EXHIBIT 13

MANAGEMENT'S DISCUSSION AND ANALYSIS


This section  presents an analysis of the  consolidated  financial  condition of
AMBANC Corp.  (Corporation) and its wholly-owned  subsidiaries,  AmBank Indiana,
N.A. (IND), AmBank Illinois, N.A. (ILL) and American National Realty Corp. (ANR)
at December 31, 1997 and 1996,  and the  consolidated  results of operations for
the years ended December 31, 1997,  1996 and 1995. This review should be read in
conjunction with the consolidated  financial  statements,  notes to consolidated
financial statements and other financial data presented elsewhere in this Annual
Report.

On November 1, 1995, the  Corporation  issued 701,647 shares of its common stock
in exchange for all of the  outstanding  common stock of First Robinson  Bancorp
(FRB),  the parent holding  company of The First National Bank in Robinson.  FRB
was then merged into the  Corporation.  This acquisition was accounted for under
the  pooling of  interests  method.  Accordingly,  the  Corporation's  financial
statements  and financial data have been  retroactively  restated to include the
accounts   and   operations   of  FRB  for  all   periods   presented.   Certain
reclassifications  have been made to FRB's  historical  financial  statements to
conform to the  Corporation's  presentation.  A 2-for-1  stock split was paid on
August 29, 1997. A 5% stock  dividend was paid on December 8, 1997,  December 2,
1996,  and  November  30,  1995.  All  share  and per  share  amounts  have been
retroactively  restated to reflect the stock split,  5% stock  dividends and the
shares issued for FRB.


<PAGE>


                             RESULTS OF OPERATIONS

         (Dollar amounts in thousands, except share and per share data)

Net income for 1997 was  $8,286 or $1.19 per share  compared  to $7,966 or $1.14
per share in 1996 and $7,045 or $1.01 per share in 1995. Earnings expressed as a
percentage of average assets and average equity were:

                                     Table I

                                   Percentage of              Percentage of
                                   Average Assets             Average Equity

                              1997    1996    1995        1997    1996    1995
                              ----    ----    ----        ----    ----    ----
 Net income                   1.14 %  1.13 %  1.09 %     11.14 % 11.58 % 11.30 %


The  following is an analysis of the critical  components  of net income for the
years 1997, 1996 and 1995 with discussion and analysis of the contrasts  between
these periods and the effect of previous  trends on anticipated  future earnings
performance.

Net Interest Income

Net interest income is the principal  source of the  Corporation's  earnings and
represents the difference between interest income on interest-earning assets and
the  interest   cost  of   interest-bearing   liabilities.   Income  on  certain
interest-earning  assets is exempt from federal  income tax and, as is customary
in the banking industry,  changes in net interest income are analyzed on a fully
tax-equivalent  basis.  Under  this  method,  and  throughout  this  discussion,
nontaxable  income on loans  and  securities  is  adjusted  to an  amount  which
represents the equivalent earnings if such earnings were subject to federal tax.
The marginal tax rate used to restate  nontaxable  income was 34% for 1997, 1996
and 1995.

The  yield on  average  interest-earning  assets  and the rate  paid on  average
interest-bearing  liabilities is based upon three major factors:  the yield/rate
received  or  paid,  the mix of the  individual  components  and the  volume  of
interest-earning  assets and  interest-bearing  liabilities.  While the national
prime rate is not the only indicator for yields  received on assets or the rates
paid on  liabilities  by the  Corporation,  it does  indicate a general trend of
current  rates being  received on assets and paid on  liabilities.  The national
prime rate averaged  8.83% during 1995,  decreased to an average of 8.27% during
1996 and increased to an average of 8.44% during 1997. Yields received and rates
paid by the  Corporation  are a blend of current and past year's  interest rates
due to the lag effect of the  repricing of both  long-term  assets and long-term
liabilities.

Tables II, III and IV illustrate the  components of net interest  income for the
last  three  years.  Table II shows the  average  balances,  interest  income or
expense  and   average   yields  and  rates  on   interest-earning   assets  and
interest-bearing  liabilities  by type.  It also  shows the  calculation  of net
interest margin for 1997, 1996 and 1995. Table III shows the change from year to
year  for  average   interest-earning   assets  and   average   interest-bearing
liabilities and the resulting net  interest-earning  assets.  Table IV shows the
change  in net  interest  income  from year to year and the  allocation  of that
yearly  change  between  volume and rate by type of  interest-earning  asset and
interest-bearing liability.


