more
sensitive  to  differences   in  risk  profiles  among  banking   organizations.
Risk-based  capital  ratios are  determined by  allocating  assets and specified
off-balance  sheet  commitments  to four risk weighted  categories,  with higher
levels of capital being  required for the categories  perceived as  representing
greater risk.

         Like the capital guidelines  established by the Federal Reserve for the
Company, these guidelines divide a bank's capital into two tiers. The first tier
("Tier I") includes common equity,  certain  non-cumulative  perpetual preferred
stock (excluding  auction rate issues) and minority interests in equity accounts
of consolidated subsidiaries,  less goodwill and certain other intangible assets
(except  mortgage  servicing  rights and  purchased  credit card  relationships,
subject to certain  limitations).  Supplementary  ("Tier II") capital  includes,
among other items,  cumulative  perpetual and long-term  limited life  preferred
stock,  mandatory  convertible  securities,  certain hybrid capital instruments,
term subordinated  debt and the allowance for loan and lease losses,  subject to
certain limitations,  less required deductions. Banks are required to maintain a
total  risk-based  capital ratio of 8%, of which 4% must be Tier I capital.  The
FDIC may,  however,  set higher capital  requirements  when a bank's  particular
circumstances warrant. Banks experiencing or anticipating significant growth are
expected to maintain capital ratios, including tangible capital positions,  well
above the minimum levels.

         In addition, the FDIC established guidelines prescribing a minimum Tier
I leverage  ratio (Tier I capital to adjusted  total  assets as specified in the
guidelines).  These guidelines provide for a minimum Tier I leverage ratio of 3%
for banks that meet certain  specified  criteria,  including  that they have the
highest  regulatory rating and are not experiencing or anticipating  significant
growth.  All other banks are required to maintain a Tier I leverage  ratio of 3%
plus an additional cushion of at least 100 to 200 basis points.

         Certain  regulatory  capital ratios under the FDIC's risk-based capital
guidelines for Peoples at December 31, 1996 are shown below:


                                                              December 31, 1996

Tier I Capital to Risk-Weighted Assets.....................         10.94%
Total Risk-Based Capital to Risk-Weighted Assets...........         12.07
Tier I Leverage Ratio......................................          8.14



                                                        14

<PAGE>

         Dividend Limitations.  Under Federal Reserve supervisory policy, a bank
holding  company  generally  should  not  maintain  its  existing  rate  of cash
dividends on common shares unless (i) the organization's net income available to
common  shareholders  over the past year has been  sufficient  to fully fund the
dividends and (ii) the prospective rate of earnings retention appears consistent
with the  organization's  capital needs,  asset quality,  and overall  financial
condition. The Company's Board of Directors has adopted a policy consistent with
these guidelines.  The FDIC also has authority under the Financial  Institutions
Supervisory Act to prohibit a bank from paying dividends if, in its opinion, the
payment of dividends would  constitute an unsafe or unsound practice in light of
the financial condition of the bank.

         Under Indiana law, the Company is precluded  from paying cash dividends
if, after giving  effect to such  dividends,  the Company would be unable to pay
its debts as they become due or the  Company's  total  assets would be less than
its liabilities and obligations to preferential shareholders. Under Indiana law,
Peoples  may pay  dividends  so long as its  capital  is  unimpaired  and it has
unimpaired  retained  surplus equal to 25% of capital.  Dividends may not exceed
undivided  profits  on hand  (less  losses,  bad debts and  expenses).  The most
stringent capital requirements affecting Peoples, however, are those established
by the prompt corrective action provisions of FDICIA, which are discussed below.
Peoples'  capital  levels  currently  exceed  the  criteria  established  to  be
designated as a "well capitalized"  institution.  Such institutions are required
to have a total risk-based  capital ratio of 10% or greater, a Tier I risk-based
capital  ratio  of 6% or  greater  and a  leverage  ratio of 5% or  greater.  At
December 31, 1996, Peoples' total risk-based capital,  Tier I risk-based capital
and  leverage  capital  exceeded  the amounts  required to be  designated  "well
capitalized" by $7.1 million, $17.1 million and $14.6 million, respectively.

         Lending  Limits.  Under Indiana law, the total loans and  extensions of
credit by an  Indiana-chartered  bank to a borrower  outstanding at one time and
not fully  secured  may not exceed 15% of such  bank's  capital  and  unimpaired
surplus.  An additional  amount up to 10% of the bank's  capital and  unimpaired
surplus  may be loaned to the same  borrower  if such loan is fully  secured  by
readily  marketable  collateral having a market value, as determined by reliable
and  continuously  available price  quotations,  at least equal to the amount of
such additional loans outstanding.

         Limitations on Rates Paid for Deposits.  Regulations promulgated by the
FDIC pursuant to FDICIA place  limitations on the ability of insured  depository
institutions  to  accept,  renew or roll  over  deposits  by  offering  rates of
interest which are significantly higher than the prevailing rates of interest on
deposits offered by other insured depository  institutions  having the same type
of charter in such  depository  institution's  normal  market area.  Under these
regulations,  "well-capitalized"  depository  institutions may accept,  renew or
roll such deposits over without restriction, "adequately capitalized" depository
institutions may accept, renew or roll such deposits over with a waiver from the
FDIC   (subject   to   certain   restrictions   on   payments   of  rates)   and
"undercapitalized"  depository  institutions may not accept,  renew or roll such
deposits  over.  The  regulations  contemplate  that  the  definitions  of "well
capitalized,"  "adequately  capitalized" and "undercapitalized" will be the same
as the  definition  adopted by the agencies to implement the  corrective  action
provisions of FDICIA.  Peoples does not believe that these regulations will have
a materially adverse effect on its current operations.

         Safety and Soundness Standards.  On August 9, 1995, the federal banking
agencies  final  safety  and  soundness  standards  for all  insured  depository
institutions became effective.  The standards,  which were issued in the form of
guidelines rather than  regulations,  relate to internal  controls,  information
systems,   internal  audit  systems,   loan   underwriting  and   documentation,
compensation and interest rate exposure.  In general, the standards are designed
to assist the federal banking agencies in identifying and addressing problems at
insured  depository   institutions  before  capital  becomes  impaired.   If  an
institution  fails to meet these  standards,  the  appropriate  federal  banking
agency may require  the  institution  to submit a  compliance  plan.  Failure to
submit a  compliance  plan may  result in  enforcement  proceedings.  Additional
standards  on earnings  and  classified  assets are expected to be issued in the
near future.

         Branching and Acquisitions or  Dispositions.  Establishment of branches
is subject to approval of the DFI and FDIC and geographic limits  established by
state laws. Indiana branch banking law permits a bank having its principal place
of business in the State of Indiana to establish branch offices in any county in
Indiana without geographic restrictions. A bank may also merge with any national
or state  chartered  bank  located  anywhere  in the  State of  Indiana  without
geographic restrictions.


<PAGE>

         Indiana banks and savings  associations  are permitted to acquire other
Indiana  banks and savings  associations  and to establish  branches  throughout
Indiana.  In  addition,   The  Riegle-Neal   Interstate  Banking  and  Branching
Efficiency Act of 1994 (the "Riegle-Neal Act") permits bank holding companies to
acquire  banks in other  states and,  with state  consent and subject to certain
limitations, allows banks to acquire out-of-state branches either through merger
or de novo expansion.  The State of Indiana  recently passed a law  establishing
interstate  branching  provisions for Indiana  state-chartered  banks consistent
with those established by the Riegle-Neal Act (the "Indiana Branching Law"). The
Indiana Branching Law authorizes Indiana banks to branch interstate by merger or
de novo expansion.  The Indiana  Branching Law became  effective March 15, 1996,
provided that prior to June 1, 1997 interstate  mergers and de novo branches are
not permitted to out-of-state  banks unless the laws of their home states permit
Indiana banks to merge or establish de novo branches on a reciprocal basis.

         Transactions with Affiliates. Peoples is subject to Sections 22(h), 23A
and 23B of the Federal Reserve Act which restrict financial transactions between
banks and affiliated companies. The statute limits credit transactions between a
bank  and its  executive  officers  and its  affiliates,  prescribes  terms  and
conditions for bank affiliate transactions deemed to be consistent with safe and
sound  banking  practices,  and  restricts  the  types  of  collateral  security
permitted in connection with a bank's extension of credit to an affiliate.

         FDICIA.  FDICIA requires,  among other things,  federal bank regulatory
authorities to take "prompt corrective action" with respect to banks that do not
meet minimum capital requirements.  For these purposes,  FDICIA establishes five
capital  tiers:  well  capitalized,  adequately  capitalized,  undercapitalized,
significantly undercapitalized, and critically undercapitalized.

         The FDIC adopted  regulations to implement the prompt corrective action
provisions  of FDICIA,  effective  December 19, 1992.  Among other  things,  the
regulations   define  the  relevant   capital  measures  for  the  five  capital
categories.  An institution is deemed to be "well capitalized" if it has a total
risk-based capital ratio of 10% or greater, a Tier I risk-based capital ratio of
6% or greater,  and a leverage  ratio of 5% or greater,  and is not subject to a
regulatory order, agreement or directive to meet and maintain a specific capital
level for any  capital  measure.  An  institution  is  deemed to be  "adequately
capitalized" if it has a total risk-based capital ratio of 8% or greater, a Tier
I risk-based  capital ratio of 4% or greater,  and generally a leverage ratio 4%
or greater. An institution is deemed to be  "undercapitalized" if it has a total
risk-based  capital ratio of less than 8%, a Tier I risk-based  capital ratio of
less  than  4%,  or  generally  a  leverage  ratio  of  less  than  4%;  and (d)
"significantly  undercapitalized"  if it has a total risk-based capital ratio of
less than 6%, a Tier I risk-based  capital  ratio of less than 3%, or a leverage
ratio  of  less  than  3%.   An   institution   is  deemed  to  be   "critically
undercapitalized"  if it has a ratio  of  tangible  equity  (as  defined  in the
regulations) to total assets that is equal to or less than 2%.

         "Undercapitalized"  banks are  subject  to growth  limitations  and are
required to submit a capital  restoration  plan. A bank's  compliance  with such
plan  is  required  to  be   guaranteed   by  any  company  that   controls  the
undercapitalized  institution as described above. If an "undercapitalized"  bank
fails to submit an  acceptable  plan,  it is treated  as if it is  significantly
undercapitalized.  "Significantly  undercapitalized" banks are subject to one or
more of a number of  requirements  and  restrictions,  including an order by the
FDIC  to  sell  sufficient  voting  stock  to  become  adequately   capitalized,
requirements  to  reduce  total  assets  and  cease  receipt  of  deposits  from
correspondent  banks,  and  restrictions on compensation of executive  officers.
"Critically  undercapitalized"  institutions  may not,  beginning  60 days after
becoming  "critically  undercapitalized",  make  any  payment  of  principal  or
interest on certain  subordinated  debt or extend credit for a highly  leveraged
transaction  or enter  into any  transaction  outside  the  ordinary  course  of
business. In addition, "critically undercapitalized" institutions are subject to
appointment of a receiver or conservator.

         Deposit  Insurance.  Peoples'  deposits  are insured up to $100,000 per
insured  account  by  the  Bank  Insurance  Fund  ("BIF")  of  the  FDIC.  As an
institution  whose  deposits are insured by the BIF,  Peoples is required to pay
deposit insurance premiums to the BIF.

         The  FDIC  administers  two  separate  insurance  funds,  the  BIF  for
commercial banks and state savings banks and the Savings  Association  Insurance
Fund ("SAIF") for savings  associations  and banks that have  acquired  deposits
from savings associations. The FDIC is required to maintain designated levels of
reserves in each fund. As of September  30, 1996,  the reserves of the SAIF were
below the level required by law, primarily because a significant  portion of the
assessments  paid  into the SAIF has been  used to pay the cost of prior  thrift
failures,  while the  reserves of the BIF met the level  required by law in May,
1995.

         The FDIC is authorized to establish  separate annual  assessment  rates
for deposit  insurance for members of the BIF and members of the SAIF.  The FDIC
may increase assessment rates for either fund if necessary to restore the fund's
ratio of reserves to insured  deposits to the target  level  within a reasonable
time and may decrease such rates if such target level has been met. The FDIC has
established a risk- based assessment system for both SAIF and BIF members. Under
this system, assessments vary depending on the risk the institution poses to its
deposit insurance fund. Such risk level is determined based on the institution's
capital level and the FDIC's level of supervisory concern about the institution.
Because of the  differing  reserve  levels of the SAIF and the BIF,  the deposit
insurance assessments paid by healthy BIF-insured institutions were reduced over
time so as to be significantly lower than the level paid by healthy SAIF-insured
institutions. However, in 1996, provisions designed to recapitalize the SAIF and
eliminate the premium disparity between the BIF and SAIF were signed into law.

         On September 30, 1996,  President  Clinton signed into law  legislation
which included  provisions  designed to recapitalize  the SAIF and eliminate the
significant  premium  disparity between the BIF and the SAIF. Under the new law,
members of SAIF were charged a one-time  special  assessment based on assessable
deposits at March 31, 1995. BIF institutions pay only 20% of the rate being paid
by SAIF institutions on their deposits with respect to obligations issued by the
federally-chartered  corporation which provided  financing to resolve the thrift
crisis in the 1980's ("FICO"). As a result, BIF institutions such as Peoples pay
lower assessments than comparable SAIF institutions.



                                       15
<PAGE>

         Federal  Securities Law. The Nonvoting Common Shares of the Company are
registered  with the SEC under the 1934  Act.  The  Company  is  subject  to the
information,   proxy  solicitation,   insider  trading  restrictions  and  other
requirements of the 1934 Act and the rules of the SEC thereunder.

         Community  Reinvestment Act Matters.  Federal law requires that ratings
of depository  institutions under the Community Reinvestment Act of 1977 ("CRA")
be disclosed.  The disclosure  includes both a four-unit  descriptive  rating --
outstanding,  satisfactory,  needs to improve, and substantial  noncompliance --
and a  written  evaluation  of  each  institution's  performance.  Each  FHLB is
required to  establish  standards of  community  investment  or service that its
members must maintain for continued access to long-term advances from the FHLBs.
The  standards  take into account a member's  performance  under the CRA and its
record of lending to first-time home buyers.  The examiners have determined that
Peoples has a satisfactory record of meeting community credit needs.

         Limitations   on  Repurchase  of  Common  Stock  of  Holding   Company.
Regulations  promulgated  by the Federal  Reserve  provide  that a bank  holding
company  must  file  written  notice  with  the  Federal  Reserve  prior  to any
repurchase of its equity securities if the gross consideration for the purchase,
when aggregated with the net consideration  paid by the bank holding company for
all repurchases  during the preceding 12 months,  is equal to 10% or more of the
bank holding company's  consolidated net worth.  This notice  requirement is not
applicable,  however,  to a bank holding  company  that  exceeds the  thresholds
established for a well capitalized  state member bank and that satisfies certain
other regulatory requirements.

         Under Indiana law, the Company will be precluded from  repurchasing its
equity securities if, after giving effect to such repurchase,  the Company would
be unable to pay its debts as they become due or the  Company's  assets would be
less than its liabilities and obligations to preferential shareholders.

         Additional  Matters.  In addition to the matters  discussed  above, the
Company and Peoples are subject to additional  regulation  of their  activities,
including a variety of consumer protection  regulations affecting their lending,
deposit and collection  activities and regulations  affecting secondary mortgage
market activities.

         The  earnings  of  financial  institutions,  including  the Company and
Peoples,  are also  affected  by  general  economic  conditions  and  prevailing
interest  rates,  both  domestic  and  foreign  and by the  monetary  and fiscal
policies of the U.S.  Government  and its  various  agencies,  particularly  the
Federal Reserve.

         Additional legislation and administrative actions affecting the banking
industry may be considered by the United States  Congress,  the Indiana  General
Assembly and various regulatory agencies,  including those referred to above. It
cannot be predicted with certainty  whether such  legislation or  administrative
action will be enacted or the extent to which the banking industry in general or
the Company and Peoples in particular would be affected thereby.



                                       16
<PAGE>

Item 2.  Properties.

         The  Company's  executive  offices are located at Peoples'  main office
building.   Peoples  owns  the  main  office  building  through  a  wholly-owned
subsidiary.  The main office  building  is a twelve  story  building  located in
downtown  Indianapolis.  The main office branch is located on the first level of
the building and, in addition,  Peoples occupies the second,  third,  fourth and
fifth floors. The Board Room and training area are located on the twelfth floor.
All other areas are leased to other tenants.

         At December 31, 1996,  Peoples operated 13 customer service offices,  8
of which are owned  (including  the main office) and 6 of which are leased under
lease agreements with remaining terms  (including  renewal options) ranging from
0.6 to 23.3 years.  The Company will develop plans and analyze  opportunities to
expand  its  number  of  locations  if the  expansion  appears  to  represent  a
profitable  opportunity.  Peoples also leases its operations center on the north
side of Indianapolis for a term (including  renewal options) ending 2010. During
1996,  Peoples  closed its southside  mortgage  office.  The northside  mortgage
office was closed on January 17, 1997.

         The  following  table  provides  certain  information  with  respect to
Peoples'  properties as of December 31, 1996.  All offices listed are located in
Indianapolis, Indiana.