<PAGE>

                       RESULTS OF OPERATIONS - Continued

                                    Table II
             Consolidated Average Balance Sheets and Interest Rates
              For the Years ended December 31, 1997, 1996 and 1995
         (Dollar amounts in thousands, except share and per share data)
<TABLE>

                                              1 9 9 7                       1 9 9 6                        1 9 9 5
                                             ---------                     ---------                      ---------
                                               Interest                      Interest                      Interest
                                     Average   Income/            Average    Income/            Average    Income/
                                     Balance   Expense  Average   Balance    Expense  Average   Balance    Expense  Average
                                    (Note A)  (Note B)   Rate    (Note A)   (Note B)   Rate    (Note A)   (Note B)   Rate
                                    --------  --------   ----    --------    ------    -----    -------   --------   -----
<S>                                 <C>       <C>       <C>      <C>         <C>       <C>      <C>       <C>        <C>
ASSETS
Interest-earning assets
 Securities
  U.S. Government                    $ 90,359  $  5,536    6.13%  $111,473   $  6,756    6.06%  $107,553   $  6,166    5.73%
  State and municipal
    obligations                        54,324     4,414    8.13     52,493      4,325    8.24     50,112      4,298    8.58
  Other                                16,479     1,008    6.12     15,889        979    6.16     22,113      1,396    6.31

   Total securities                   161,162    10,958    6.80    179,855     12,060    6.71    179,778     11,860    6.60

 Interest-bearing deposits
  in other banks                          413        25    6.05        628         38    6.05        914         54    5.91
 Loans held for sale                    2,021       163    8.07      5,441        389    7.15      4,307        326    7.57
 Total loans, less unearned
   (Notes A and C)                    516,513    46,342    8.97    467,509     42,421    9.07    416,489     38,073    9.14
 Federal funds sold                     7,744       427    5.51     13,076        710    5.43     11,842        685    5.78

   Total interest-earning assets and
    interest income                  $687,853  $ 57,915    8.42%   666,509   $ 55,618    8.34%   613,330   $ 50,998    8.32%

Noninterest-earning assets
 Cash and due from banks               19,967                       18,325                        18,372
 Premises and equipment, net           12,427                       10,249                         8,877
 Other assets                          13,345                       11,954                        10,906
 Allowance for loan losses             (5,448)                      (5,237)                       (4,636)
 Unrealized loss on securities
   available for sale                     137                         (214)                       (2,393)

   Total assets                      $728,281                     $701,586                      $644,456


LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities
 Savings and demand deposits         $216,034  $  6,520    3.02%  $218,090   $  6,709    3.08%  $212,092   $  6,662    3.14%
 Time deposits                        368,061    21,487    5.84    344,388     20,052    5.82    299,794     16,931    5.65

   Total savings and
     time deposits                    584,095    28,007    4.80    562,478     26,761    4.76    511,886     23,593    4.61
 Short-term borrowings                  5,433       305    5.61      7,383        385    5.22      8,129        437    5.38
 Long-term debt                         2,064       129    6.25      2,373        142    5.98      2,804        161    5.74

   Total interest-bearing liabilities
     and interest expense             591,592  $ 28,441    4.81%   572,234   $ 27,288    4.77%   522,819   $ 24,191    4.63%

Noninterest-bearing liabilities
 Demand deposits                       56,062                       54,730                        55,527
 Other                                  6,230                        5,850                         3,766
Shareholders' equity                   74,397                       68,772                        62,344

   Total liabilities and
     shareholders' equity            $728,281                     $701,586                      $644,456

Interest margin recap
 Interest income/interest-
   earning assets                              $ 57,915    8.42%             $ 55,618    8.34%             $ 50,998    8.32%
 Interest expense/interest-
   earning assets                                28,441    4.13                27,288    4.09                24,191    3.95

   Net interest income/interest-
     earning assets                            $ 29,474    4.29%             $ 28,330    4.25%             $ 26,807    4.37%

</TABLE>

<PAGE>

Note A -  Included in total loans are nonaccrual  loans averaging  $710,  $2,495
          and $1,127 for the years 1997, 1996 and 1995.

Note B -  Interest  income  includes the effects of  tax-equivalent  adjustments
          using a marginal  federal tax rate of 34% for 1997, 1996 and 1995. The
          total adjustment to convert tax-exempt loans and securities to a fully
          tax-equivalent basis was $1,661,  $1,611 and $1,606 for 1997, 1996 and
          1995.

Note C -  Net loan fees and costs included in interest  income on loans amounted
          to $932, $971 and $866, for the years 1997, 1996 and 1995.



<PAGE>


                        RESULTS OF OPERATIONS - Continued
         (Dollar amounts in thousands, except share and per share data)


                                    Table III
                     Changes in Net Interest-Earning Assets
                     ---------------------------------------
<TABLE>

                                           1997 change                    1996 change
                                            from 1996                      from 1995
                                            ---------                      ---------
                                1997     Dollar  Percentage   1996     Dollar    Percentage  1995
                                ----     ------  ----------   ----     ------    ----------  ----
<S>                             <C>      <C>      <C>        <C>       <C>        <C>       <C>
Average interest-
  earning assets               $687,853  $21,344   3.20%    $666,509    $53,179    8.67%    $613,330
Average interest-bearing
  liabilities                   591,592   19,358   3.38      572,234     49,415    9.45      522,819

     Net interest-
     earning assets            $ 96,261  $ 1,986   2.11%    $ 94,275    $ 3,764    4.16%    $ 90,511