                                                                     Approximate
                                       Year Opened      "ART" ATM      Square
 Description and Address               or Acquired      Location       Footage
Main Office
130 East Market Street                    1905             ATM        3,500
Castleton Office
6071 East 82nd Street                     1983             ATM        3,400
Chapel Hill Office (1)
7365 West 10th Street                     1965             ATM        3.200
College Park Office (2)
8910 Wesleyan Road                        1985             ATM        6,647
Lafayette Road Office (1)
2802 Lafayette Road                       1956             ATM        3,200
Greenwood Place Office
7921 South U.S. Hwy. 31                   1986             ATM        3.520
Lawrence Office
6909 East 38th Street                     1951             ATM        3,275
Madison/Thompson Office
4940 Madison Avenue                       1963             ATM        2,800
71st & Keystone Office
2411 East 71st Street                     1967             ATM        2.000
West 86th Street Office
1851 West 86th Street                     1970             ATM        3.525
Winona Office (1)
3266 North Meridian                       1970                        2,000
Washington Square Office (1)
10001 East Washington Street              1995             ATM        2,801
Operations Center (1)
5840 West 74th Street                     1990                        21,905
Peoples Mortgage Office-Northside         1994                        7,380
9002 Purdue Road, Suite 100

(1)      Leased facility.
(2)      Includes 2,927 square feet leased to a tenant through July 1998

         Peoples has 24-hour automatic teller machines ("ATMs") at eleven of its
branches as indicated  above.  The automatic  teller machines  operate under the
trade name "ART". Peoples' ATMs participate in the nationwide CIRRUS and MAC ATM
networks. See "Item 1. Business--Electronic Data Processing."

         Peoples owns  substantially  all of its  computer  and data  processing
equipment used for transaction  processing,  accounting,  financial forecasting,
loan  documentation  and all other data processing and reporting  services.  The
main data processing facility is at the Operations Center.

Item 3.  Legal Proceedings.

         From time to time the Company or Peoples is subject to various  pending
and threatened lawsuits in which claims for monetary damages are asserted in the
ordinary  course of  business.  While any  litigation  involves  an  element  of
uncertainty, in the opinion of


                                       17
<PAGE>


management,  liabilities, if any, arising from such litigation or threat thereof
will  not have a  material  effect  on the  financial  position  or  results  of
operations of the Company or Peoples.

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

         None


                                     PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters.

         Nonvoting  Common Shares are quoted on the Nasdaq National Market under
the symbol  "PPLS." The  following  table sets forth the high and low bid prices
per Nonvoting Common Share between January 1, 1995 and March 10, 1997.


Trading Period                                      High                Low
--------------                                      ----                ---
1/1/95 - 3/27/95                                   21 7/8               19
4/1/95 - 6/30/95                                   20 1/2               19
7/1/95 - 9/30/95                                     24                 19
10/1/95 - 12/31/95                                 25 1/4             23 1/4
1/1/96 - 3/31/96                                   29 1/2             24 1/4
4/1/96 - 6/30/96                                   30 1/4             24 3/4
7/1/96 - 9/30/96                                   34 1/4             28 1/2
10/1/96 - 12/31/96                                 36 3/4               33
1/1/97 - 3/10/97                                     44                 35

         As of March 10, 1997, there were 224 holders of record of the Company's
Nonvoting Common Shares,  of which 1,430,962 were issued and outstanding.  As of
such  date,  there  were 37 holders  of record of the  Company's  Voting  Common
Shares,  of which  140,000  were issued and  outstanding.  The market for Voting
Common Shares is inactive and  management has no plans to list the Voting Common
Shares on Nasdaq or any exchange.

         The Company has paid cash  dividends  on its Common  Shares  every year
since it was formed in 1986 and Peoples  paid regular  dividends  for many years
prior thereto.  The per share amount of cash dividends declared for each quarter
since the first quarter of 1995 are as follows:


                                                             Cash Dividends
Calendar Quarter                                           Per Common Share
----------------                                           ----------------
1995
First Quarter........................................            $0.1700
Second Quarter.......................................             0.1700
Third Quarter........................................             0.1800
Fourth Quarter.......................................             0.1800
1996
First Quarter........................................            $0.1800
Second Quarter.......................................             0.1800
Third Quarter........................................             0.1900
Fourth Quarter.......................................             0.2000

         On March 20, 1997,  the Company  declared a dividend of $0.21 per share
payable  to  shareholders  of  record  March 31,  1997.  The  Company  currently
anticipates  paying  quarterly  cash  dividends  at the  rate  indicated  above,
although the payment of dividends is subject to the  discretion  of the Board of
Directors.  The  declaration  of future  dividends  will depend on,  among other
things, the earnings,  financial  condition and cash requirements of the Company
at the time such  payment is  considered,  and on the  ability of the Company to
receive  dividends  from  Peoples  the amount of which is subject to  regulatory
limitations.


Item 6.  Selected Consolidated Financial Data.

         The following table sets forth certain selected  financial  information
reflecting the  operations and financial  condition of the Company for each year
in the five year period ended  December  31,  1996.  This data should be read in
conjunction  with the Company's  consolidated  financial  statements and related
notes thereto and "Management's Discussion and Analysis of Results of Operations
and Financial Condition" included elsewhere herein.



                                       18
<PAGE>

<TABLE>
<CAPTION>

                                                                           As Of and For The
                                                                        Year Ended December 31,
                                                           1996         1995          1994          1993          1992
                                                           ----         ----          ----          ----          ----
                                                             (Dollars in thousands, except per share data)
Consolidated Statements of Income Data:

<S>                                                     <C>          <C>           <C>           <C>           <C>
    Interest income..............................       $32,251      $31,034       $24,806       $23,132       $25,169
    Interest expense.............................        14,044       14,869        10,462         8,747        10,315
                                                         ------       ------        ------         -----        ------
      Net interest income........................        18,207       16,165        14,344        14,385        14,854
    Provision for loan losses....................         1,125          536           528           606         1,110
                                                         ------      -------       -------       -------         -----
      Net interest income after
         provision for loan losses...............        17,082       15,629        13,816        13,779        13,744
    Other operating income.......................         5,437        4,868         4,819         4,912         4,651
    Other operating expense                              14,794       15,316        14,885        13,293        13,195
                                                         ------       ------        ------        ------        ------
      Income before income taxes
         and cumulative effect of change in
         accounting method (1)...................         7,725        5,181         3,750         5,398         5,200
    Income taxes.................................         2,316        1,295           865         1,676         1,730
                                                          -----        -----        ------         -----         -----
      Income before cumulative effect of
         change in accounting method (1).........         5,409        3,886         2,885         3,722         3,470
    Cumulative effect of change in
      accounting method (1)......................             0            0             0           100             0
                                                        -------      -------       -------       -------       -------
         Net income..............................        $5,409       $3,886        $2,885        $3,822        $3,470
                                                          =====        =====         =====         =====         =====
Consolidated Balance Sheets Data:
    Assets.......................................      $471,478     $417,019      $425,075      $366,304      $350,741
    Held-to-maturity securities..................           ---          ---       113,823       100,349       114,066
    Available-for-sale securities................        94,589      107,745        55,177        43,939        44,402
    Loans held for sale..........................           421        2,557           761         5,007         2,898
    Total loans..................................       332,953      271,093       214,390       171,833       151,639
    Allowance for loan losses....................         3,900        3,290         2,704         2,513         2,288
    Deposits.....................................       411,805      351,762       346,577       315,074       308,562
    Shareholders' equity.........................        45,349       41,636        38,477        29,216        25,842
    Average shares outstanding...................     1,584,130    1,595,322     1,682,021     1,274,012     1,370,740
Per Share Data:
    Income before cumulative effect of
      change in accounting method (1)............         $3.41        $2.44         $1.72         $2.92         $2.53

    Net income...................................         $3.41         2.44          1.72          3.00          2.53
    Cash dividends declared......................          0.75         0.70          0.66          0.35          0.21
    Book value (2)...............................         28.83        26.19         23.63         22.93         20.28
Other Statistics and Operating Data:
    Return on average assets.....................         1.22%        0.89%         0.73%         1.05%         1.01%
    Return on average equity.....................         12.92         9.70          7.56         14.16         13.86
    Net interest margin (3)......................          4.64         4.27          4.21          4.61          4.92
    Efficiency ratio (4).........................         60.32        69.18         73.48         66.01         65.81
    Average loans to average deposits............         76.27        70.65         57.75         54.02         50.97
    Dividend payout ratio........................         21.91        28.64         38.37         11.66          8.30
    Allowance for loan losses to loans
      at the end of period.......................          1.17         1.20          1.26          1.42          1.48
    Allowance for loan losses to non-
      performing loans...........................      1,378.09       256.43        164.38        117.98        148.48
    Nonperforming loans to loans
      at the end of period.......................          0.09         0.47          0.76          1.20          1.00
    Net charge-offs to average loans.............          0.17       (0.02)          0.18          0.23          0.36
      Number of offices..........................            13           15            15            13            13
Capital Ratios:
    Average shareholders' equity to
      average assets.............................         9.41%        9.14%         9.62%         7.45%         7.27%
    Leverage ratio...............................          9.62         9.93          9.26          7.98          7.37
    Total risk-based capital ratio...............         14.11        14.83         15.34         14.44         14.03
--------------------
</TABLE>
(footnotes on following page)

                                       19
<PAGE>

----------------
(1)      Effective  January 1, 1993, the Company  adopted  Financial  Accounting
         Standard No, 109, Accounting for Income Taxes.

(2)      Based on Common Shares outstanding at the end of the period.

(3)      Net interest income as a percentage of average interest-earning assets,
         on a fully tax equivalent basis.

(4)      The efficiency ratio is calculated by dividing  non-interest expense by
         the sum of net interest  income,  on a fully tax equivalent  basis, and
         recurring non-interest income.


Item 7. Management's  Discussion and Analysis of Financial Condition and Results
of Operations.

General

    The business of Peoples Bank Corporation ("the Company") consists of holding
and administering its interest in Peoples Bank & Trust Company ("Peoples").  The
principal business of Peoples consists of attracting  deposits from consumer and
commercial  customers and making loans to individuals  and  businesses.  Peoples
offers various products for depositors, including checking and savings accounts,
certificates  of deposit and safe deposit  boxes.  Loans consist  principally of
loans to  individuals  secured  by  mortgage  liens on  residential  properties,
consumer loans  generally  secured by liens on personal  property,  and loans to
businesses  generally  secured by liens on business  assets  such as  inventory,
accounts  receivable,  commercial real estate and other  property.  Peoples also
offers trust  services to  individuals,  businesses  and  institutions.  Peoples
operates 12 banking  offices in  Indianapolis,  and an operations  center on the
north  side  of  Indianapolis.  The  Company  will  develop  plans  and  analyze
opportunities  to expand its number of  locations  if the  expansion  appears to
represent a profitable opportunity.

Earnings Summary

    The Company's net income for 1996 was  $5,409,000,  compared with net income
for 1995 of $3,886,000,  an increase of $1,523,000 or 39.2%. Net income for 1994
was $2,885,000. Earnings per share were $3.41 in 1996, $2.44 for 1995, and $1.72
for 1994.  The number of shares used in the  computation  of earnings per common
share were 1,584,130  shares in 1996,  1,595,322  shares in 1995,  1,682,021 and
shares in 1994.

Net Interest Income

    Net interest income is the principal component of net income for the Company
and is determined by the relative size and characteristics of  interest-earnings
assets and interest-bearing  liabilities. For the years ended December 31, 1996,
1995,  and  1994,  net  interest  income  was  $18,207,000,   $16,165,000,   and
$14,344,000,  respectively.  This  represents  an increase in 1996 of $2,042,000
(12.6% ), and an increase in 1995 of $1,821,000 (12.7%).  Increased net interest
income contributed significantly to the net income growth during the period.

    Average earning assets  increased to $411,119,000 in 1996 from  $404,590,000
in 1995, an increase of $6,529,000 (1.6%).  Average loans increased  $37,815,000
(14.6%) to $296,310,000 in 1996.  Increasing loan balances drove the increase in
net interest income during 1996. The increase in average loan balances continues
management's   strategy  of  redeploying  earning  assets  from  the  securities
portfolio into the higher  yielding loan  portfolio.  The average yield on loans
remained  stable,  at 8.86% for 1996  compared to 8.91% for 1995.  The following
table (next page) sets forth, for the periods indicated,  information  regarding
the  average   balances   of   interest-earning   assets  and   interest-bearing
liabilities,  the dollar amount of interest income and interest expense, and the
resulting yield on average earning assets and rates on average  interest-bearing
liabilities.   Average  balances  are  also  provided  for  non-earning  assets,
non-interest-bearing liabilities and shareholders' equity.

    Net  interest  income also depends on the rates earned on assets and paid on
liabilities. The net interest margin represents net interest income as a percent
of average  earning assets.  The net interest margin  increased to 4.43% in 1996
from  4.00% in 1995,  and 3.91% in 1994.  The most  significant  reason  for the
ongoing  improvement  in net  interest  margin was the shift in asset mix toward
loans. In addition, during 1996 the rates paid on savings deposits were reduced,
and that was accomplished without significant loss of balances.



                                       20
<PAGE>
<TABLE>
<CAPTION>
                                                          Years Ended December 31,
                                 1996                               1995                              1994
                     Average               Average     Average                Average     Average               Average
                     Balance   Interest     Rate       Balance   Interest      Rate       Balance   Interest     Rate
                                                           (Dollars in thousands)
<S>                     <C>        <C>      <C>           <C>         <C>        <C>        <C>         <C>         <C>
ASSETS:
Interest-earning assets:
  Interest-earning
     deposits.....  $      833  $     45    5.40%     $      384   $     22      5.73%     $      0   $     0       0.00%
  Federal funds sold    15,995       844    5.28           7,530        444      5.90         7,591       300       3.96
  Securities:
     Taxable......      62,814     3,372    5.37          99,280      5,614      5.65       129,651     7,013       5.41
     Tax-exempt...      35,167     1,779    5.06          38,901      1,984      5.10        39,413     1,973       5.01
  Loans (net of
      unearned
      income) (1).     294,141    26,074    8.86         256,035     22,805      8.91       187,128    15,371       8.21
  Tax-exempt
     loans........       2,169       137    6.32           2,460        165      6.71         2,846       149       5.24
                     ---------  --------               ---------   --------                 -------  --------
Total interest-
    earning assets     411,119    32,251    7.84         404,590     31,034      7.67       366,629    24,806       6.77
Nonearning assets:
  Cash and due
      from banks..      24,571                            22,743                             20,143
  Bank premises
     and equipment,
     net..........       7,127                             8,461                              7,819
  Other Nonearning
     assets.......       5,957                             5,782                              4,872
  Allowance for
     loans losses.      (3,634)                           (3,091)                            (2,723)
                         -----                            -------                            -------
     Total assets.    $445,140                          $438,485                           $396,740
                       =======                           =======                            =======
LIABILITIES AND
EQUITY
Interest-bearing
  liabilities:
  Transaction
     accounts.....   $  37,342      $772    2.07%      $  37,488       $778      2.08     $  41,684      $859       2.06%
  Savings
     deposits.....     168,726     6,483    3.84         147,281      6,087      4.13       149,480     4,879       3.26
  Time
     deposits          103,597     6,216    6.00         106,279      6,305      5.93        73,719     3,333       4.52
  Short-term
     borrowings...      12,222       573    4.69          29,941      1,699      5.67        32,937     1,391       4.22
                       -------    ------                --------    -------                --------  --------
     Total interest
       bearing
       liabilities -   321,887    14,044    4.36         320,989     14,869      4.63       297,820    10,462       3.51
                                  ------                             ------                            ------
Non-interest-bearin
  liabilities:
  Demand deposits.      78,825                            74,816                             58,877
  Other liabilities      2,556                             2,612                              1,863
Shareholder's equity    41,872                            40,068                             38,180
                        ------                            ------                             ------
  Total liabilities

     and share-
     holders' equity  $445,140                          $438,485                           $396,740
                       =======                           =======                            =======
Net interest income               18,207                             16,165                            14,344
Net interest spread                         3.48%                                  3.04%                            3.26%
Net interest margin                         4.43                                   4.00                             3.91
Tax-equivalent
  data: (2)
  Tax-equivalent
     adjustment...                   880                              1,107                             1,093
                                --------                            -------                           -------
  Adjusted net

     net interest
     income.......             $  19,087                         $   17,272                $  15,437
                               =========                          =========                =========
  Net interest
     spread.......                          3.70%                                  3.31%                            3.55%
  Net interest                              4.64                                   4.27                             4.21
     margin.......
--------------------
</TABLE>

                                       21
<PAGE>

(1)      Average total loans include  non-accrual loans and loan income includes
         loan fee income on loans held in the loan portfolio.

(2)      Tax-equivalent  adjustment  is computed  using a 34% effective tax rate
         for all periods presented.

         The  following  table  presents  information  regarding  the  Company's
interest  income and  interest  expense  for the  periods  indicated.  The table
presents the change in interest income or interest expense which is attributable
to the change in the average balance  (volume) and the change in interest income
or  interest  expense  which is related to change in rates.  Changes in balances
were  responsible  for an increase in net interest  income of $1,864,000  during
1996 as  asset  balances  shifted  from  the  securities  portfolio  to the loan
portfolio  and  changes in rates  resulted  in an  increase  of  $178,000 in net
interest  income as declines in pricing on deposits more than offset lower rates
on loans and investments.