</TABLE>


                                    Table IV
                         Changes in Net Interest Income

<TABLE>

                                 1997 compared to 1996     1996 compared to 1995
                                  increase/(decrease)       increase/(decrease)
                                   due to change in          due to change in
                                   -----------------         -----------------
                               Volume    Rate     Total     Volume   Rate     Total
                               ------    ----     -----     ------   ----     -----
<S>                            <C>     <C>      <C>       <C>      <C>      <C>
Interest income
  Loans                        $4,397   $ (476) $ 3,921   $ 4,629  $ (281)  $ 4,348
  Loans held for sale            (276)      50     (226)       81     (18)       63
  Interest-bearing deposits
    with other banks              (13)       0      (13)      (17)      1       (16)
  Securities
    U.S. Government            (1,294)      74   (1,220)      237     353       590
    State and municipal
      obligations                 149      (60)      89       196    (169)       27
    Other                          36       (7)      29      (383)    (34)     (417)

      Total securities         (1,109)       7   (1,102)       50     150       200

  Federal funds sold             (294)      11     (283)       67     (42)       25

      Total interest income     2,705     (408)   2,297     4,810    (190)    4,620

Interest expense
  Savings and demand deposits     (62)    (127)    (189)      185    (138)       47
  Time deposits                 1,382       53    1,435     2,597     524     3,121
  Short-term borrowings          (110)      30      (80)      (39)    (13)      (52)
  Long-term debt                  (19)       6      (13)      (26)      7       (19)

    Total interest expense       1,191     (38)    1,153     2,717    380     3,097

          Net interest income   $1,514  $ (370) $ 1,144   $ 2,093  $ (570)  $ 1,523
</TABLE>



<PAGE>


                        RESULTS OF OPERATIONS - Continued
         (Dollar amounts in thousands, except share and per share data)

Net  interest  income in 1997  increased  $1,144  or 4.04%  from  1996,  and the
percentage  of  net  interest   margin,   or  net  interest  income  to  average
interest-earning  assets,  increased  to 4.29% in 1997 from 4.25% in 1996.  This
increase in net interest income was due to an increase of $1,986 or 2.11% in net
interest-earning assets during 1997 from 1996 and the increase in rates for both
interest-earning assets and interest-bearing  liabilities. The allocation of the
yearly  difference  shows  that  $1,514 of the 1997  increase  was due to volume
changes  while rate changes  reduced the net interest  income by $370.  Rates on
both interest-earning assets and interest-bearing liabilities increased in 1997,
but the rate allocation shows the .08% increase in the rates on interest-bearing
assets exceeded the .04% increase in rates on interest-earning liabilities.

Net  interest  income in 1996  increased  $1,523  or 5.68%  from  1995,  and the
percentage  of  net  interest   margin,   or  net  interest  income  to  average
interest-earning  assets,  decreased  to 4.25% in 1996 from 4.37% in 1995.  This
increase in net interest income was due to an increase of $3,764 or 4.16% in net
interest-earning assets during 1996 from 1995 and the increase in rates for both
interest-earning assets and interest-bearing  liabilities. The allocation of the
yearly  difference  shows  that  $2,093 of the 1996  increase  was due to volume
changes  while rate changes  reduced the net interest  income by $570.  Rates on
both interest-earning assets and interest-bearing liabilities increased in 1996,
but the rate allocation shows the .14% increase in the rates on interest-bearing
liabilities exceeded the .02% increase in rates on interest-earning assets.

Provision and Allowance for Loan Losses

The provision for loan losses expense on the income statement provides a reserve
called the  allowance  for loan losses (a contra asset on the balance  sheet) to
which loan losses are charged as those losses become evident. Management of each
bank  determines  the  appropriate  level of the  allowance for loan losses on a
quarterly  basis  utilizing  a report  containing  loans with a more than normal
degree of risk. This report is the by-product of an ongoing loan review process,
the  purpose  of which is to  determine  the level of  credit  risk  within  the
portfolio  and to ensure  proper  adherence to  underwriting  and  documentation
standards. Utilizing this report, a specific portion of the reserve is allocated
to those loans which are considered to represent  significant  exposure to risk.
In  addition,   estimates   are  made  for  potential   losses  on   commercial,
agricultural,  real  estate,  installment,  credit  cards  and  other  loans not
specifically  reviewed,  based on  historical  loan  loss  experience  and other
factors and trends.  Table V shows the  provision  and allowance for loan losses
for the last five years.  Table VI includes  the  specific  allocation  for loan
losses at year-end for the last five years.