<TABLE>
<CAPTION>

                                                        Years Ended December 31,
                                  -------------------------------------------------------------------
                                           1996 vs. 1995                      1995 vs. 1994
                                  --------------------------------    -------------------------------
                                                Change      Change                 Change     Change
                                     Total      Due To      Due To      Total      Due To     Due To
                                    Change      Volume       Rate      Change      Volume      Rate
                                                                      (In thousands)
Interest Income:
<S>                               <C>         <C>         <C>         <C>         <C>         <C>
Interest-earning deposits ....    $    23     $    24     $    (1)    $    22     $    22     $     0
Federal funds sold ...........        400         451         (51)        144          (2)        146
Securities:
     Taxable .................     (2,242)     (1,970)       (272)     (1,399)     (1,686)        287
     Tax exempt ..............       (205)       (189)        (16)         11         (26)         37
Loans ........................      3,269       3,378        (109)      7,434       5,649       1,785
Tax exempt loans .............        (28)        (19)         (9)         16         (23)         39
                                   -------     -------     -------     -------     -------     -------
     Total interest income....       1,217       1,675        (458)      6,228       3,934       2,294
                                   =======     =======     =======     =======     =======     =======
Interest expense:
Transaction accounts ..........         (6)         (3)         (3)        (81)        (85)          4
Savings deposits ..............        396         844        (448)      1,208         (73)      1,281
Time deposits .................        (89)       (160)         71       2,972       1,473       1,499
Short-term borrowings .........     (1,126)       (870)       (256)        308        (126)        434
                                   -------     -------     -------     -------     -------     -------
     Total interest expense....       (825)       (189)       (636)      4,407       1,189       3,218
                                   -------     -------     -------     -------     -------     -------
Net interest income ...........    $ 2,042     $ 1,864     $   178     $ 1,821     $ 2,745     $  (924)
                                   =======     =======     =======     =======     =======     =======
</TABLE>


                                       22
<PAGE>

Non-Interest Income

         Non-interest  income was  $5,437,000 in 1996,  $4,868,000 in 1995,  and
$4,819,000 in 1994.  This reflected an increase in 1996 of $569,000  (11.7%) and
an increase in 1995 of $49,000  (1.0%).  Trust fees  increased  both in 1996 and
1995, $38,000 (2.9%) and $91,000 (7.5%),  respectively.  The increase in revenue
from the Trust and Investment  Management  Group is reflective of the continuing
sales effort and the  increased  focus on growth.  Management  believes that the
Trust &  Investment  Management  Group  possesses  a  competitive  advantage  by
offering  customers  local service and management of customers'  funds.  Service
charges on deposit accounts and other retail related fees increased  $463,000 to
$2,511,000  during 1996  compared to an increase  of $74,000  during  1995.  Fee
income  increased  for a variety of  services.  Fees  charged to  customers  for
overdrawn  accounts were up in 1996, as were fees charged to business  customers
who did not  maintain  significant  balances  but  utilized  a  variety  of cash
management  related services.  Peoples Bank & Trust Company provides free access
to automated  teller machines to customers who maintain  checking  accounts with
the bank, but implemented a fee for non-customers who use Peoples Bank automated
teller machines. This new fee produced $105,000 in revenue during 1996.

         Mortgage banking  revenues  included net gains and losses realized when
mortgage loans were sold into the secondary  market,  service fee revenue earned
from servicing  those loans after they are sold and, in 1995, a gain on the sale
of  loan  servicing  rights.  Mortgage  banking  revenue,  as  reflected  in the
Company's  financial  statements,  has not been reduced by the associated costs,
such as  compensation  expense,  which is shown  elsewhere  within  non-interest
expense.  Mortgage  banking revenue was $713,000 in 1996,  $843,000 in 1995, and
$738,000 in 1994.  This  reflects a decrease in 1996 of $130,000  (15.4%) and an
increase in 1995 of $105,000  (14.2%).  The sale of loan servicing rights during
1995 generated  $380,000.  At December 31, 1996, the Company  serviced  mortgage
loans with an aggregate  outstanding  principal  balance of  approximately  $104
million.

         The Company does not engage in the purchase and sale of securities with
the intent to generate gains. The Company may sell available-for-sale securities
for  liquidity or to manage its  asset/liability  position.  During  1996,  such
sales, as well as gains and losses realized when securities were called prior to
their maturity,  generated net losses of $63,000  compared to net losses in 1995
of $112,000 and net gains of $271,000 in 1994.

Non-Interest Expense

         Non-interest  expense,  or overhead,  includes the costs of  personnel,
occupancy,  equipment,  insurance,  and other  costs of  sustaining  operations.
Overhead for the years ended December 31, 1996, 1995, and 1994, was $14,794,000,
$15,316,000, and $14,885,000, respectively. This reflects a decrease of $522,000
(3.4%) in 1996 compared to an increase of $431,000  (2.9%) in 1995. The decrease
in non-interest  expense,  which was accomplished  while net interest income was
growing,  was an important  contributor  to the increase in net income for 1996.
More than half of total  non-interest  expense  is  comprised  of  salaries  and
employee  benefits.  Salaries and employee  benefit expense  decreased  $564,000
(6.6%) in 1996  compared to an increase of $714,000  (9.1%) in 1995.  During the
third quarter of 1995, Peoples developed new procedures and reorganized  certain
operations  with a goal of improving  process  efficiency  and lowering  overall
non-interest  expense. The improvements were based on recommendations from staff
members  throughout  the  organization,   and  were  a  major  driver  of  lower
non-interest expense. Advertising expense decreased $106,000 in 1996 following a
decrease of $385,000  in 1995.  During  1994,  the  Company  conducted  an image
campaign to increase  local  awareness and to support its sales  efforts.  Since
that time,  advertising  had been targeted to selected  audiences and growth has
continued at strong rates. FDIC

                                                        23

<PAGE>



insurance  expense was $2,000 during 1996,  down from  $386,000  during 1995 and
$703,000  during 1994. This decline  occurred due to a significant  reduction in
the assessment rate during 1995 and 1996.  However,  that rate will be increased
in 1997 and FDIC insurance expense will increase, though it is anticipated to be
less than 1995's level.

Income Taxes

         The Company's income tax expense was affected primarily by the level of
pre-tax income.  As income  increased,  tax expense did as well. Tax expense for
1996 increased $1,021,000 in 1996 following an increase of $430,000 during 1995.
The Company can and does purchase  tax-free  securities and originates  tax-free
loans as a means of  generating  tax-free  income,  effectively  mitigating  tax
expense.  The  Company  also has  invested  in several  low income  housing  tax
partnerships  with the intent of  generating  lower income tax expense in future
years in addition to serving the community by providing  subsidized  housing for
lower income families.

         Net deferred tax assets at December 31, 1996 and 1995,  were $1,346,000
and  $980,000.  Deferred  tax  assets  result,  primarily,  from  book  bad debt
deductions in excess of those  deductible  for tax  purposes.  The asset will be
realized  as loans are  charged off in future  periods.  Based on the  Company's
historical  levels  of  taxable  income  and the  relatively  small  size of the
deferred tax assets recorded,  management does not believe a valuation allowance
for those assets was needed at December 31, 1996.

Asset and Liability Management

         The Company  engages in a formal  process of measuring and defining the
amount of interest  rate risk.  Interest rate risk is the effect on net interest
income  resulting  from  changes in  interest  rates.  The goal of the asset and
liability  management  process is to maintain a high,  yet stable,  net interest
margin by identifying  the degree of interest rate risk and  developing  tactics
and  strategies  to  mitigate  the extent to which net  interest  income will be
affected by changes in interest rates.

         The following tables illustrate the repricing  opportunities,  or "rate
sensitivity" of  interest-earning  assets and  interest-bearing  liabilities.  A
repricing  may occur if the rate on the asset or  liability  changes as interest
rates change,  or, when the rate is fixed, at the time they mature. The "gap" is
the  difference  between rate sensitive  assets and rate  sensitive  liabilities
within a specific  time frame.  Gap is  considered  an indicator of the effect a
change in interest rates may have on net interest income.


<PAGE>

         As of December 31,  1996,  the  Company's  rate  sensitive  liabilities
exceeded rate sensitive  assets through one year.  This would indicate that when
rates  increase,  net  interest  income  may  decline.  In order  to  accurately
determine the effect of changes in interest rates,  the repricing effect of each
type of interest-earning asset and interest-bearing  liability must be measured.
Assets and  liabilities  have  different  characteristics  and the  magnitude of
change  differs for each.  Management  continually  monitors  the changes to net
interest income which may result from changing interest rates.


<TABLE>
<CAPTION>
                                                                    At December 31, 1996
                                                               Repriceable or Maturing Within
                                     ----------------------------------------------------------------------------------
                                                                  6 Months
                                         0 to 3       3 to 6         to           1 to 5       After 5
                                         Months       Months       1 Year         Years         Years        Total
                                                                   (Dollars in thousands)
Interest-earning assets:
<S>                                         <C>         <C>       <C>            <C>           <C>          <C>
     Loans...........................       $166,285    $22,887   $35,264        $102,952      $5,986       $333,374
     Available for sale securities...         32,410      7,647     6,262          36,380      11,890         94,589
                                              ------      -----     -----          ------      ------         ------
          Total interest-earning assets      198,695     30,534    41,526         139,332      17,876        427,963
Interest-bearing liabilities:
     Transaction accounts............        216,146         --       --               --          --        216,146
     Time deposits...................         23,741     12,133    18,080          57,480         314        111,748
     Short-term borrowings...........         10,091         --        --             175          --         10,266
                                              -------   -------      ----         --------    -------        ------
          Total interest-bearing
               liabilities...........        249,978     12,133    18,080          57,655         314       $338,160
                                             -------     ------    ------          ------       -----        -------
     Assets (liability) gap..........       $(51,283)   $18,401    $23,446        $81,677     $17,562      $  89,803
                                             =======     ======    =======         ======      ======       ========
     Cumulative asset
          (liability gap)............       $(51,283)  $(32,882)  $(9,436)        $72,241     $89,803
     Cumulative gap to total assets..         -10.88%     -6.97%    -2.00%          15.32%      19.05%
</TABLE>


         A significant  assumption  that creates the large negative gap in the 0
to 3 month category is that all interest-bearing demand and savings accounts are
subject  to  immediate  repricing.  While it is true that  contractually,  those
accounts are subject to immediate  repricing,  the rates paid on those  accounts
are not  generally  tied  to  specific  indices  and are  influenced  by  market
conditions and other factors. Accordingly, a general movement in interest rates,
either up or down, may not have any immediate  effect on the rates paid on these
deposit accounts. The foregoing table illustrates only one source of information
about sensitivity to interest rate movements. The core of the

                                                        24

<PAGE>



Company's asset and liability  management  process  consists of simulations that
take into account the time that various assets and  liabilities  may reprice and
the degree to which  various  categories  of such  assets and  liabilities  will
respond to  general  interest  rate  movements.  Interest  rate risk can only be
represented by a measurement of the effects of changing interest rates given the
capacity for and magnitude of change on specific assets and liabilities.

Liquidity

         Liquidity   refers  to  the  availability  of  funds  to  meet  deposit
withdrawals,  fund  loan  commitments  and  pay  expenses.  The  Company's  loan
portfolio,  excluding loans held for sale, increased to $332,953,000 at December
31, 1996 from  $271,093,000  at December 31, 1995, an increase of $61,860,000 or
22.8%.  Increases in deposits  provided  funding for loan growth in 1996.  Total
deposits at December 31, 1996 were $411,805,000, an increase of $60,043,000 from
balances of $351,762,000 at December 31, 1995.

         A common  measure  of  liquidity  is the loan to deposit  ratio.  As of
December  31,  the loan to deposit  ratio was 80.9% in 1996,  and 77.1% in 1995.
Increasing this ratio was an important goal for the Company's  management during
1996, and significantly added to the Company's  profitability by shifting assets
from lower yield securities to higher yield loans.

         Loan  commitments  include  unfunded  portions  of lines of credit  and
commercial letters of credit.  These unfunded commitments may or may not require
funding. At December 31, 1996 and 1995, such commitments totaled $94,293,000 and
$80,830,000, respectively. Loan commitments generate fee income for the Company.

Loan Quality

         The  Company  has  maintained  a high  level  of  quality  in the  loan
portfolio.  Non-performing loans are those loans which are past due more than 90
days and still accruing  interest and those loans on which the Company no longer
accrues interest. As of December 31, 1996 and 1995, non-performing loans totaled
$283,000 and $1,283,000,  respectively.  As a percent of total loans,  including
loans held for sale,  non-performing  loans were .09% at  December  31, 1996 and
 .47% at December 31, 1995.

         The  provision  for loan  losses is a charge to earnings to provide for
potential  future loan losses.  The provision for loan losses was  $1,125,000 in
1996,  $536,000 in 1995, and $528,000 in 1994. The increase in the provision for
loan losses in 1996 had a negative impact on  profitability,  but was considered
necessary  by  management  to maintain the  allowance  at a desirable  level and
provide for the  substantial  loan growth  during the year.  The adequacy of the
allowance for loan losses is evaluated at least  quarterly by  management  based
upon a review  of  identified  loans  with  more  than a normal  degree of risk,
historical  loss  percentages,  and present  and  forecast  economic  conditions
affecting  borrowers.  At  December  31,  the  allowance  for  loan  losses  was
$3,900,000  for 1996,  and  $3,290,000  for 1995.  As a percent of total  loans,
including  loans  held for sale,  the  allowance  for loan  losses  was 1.17% at
December  31,  1996 and  1.20%  at  December  31,  1995.  Management's  analysis
indicates  that the  allowance for loan losses at December 31, 1996 was adequate
to cover  potential  losses on identified  loans with credit problems and on the
remaining portfolio based on historical percentages.

         Gross  loan  charge-offs  in  1996  ,1995,  and  1994,  were  $607,000,
$125,000,  and $516,000,  respectively.  As a percentage of average loans, gross
loan charge-offs were .21%, .05%, and .28% for those periods.

         Effective  January 1, 1995, the Company was required to adopt Financial
Accounting  Standard  No.  114 (FAS  114)  which  required  recognition  of loan
impairment. Loans are considered impaired if full principal or interest payments
are not anticipated. Impaired loans are carried at the present value of expected
cash flows discounted at the loan's effective interest rate or at the fair value
of the  collateral  if the  loan  is  collateral  dependent.  A  portion  of the
allowance for loan losses is allocated to impaired loans. The effect of adopting
this standard is included in the provision for loan losses and was not material.
The  Company's  average  investment  in impaired  loans during 1996 and 1995 was
$1,068,000 and $1,394,000 respectively.  At December 31, 1996, $743,000 of loans
were deemed to be impaired  and  $155,000 of the  allowance  for loan losses was
allocated  to those  loans.  The loans that are  classified  as impaired and are
still  accruing  interest are  generally  collateralized  and  currently  making
payments. However, based on past experience with the customer and their analysis
of the situation,  management  believes that it is not probable that these loans
will be repaid in accordance with the  contractual  terms of the loan agreement.
As a result, management has classified these loan relationships as impaired.


<PAGE>

Capital Position

         Both the  Company and  Peoples  are  required  to comply  with  capital
requirements promulgated by their primary regulators.  Those regulations require
the  maintenance  of specified  levels of capital to total assets (the  leverage
ratio) and to  risk-weighted  assets  (the risk-  based  capital  ratio).  These
regulations  require  maintaining  a  minimum  leverage  ratio of 4% and a total
risk-based capital ratio of at least 8%.

         In February,  1994, the Company completed an initial public offering of
its non-voting  common shares.  The net proceeds after  commissions and expenses
from the sale of 450,980 shares were  approximately  $10.6  million.  The shares
were registered for trading on the NASDAQ  National  Market System.  During 1994
and 1995, the Company repurchased a total of 135,000 shares at prices below book
value which has the effect of enhancing  book value per share for the  remaining
shares. During 1996, a total of 16,780 shares were repurchased.

                                                        25

<PAGE>



    The Company and Peoples were in full compliance with all regulatory  capital
requirements  at December 31, 1996. The following  table indicates the Company's
actual capital levels at the dates indicated.

<TABLE>
<CAPTION>
                                                  At December 31,
                                        ------------------------------------
                                          1996          1995            1994
                                          ----          ----            ----
                                                    (In thousands)
<S>                                      <C>            <C>           <C>
Tier I capital........................   $45,063        $41,398       $39,460
Total capital.........................    48,963         44,688        42,164
Leverage ratio........................      9.62%          9.93%         9.26%
Tier I risk-based capital ratio.......     12.99%         13.73%        14.35%
Total risk-based capital ratio........     14.11%         14.83%        15.34%
</TABLE>

New Accounting Pronouncements

    Financial  Accounting  Standard  No.  125,  "Accounting  for  Transfers  and
Servicing of Financial Assets and  Extinguishment of Liabilities," was issued by
the Financial  Accounting Standards Board in 1996. It revises the accounting for
transfers  of  financial  assets,   such  as  loans  and  securities,   and  for
distinguishing  between sales and secured  borrowings.  It is effective for some
transactions in 1997 and others in 1998.  Management does not expect adoption of
this Standard to have a significant  effect on the Company's  financial position
or results of operations.


                                       26

<PAGE>
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                         REPORT OF INDEPENDENT AUDITORS




Board of Directors and Shareholders
Peoples Bank Corporation of Indianapolis
Indianapolis, Indiana


We have audited the  consolidated  balance sheets of Peoples Bank Corporation of
Indianapolis  as of  December  31, 1996 and 1995,  and the related  consolidated
statements of income, changes in shareholders' equity and cash flows for each of
the  three  years  in the  period  ended  December  31,  1996.  These  financial
statements   are  the   responsibility   of  the   Company'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  financial  position  of Peoples  Bank
Corporation of Indianapolis as of December 31, 1996 and 1995, and the results of
its  operations  and its cash  flows for each of the three  years in the  period
ended  December 31, 1996,  in  conformity  with  generally  accepted  accounting
principles.

As  discussed in Note 1 to the  financial  statements,  the Company  changed its
methods of  accounting  for  certain  loans in 1995 and for  mortgage  servicing
rights in 1996.




                                         Crowe, Chizek and Company LLP

Indianapolis, Indiana
February 14, 1997




                                       1.


<PAGE>


                            PEOPLES BANK CORPORATION
                                 OF INDIANAPOLIS


                           CONSOLIDATED BALANCE SHEETS
                           December 31, 1996 and 1995
                          (Dollar amounts in thousands)



<TABLE>
<CAPTION>
                                                                                   1996                1995
                                                                                   ----                ----
ASSETS
<S>                                                                          <C>                 <C>
    Cash and due from banks                                                  $         32,252    $        23,377
    Available-for-sale securities (Note 2)                                             94,589            107,745
    Loans held for sale, net                                                              421              2,557
    Total loans (Note 3)                                                              332,953            271,093
       Allowance for loan losses (Note 4)                                              (3,900)            (3,290)
                                                                             ----------------    ---------------
          Loans, net                                                                  329,053            267,803
    Premises and equipment, net (Note 5)                                                7,923              8,744
    Accrued income and other assets                                                     7,026              6,568
    Gold, at fair value                                                                   214                225
                                                                             ----------------    ---------------
                                                                             $        471,478    $       417,019
                                                                             ================    ===============


LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
    Deposits
       Non interest-bearing accounts                                         $         83,911    $        67,966
       Savings and NOW                                                                216,146            191,957
       Time deposits (Note 6)                                                         111,748             91,839
                                                                             ----------------    ---------------
          Total deposits                                                              411,805            351,762
    Short-term borrowings (Note 7)                                                     10,266             20,056
    Accrued expenses and other liabilities                                              4,058              3,565
                                                                             ----------------    ---------------
       Total liabilities                                                              426,129            375,383
                                                                             ----------------    ---------------

Commitments  and contingencies (Note 11)

Shareholders' equity Common shares, no par value:
       Authorized:
         Voting - 300,000 shares
         Nonvoting -  4,000,000 shares
       Issued:
          Voting - 140,000 shares                                                         950                950
          Nonvoting - 1,433,212 shares (1996),
          and 1,449,992 shares (1995)                                                  14,775             15,334
    Retained earnings                                                                  29,338             25,114
    Unrealized gain on available-for-sale securities,
       net of tax of $(188) and $(155)                                                    286                238
                                                                             ----------------    ---------------
       Total shareholders' equity                                                      45,349             41,636
                                                                             ----------------    ---------------

                                                                             $        471,478    $       417,019
                                                                             ================    ===============
</TABLE>

See accompanying notes to consolidated financial statements.


<PAGE>


                            PEOPLES BANK CORPORATION
                                 OF INDIANAPOLIS


                        CONSOLIDATED STATEMENTS OF INCOME
                  Years ended December 31, 1996, 1995 and 1994
             (Dollar amounts in thousands, except per share amounts)



<TABLE>
<CAPTION>
                                                                           1996           1995           1994
                                                                           ----           ----           ----

Interest income
<S>                                                                    <C>            <C>            <C>
    Loans, including related fees                                      $    26,211    $    22,970    $    15,520
    Federal funds sold                                                         889            466            300
    Securities
      Taxable                                                                3,372          5,614          7,013
      Tax exempt                                                             1,779          1,984          1,973
                                                                       -----------    -----------    -----------
       Total interest income                                                32,251         31,034         24,806

Interest expense
    Deposits                                                                13,471         13,170          9,071
    Short-term borrowings                                                      573          1,699          1,391
                                                                       -----------    -----------    -----------
       Total interest expense                                               14,044         14,869         10,462
                                                                       -----------    -----------    -----------

Net interest income                                                         18,207         16,165         14,344

Provision for loan losses (Note 4)                                           1,125            536            528
                                                                       -----------    -----------    -----------

Net interest income after provision for loan losses                         17,082         15,629         13,816

Noninterest income
    Trust fees                                                               1,342          1,304          1,213
    Service charges and fees                                                 2,511          2,048          1,974
    Mortgage banking revenue                                                   713            843            738
    Net gain/(loss) on securities (Note 2)                                     (63)          (112)           271
    Other                                                                      934            785            623
                                                                       -----------    -----------    -----------
       Total noninterest income                                              5,437          4,868          4,819

Noninterest expense
    Salaries and employee benefits (Note 8)                                  8,029          8,593          7,879
    Occupancy (net)                                                          1,602          1,427          1,322
    Equipment                                                                1,010          1,248          1,113
    FDIC insurance                                                               2            386            703
    Advertising                                                                374            480            865
    Other                                                                    3,777          3,182          3,003
                                                                       -----------    -----------    -----------
       Total noninterest expense                                            14,794         15,316         14,885
                                                                       -----------    -----------    -----------

Income before income taxes                                                   7,725          5,181          3,750

Income tax expense (Note 9)                                                  2,316          1,295            865
                                                                       -----------    -----------    -----------

Net income                                                              $    5,409     $    3,886      $   2,885
                                                                       ===========    ===========    ===========

Net income per share (Note 10)                                         $      3.41    $      2.44    $      1.72
                                                                       ===========    ===========    ===========
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>


                            PEOPLES BANK CORPORATION
                                 OF INDIANAPOLIS


           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                  Years ended December 31, 1996, 1995 and 1994
             (Dollar amounts in thousands, except per share amounts)

<TABLE>
<CAPTION>

                                                                                      Net
                                                                                  Unrealized
                                                                                Gain/(Loss) on
                                                Common           Retained       Available- for-
                                                Shares           Earnings       Sale Securities       Total
<S>                                          <C>               <C>                <C>               <C>
Balance January 1, 1994                       $ 8,645           $20,571            $     -           $29,216

Implementation of FAS No. 115                       -                 -                612               612
Sale of common shares (Note 1)                 10,558                 -                  -            10,558
Net income                                          -             2,885                  -             2,885
Cash dividends ($.66 per share)                     -            (1,115)                 -            (1,115)
Redemption of  96,376 nonvoting
  shares                                       (2,084)                -                  -            (2,084)
Change in net unrealized gain/(loss)
  on available-for-sale securities                  -                 -             (1,595)           (1,595)
                                               ------            ------             ------            ------

Balance December 31, 1994                      17,119            22,341               (983)           38,477

Net income                                          -             3,886                  -             3,886
Cash dividends ($.70 per share)                     -            (1,113)                 -            (1,113)
Redemption of 38,624 nonvoting
  shares                                         (835)                -                  -              (835)
Change in net unrealized gain/(loss)
  on available-for-sale securities                  -                 -              1,221             1,221
                                               ------            ------             ------            ------

Balance December 31, 1995                      16,284            25,114                238            41,636

Net income                                          -             5,409                  -             5,409
Cash dividends ($ .75 per share)                    -            (1,185)                 -            (1,185)
Redemption of 16,780 nonvoting
  shares                                         (559)                -                  -              (559)
Change in net unrealized gain/(loss)
  on available-for-sale securities                  -                 -                 48                48
                                               ------            ------             ------            ------

Balance December 31, 1996                     $15,725           $29,338            $   286           $45,349
                                              =======           =======            =======           =======
</TABLE>
See accompanying notes to consolidated financial statements.

<PAGE>


                            PEOPLES BANK CORPORATION
                                 OF INDIANAPOLIS


                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  Years ended December 31, 1996, 1995 and 1994
                          (Dollar amounts in thousands)



<TABLE>
<CAPTION>
                                                                        1996            1995            1994
                                                                        ----            ----            ----

Cash flows from operating activities
<S>                                                                  <C>             <C>            <C>
    Net income                                                       $     5,409     $     3,886    $     2,885
    Adjustments to reconcile net income to net cash
      from operating activities
        Depreciation and amortization                                      1,032           1,252          1,136
        Provision for loan losses                                          1,125             536            528
        Net (gain)/loss on securities                                         63             112           (271)
        Net amortization on securities                                       362             540          1,090
        Net gain on sale of loans                                           (488)           (238)          (471)
        Loans originated for sale, net of sales proceeds                   2,624          (1,558)         4,717
        Deferred tax benefit                                                (399)           (346)          (321)
        Change in assets and liabilities
           Interest receivable                                               383             298           (578)
           Interest payable                                                  141             384            222
           Income tax payable                                                 38             546            (57)
           Other liabilities                                                 321           1,121           (631)
           Other assets                                                     (469)         (1,138)          (768)
                                                                     -----------     -----------    -----------
               Net cash from operating activities                         10,142           5,395          7,481

Cash flows from investing activities
    Proceeds from maturities of held-to-maturity
      securities                                                               -          21,013         37,598
    Purchase of held-to-maturity securities                                    -               -        (53,001)
    Proceeds from sales of available-for-sale securities                   8,605          36,104         13,289
    Proceeds from maturities of available-for-sale
      securities                                                          49,771          16,590         14,418
    Purchase of available-for-sale securities                            (45,566)        (11,085)       (39,461)
    Loans made to customers, net of principal
      collections thereon                                                (62,375)        (56,653)       (42,948)
    Property and equipment expenditures, net                                (211)         (1,044)        (1,164)
                                                                     -----------     -----------    -----------
        Net cash from investing activities                               (49,776)          4,925        (71,269)

Cash flows from financing activities
    Net change in deposits                                                60,043           5,185         31,503
    Net change in short-term borrowings                                   (9,790)        (17,905)        18,416
    Redemption of nonvoting shares                                          (559)           (835)        (2,084)
    Sale of common shares                                                      -               -         10,558
    Dividends paid                                                        (1,185)         (1,113)        (1,115)
                                                                     -----------     -----------    -----------
        Net cash from financing activities                                48,509         (14,668)        57,278
                                                                     -----------     -----------    -----------

Net change in cash and due from banks                                      8,875          (4,348)        (6,510)

Cash and due from banks at beginning of year                              23,377          27,725         34,235
                                                                     -----------     -----------    -----------
Cash and due from banks at end of year                               $    32,252     $    23,377    $    27,725
                                                                     ===========     ===========    ===========
Cash paid during the year for:
    Interest                                                        $     13,904     $    14,485    $    10,240

    Income taxes (net)                                                     2,870           1,495          1,243

</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>


                            PEOPLES BANK CORPORATION
                                 OF INDIANAPOLIS
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1996, 1995 and 1994
             (Dollar amounts in thousands, except per share amounts)





NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Reporting:  The consolidated  financial statements include the accounts
of Peoples Bank Corporation of Indianapolis  ("the  Company"),  its wholly-owned
subsidiary,  Peoples Bank & Trust Company ("Peoples") and Peoples'  wholly-owned
subsidiary,  Peoples Building Corporation.  Upon consolidation,  all significant
intercompany accounts and transactions have been eliminated.

Description of Business:  The Company operates primarily in the banking industry
which accounts for more than 90% of its revenues,  operating  income and assets.
Peoples  provides  commercial  and  retail  banking  and trust  services  to its
customers  from its main  office  and 12  branches  located  in  Marion  County,
Indiana.  The majority of the Peoples'  income is derived  from  commercial  and
retail  business  lending  activities  and  investments.  The loan  portfolio is
diversified  and the ability of debtors to repay loans is not dependent upon any
single industry. The majority of Peoples' loans are secured by specific items of
collateral including business assets, real property and consumer assets.

Use of Estimates in Preparation of Financial  Statements:  Management  must make
estimates and  assumptions  in preparing  financial  statements  that affect the
amounts  reported  therein and the  disclosures  provided.  These  estimates and
assumptions   may  change  in  the  future  and  future  results  could  differ.
Significant  areas involving the use of  management's  estimates and assumptions
that are more  susceptible  to change in the near term include the allowance for
loan  losses,  the fair  values of certain  securities,  the  determination  and
carrying value of impaired loans and the carrying value of loans held for sale.

Sale of Common  Shares:  In  February,  1994,  the Company  completed an initial
public offering of its non-voting  common shares.  450,980 shares were sold at a
price of $25.50 per share.  After the deduction of $942 of offering  costs,  the
Company received net proceeds of $10,558.

Securities:  The Company  identifies its  securities as either  held-to-maturity
securities  or  available-for-sale   securities.  Only  those  securities  which
management  has the  positive  intent and the Company has the ability to hold to
maturity,  may be  carried  at  amortized  cost.  All other  securities  must be
classified as "available-for-sale". Available-for-sale securities are carried at
fair value with the net unrealized  holding gain or loss reflected,  net of tax,
as an adjustment to shareholders' equity.

Available-for-sale  securities are those  securities  which might be sold in the
indefinite future in connection with the execution of asset/liability management
strategies,   in  response  to  changes  in  interest  rates,  as  a  result  of
prepayments, or for similar reasons.




<PAGE>

                            PEOPLES BANK CORPORATION
                                 OF INDIANAPOLIS
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1996, 1995 and 1994
             (Dollar amounts in thousands, except per share amounts)


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Securities:  (Continued)  Premium  amortization  is deducted  from and  discount
accretion is added to interest income using the level yield method.  The cost of
securities sold is computed on the identified securities method.

Mortgage  Banking  Activities:  Peoples sells certain fixed rate first  mortgage
loans on the secondary  market.  Loans held for sale are carried at the lower of
cost or estimated fair value  determined on an aggregate  basis. At December 31,
1996 and 1995,  the estimated  fair value of loans held for sale exceeded  their
cost.  Mortgage banking revenue includes  gains/losses  realized when such loans
are  sold  and  service  fee  revenue  earned  after  the  sale,  offset  by the
amortization of capitalized loan servicing rights.

Effective January 1, 1996, the Company adopted Financial Accounting Standard No.
122 "Accounting for Mortgage Servicing Rights". The total cost of mortgage loans
originated with the intent to sell is allocated between the loan servicing right
and the mortgage loan without  servicing  based on their relative fair values at
the date of  origination  (or date of sale).  Servicing  rights are  expensed in
proportion  to,  and over the  period  of,  estimated  net  servicing  revenues.
Impairment is evaluated  based on the fair value of the rights,  using groupings
of the  underlying  loans as to  interest  rates  and then,  secondarily,  as to
geographic  and  prepayment  characteristics.  Any  impairment  of a grouping is
reported as a valuation allowance.

Interest Income on Loans:  Interest income is accrued over the term of the loans
based on the principal  outstanding.  Loans are placed on nonaccrual status when
the collection of interest  becomes  doubtful.  Loan fees, net of certain direct
loan  origination  costs,  are deferred and recognized as an element of interest
income over the term of the loan using the level yield method.

Allowance  for Loan  Losses:  The  allowance  for  loan  losses  is a  valuation
allowance,  increased  by  the  provision  for  loan  losses  and  decreased  by
charge-offs less recoveries. Management estimates the allowance balance required
based on past loan loss  experience,  known and inherent risks in the portfolio,
information about specific borrower situations and estimated  collateral values,
economic conditions, and other factors. Allocations of the allowance may be made
for specific loans,  but the entire allowance is available for any loan that, in
management's judgment, should be charged-off.




<PAGE>


                            PEOPLES BANK CORPORATION
                                 OF INDIANAPOLIS
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1996, 1995 and 1994
             (Dollar amounts in thousands, except per share amounts)


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Allowance  for Loan Losses:  (Continued)  Loan  impairment is reported when full
payment  under  the  loan  terms  is  not  expected.   Impairment  is  evaluated
collectively  for  smaller-balance  loans of similar  nature such as residential
mortgage,  consumer,  and credit card loans, and on an individual loan basis for
other loans.  If a loan is impaired,  a portion of the allowance is allocated so
that the loan is reported,  net, at the present  value of estimated  future cash
flows using the loan's  existing rate.  Management  evaluates all loans selected
for specific  review during their  analysis of the allowance for loan losses for
impairment.  In general,  loans  classified  as doubtful or loss are  considered
impaired while loans  classified as substandard are  individually  evaluated for
impairment.  Depending on the relative size of the credit relationship,  late or
insufficient  payments of 30 to 90 days will cause  management to reevaluate the
credit under its normal evaluation procedures.

The carrying value of impaired loans are  periodically  adjusted to reflect cash
payments,  revised  estimates of future cash flows, and increases in the present
value  of  expected  cash  flows  due to the  passage  of  time.  Cash  payments
representing  interest  income are  reported as such.  Other cash  payments  are
reported as reductions in carrying  value,  while  increases or decreases due to
changes  in  estimates  of future  payments  and due to the  passage of time are
included in the provision for loan losses expense.

Premises  and  Equipment:  Premises  and  equipment  are  stated  at  cost  less
accumulated  depreciation.   Premises  and  equipment  are  depreciated  on  the
straight-line and  declining-balance  methods over the estimated useful lives of
the assets.  Maintenance  and repairs are  expensed and major  improvements  are
capitalized.

Other Real Estate:  Other real estate acquired through foreclosure is carried at
the lower of cost (fair  value at  foreclosure)  or fair  value  less  estimated
selling  costs.  Expenses  incurred in carrying other real estate are charged to
operations as incurred.

Income Taxes: Deferred tax liabilities and assets are determined at each balance
sheet date.  They are  measured by applying  enacted tax laws to future  amounts
that will result from  differences  in the financial  statement and tax basis of
assets and  liabilities.  Recognition  of deferred  tax assets is limited by the
establishment of a valuation reserve unless  management  concludes that they are
more  likely  than not going to result in future tax  benefits  to the  Company.
Income tax  expense  represents  the amount  paid for  current  year  income tax
liabilities plus or minus the change in deferred taxes.

Pension Plan: Peoples maintains a defined benefit pension plan for all qualified
employees.  The benefits are based  primarily on years of service and employees'
pay near  retirement.  Peoples'  funding  policy is to  contribute  annually the
maximum amount that can be deducted for federal income tax purposes.



<PAGE>


                            PEOPLES BANK CORPORATION
                                 OF INDIANAPOLIS
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1996, 1995 and 1994
             (Dollar amounts in thousands, except per share amounts)



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Stock Compensation:  Expense for employee  compensation under stock option plans
is based on Opinion 25, with expense  reported only if options are granted below
market price at grant date. Pro forma disclosures of net income and earnings per
share are provided as if the fair value method of Financial  Accounting Standard
No. 123 were used for stock-based compensation.