<PAGE>


                        RESULTS OF OPERATIONS - Continued
         (Dollar amounts in thousands, except share and per share data)

                                     Table V
                      Analysis of Allowance for Loan Losses

<TABLE>

                            1997        1996        1995         1994        1993
                           ------      ------      ------       ------      ------
<S>                     <C>          <C>         <C>          <C>         <C>  
Balance at beginning
 of year                 $  5,630    $  5,022    $  4,531     $  4,238    $  4,168

Loans charged off
  Commercial                1,006         329         349          352       1,327
  Agricultur                                                        (a)        (a)
  Real estat                  180         106          11           32         112
  Installment                 436         586         537          365         266
  Credit cards                109         219         108           (a)        (a)
  Other                        36          26          14           59          49
                             -----       -----      -----          ---       -----
      Total charge-offs      1,767       1,266      1,019          808       1,754
                             -----       -----      -----          ---       -----
Charge-offs recovered
  Commercial                    54         196         115         548         177
  Agricultural                  14          70          78          (a)        (a)
  Real estate                   62          29           6          71          43
  Installment                  157         195         117         136         105
  Credit cards                  22          11           7          (a)        (a)
  Other                         11           7           5           8           7
                               ---         ---         ---         ---         ---
      Total recoveries         320         508         328         763         332
                               ---         ---         ---         ---         ---
      Net loans
      charged off            1,447         758         691          45       1,422
Current year provision       1,245       1,366       1,182         338       1,492
                             -----       -----       -----         ---       -----
        Balance at
        end of year       $  5,428    $  5,630    $  5,022    $  4,531    $  4,238 
                             =====       =====       =====       =====       =====

Loans at year end         $540,433    $494,467    $442,657    $388,657    $342,950

Ratio of allowance
  to loans at year end        1.00 %      1.14 %      1.13 %      1.17 %      1.24 %

Average loans             $516,513    $467,509    $416,489    $368,198    $325,544

Ratio of net loans
  charged off to
  average loans                .28 %       .16 %       .17 %       .01 %       .44 %

</TABLE>

(a) Unavailable but included in another classification.

<PAGE>

                                    Table VI
                     Allocation of Allowance for Loan Losses

<TABLE>

                             1997        1996        1995        1994        1993
                            ------      ------      ------      ------      ------
<S>                        <C>         <C>         <C>         <C>         <C>     
Commercial                 $   663     $  1,305    $  1,231    $    936    $    954
Agricultural                   105           94         424         213         329
Real estate                    285          223         212         204         223
Installment                    488          350         451         674         457
Credit cards                   131          109          18          25          17
Unallocated                  3,756        3,549       2,686       2,479       2,258
                             -----        -----       -----       -----       ------
   Total                   $ 5,428     $  5,630    $  5,022    $  4,531    $  4,238
                             =====        =====       =====       =====       =====

</TABLE>


<PAGE>


                        RESULTS OF OPERATIONS - Continued
         (Dollar amounts in thousands, except share and per share data)


Nonperforming Assets

Nonperforming  assets are  defined as  nonaccrual  loans for which the  ultimate
collectibility  of  interest  is  uncertain,  but for  which  the  principal  is
considered  collectible;  restructured loans which have had an alteration to the
original  interest  rate,  repayment  terms or  principal  balance  because of a
deterioration  in the financial  condition of the  borrower;  and loans past due
over 90 days,  but still  accruing  interest  because the interest is ultimately
considered collectible. Impaired loans covered in FAS 114 and 118 are defined by
the Corporation to be nonaccrual loans.  Nonperforming assets also include other
real estate owned which has been acquired through foreclosure or acceptance of a
deed in lieu of foreclosure.  Other real estate owned is carried at the lower of
cost or fair value less estimated  selling costs, and is actively being marketed
for sale. Table VII sets forth the components of nonperforming  assets and their
percentage  to loans  and the  allowance  for loan  losses  as a  percentage  of
nonperforming assets at December 31, for the past five years.

                                    Table VII
                      Nonperforming Assets at December 31,

<TABLE>

                             1997        1996        1995        1994        1993
                            ------      ------      ------      ------      ------
<S>                      <C>         <C>         <C>         <C>         <C>     
Nonaccrual loans         $    649    $  1,421    $    983    $    650    $  1,078
Restructured                2,421       3,089          45         490         565
90 days or more past due    1,976       1,313       1,272       1,325         837
                            -----       -----       -----       -----       ------
   Total nonperforming
     loans               $  5,046    $  5,823    $  2,300    $  2,465    $  2,480
                            =====       =====       =====       =====       =====

Percentage of loans           .93 %      1.18 %       .52 %       .63 %       .72 %
                              ===        ====         ===         ===         ===

Allowance as a percentage
  of nonperforming loans      108 %        97 %       218 %       184 %       171 %
                              ===          ==         ===         ===         === 

Other real estate owned  $    729    $    324     $    280    $    72     $   145
                              ===         ===          ===         ==         ===

Percentage of loans           .13 %       .07 %       .06 %       .02 %       .04 %
                              ===         ===         ===         ===         ===
</TABLE>

Assets considered to be nonperforming are reviewed more frequently by management
for repayment probability and residual collateral values. All restructured loans
shown  above  have  been  performing  within  the  terms of  their  restructured
agreements. In addition to the nonperforming loans, there are other loans in the
portfolio  that have been  identified  by  management or through an ongoing loan
review  process as having  more than a normal  degree of risk.  These  loans are
reviewed  quarterly by management and totaled $17,704 or 3.28% of total loans at
December 31, 1997.