Fair Value of Financial  Instruments:  Fair values of financial  instruments are
estimated using relevant market information and other assumptions, as more fully
disclosed separately.  Fair value estimates involve uncertainties and matters of
significant  judgment regarding interest rates,  credit risk,  prepayments,  and
other factors,  especially in the absence of broad markets for particular items.
Changes in assumptions or in market  conditions could  significantly  affect the
estimates.  The fair value  estimates  of  existing  on- and  off-balance  sheet
financial instruments do not include the value of anticipated future business or
the values of assets and liabilities not considered financial instruments.

Statement  of  Cash  Flows:  For  purposes  of this  statement,  cash  and  cash
equivalents  include  cash on hand,  amounts due from banks,  and daily  federal
funds sold.  The Company  reports net cash flows for  customer  loan and deposit
transactions, and interest-bearing balances with banks.

Financial Statement  Presentation:  Certain items in the 1994 and 1995 financial
statements have been  reclassified to correspond with the 1996  presentation and
terminology.  These reclassifications did not affect shareholders' equity or net
income.




<PAGE>


                            PEOPLES BANK CORPORATION
                                 OF INDIANAPOLIS
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1996, 1995 and 1994
             (Dollar amounts in thousands, except per share amounts)


NOTE 2 - SECURITIES

The  amortized  cost and  fair  value of  available-for-sale  securities  are as
follows at the date indicated:

<TABLE>
<CAPTION>
                                                                   December 31, 1996
                                       ------------------------------------------------------------------------
                                                               Gross               Gross
                                         Amortized          Unrealized          Unrealized             Fair
                                           Cost                Gains              Losses               Value
                                       -------------       -------------      --------------      -------------
<S>                                     <C>                    <C>                <C>                <C>
Obligations of U.S. Government
  and its agencies                        $15,997               $ 26               $  (3)              $16,020
Obligations of states and
  political subdivisions                   32,215                535                (116)               32,634
Mortgage-backed investments:
    U.S. Government agencies               41,584                119                 (83)               41,620
    Other corporate entities                  737                  -                  (6)                  731
Debt securities issued by
  foreign governments                          75                  -                   -                    75
Corporate securities                        3,507                  2                   -                 3,509
                                          -------               ----               -----               -------

                                          $94,115               $682               $(208)              $94,589
                                          =======               ====               =====               =======
</TABLE>

<TABLE>
<CAPTION>

                                                                 December 31, 1995
                                       ------------------------------------------------------------------------
                                                               Gross               Gross
                                         Amortized          Unrealized          Unrealized             Fair
                                           Cost                Gains              Losses               Value
                                       -------------       -------------      --------------      -------------
<S>                                    <C>                      <C>                 <C>             <C>
Obligations of U.S. Government
  and its agencies                     $ 28,079                 $ 90                $ (89)          $ 28,080
Obligations of states and
  political subdivisions                 37,677                  693                 (197)            38,173
Mortgage-backed investments:
    U.S. Government agencies             35,740                   90                 (241)            35,589
    Other corporate entities              2,274                   21                   (6)             2,289
Debt securities issued by
  foreign governments                        75                    -                   (5)                70
Corporate securities                      3,507                   37                    -              3,544
                                       --------                 ----                -----           --------

                                       $107,352                 $931                $(538)          $107,745
                                       ========                 ====                =====           ========
</TABLE>



<PAGE>


                            PEOPLES BANK CORPORATION
                                 OF INDIANAPOLIS
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1996, 1995 and 1994
             (Dollar amounts in thousands, except per share amounts)





NOTE 2 - SECURITIES (Continued)

The amortized cost and fair value of  available-for-sale  securities at December
31, 1996 are shown below by contractual maturity. Expected maturities may differ
from contractual maturities because issuers may have the right to call or prepay
obligations with or without call or prepayment penalties.

                                                  Amortized
                                                    Cost           Fair Value

Due in one year or less                           $10,713            $10,733
Due after one year through five years              25,154             25,416
Due after five years through ten years             11,854             12,011
Due after ten years                                 4,073              4,078
                                                  -------            -------
    Subtotal                                       51,794             52,238
Mortgage-backed investments                        42,321             42,351
                                                  -------            -------

                                                  $94,115            $94,589
                                                  =======            =======

The  securities  portfolio  includes   mortgage-backed   investments  which  are
collateralized  by  residential  mortgage loans and are repaid as the underlying
loans are repaid.  The majority of the  mortgage-backed  investments  consist of
Collateralized  Mortgage Obligations (CMOs) with projected average lives between
1 and 5 years and underlying  mortgages which are guaranteed by U.S.  Government
agencies or government sponsored entities.

Sales of  available-for-sale  securities  during 1996, 1995 and 1994 resulted in
gross gains of $0, $130 and $261 and gross  losses of $63,  $246 and $0.  During
1995 and 1994, held-to-maturity securities were called resulting in net gains of
$4 and $10.

During  December  1995,  securities  with an  amortized  cost of $81,807  and an
unrealized   gain  of   $358   were   transferred   from   held-to-maturity   to
available-for-sale in accordance with the Financial Accounting Standards Board's
Special Report on Implementation of FAS 115.

Securities with a carrying value of $26,193 and $26,944 at December 31, 1996 and
1995,  respectively,  were  pledged to secure  public  deposits  and  repurchase
agreements and for other purposes required or permitted by law.




<PAGE>


                            PEOPLES BANK CORPORATION
                                 OF INDIANAPOLIS
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1996, 1995 and 1994
             (Dollar amounts in thousands, except per share amounts)





NOTE 3 - LOANS

Loans excluding loans held for sale, are comprised of the following:

                                                 December 31,
                                           1996                 1995

Commercial                               $156,755            $ 97,914
Real estate                                75,247              72,852
Construction                               23,644              31,965
Consumer                                   75,187              66,132
Tax-exempt                                  2,120               2,230
                                         --------            --------

                                         $332,953            $271,093
                                         ========            ========

The  Bank  services  mortgage  loans  sold  to  the  Federal  National  Mortgage
Association.  These  loans are not  included  in the  accompanying  consolidated
balance sheets. The unpaid principal balance of these loans at December 31, 1996
and 1995 was $104,084 and $95,049.

Following  is an  analysis of the  activity  for loan  servicing  rights and the
related valuation allowance for 1996:

                     Balance at January 1                   $            -
                     Additions                                         193
                     Amortizations                                     (16)
                     Valuation allowance                                 -
                                                            --------------

                     Carrying value at December 31          $          177
                                                            ==============

On December 19, 1994,  Peoples  entered into an agreement to sell the  servicing
rights to loans  with  aggregate  unpaid  principal  balances  of  approximately
$34,000. The sale consummated during the first quarter of 1995 and resulted in a
gain of $380.

Certain of the Company's directors were loan customers of Peoples. A schedule of
the aggregate activity in these loans follows:

                  Balance as of January 1, 1996             $        1,835
                  New loans                                              -
                  Loan reductions                                     (175)
                                                            --------------

                  Balance as of December 31, 1996           $        1,660
                                                            ==============




<PAGE>


                            PEOPLES BANK CORPORATION
                                 OF INDIANAPOLIS
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1996, 1995 and 1994
             (Dollar amounts in thousands, except per share amounts)





NOTE 4 - ALLOWANCE FOR LOAN LOSSES

Activity in the allowance for loan losses is as follows:

<TABLE>
<CAPTION>
                                                                          Year ended December 31,
                                                               1996                1995                1994

<S>                                                        <C>                <C>                 <C>
Beginning balance                                          $       3,290      $        2,704      $       2,513
Provision charged to operations                                    1,125                 536                528
Loans charged off                                                   (607)               (125)              (516)
Recoveries                                                            92                 175                179
                                                           -------------      --------------      -------------

Ending balance                                             $       3,900      $        3,290      $       2,704
                                                           =============      ==============      =============
</TABLE>


Information regarding impaired loans is as follows:

<TABLE>
<CAPTION>

                                                                          1996           1995
                                                                          ----           ----
<S>                                                                      <C>            <C>
Average investment in impaired loans during the year                     $1,068         $1,394
                                                                         ======         ======

Interest income recognized on impaired loans including
  interest income recognized on cash basis of $173 and $84               $  173         $   84
                                                                         ======         ======

Balance of impaired loans at year end                                    $  743         $1,343
Less portion for which no allowance for loan losses is allocated            159            233
                                                                         ------         ------

Portion for which an allowance for loan losses is allocated              $  584         $1,110
                                                                         ======         ======

Portion of allowance for loan losses allocated                           $  155         $  306
                                                                         ======         ======
</TABLE>


Nonperforming  loans,  defined as those on nonaccrual status and those accruing,
but past due greater  than 90 days,  at December 31, 1996 and 1995 were $283 and
$1,283.  The Company had $3 and $152 of loans on nonaccrual at December 31, 1996
and 1995 that management did not deem to be impaired under FAS 114.


NOTE 5 - PREMISES AND EQUIPMENT

A summary of premises and equipment by major category follows:

                                                      December 31,
                                                 1996               1995

Land                                       $         1,103      $       1,103
Buildings and improvements                          10,991             10,993
Furniture and equipment                              7,410              7,590
                                           ---------------      -------------
    Total                                           19,504             19,686
Accumulated depreciation                           (11,581)           (10,942)
                                           ---------------      -------------

    Net premises and equipment             $         7,923      $       8,744
                                           ===============      =============



<PAGE>


                            PEOPLES BANK CORPORATION
                                 OF INDIANAPOLIS
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1996, 1995 and 1994
             (Dollar amounts in thousands, except per share amounts)





NOTE 6 - INTEREST-BEARING DEPOSITS

Interest-bearing  deposits  issued in  denominations  of $100 or greater totaled
$13,606  and $15,520 at December  31, 1996 and 1995.  Interest  expense in 1996,
1995 and 1994 for interest-bearing  deposits in denominations of $100 or greater
totaled $965, $2,243 and $787, respectively.

At December 31, 1996, stated maturities of time deposits were:

                  1997                         $        53,954
                  1998                                  27,563
                  1999                                  23,180
                  2000                                   3,716
                  2001                                   3,021
                  Thereafter                               314
                                               ---------------

                                               $       111,748
                                               ===============


NOTE 7 - SHORT-TERM BORROWINGS

Short-term  borrowings are comprised of retail repurchase agreements and federal
funds purchased.  Repurchase  agreements,  essentially,  represent borrowings by
Peoples  from its  customers  and are  accounted  for as such.  Peoples  pledges
certain of its  securities  as  collateral  for those  borrowings  but maintains
control  over all  such  securities.  Repurchase  agreements  outstanding  as of
December  31, 1996 had  maturities  ranging  from one day to 14 months.  Federal
funds purchased are generally  acquired for one day periods and bear interest at
market rates. The following presents information about short-term  borrowings at
the dates indicated:

                                                           December 31,
                                                       1996           1995

Balance of repurchase agreements at year end         $10,266        $16,056
Average balance during the year                       11,964         26,413
Weighted average interest rate during the year          4.69%          5.95%
Maximum month-end balance during the year             14,052         46,578

Balance of federal funds at year end                      --          4,000
Weighted average interest rate                            --           5.75%




<PAGE>


                            PEOPLES BANK CORPORATION
                                 OF INDIANAPOLIS
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1996, 1995 and 1994
             (Dollar amounts in thousands, except per share amounts)





NOTE 8 - RETIREMENT PLANS

Peoples  has a defined  benefit  pension  plan which  covers a  majority  of its
employees.

The following  sets forth the Plan's funded status and the amount  recognized in
the balance sheet at December 31, 1996 and 1995.

                                                           1996       1995
                                                         -------    -------

Accumulated benefit obligation (including
  vested benefits of $3,051 and $3,324)                  $ 3,272    $ 3,502
                                                         =======    =======

Plan assets at fair value (primarily listed stocks)      $ 5,110    $ 4,831
Projected benefit obligation for service
  rendered to date                                        (4,521)    (5,071)
Unrecognized (gain) loss                                    (422)       684
Unrecognized transition asset, amortized over 18 years      (463)      (530)
                                                         -------    -------

Accrued pension cost                                     $  (296)   $   (86)
                                                         =======    =======

Net pension expense for the year included the following:

                                         1996           1995           1994
                                        -----          -----          -----
Service cost for the year               $ 344          $ 293          $ 263
Interest cost on projected benefit
  obligation                              327            294            267
Actual return on plan assets             (731)          (922)           (17)
Net amortization and deferral             270            535           (394)
                                        -----          -----          -----

                                        $ 210          $ 200          $ 119
                                        =====          =====          =====


Significant  assumptions made in computing pension liability and expense were as
follows:

                                            1996          1995          1994
                                            ----          ----          ----

Weighted average discount rate              7.00%          6.50%         7.25%
Increase in future compensation             5.50           5.50          5.50
Long-term rate of return                    8.50           8.50          8.50




<PAGE>


                            PEOPLES BANK CORPORATION
                                 OF INDIANAPOLIS
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1996, 1995 and 1994
             (Dollar amounts in thousands, except per share amounts)





NOTE 8 - RETIREMENT PLANS (Continued)

Peoples  also  maintains a  voluntary  401(k)  plan in which  substantially  all
employees may participate.  Peoples matches employees' contributions at the rate
of 25 percent of each  participant's  contributions  subject to certain  limits.
Peoples' total contributions under the plan were $46, $45 and $45 for 1996, 1995
and 1994.


NOTE 9 - INCOME TAX EXPENSE

Income tax expense  consists  of the  following  components  for the years ended
December 31:

                               1996            1995             1994
                             -------         -------          -------

Income tax/(benefit)
    Current                  $ 2,715         $ 1,641          $ 1,186
    Deferred                    (399)           (346)            (321)
                             -------         -------          -------

       Total                 $ 2,316         $ 1,295          $   865
                             =======         =======          =======

The following is a reconciliation  of income tax expense and the amount computed
by applying the effective federal income tax rate of 34% to income before income
taxes:

                                                1996         1995         1994
                                              -------      -------      -------

Statutory rate applied to income before
  income taxes                                $ 2,625      $ 1,762      $ 1,275
Add/(deduct)
    Tax exempt interest income                   (646)        (729)        (721)
    Non-deductible interest                        68           77           62
    State tax expense (net of federal tax
      benefit)                                    450          306          211
    Affordable housing credit                    (190)        (140)          --
    Other                                           9           19           38
                                              -------      -------      -------

       Total income taxes                     $ 2,316      $ 1,295      $   865
                                              =======      =======      =======




<PAGE>


                            PEOPLES BANK CORPORATION
                                 OF INDIANAPOLIS
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1996, 1995 and 1994
             (Dollar amounts in thousands, except per share amounts)





NOTE 9 - INCOME TAXES (Continued)

The net  deferred  tax asset at December  31, 1996 and 1995 is  comprised of the
following components:

                                                    1996         1995
                                                   -------      -------

Deferred tax assets from:
     Loan loss provisions                          $ 1,209      $   957
     Deferred compensation                             369          238
     Other                                              47           84
                                                   -------      -------
                                                     1,625        1,279

Deferred tax liabilities for:
     Depreciation                                      (67)         (94)
     Accretion                                         (10)         (36)
     Net unrealized gain on
          available-for-sale securities               (188)        (155)
     Other                                             (14)         (14)
                                                   -------      -------
                                                      (279)        (299)
                                                   -------      -------

                                                   $ 1,346      $   980
                                                   =======      =======


NOTE 10 - EARNINGS PER SHARE

Earnings per common  share have been  computed  based upon the weighted  average
number of shares  outstanding during the years presented adjusted for the effect
of common stock  equivalents,  if  dilutive.  The stock  options are  considered
common stock equivalents. The weighted average number of shares outstanding were
1,584,130 shares in 1996, 1,595,322 shares in 1995 and 1,682,021 shares in 1994.
The options were not dilutive.


NOTE 11 - COMMITMENTS AND CONTINGENCIES

Peoples is committed  under various  non-cancelable  lease contracts for certain
branch  facilities  which expire at various dates through the year 2005. Most of
the  leases  contain  renewal  provisions  at  Peoples'  option  and  contain no
restrictive provisions of consequence.




<PAGE>


                            PEOPLES BANK CORPORATION
                                 OF INDIANAPOLIS
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1996, 1995 and 1994
             (Dollar amounts in thousands, except per share amounts)





NOTE 11 - COMMITMENTS AND CONTINGENCIES (Continued)

Expense for leased  premises  was $489,  $488 and $374 for 1996,  1995 and 1994.
Minimum lease payments at December 31, 1996 for all non-cancelable leases are as
follows:

               1997                                  $          377
               1998                                             338
               1999                                             340
               2000                                             204
               2001                                              97
               Thereafter                                       301
                                                     --------------

                  Total minimum lease payments       $        1,657
                                                     ==============

In the  ordinary  course  of  business,  Peoples  has  loans,  commitments,  and
contingent  liabilities,  such as guarantees  and  commitments to extend credit,
which  are  not  reflected  in the  accompanying  consolidated  balance  sheets.
Peoples'  exposure  to credit loss in the event of  nonperformance  by the other
party to the financial instrument for commitments to make loans, standby letters
of credit, and financial  guarantees is represented by the contractual amount of
those instruments.  Peoples uses the same credit policy to make such commitments
as it used for  on-balance-sheet  items.  At  December  31,  1996 and 1995 these
financial instruments are summarized as follows:

                                                         1996        1995
                                                       -------     -------

Financial instruments whose contract
   amount represents credit risk:
     Unused commercial lines of credit                 $41,460     $44,968
     Unused home equity lines of credit                 50,147      33,612
     Standby letters of credit                           2,686       2,250
     Commitments to make loans                          12,253      21,079

The unused home equity and commercial lines of credit are predominantly variable
rate agreements. Loan commitments are agreements to lend to a customer, provided
they accept the terms and conditions  offered by Peoples.  These commitments are
generally  extended  for terms of up to 60 days and,  in many  cases,  allow the
customer to select from one of several  financing  options offered.  At December
31, 1996,  these  commitments  included $237 of fixed rate loan commitments at a
weighted  average  rate of 8.92%.  Since many  commitments  to make loans expire
without  being  used,  the amount  does not  necessarily  represent  future cash
commitments.  Collateral  obtained upon exercise of the commitment is determined
using management's  credit evaluation of the borrower,  and may include accounts
receivable, inventory, property, land and other items.



<PAGE>


                            PEOPLES BANK CORPORATION
                                 OF INDIANAPOLIS
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1996, 1995 and 1994
             (Dollar amounts in thousands, except per share amounts)





NOTE 11 - COMMITMENTS AND CONTINGENCIES (Continued)

At December  31,  1996,  Peoples was required to have $6,694 on deposit with the
Federal Reserve or as cash on hand as reserve.

The Company is also subject to claims and lawsuits which arise  primarily in the
ordinary  course  of  business.  It  is  the  opinion  of  management  that  the
disposition  or ultimate  resolution of such claims and lawsuits will not have a
material adverse effect on the financial position of the Company.


NOTE 12 - STOCK OPTION PLAN

During  1996,  the Company  established  a  nonqualified  stock  option plan and
granted  stock options to directors  and key members of  management.  A total of
100,000  shares  were made  available  for grant at a price  equal to the market
price of the  stock at the date of  grant.  The  specific  terms of each  option
agreement are determined by the Compensation Committee at the date of the grant.
Generally,  options  granted  to  management  have a ten year  term and vest and
become  exercisable  in three  equal  portions  over a three or a six year term.
Options  granted to directors also have a ten year term but are  exercisable six
months  after  shareholder  approval,  which  will be put to a vote at the  1997
shareholders meeting scheduled for April 17, 1997.

A  summary  of the  Company's  stock  option  activity,  and  related  per share
information for 1996 follows:

<TABLE>
<CAPTION>
                                                                                 Weighted-           Weighted-
                                                                                  Average             Average
                                                                                 Exercise           Fair Value
                                                              Options              Price             of Grants

<S>                                                              <C>                  <C>                 <C>
Outstanding beginning of year                                          -      $            -      $           -
Granted                                                           56,010               26.56               8.28
Exercised                                                              -                   -                  -
Forfeited                                                              -                   -                  -
                                                           -------------      --------------      -------------

Outstanding at end of year                                        56,010      $        26.56      $        8.28
                                                           =============      ==============      =============

Exercisable at end of year                                        22,796      $       25.51
                                                           =============      =============
</TABLE>


Options  outstanding  at  December  31, 1996 have a 8.95 year  weighted  average
remaining life and exercise prices ranging from $24.88 to $30.25 per share.



<PAGE>


                            PEOPLES BANK CORPORATION
                                 OF INDIANAPOLIS
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1996, 1995 and 1994
             (Dollar amounts in thousands, except per share amounts)



NOTE 12 - STOCK OPTION PLAN (Continued)

Financial Accounting Standard No. 123, which became effective for 1996, requires
pro forma  disclosures for companies that do not adopt its fair value accounting
method for stock-based  employee  compensation.  Accordingly,  the following pro
forma information  presents net income and earnings per share had the Standard's
fair value method been used to measure compensation cost for stock option plans.
Compensation cost actually recognized for stock options was $0 for 1996.

                                                                1996

           Net income as reported                         $     5,409
           Pro forma net income                                 5,157

           Earnings per share as reported                 $      3.41
           Proforma earnings per share                           3.28

The fair value of options granted are estimated based upon  assumptions  about a
stock's  dividend yield,  the expected time until exercise,  the volatility of a
company's  stock  price  and  the  risk-free  interest  rate.  Fair  values  are
determined at the date of grant and estimates are not subsequently  changed. The
1996 fair  value  estimates  used the  following  weighted-average  assumptions:
risk-free interest rate of 6.74%;  dividend yield of 2.62%;  expected volatility
of stock price of .22, and expected life of 9.67 years.


NOTE 13 - CAPITAL REQUIREMENTS

The Company and Peoples are subject to various regulatory  capital  requirements
administered  by the federal banking  agencies.  Failure to meet minimum capital
requirements   can  result  in  certain   mandatory   and  possibly   additional
discretionary  actions by regulators  that, if  undertaken,  could have a direct
material effect on the financial statements. These guidelines and the regulatory
framework for prompt corrective action involve quantitative measures of capital,
assets,  liabilities,  and certain  off-balance-sheet  items as calculated under
regulatory  accounting  practices  as  well  as  qualitative  judgments  by  the
regulators about components, risk weightings, and other factors.

Compliance  with these  regulations  can limit  dividends paid by either entity.
Both entities must comply with  regulations  that  establish  minimum  levels of
capital adequacy. Peoples must also comply with capital requirements promulgated
by the FDIC  under  its  "prompt  corrective  action"  rules.  Peoples'  deposit
insurance assessment rate is based, in part, on these requirements.  At December
31,  1996,  Peoples'  capital  level  results  in it being  designated  as "well
capitalized".



<PAGE>


                            PEOPLES BANK CORPORATION
                                 OF INDIANAPOLIS
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1996, 1995 and 1994
             (Dollar amounts in thousands, except per share amounts)


NOTE 13 - CAPITAL REQUIREMENTS (Continued)

The Company's  consolidated  and Peoples' (bank only) capital amounts and ratios
at December 31, 1996 are presented below:

<TABLE>
<CAPTION>
                                                                                                To Be Well
                                                                                                Capitalized
                                                                For Capital                    Under Prompt
                                                                 Adequacy                    Corrective Action
                                 Actual                          Purposes                       Provisions
                          Amount        Ratio              Amount        Ratio              Amount        Ratio
<S>                      <C>            <C>               <C>            <C>              <C>              <C>
Total capital
  (to Risk
  Weighted
  Assets)
    Consolidated         $    48,963    14.11%            $    27,763    8%               $    34,703      10%
    Peoples                   41,690    12.07%                 27,633    8%                    34,541      10%

Tier I Capital
  (to Risk
  Weighted
  Assets)
    Consolidated         $    45,063    12.99%            $    13,881    4%               $    20,822       6%
    Peoples                   37,790    10.94%                 13,816    4%                    20,725       6%

Tier 1 Capital
  (to Average
  Assets)
    Consolidated         $    45,063    9.62%             $    18,730    4%               $    23,412       5%
    Peoples                   37,790    8.14%                  18,563    4%                    23,204       5%
</TABLE>



<PAGE>


                            PEOPLES BANK CORPORATION
                                 OF INDIANAPOLIS
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1996, 1995 and 1994
             (Dollar amounts in thousands, except per share amounts)





NOTE 14 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The  following  table  presents  the  carrying  value and the fair  value of the
Company's  financial  instruments at December 31, 1996 and 1995. Items which are
not financial instruments are not included.

<TABLE>
<CAPTION>
                                                               1996                              1995
                                                               ----                              ----
                                                   Carrying            Fair           Carrying            Fair
                                                     Value             Value            Value             Value
<S>                                               <C>               <C>               <C>               <C>
Financial assets
    Cash and due from banks                       $  32,252         $  32,252         $  23,377         $  23,377
    Available-for-sale securities                    94,589            94,589           107,745           107,745
    Loans and loans held for sale (net)             329,474           331,878           270,360           272,642
Financial liabilities
    Deposits                                       (411,805)         (411,679)         (351,762)         (352,600)
    Short-term borrowings                           (10,266)          (10,266)          (20,056)          (20,056)
Off-balance sheet items                                  --                --                --                --
</TABLE>


For purposes of these fair value  disclosures,  the following  assumptions  were
used:

o    The fair value for cash and cash  equivalents  is considered to approximate
     cost.
o    The fair  value for  securities  is based on quoted  market  values for the
     individual securities or for equivalent securities.
o    The  fair  value  for  loans is based on  estimates  of the  difference  in
     interest  rate that  Peoples  would charge the  borrowers  for similar such
     loans with similar  maturities made at December 31, 1996 and 1995,  applied
     for an  estimated  time  period  until the loan is assumed to reprice or be
     paid.  The fair  value of loans  held for sale is  estimated  using  quoted
     market prices for similar loans.
o    The fair value for demand and savings  deposits is based on their  carrying
     value.
o    The fair value for  certificates  of deposit is based on  estimates  of the
     rate that Peoples would pay on such deposits at December 31, 1996 and 1995,
     applied for the time period until maturity.
o    The carrying  amount of short-term  borrowings is a reasonable  estimate of
     their fair value.
o    The carrying value (which is zero) of off-balance sheet items is considered
     to be a  reasonable  estimate  of  fair  value  as  these  instruments  are
     generally  variable  rate and  short-term  in  nature,  with  minimal  fees
     charged.




<PAGE>


                            PEOPLES BANK CORPORATION
                                 OF INDIANAPOLIS
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1996, 1995 and 1994
             (Dollar amounts in thousands, except per share amounts)





NOTE 15 - PARENT COMPANY FINANCIAL STATEMENTS

Presented  below  are  condensed   balance  sheets  and  the  related  condensed
statements of income and cash flows for the parent company:

                            CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>


                                                                    December 31,
                                                              1996                1995
<S>                                                       <C>                <C>
ASSETS
    Cash on deposit                                       $       3,285      $         574
    Investment in Peoples                                        38,084             34,046
    Available-for-sale securities                                 3,994              6,794
    Other assets                                                    530                530
                                                          -------------      -------------

       Total assets                                       $      45,893      $      41,944
                                                          =============      =============

LIABILITIES                                               $         544      $         308

SHAREHOLDERS' EQUITY                                             45,349             41,636
                                                          -------------      -------------

       Total liabilities and shareholders' equity         $      45,893      $      41,944
                                                          =============      =============
</TABLE>



                         CONDENSED STATEMENTS OF INCOME

                                                      Years ended December 31,
                                                  1996        1995        1994
Operating income
    Dividends from Peoples                      $ 1,186     $ 1,130     $ 1,127
    Other operating income                          292         290         335
                                                -------     -------     -------
       Total operating income                     1,478       1,420       1,462

Operating expenses                                   59          43          78
                                                -------     -------     -------

Income before income tax benefit and equity
  in undistributed income of Peoples              1,419       1,377       1,384

Income tax benefit/(expense)                        (20)         (1)         17
                                                -------     -------     -------

Income before equity in undistributed
  income of Peoples                               1,399       1,376       1,401

Equity in undistributed income of Peoples         4,010       2,510       1,484
                                                -------     -------     -------
Net income                                      $ 5,409     $ 3,886     $ 2,885
                                                =======     =======     =======





<PAGE>


                            PEOPLES BANK CORPORATION
                                 OF INDIANAPOLIS
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1996, 1995 and 1994
             (Dollar amounts in thousands, except per share amounts)




NOTE 15 - PARENT COMPANY FINANCIAL STATEMENTS (Continued)

                       CONDENSED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                         Years ended December 31,
                                                       1996        1995        1994
<S>                                                <C>         <C>         <C>
Cash flows from operating activities
    Net income                                     $  5,409    $  3,886    $  2,885
    Adjustments to reconcile net income to net
      cash from operating activities:
       Equity in undistributed income of Peoples     (4,010)     (2,510)     (1,484)
       Net loss on securities                            --           8          --
       Net amortization on securities                    83         121         110
       Change in other assets                           (13)        (45)       (162)
       Change in other liabilities                      236          31          86
                                                   --------    --------    --------
          Net cash from operating activities          1,705       1,491       1,435

Cash flows from investing activities
    Purchase of available-for-sale securities            --          --     (11,225)
    Sales and maturities of available-for-sale
      securities                                      2,750       2,145       2,100
    Investment in Peoples                                --      (1,000)         --
                                                   --------    --------    --------
       Net cash from investing activities             2,750       1,145      (9,125)

Cash flows from financing activities
    Dividends paid                                   (1,185)     (1,113)     (1,115)
    Redemption of nonvoting shares                     (559)       (835)     (2,084)
    Sale of common shares                                --          --      10,558
                                                   --------    --------    --------
       Net cash from financing activities            (1,744)     (1,948)      7,359
                                                   --------    --------    --------

Net change in cash                                    2,711         688        (331)

Cash at beginning of year                               574        (114)        217
                                                   --------    --------    --------

Cash at end of year                                $  3,285    $    574    $   (114)
                                                   ========    ========    ========
</TABLE>



NOTE 16 - PENDING ACCOUNTING CHANGE

Financial Accounting Standard No. 125, Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities,  was issued by the Financial
Accounting  Standards  Board in 1996. It revises the accounting for transfers of
financial assets, such as loans and securities,  and for distinguishing  between
sales and secured borrowings.  It is effective for some transactions in 1997 and
others in 1998.  Management  does not expect adoption of this Standard to have a
significant effect on the Company's financial position or results of operations.

<PAGE>



Item  9.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure.

    Not Applicable.

                                                     PART III

Item 10.     Directors and Executive Officers of the Registrant

    The directors and executive  officers of the Company,  their respective ages
at March 1, 1996 and their respective positions with the Company and Peoples are
listed below:

Name                           Age    Position*
Felix T. McWhirter             80     Chairman of the Board of the Company and
                                          Peoples
Mac McWhirter                  46     Director, President and Chief Executive
                                          Officer of the Company and Peoples
Charles R. Farber              47     Director, Executive Vice President of
                                          the Company and Peoples
Gerald R. Francis              53     Director, Executive Vice President of
                                          the Company and Peoples
Elbert L. Bradshaw             69     Director
Robert B. Hirschman, D.D.S.    62     Director
David W. Knall                 52     Director
Mary Ellen Rodgers             44     Director
Henry C. Ryder                 69     Director
Stephen R. West                65     Director
Robert R. Connors              47     Secretary and Treasurer of the Company,
                                          Senior Vice President, Director of
                                          Operations & Cashier of Peoples
Charles R. Hageboeck           34     Senior Vice President and CFO,
                                          Director of Finance of Peoples
Elliott R. Lese                63     Senior Vice President, Director of Loan
                                          Administration of Peoples
Craig G. Stilwell              41     Senior Vice President, Director of Sales
                                          & Marketing of Peoples
Terry L. Young                 50     Senior Vice President, Senior Trust
                                          Officer of Peoples

         Mr. Felix T.  McWhirter  has been  Chairman of the Board of the Company
since its  formation and Chairman of the Board of Peoples since 1972. In 1984 he
retired as President of Peoples after serving in that capacity for 25 years.  He
has served Peoples in various  capacities  since 1938. Felix T. McWhirter is Mac
McWhirter's father.

         Mr. Mac McWhirter has been President of the Company since its formation
in 1986 and President and Chief Executive  Officer of Peoples since 1984. He has
served  Peoples in various  capacities  since 1969,  including  the  position of
Executive Vice  President  from 1976 to 1984. Mr.  McWhirter is also Chairman of
Peoples Building  Corporation.  In addition to serving on the Board of Directors
of Peoples and the Company, Mr. McWhirter serves on all committees of the Board,
except the Board Related Affairs  Committee,  described below. He is Chairman of
the Investment  Committee.  Mr. McWhirter serves as a director of the United Way
of Central  Indiana,  the  Salvation  Army,  St.  Vincent  Hospital  Foundation,
Crossroads  Rehabilitation  Center, the Kiwanis Club of Indianapolis  Foundation
and the Greater Indianapolis Progress Committee. Mr. McWhirter is Past President
of the Kiwanis Club of Indianapolis, Past Treasurer of the United Way of Central
Indiana and Past Director and Treasurer of the Community Bankers  Association of
Indiana.  Mr. McWhirter is currently a member of the Indiana Bankers Association
Governmental  Relations Committee,  and the Young Presidents  Organization.  Mac
McWhirter is Felix T. McWhirter's son.

         Mr.  Farber  joined  Peoples  in 1972 and headed  its  commercial  loan
department  from 1977 to 1984.  Since May, 1984, he has been Peoples'  Executive
Vice  President.  He also serves as Executive  Vice President of the Company and
Peoples Building  Corporation.  Mr. Farber is a member of the Board of Directors
of Peoples, the Company and President of Peoples Building Corporation and serves
on  the  Loan  Committee,  the  Asset/Liability  Management  Committee  and  the
Compliance  Council.  Mr. Farber is currently the President of the  Indianapolis
Athletic Club.

         Mr.  Francis  joined the Company in  February  of 1996 as an  Executive
Vice-President.  He is directly responsible for all aspects of retail banking at
Peoples,   including  the  branch  system,  mortgage  banking,   marketing,  and
operations.  Prior to joining the Company, Mr. Francis was employed by Bank One,
Cincinnati  N.A.,  where he was the  Chairman  of the Board and Chief  Executive
Officer  between 1992 and 1995.  Between 1989 and 1992,  Mr.  Francis  served as
Regional President for Bank One Ohio Corporation. Between 1982 and

                                                        28

<PAGE>



1989,  Mr.  Francis was President of  Metropolitan  Bank in Lima,  Ohio.  Before
joining Metropolitan Bank, Mr. Francis was Senior Vice President and Senior Loan
Officer with the First National Bank of Dayton,  Ohio, having joined the bank in
1971.