<PAGE>

The  provision  for loan losses for 1997,  1996 and 1995 was $1,245,  $1,366 and
$1,182  while net  charge-offs  were $1,447,  $758 and $691.  Trends in the loan
portfolio are indicative of a healthy local  economy.  Loan growth is strong and
asset quality is improved.  Loans at December 31, 1997, were up $45,966 or 9.30%
to  $540,433  while  nonperforming  loans  showed a decrease  in both amount and
percentage of ending loans.  Nonperforming loans at December 31, 1997, were down
$777 or 13.34% to $5,046 from $5,823 at December 31, 1996.  Nonperforming  loans
were also down to .93% of loans at December 31, 1997, from 1.18% at December 31,
1996. Based upon the  Corporation's  review,  considering  remaining  collateral
and/or financial condition of identified loans with a more than normal degree of
risk,  including  nonperforming  loans,  historical  loan loss  percentages  and
economic conditions,  it is Management's belief that the $1,245 of provision for
loan losses  during 1997 and the $5,428 of allowance for loan losses at December
31, 1997, is adequate to cover future  possible  losses.  The statements in this
paragraph related to the adequacy of the Corporation's provision for loan losses
and allowance for loan losses are forward-looking statements that may or may not
be  accurate  due to the  impossibility  of  predicting  future  events.  Severe
economic  downturns or other factors could cause  significant  increases in loan
losses that cannot be foreseen by the  Corporation,  resulting in the  allowance
being inadequate to cover future losses.


                        RESULTS OF OPERATIONS - Continued
         (Dollar amounts in thousands, except share and per share data)


Noninterest Income


                                   Table VIII
                          Changes in Noninterest Income

<TABLE>
                                       1997 change               1996 change
                                        from 1996                 from 1995
                                       -----------               -----------
                                1997   Dollar  Percentage  1996   Dollar   Percentage  1995
                                ----   ------  ----------  ----   -----    ----------  ----
<S>                           <C>     <C>       <C>      <C>     <C>        <C>      <C>   
Fiduciary income              $  758  $  104    15.90 %  $  654  $   52     8.64 %   $  602
Deposit service charges        1,754     168    10.59     1,586      66     4.34      1,520
Other operating income         1,759     333    23.35     1,426     436    44.04        990
Security gains/(losses)           78      50   178.57        28     (13)  (31.71)        41
                               -----     ---   ------     -----     ----  ------      -----

  Total noninterest income    $4,349  $  655    17.73 %  $3,694  $  541    17.16 %   $3,153
                               =====     ===    =====     =====    ====    =====     ======
</TABLE>

As  shown  in Table  VIII,  noninterest  income  was up in both  1997 and  1996.
Fiduciary  income  increased  both  years due to the trust  departments'  having
additional  assets  under  management  and  due to the  increase  in the  market
valuation of investments managed. Deposit service charges increased in both 1997
and 1996 and was due mainly to increases in fees from  nonsufficient  and return
check charges.  These fees increased in 1997 as a result of stronger  collection
efforts  in this area.  The major  reason for the  increase  in other  operating
income in 1997 was due to  increased  gains on sales of loans  held for sale and
increased insurance commissions. The 1996 increase came primarily as a result of
increases  in gains on sales of loans  held for sale.  Loans  held for sale (see
loan  discussion)  realized net gains of $558,  $409 and $191 in the years 1997,
1996 and 1995.



<PAGE>


                        RESULTS OF OPERATIONS - Continued
         (Dollar amounts in thousands, except share and per share data)


Noninterest Expense

                                    Table IX
                         Changes in Noninterest Expense

<TABLE>
                                        1997 change              1996 change
                                         from 1996                from 1995
                                         ---------                ----------
                                1997     Dollar  Percentage   1996    Dollar   Percentage  1995

<S>                          <C>        <C>      <C>        <C>      <C>      <C>        <C>
Salaries and
  employee benefits           $10,679   $1,046    10.86 %   $ 9,633  $  183     1.94 %   $ 9,450
Occupancy expenses              1,473      255    20.94       1,218     167    15.89       1,051
Equipment expenses              1,488      268    21.97       1,220     103     9.22       1,117
Data processing expenses          461      (19)   (3.96)        480      92    23.71         388
FDIC insurance                     75     (195)  (72.22)        270    (420)  (60.87)        690    
Other operating expenses        4,869     (109)  (2.19)       4,978     172     3.58       4,806
                                -----     -----  ------       -----     ---     ----       -----

 Total noninterest expense    $19,045   $1,246    7.00 %    $17,799  $  297     1.70 %   $17,502
                               ======    =====    ====       ======     ===     ====      ======
</TABLE>