         Mr.  Bradshaw,   now  semi-retired,   owns  and  operates  E.  Bradshaw
Enterprises,  Inc., a consulting firm serving primarily small businesses. He has
been a member of the Board of Directors since 1967.

         Dr. Hirschman has served on the Board of Directors since 1967. In 1991,
he retired from a thirty-year  practice as an orthodontist  in the  Indianapolis
area.

         Mr.  Knall is a Managing  Director  of  McDonald & Company  Securities,
Inc.,  a position he has held since 1983.  Mr.  Knall  first  joined  McDonald &
Company  Securities,  Inc.  in 1969,  and he became the  manager of that  firm's
Indianapolis  office in 1976. He joined the Board of Directors of the Company in
1991.

         Ms.  Rodgers  has  served as Senior  Vice  President,  Chief  Financial
Officer and Secretary of American Home Patient,  a diversified  home health care
company based in Brentwood,  Tennessee,  since April,  1996.  Prior to 1996, Ms.
Rodgers worked as a self-employed consultant,  after having retired in 1995 from
Eli Lilly & Co. Ms. Rodgers had served as Controller for Management  Information
Services  for Eli Lilly & Co. and its  affiliates  in various  other  capacities
since 1981. She had been  Controller of Lilly Research  Laboratories,  Assistant
Treasurer  of Eli  Lilly  and  Company,  and  Treasurer  of Lilly  International
Corporation.  She joined the Board of Directors in 1991 and currently chairs the
Asset/Liability  Management  Committee and the  Investment  Policy  Committee of
Peoples.

         Mr. Ryder joined the Board of  Directors in 1986 and  currently  chairs
the Compliance  Council Committee and the Pension and Retirement  Committee.  He
founded the firm of Roberts & Ryder in 1960,  and came to the law firm of Barnes
&  Thornburg  as a partner  in 1987 as a result of the  merger of the two firms.
Since January 1, 1996, Mr. Ryder has been of counsel at Barnes & Thornburg.  Mr.
Ryder is involved in numerous  professional,  civic,  philanthropic,  and social
organizations throughout Indiana.

         Mr. West has been on the  Company's  and  Peoples'  Board of  Directors
since 1984 and currently  chairs the Peoples'  Examination and Audit  Committee.
During the past five years,  Mr. West has served as the  President and Treasurer
of West Baking,  Inc.,  Indianapolis,  Indiana.  Between 1988 and 1990, Mr. West
served  as  Senior  Vice  President  and  Treasurer  of Dunes  Transport,  Inc.,
Indianapolis,  Indiana.  In addition,  from 1988 to 1995, Mr. West served as the
Vice President of the Indianapolis City-County Council. Since January, 1996, Mr.
West  has  served  as an  appointed  trustee  of  Indiana  Health  and  Hospital
Corporation of Marion County, Indiana.

         Mr.  Connors  has  served as Senior  Vice  President  and  Director  of
Operations  since  he came to  Peoples  in  1984.  He has 26  years  of  banking
experience which includes 13 years with the Federal  Reserve.  His last position
with the  Federal  Reserve was that of  Regional  Manager  for the  Indianapolis
office. Mr. Connors is  Secretary/Treasurer  for Peoples Bank Corporation and is
Chairman  of  the  Research  and   Development   Committee  and  the  Technology
Maximization  Group.  Mr.  Connors  is  currently  on  the  Strategic  Direction
Committee of the  Comprehensive  Banking System Users Group, a computer software
users  group  which  consists  of over 100  financial  institutions  around  the
country.

         Mr. Charles R. Hageboeck  joined the Company in August of 1995 as Chief
Financial  Officer and  Director of Finance.  He also serves as Secretary to the
Board of  Directors  for  Peoples.  From  January,  1992 to  August,  1995,  Mr.
Hageboeck was the Chairman of the  Asset/Liability  Committee for NBD Bank, N.A.
in Indiana, as well as manager of that bank's funding and ALCO departments.  Mr.
Hageboeck also serves the Company on the Asset/Liability  Management  Committee,
Investment Committee,  Product and Pricing Committee,  Audit Committee,  and the
Board of Directors of Peoples Building Corporation.  Mr. Hageboeck holds a Ph.D.
in Economics at Indiana University.

         Mr.  Lese came to Peoples  from  Marquette  National  Bank in  Chicago,
Illinois,  where he served as a Senior Vice President  from 1985 to 1989.  Since
December,  1989,  Mr. Lese has served as Senior Vice President in charge of Loan
Administration  for  Peoples.  Mr. Lese has over 30 years of banking  experience
including  the  areas of loan  administration,  executive  management,  finance,
operations and planning.  Mr. Lese serves on the Loan Committee,  the Investment
Committee,  the Asset and Liability  Management Committee and the ORE Committee.
Mr. Lese has served as the Vice President of the Notre Dame Club of Indianapolis
and is a member of the Indiana CPA Society and the Rotary Club of Indianapolis.

         Mr. Stilwell has been Senior Vice President,  Director of Marketing for
Peoples since 1988. He first came to Peoples in September,  1978.  During his 16
years with  Peoples,  Mr.  Stilwell  has been the  Assistant  Cashier,  a branch
manager and the Director of  Marketing,  a position he has held since 1984.  Mr.
Stilwell  currently serves as Chairman of the Product and Pricing  Committee and
the CRA Committee and as Secretary of the Compliance  Council. He also serves on
the  Research  and  Development  Committee  and the  Asset/Liability  Management
Committee. Mr. Stilwell is a member of the Indiana Chapter of the Bank Marketing
Association and is a board member of the Community Bankers Association Insurance
Agency.

         Mr.  Young  joined  Peoples  in 1980 and has had more  than 20 years of
banking  experience,  primarily in the areas of lending and trust.  He currently
serves on the Trust  Committee.  Mr.  Young is the past  Chairman of the Indiana
Bankers  Association  Trust  Committee and Past President of the Central Indiana
Corporate Fiduciaries Association.


                                                        29

<PAGE>



Compliance with Section 16(a) of the Exchange Act.

         Section 16(a) of the  Securities  Exchange Act of 1934, as amended (the
"1934  Act"),  requires  the  Company's  directors  and  executive  officers and
beneficial  owners of more than 10% of the Company's  equity  securities to file
with the SEC certain reports regarding the ownership of the Company's securities
or any changes in such  ownership.  Officers,  directors  and  greater  than 10%
shareholders  are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms that they file.

         Based solely on its review of the copies of such forms  received by it,
and/or written  representations  from certain  reporting persons that no Forms 5
were required for such persons,  the Company  believes  that,  during the fiscal
year  ended  December  31,  1996,  all  filing  requirements  applicable  to its
officers,  directors  and greater  than 10%  beneficial  owners with  respect to
Section 16(a) of the 1934 Act were complied with.


Item 11.     Executive Compensation.

         The following table sets forth,  for the years ended December 31, 1994,
1995,  and 1996,  information  with respect to William E.  McWhirter,  the Chief
Executive Officer,  and Charles R. Farber and Gerald R. Francis,  the only other
executive  officers of the Company whose aggregate  compensation  and bonus from
Peoples exceeded $100,000:


<TABLE>
<CAPTION>
                                                                           Annual Compensation
                                     -----------------------------------------------------------------------------------------------
Name and                                                                                     Long-Term
Principal Position                                                                          Compensation
                                                                                       Securities Underlying          All Other
                                         Year         Salary(1)        Bonus(2)          Option Awards (#)         Compensation(5)
<S>                                       <C>          <C>              <C>                  <C>                        <C>
Mac McWhirter.......................      1996         $186,673         $17,425              16,130(3)                  $500
President and                             1995         178,680            5,425                 ---                      500
Chief Executive Officer                   1994         175,185                0                 ---                      500

Charles R. Farber...................      1996         $113,779         $13,729              10,000(4)                  $500
Executive Vice President                  1995         112,680            3,379                 ---                      500
                                          1994         110,830                0                 ---                      500

Gerald Francis......................      1996         $101,077         $13,856              10,000(4)                 $3,700
Executive Vice President
 </TABLE>
--------------------
(1)      Salary figures shown above include  directors'  fees of $4,000 for each
         of Mr. McWhirter and Mr. Farber and $2,000 for Mr. Francis, and amounts
         deferred  at  the  election  of the  respective  officers  pursuant  to
         Peoples'  Deferred  Compensation  Plan, more fully described below, for
         the year in which earned.  For fiscal year 1996, Mr. McWhirter deferred
         none of his director's fees and $15,000 of his regular salary,  and Mr.
         Farber  deferred none of his  directors  fees and $7,000 of his regular
         salary.

(2)      Bonuses are based on discretionary  guidelines established by the Board
         Related Affairs  Committee and are contingent upon, among other things,
         individual   performance   reviews  and  the  attainment  of  strategic
         financial  goals.  The bonus figures shown were awarded for performance
         in the  fiscal  year  shown  and  paid in the  subsequent  fiscal  year
         pursuant to the Board and Senior Management Profit Sharing Plan.

(3)      Mr.  McWhirter's  incentive  stock  option  for  3,654  shares  and his
         non-qualified stock option for 12,476 shares were granted in March 1996
         and became exercisable in September 1996.

(4)      The incentive  stock options held by each of Mr. Farber and Mr. Francis
         were  granted  in  January  1996.  They  become  exercisable  in  three
         installments. The first installment for 3,333 shares became exercisable
         on December 1, 1996.  The  remaining  installments  for 3,333 and 3,334
         shares  become  exercisable  on  December  1, 1997 and January 1, 1998,
         respectively.

(5)      401(k) matching  contributions for Mr. McWhirter and Mr. Farber.  Other
         compensation for Mr. Francis also included  temporary  housing expenses
         paid by the Company.



                                                        30

<PAGE>
           Stock Option Grants in Fiscal Year Ended December 31, 1996

<TABLE>
<CAPTION>
                                        Individual Grants
                                                 % of Total
                            Securities Un      Options Granted     Exercise or
                           derlying Options    to Employees in      Base Price      Expiration
          Name               Granted (#)      Fiscal Year 1996        ($/Sh)            Date        5%($)(1)          10%($)(4)
          ----               -----------      ----------------        ------           -----        --------          ---------
<S>                          <C>                 <C>                   <C>        <C>             <C>             <C>
Mac McWhirter                   3,654(1)            6.87%              27.3625    03/01/01          $62,879.04      $150,342.23
                               12,476(2)           23.45%               24.875    03/22/06         $195,173.14      $494,589.65
Charles R. Farber              10,000(3)           18.79%               24.875    03/22/06         $156,438.88      $396,432.88
Gerald Francis                 10,000(3)           18.79%                26.50    01/24/06         $166,658.50      $422,330.50
</TABLE>
--------------------
(1)      Include  incentive  stock  option  shares  granted  in March 1996 which
         became exercisable in September 1996.

(2)      Includes  non-qualified stock option shares granted in March 1996 which
         become exercisable in September 1996.

(3)      The incentive  stock options held by each of Mr. Farber and Mr. Francis
         were  granted  in  January  1996.  They  become  exercisable  in  three
         installments. The first installment for 3,333 shares became exercisable
         on December 1, 1996.  The  remaining  installments  for 3,333 and 3,334
         shares  become  exercisable  on  December  1, 1997 and January 1, 1998,
         respectively.

(4)      These  gains are based  upon  assumed  rates of annual  compound  stock
         appreciation  of 5% and 10% from the date the options were granted over
         the full option term. These amounts  represent certain assumed rates of
         appreciation  only.  Actual  gains,  if any,  on option  exercises  are
         dependent upon the future  performance  of the Nonvoting  Common Shares
         and overall stock market conditions. There can be no assurance that the
         amounts reflected on this table will be achieved.

         The following table sets forth certain information  regarding the total
number of stock options held by each of the Named  Executive  Officers,  and the
aggregate value of such stock options,  as of March 31, 1996. None of such stock
options had been exercised as of such date.

       Aggregated Option Exercises in Fiscal Year Ended December 31, 1996
                        and Fiscal Year-End Option Values


<TABLE>
<CAPTION>
                                                                 Number of Securities
                                 Shares                               Underlying           Value of In-the-Money
                               Acquired on     Value Realized   Unexercised Options at     Unexercised Options at
           Name               Exercise (#)           ($)            Fiscal Year-End        Fiscal Year-End ($)(3)
           ----               ------------           ---            ---------------        ----------------------
<S>                            <C>                <C>                 <C>                      <C>
Mac McWhirter                      ---               ---               16,130(1)                $168,340.67
Charles R. Farber                  ---               ---               10,000(2)                $109,950.00
Gerald Francis                     ---               ---               10,000(2)                $ 93,750.00
</TABLE>
--------------------
(1)      Mr.  McWhirter's  incentive  stock  option  for  3,654  shares  and his
         non-qualified stock option for 12,476 shares were granted in March 1996
         and became exercisable in September 1996.

(2)      The incentive  stock options held by each of Mr. Farber and Mr. Francis
         were  granted  in  January  1996.  They  become  exercisable  in  three
         installments. The first installment for 3,333 shares became exercisable
         on December 1, 1996.  The  remaining  installments  for 3,333 and 3,334
         shares  become  exercisable  on  December  1, 1997 and January 1, 1998,
         respectively.

(3)      Based on the fair market value for the  Nonvoting  Common Shares on the
         last business day of the fiscal year ended December 31, 1996, which was
         $35.875 per share.


         Stock Option Plan.  The  Company's  Board of Directors  has adopted the
Peoples  Bank  Corporation  of  Indianapolis  Stock  Option  Plan  (the  "Plan")
effective  January 1, 1996.  The Plan was  approved by the  shareholders  of the
Company at the  annual  meeting in April,  1996.  The  purpose of the Plan is to
provide  to  officers  and other key  employees  of the  Company  and  Peoples a
favorable opportunity to acquire Nonvoting Common Shares, thereby providing them
with an  increased  incentive to work for the success of the Company and Peoples
and better  enabling  each such entity to attract and retain  capable  executive
personnel.

                                                        31

<PAGE>

         The Plan  authorizes the granting of both  incentive  stock options and
non-qualified  stock  options to officers and other key employees of the Company
and its  subsidiaries  by a  committee  of  disinterested  directors,  which  is
currently the Board Related Affairs  Committee  ("BRAC").  Stock options granted
under the Plan will be  exercisable  at such  times (not after ten years and one
day from the date of grant) and at such  exercise  prices  (not less than 85% of
the fair market value per share of the Nonvoting Common Shares at date of grant)
as the BRAC determines and will, except in limited  circumstances,  terminate if
the  grantee's  employment  terminates  prior to  exercise.  A total of  100,000
Nonvoting Common Shares have been reserved for issuance under the Plan, of which
options for 53,210 Nonvoting Common Shares have been granted to officers and key
employees to date.

         During  1996,  the BRAC  granted  an  aggregate  of 53,210  options  to
purchase  Nonvoting Common Shares to members of the senior management team, with
expiration  dates  ranging from March 21, 2001  through  June 11,  2006,  and at
exercise  prices  ranging from $24.88 to $28.04 per share.  William E. McWhirter
was granted options for 16,130 shares,  consisting of 3,654 shares subject to an
incentive  stock  option and 12,476  shares  subject  to a  non-qualified  stock
option.  Charles R. Farber and Gerald R.  Francis  were each  awarded  incentive
stock options for 10,000 shares. Mr.  McWhirter's  options became exercisable in
September,  1996.  The options held by each of Mr. Farber and Mr. Francis become
exercisable in three  installments  of 3,333 shares each on December 1, 1996 and
December 1, 1997, and 3,334 shares on January 1, 1998.  Such grants were made to
provide  significant   incentives  for  future  performance  and  to  align  the
executive's  interest  with those of the  shareholders  and,  in the case of Mr.
McWhirter  and Mr.  Farber,  as a reward  for prior  performance.  Other  senior
officers  received  options  totaling  17,080,  collectively,  all of which  are
incentive  stock  options.   Such  options   generally  become   exercisable  in
installments over a period of years ranging from 1998 to 2002.

         Consulting  Agreement.  Felix T.  McWhirter  entered  into a consulting
agreement  with Peoples on January 15, 1987 for a ten- year term to allow him to
serve as a consultant upon the termination of his full-time active employment on
that date. Mr. Felix T.  McWhirter's  obligations with Peoples were completed as
of January 15, 1997. The terms of his consulting  agreement  called for payments
during the  remainder  of his life.  Mr.  McWhirter  currently  receives  $8,122
monthly, subject to the following adjustments: (i) a ten percent reduction every
five years, and (ii) an annual adjustment to reflect  cost-of-living  increases.
In the event of his death, Mr.  McWhirter's  surviving spouse is entitled to the
payments for the remainder of her life.

         Compensation  of  Directors.  All  directors  of the Company  receive a
retainer fee of $4,000 per year.  Additionally,  outside directors receive a fee
of $420 per board or  committee  meeting.  Board  members  are also  eligible to
receive bonuses pursuant to the Board and Senior Management Profit Sharing Plan,
further discussed below.

         Directors  Stock  Option Plan.  The  Company's  Board of Directors  has
adopted the Peoples Bank Corporation of Indianapolis 1996 Directors Stock Option
Plan (the  "Directors  Plan")  effective  June 20, 1996.  The Directors  Plan is
subject to shareholder approval,  which is expected to be obtained at the annual
meeting of shareholders to be held in April,  1997. The purpose of the Directors
Plan is to provide  directors of the Company who are not employed by the Company
("Outside  Directors")  a  favorable  opportunity  to acquire  Nonvoting  Common
Shares,  thereby  better  enabling  the  Company to attract  and retain  capable
Outside Directors.

         The  Directors  Plan provides for the granting of  non-qualified  stock
options to Outside  Directors.  A total of 50,000  Nonvoting  Common Shares have
been reserved for issuance under the Directors  Plan, of which options for 2,800
Nonvoting  Common Shares have been granted to seven  Outside  Directors to date.
Stock options granted under the Plan are  exercisable for a period  beginning on
the date of grant and  ending on the day  immediately  following  the tenth year
anniversary  of the date of grant,  and at an  exercise  price equal to the fair
market value per share of the Nonvoting  Common Shares on the date of grant.  On
the date the Directors  Plan was adopted,  each Outside  Director was granted an
option for 400 shares with an exercise price of $30.25. If the Directors Plan is
approved by the  shareholders,  such options will become  exercisable on October
17, 1997. The Directors Plan further provides that, on April 1, 1997 and on each
April 1 thereafter  while there are still shares  reserved  under the  Directors
Plan for which  options  have not been  granted,  the Company will grant to each
Outside  Director who is serving as a director of the Company on such grant date
a non-qualified  option to purchase a number of Nonvoting Common Shares pursuant
to a formula based on directors' fees. is subject to shareholder approval.

         Deferred  Compensation Plan. Pursuant to Peoples' Deferred Compensation
Plan,  selected  employees are given the  opportunity to defer  irrevocably  the
receipt of income in anticipation of future monthly benefits,  payable either to
the employee  upon  retirement  at age 65 or to the  employee's  survivor in the
event of the employee's death prior to the normal  retirement date. The benefits
payable  under the plan are to be paid from  Peoples'  general  assets.  Peoples
maintains  insurance  policies on the lives of Mac McWhirter,  Charles R. Farber
and all other  plan  participants  to  provide  for  eventual  payment  of their
deferred benefits.  Peoples is the sole owner and beneficiary of these policies.
Peoples has the right to amend or terminate the plan at any time.

         Profit  Sharing  Plan.   Peoples  has  adopted  the  Board  and  Senior
Management  Profit  Sharing  Plan.  Pursuant  to the  plan,  members  of  senior
management  and the Board of  Directors  are  eligible to receive  discretionary
bonuses based on, among other factors,  profits achieved by Peoples in excess of
those  budgeted  for  a  given  fiscal  year.  The  schedule  serves  only  as a
discretionary guideline and does not represent a contractual obligation.

         401(k)  Plan.  Employees  who  have  attained  age 21 are  entitled  to
participate  in the 401(k) Profit  Sharing Plan.  Under the plan,  commencing in
1993  Peoples  makes a  matching  contribution  on behalf of each  participating
employee  up to $500  based on 25% of the  employee's  deferred  amount.  Vested
portions of the benefits  under the 401(k) Plan are payable upon the  employee's
retirement, death,

                                                        32

<PAGE>

disability or other termination of employment. In late 1995, Peoples amended the
401(k)  Plan to permit  participants  to direct  the  investment  of their  plan
account balances in Nonvoting Common Shares.

         Pension  Plan.  The "Peoples Bank & Trust  Company  Employees'  Pension
Plan" is a tax-qualified  defined benefit pension plan.  People's  employees are
eligible to participate in the plan once they have completed one year of service
and are 21 years of age.  Continued  eligibility  requires  completion  of 1,000
hours of service in a calendar year.  Participants are not required or permitted
to make  contributions  under the plan. An employee's  pension benefits are 100%
vested after five years of service.

         The plan  provides for monthly  retirement  benefits  determined on the
basis of the employee's  highest  five-year average salary and years of service.
Early retirement, disability and death benefits are also payable under the plan.
The  estimated  base annual  retirement  benefits  presented on a  straight-line
annuity basis payable at normal  retirement  age (65) under the plan to a person
in specified remuneration and years of service classifications are as follows:

<TABLE>
<CAPTION>
                                                                   Years of Service
                            ----------------------------------------------------------------------------------------------
                                    10                 20                 30                 40                 50
                                    --                 --                 --                 --                 --
       Remuneration
<C>                                   <C>                <C>                <C>                <C>                <C>
$   100,000................           $ 20,000           $ 40,000           $ 60,000           $ 80,000           $100,000
    120,000................             24,000             48,000             72,000             96,000            120,000
    140,000................             28,000             56,000             84,000            112,000            140,000
    160,000................             32,000             64,000             96,000            128,000            160,000
    180,000................             36,000             72,000            108,000            144,000            180,000
    200,000................             40,000             80,000            120,000            160,000            200,000
</TABLE>

         Annual  compensation  of Mr.  McWhirter,  Mr.  Farber,  and Mr. Francis
covered by the Pension Plan is the same as their salary compensation illustrated
in the Annual  Compensation  Table  (excluding  directors  fees).  Benefits  are
payable as a monthly life  annuity and are not subject to  deduction  for Social
Security or other offset.  The years of service credited to Mr.  McWhirter,  Mr.
Farber,  and Mr.  Francis,  under the Pension  Plan as of December 31, 1996 were
23.50, 24.33, and .92 respectively. Peoples has adopted a Supplemental Executive
Retirement  Plan ("SERP")  which  supplements  the amount of benefits  otherwise
available to Mr. McWhirter,  Mr. Farber,  and Mr. Francis under the Pension Plan
upon their retirement.  Annual SERP benefits equal 2% of pay per year subject to
the maximum of 75% of the executive's  average annual  compensation in the three
highest years with Peoples, less the executive's annual benefit payable (i) on a
single life basis under the Pension  Plan and (ii) under Social  Security.  Only
Mac McWhirter,  Mr. Farber,  and Mr. Francis are SERP participants at this time,
but additional key executives may be added by the Board of Directors.

         Compensation Committee Interlocks and Insider Participation.  The Board
Related  Affairs  Committee  of the Board of  Directors  served  as the  board's
compensation  committee during fiscal 1996. There are no interlocks  between the
Company's or Peoples' boards of directors or  compensation  committee on the one
hand and those of any other company on the other hand.


Item 12.    Security Ownership of Certain Beneficial Owners and Management.

         The following table sets forth certain information regarding beneficial
ownership of the Company's  Common Shares by (i) each person who is known by the
Company to own beneficially more than 5% of the outstanding Voting Common Shares
(ii) each  director and executive  officer  named in the executive  compensation
table, and (iii) all executive  officers and directors of the Company as a group
as of March  10,  1997.  Except as  otherwise  indicated,  based on  information
furnished by such owners,  the  beneficial  owners of the Common  Shares  listed
below have sole  investment and voting power with respect to such Common Shares,
subject to community property laws where applicable.



                                                        33

<PAGE>
<TABLE>
<CAPTION>
                                         Voting Common Shares               Nonvoting Common
Name and Address                         Beneficially Owned                 Shares Beneficially Owned
of Beneficial Owner                      and Percentage or Class            and Percentage or Class
-------------------                      -----------------------            -----------------------
<S>                                          <C>                                 <C>
Elbert L. Bradshaw                           1,400                               1,500
13843 Driftwood Drive                          1.0%                                0.1%
Carmel, Indiana 46033

Charles R. Farber                              536     (1)                       4,394    (1)(8)
130 E. Market Street                           0.4%                                0.3%
Indianapolis, Indiana 46204

Gerald R. Francis                                                                5,603    (9)
130 East Market Street                                                            0.4%
Indianapolis, Indiana 46204

Robert B. Hirschman, D.D.S.                  1,400                               2,000
5104 Plantation Drive                          1.0%                                0.1%
Indianapolis, Indiana 46250

Estate of Margaret Rose Zapf King           10,396     (11)                        ---    (11)
8890 Pickwick Drive                            7.4%
Indianapolis, Indiana 46260

David W. Knall                                 ---                              16,740
One American Square                                                               1.2%
Suite 2615
Indianapolis, Indiana 46282

Luella M. Martin                            12,404     (3)                      60,197    (3)
3738 Bay Road. South Drive                     8.9%                                4.2%
Indianapolis, Indiana 46240

William E. McWhirter                        82,616     (4)                      18,850    (4)
130 E. Market Street                          59.0%                                1.3%
Indianapolis, Indiana 46204

Felix T. McWhirter                             ---                             284,380    (5)
130 E. Market Street                                                             19.9%
Indianapolis, Indiana 46204

Mary Ellen Rodgers                             ---                                 400    (1)
10639 Windjammer Circle                                                                   (2)
Indianapolis, Indiana 46236

Evans McWhirter Rust                        13,220     (6)                     169,164    (6)
6917-B East Osborn                             9.4%                               11.8%
Scottsdale, Arizona 85251

Henry C. Ryder                                 ---                               5,800    (7)
11 South Meridian Street                                                           0.4%
Indianapolis, Indiana 46204

Stephen R. West                                ---                               6,904
4120 North Illinois Street                                                         0.5%
Indianapolis, Indiana 46208

All Directors and Executive                 99,572                             150,146
Officers, as a group (15 persons)             71.1%                               10.5%
</TABLE>
--------------------
(footnotes on next page)


                                                        34

<PAGE>
--------------------
(1)      Held jointly with spouse.

(2)      Less than 0.1%.

(3)      Includes  forty (40)  Voting  Common  Shares held in trust by Luella M.
         Martin as trustee.  Of the Nonvoting  Common Shares,  44,564 shares are
         held in trust by Luella M.  Martin as  trustee  and  additional  11,085
         shares  are  registered  in the name of Wesley P.  Martin,  husband  of
         Luella M. Martin.

(4)      Of the Voting Common  Shares,  696 shares are held by Susan  McWhirter,
         wife of William E. McWhirter. Of the Nonvoting Common Shares, 1,936 are
         held by  Susan  McWhirter,  and 784  shares  are  held  by  William  E.
         McWhirter.  Also includes  3,654 Shares  subject to an incentive  stock
         option  and  12,476  Shares  subject to a  non-qualified  stock  option
         granted  under the  Company's  Stock  Option  Plan,  which  options are
         currently exercisable in accordance with their terms.

(5)      Includes  182,000  shares  held by  Peoples  as trustee of the Felix M.
         McWhirter Trust for Children and Grandchildren. Pursuant to such trust,
         Felix  T.  McWhirter   holds  voting  power  and  shares  with  Peoples
         dispositive  power with  respect to the shares.  Also  includes  55,912
         shares held by Margaret J. McWhirter, Mr. McWhirter's spouse.

(6)      All Voting Common Shares and 128,564  Nonvoting  Common Shares are held
         in trust by Evans  McWhirter  Rust as  trustee.  Also  includes  40,600
         Shares  held by  Peoples  as  trustee  as to which Mr.  Rust  disclaims
         beneficial ownership.

(7)      Includes  5,400 shares held by Society  National Bank as trustee of Mr.
         Ryder's 401 (k) Plan.

(8)      Includes  661 Shares  (rounded  to the  nearest  whole  share)  held in
         Peoples' 401(k) Profit Sharing Plan. Also includes 3,333 Shares subject
         to an incentive  stock option granted under the Company's  Stock Option
         Plan, the first installment of which became  exercisable on December 1,
         1996.

(9)      Includes 2,270 Shares held in Mr. Francis' IRA and 3,333 Shares subject
         to an incentive  stock option granted under the Company's  Stock Option
         Plan, the first installment of which became  exercisable on December 1,
         1996.

(10)     Held in Robert B. Hirschman D.D.S. Retirement Plan.

(11)     Ms.  King  passed  away in  January,  1997 and her  estate has not been
         closed.  The share amounts indicated are based on information  provided
         by the Personal Representative of Ms. King's estate



Item 13.    Certain Relationships and Related Transactions.

         From time to time Peoples makes loans to its directors and  significant
shareholders. At December 31, 1996, such loans and extensions of credit amounted
to  approximately  $1,660,000.  Such  loans and all  similar  loans or  advances
outstanding  during any of the three prior years,  were made (i) in the ordinary
course of business,  (ii) on substantially  the same terms,  including  interest
rates  and  collateral,   as  those   prevailing  at  the  time  for  comparable
transactions with other persons,  and (iii) did not involve more than the normal
risk of collectibility or present other unfavorable  features.  Peoples does not
generally make any loans to executive officers.

         David W. Knall, one of the Company's directors,  is a Managing Director
of McDonald & Company Securities, Inc., one of the underwriters in the Company's
initial  public  offering.  From time to time,  the Company and Peoples  utilize
investment  advisory  and  brokerage  services  provided  by  McDonald & Company
Securities, Inc.

         Henry C. Ryder, one of the Company's directors, is a partner in the law
firm of Barnes & Thornburg. Such firm provides legal services to the Company and
Peoples on a regular basis.



<PAGE>

                                     PART IV

Item 14.    Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

(a)      List the following documents filed as part of the report:

         Financial Statements -- Included Under Item 8:

         Report of Crowe, Chizek and Company LLP, Independent Auditors

         Consolidated Balance Sheets as of December 31, 1996 and 1995

         Consolidated  Statements  of Income for the Years  Ended  December  31,
1996, 1995 and 1994.

         Consolidated  Statements  of  Changes in  Shareholders'  Equity for the
Years Ended December 31, 1996, 1995, and 1994

         Consolidated  Statements of Cash Flows for the Years Ended December 31,
1996, 1995 and 1994

(b)      Reports on Form 8-K


                                       35

<PAGE>



         Registrant  filed no  reports on Form 8-K  during  the  quarter  ending
December 31, 1996.

(c)      The exhibits filed herewith or incorporated by reference herein are set
         forth on the Exhibit Index on page 38.

                                       36

<PAGE>

                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended,  the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereto duly authorized.

                                    PEOPLES BANK CORPORATION OF INDIANAPOLIS


                                    By:   /s/ William E. McWhirter
                                          ------------------------------------
                                          William E. McWhirter
                                          President and Chief Executive Officer

         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the date indicated.

     Signature                             Title                      Date
     ----------------------------          ----------------        -----------
(1)  Principal Executive Officer:

     By: /s/ William E. McWhirter          President, Chief      )
     William E. McWhirter                  Executive Officer     )
                                                                 )
(2)  Principal Financial/                                        )
      Accounting Officer:                                        )
                                                                 )
     By: /s/ Charles R. Hageboeck          Senior Vice President.)
         ------------------------                                )
     Charles R. Hageboeck                     Director of Finance)
                                                                 )
(3)  A Majority of the                                           )
       Board of Directors:                                       )
                                                                 )
     /s/ Felix T. McWhirter                Director              )
         ------------------------                                )
     Felix T. McWhirter                                          )
                                                                 )
     /s/ Elbert L. Bradshaw                Director              )
         ------------------------                                )
     Elbert L. Bradshaw                                          )
                                                                 )
     /s/ Charles R. Farber                 Director              )
         ------------------------                                )
     Charles R. Farber                                           )March 31, 1997
                                                                 )
     /s/ Robert B. Hirschman               Director              )
         ------------------------                                )
     Robert B. Hirschman                                         )
                                                                 )
     /s/ David W. Knall                    Director              )
         ------------------------                                )
     David W. Knall                                              )
                                                                 )
     /s/ William E. McWhirter              Director              )
         ------------------------                                )
     William E. McWhirter                                        )
                                                                 )
     /s/ Mary Ellen Rodgers                Director              )
         ------------------------                                )
     Mary Ellen Rodgers                                          )
                                                                 )
     /s/ Henry C. Ryder                    Director              )
         ------------------------                                )
     Henry C. Ryder                                              )
                                                                 )
     /s/ Stephen R. West                   Director              )
         ------------------------                                )
     Stephen R. West                                             )



                                                        37

<PAGE>


                                  EXHIBIT INDEX

Exhibit No.                         Description                         Page

3.1      Registrant's Articles of Incorporation, as amended                *

3.2      Registrant's Code of By-Laws, as amended                          *

3.3      Form of Share Certificate                                         *

4.1      Articles  V, VI, and VII and  Sections 1, 2, and 4 of Article     *
         IX  of the Registrant's  Articles of Incorporation respecting
         the terms of Common Shares,  are incorporated by reference to
         the Registrant's  Articles of Incorporation  filed as Exhibit
         3.1

4.2      Articles  I and  VII  of the  Registrant's  Code  of  By-Laws     *
         respecting the terms   of Common Shares,  are incorporated by
         reference  to the  Registrant's  Code  of  By-Laws  filed  as
         Exhibit 3.2

10.1     Lease  Agreement  by and between  Park 100 Joint  Venture and     *
         Peoples   Bank & Trust  Company  dated  November 17, 1989, as
         amended

10.2     Property   Management   Agreement  between  Peoples  Building     *
         Corporation   and F.C. Tucker  Company,  Inc. dated September
         30, 1986

10.3     Consulting  Agreement between F.T. McWhirter and Peoples Bank     *
         &   Trust Company dated January 15, 1987

10.4(a)  Peoples Bank & Trust Company Executives Deferred Compensation     *
         Plan

10.4(b)  Peoples Bank & Trust Company Directors Deferred Fees Plan         *

10.5     First Amendment to Complete Restatement of the Peoples Bank &     *
         Trust Company Unfunded  Supplemental  Retirement Plan for a
         Select Group of Management Employees

10.6     Peoples  Bank & Trust  Company  Board and  Senior  Management     *
         Profit Sharing Plan

10.7     Peoples Bank Corporation of Indianapolis Stock Option Plan        **

10.8     Peoples Bank  Corporation  of  Indianapolis  Directors  Stock
         Option Plan                                                       39

21       Subsidiaries of the Registrant                                    *

23       Consent of Crowe Chizek                                           49

27       Financial Data Schedule                                           50


*        Incorporated  by reference to the  corresponding  exhibit number of the
         Registrant's  registration statement on Form S-1, effective January 18,
         1994, under the Securities Act of 1933, Reg. No. 33-71988.

**       Incorporated  by reference to the  corresponding  exhibit number of the
         Registrant's  annual  report on Form  10-K for the  fiscal  year  ended
         December 31, 1995.



                                                        38