The largest  component of noninterest  expense is salaries and employee benefits
which increased  $1,046 in 1997 due to increases in salary,  medical and pension
expenses.  All  three  categories  were  affected  by the  additional  personnel
required to staff the increased  branch network and growing asset base.  Medical
expenses are subject to large swings in claim activity from year to year.  Claim
activity  was  unexpectedly  heavy  during  1997,  resulting  in larger  medical
expenses. Occupancy expense increased again in 1997 after a significant increase
during 1996.  The  Corporation  opened two new branches and relocated a third in
1997  and  opened  two  new  branches  in  1996.   Equipment  expense  increased
significantly  in 1997 after a smaller  increase  in 1996 and was due in part to
new branches  and to expenses  related to the  continued  increase in the use of
technology,  as well as a consolidation  of the operations area completed in the
fourth quarter of 1997.  Data  processing  expenses  decreased  slightly in 1997
after  increasing  in 1996.  Both  subsidiary  banks are now using one  computer
system which was installed during the latter part of 1995.  Having this new data
processing system during all of 1996 caused data processing expenses to increase
that year and level off in 1997.

The  FDIC  deposit  insurance  premium  paid by the  Corporation  for  the  Bank
Insurance  Fund (BIF) was at a 0% rate with a minimum  annual  payment of $2 per
subsidiary bank starting in 1996.  Both subsidiary  banks have been assigned the
classification  of least risk by the FDIC and as such are  subject to the lowest
deposit  insurance  rates  available  from BIF. The  Corporation  had $32,374 of
deposits  as of  December  31,  1997,  purchased  from  savings and loans by its
subsidiary banks. These deposits (adjusted to a consistent percentage of current
deposits) remain insured by the Savings Association Insurance Fund (SAIF) rather
than  BIF.  The  cost of SAIF to the  Corporation  for  these  savings  and loan
deposits was .0644% and .23% for 1997 and 1996,  respectively.  At September 30,
1996, a special one-time  assessment was signed into law and charged on all SAIF
insured deposits.  This special assessment  amounted to 0.5256% of SAIF deposits
as of March 31, 1995, and totaled $191 in 1996 for the Corporation. This special
assessment was $118 after tax and had the effect of reducing  earnings per share
for 1996 by $.04. The cost of BIF and SAIF fees through 1999 are estimated to be
 .0129% and .0644%,  respectively.  Starting in the year 2000, it is  anticipated
that the insurance expense on all deposits will be approximately .0243%.

<PAGE>

Other operating  expenses  decreased  slightly in 1997 after increasing in 1996.
Several  components of other operating  expenses showed improvement in 1997. Key
expense reductions were noted in supplies,  professional fees, advertising,  ATM
charges and  outside  labor.  Offsetting  those  reductions  were  increases  in
telephone and  collection  expenses.  Tighter cost  controls,  consolidation  of
functions  and the lack of  acquisition  activity  in 1997,  for the most  part,
accounted for favorable reductions in 1997 expenses. At the same time, additions
to  the  branch  network  and  increasing  consumer  delinquency  accounted  for
increased expenses.  The largest increases in 1996 were in telephone,  supplies,
advertising,  ATM charges,  goodwill  amortization and outside labor offset by a
decrease in  professional  fees. Most of these increases can be explained by the
changing of the name of all subsidiary  banks to AmBank  effective July 1, 1996,
the opening of new  branches in 1996 and the fact that the  Corporation  did not
incur professional fees in 1996 related to an acquisition. The goodwill increase
in  1996  resulted  from a full  year of  goodwill  amortization  from  deposits
purchased in 1995.



<PAGE>


                        RESULTS OF OPERATIONS - Continued
         (Dollar amounts in thousands, except share and per share data)


Income Tax

The Corporation's effective tax rate was 30.21%, 29.18% and 27.15% in 1997, 1996
and 1995. The relatively  lower effective rate for 1995 resulted from a reversal
of an allowance  relating to the realization of alternative  minimum tax credits
of $212.  Management  determined  that these  credits  would be realized and the
allowance was reversed during 1995. The major differences  between the effective
tax rate on the financial  statements  and the federal  statutory rate of 34% is
interest  income on  tax-exempt  securities  and loans  offset by  nondeductible
interest,  nondeductible  merger  expenses and state taxes.  The Corporation had
tax-exempt income of $3,226,  $3,128 and $3,118 for 1997, 1996 and 1995. Note 14
to the consolidated  financial  statements  contains  additional  details of the
differences  between the  statutory  taxes and taxes  shown on the  consolidated
financial statements.

                               FINANCIAL CONDITION
         (Dollar amounts in thousands, except share and per share data)

Investments

The Corporation's  holdings of short-term  investments and securities serve as a
source of liquidity to meet  depositor  and borrower  funding  requirements,  in
addition to being a significant  element of total  interest  income.  Short-term
investments,  defined as federal  funds sold and  interest-bearing  deposits  in
other banks, had combined average  outstanding  balances of $8,157,  $13,704 and
$12,756 for the years 1997, 1996 and 1995. The year-end  outstanding balances of
short-term  investments were $7,738, $6,465 and $23,346 for 1997, 1996 and 1995.
The significant  changes in the amounts in short-term  investments  from year to
year is due to large  fluctuations  in  deposits  from  public and  governmental
institutions  which are  invested  in  federal  funds  sold at  year-end.  These
deposits were being kept liquid to fund commercial loan  commitments at year-end
1997 and for possible liquidity needs of institutional deposits.

Effective  December 31, 1993, the Corporation  adopted FAS 115,  "Accounting for
Certain  Investments  in Debt and Equity  Securities."  With the adoption of FAS
115, all  securities  were required to be  classified by management  into one of
three  categories,  "available  for sale,"  "held to  maturity,"  or  "trading."
Securities  classified as available for sale are securities that the Corporation
intends to hold for an  indefinite  period of time,  but not  necessarily  until
maturity.  Securities  available  for sale are carried at fair value with market
adjustments,  net of related  deferred  taxes,  being recorded in  shareholders'
equity as unrealized gain or loss on securities.  Securities  classified as held
to maturity are carried at amortized  cost,  calculated by using the level yield
method.  Securities  classified as trading are carried at fair market value. The
Corporation  does not currently  maintain any securities  that are classified as
held to  maturity  or  trading.  Since the  original  adoption  of FAS 115,  and
starting in December 1994, the equity adjustment for mark-to-market of available
for sale  securities has been deleted from  inclusion in the regulatory  capital
ratio  calculations.  The  mark-to-market  for available for sale  securities at
December 31, 1997, included market gains of $2,301 and market losses of $617 for
a net  increase  due to the  mark-to-market  of  $1,684  on  securities  with an
amortized  cost of $148,535.  The after-tax  effect of these  available for sale
securities  accounted for $1,077 of the  Corporation's  total equity at December
31,  1997.  The  effect on the total  change  in  equity of the  Corporation  at
December 31, 1997,  from December 31, 1996,  was an increase of $767 due to this
mark-to-market  of available for sale  securities.  The  difference  between the
mark-to-market  adjustment  at  December  31,  1997  and  1996,  was  due to the
difference  in the market  yields at these two  year-ends  when  compared to the
yields on the investments of the  Corporation  classified as available for sale.
Proceeds  from sales of available  for sale  securities  in 1997 were $6,405 and
resulted in net gains of $78,  while  sales of $16,893  resulted in net gains of
$28 in 1996 and sales of $4,559 resulted in net gains of $41 in 1995. Other than
U.S. Government  securities,  there are no concentrations of securities over 10%
of  shareholders  equity  to any  single  issuer.  Table X  presents  securities
outstanding at year-end for the preceding three years.



<PAGE>


                         FINANCIAL CONDITION - Continued
         (Dollar amounts in thousands, except share and per share data)

                                     Table X
                           Securities at December 31,
<TABLE>

                                                      1997        1996        1995
                                                      ----        ----        ----
<S>                                                <C>         <C>         <C>
Securities available for sale
  U.S. Government and its agencies                  $ 76,583    $101,819    $101,710
  States and political subdivisions                   54,233      55,776      51,837
  Corporate obligations                                2,140       1,823       3,590
  Collateralized mortgage obligations                 10,522       9,166      15,516
  Mutual funds                                         6,741       2,140         816
                                                     -------      -------    -------
     Total securities available for sale            $150,219    $170,724    $173,469
                                                     =======     =======     =======
</TABLE>

Loans

The loan  portfolio  constitutes  the major  earning  asset of most bank holding
companies and typically  offers the best  alternative  for obtaining the maximum
interest spread above the cost of funds.  The overall  economic  strength of any
bank  holding  company  generally  parallels  the  quality and yield of its loan
portfolio.  The  Corporation's  total  average  loans were  $516,513 in 1997, an
increase of $49,004 or 10.48% from 1996. The Corporation had total average loans
of  $467,509  in 1996,  an  increase  of $51,020  or 12.25%  from the 1995 total
average loans of $416,489.  Table XI presents loans  outstanding at year-end for
the preceding five years.

                                    Table XI

<TABLE>

                                                Loans at December 31,
                                      1997      1996      1995      1994      1993
                                     ------    ------    ------    ------    ------
<S>                                 <C>       <C>       <C>       <C>       <C>     
Commercial                          $224,468  $201,092  $172,782  $151,027  $126,738
Agricultural                          55,267    55,404    65,239    44,876    52,569
Real estate                          147,016   129,116   107,123   101,111    81,945
Installment                          110,310   105,464    94,784    90,300    80,909
Credit cards                           3,430     3,686     3,722     3,351     3,039
                                     -------   -------   -------   -------   -------
  Total loans                        540,491   494,762   443,650   390,665   345,200
Unearned income                          (58)     (295)     (993)   (2,008)   (2,250)
                                     -------   -------   -------   -------   -------

  Total loans, net                  $540,433  $494,467  $442,657  $388,657  $342,950
                                     =======   =======   =======   =======   =======

Loans held for sale                 $  2,443  $  2,350  $  6,727  $  2,664  $ 16,919
                                      ======    ======    ======    ======    ======

Composition of loan portfolio at December 31,

Commercial                             41.54 %   40.67 %   39.03 %   38.86 %   36.95 %
Agricultural                           10.23     11.20     14.74     11.55     15.33
Real estate                            27.20     26.11     24.20     26.01     23.89
Installment                            20.40     21.27     21.19     22.72     22.94
Credit cards                             .63       .75       .84       .86       .89

</TABLE>


<PAGE>


                         FINANCIAL CONDITION - Continued
         (Dollar amounts in thousands, except share and per share data)


The economy  rebounded in late 1992 and has continued  steady to strong  through
1997.  The  Corporation  has increased  efforts to take advantage of the healthy
demand in commercial loans resulting from the growing economy.  Commercial loans
increased $23,376 or 11.62% in 1997 from 1996 and increased $28,310 or 16.38% in
1996 from 1995. While commercial loans have shown the largest increases over the
last five years, real estate and installment loans have also increased  steadily
during that period. As shown in Table XI, the percentage of loans to total loans
for  commercial,  real estate,  installment  and credit cards have remained very
similar for 1996 and 1997.

Real estate loans shown in Table XI are predominantly variable-rate loans. These
loans have increased  $17,900 or 13.86% in 1997 from 1996 and increased  $21,993
or 20.53% in 1996 from 1995. During these years the Corporation has placed added
emphasis on serving the real estate mortgage needs of its customers. The balance
of real estate loans has been directly affected by the current rates on variable
and  fixed-rate  mortgages.   As  rates  increase,   customers  tend  to  prefer
variable-rate  mortgages  and  as  rates  decrease,  customers  tend  to  prefer
fixed-rate mortgages.  The Corporation also makes conforming fixed-rate mortgage
loans that can be sold into the secondary market with the Corporation  retaining
more than 95% of the servicing rights. These fixed-rate mortgage loans are shown
separately  in Table XI and on the  balance  sheet as loans  held for sale.  The
Corporation's  strategy  has been to hold  fixed-rate  loans  during  periods of
decreasing  rates and sell them during periods of increasing  rates to realize a
gain.  The  balance of loans held for sale at year-end  fluctuates  a great deal
depending  upon the  variations of rates during the year and the amount of these
loans that are sold into the secondary market. Sales of loans held for sale were
$28,298,  $30,385  and $16,231 for 1997,  1996 and 1995 with  corresponding  net
gains of $558,  $409 and  $191.  At  December  31,  1997,  the  Corporation  was
servicing  $110,484 of loans it had sold into the secondary  market.  This was a
13.19%  increase  from $97,606 of sold loans  serviced for others as of December
31, 1996. As included in Note 1 and 6 to the consolidated  financial statements,
the Corporation  adopted FAS 122 as of January 1, 1996. Total mortgage servicing
rights  capitalized  were $235 and $307  during 1997 and 1996.  The  Corporation
amortized $25 in 1997 and $16 in 1996 of these mortgage  servicing  rights for a
net  carrying  value of $501 at December 31, 1997 and $291 at December 31, 1996.
These loans serviced for others were not included in the financial statements.

Installment  loans  increased  $4,846 or 4.59% in 1997 over 1996 and  $10,680 or
11.27% in 1996  over  1995.  The  level of  consumer  lending  normally  relates
directly to consumer  confidence in the economy.  However,  the  Corporation has
seen a negative trend in  charge-offs  of installment  loans starting in 1993. A
lag effect  exists in  charge-offs  and the  Corporation  has  strengthened  its
lending  criteria  for  consumer  loans  starting in 1995.  The  composition  of
installment  loans at December 31, 1997,  was $99,183 of auto and other  secured
loans,  $6,191 of moneylines tied to second  mortgages on real estate and $4,936
of unsecured loans.

The loan portfolio contains no loans to foreign governments, foreign enterprises
or  foreign  operations  of  domestic  corporations.  Other  than loans for real
estate,  equipment and operating  lines to farmers  engaged in the  agricultural
industry,  the Corporation has no concentrations of loans in the same or similar
industries that exceed 10% of total loans.

Deposits

The deposit base  provides the major funding  source for earning  assets of most
bank holding companies.  Generally,  demand,  savings and time certificates less
than $100 are  recognized as the core base of deposits,  while  certificates  in
excess of $100 and public  funds are more  subject to interest  variations  and,
thus,  are not  included in the core  deposit  base.  Because of these  factors,
management views the growth of demand,  savings and time  certificates less than
$100 as more stable growth.  The Corporation's  total average core deposits were
$549,743 in 1997,  $541,832 in 1996 and $519,453 in 1995. Total average deposits
were  $640,157,  $617,366 and $567,413  during  1997,  1996 and 1995.  Table XII
indicates  the mix and levels of  deposits at year-end  for the  preceding  five
years.

<PAGE>


                         FINANCIAL CONDITION - Continued
         (Dollar amounts in thousands, except share and per share data)

                                    Table XII
                            Deposits at December 31,

<TABLE>

                                      1997      1996      1995      1994      1993
                                     ------    ------    ------    ------    ------
<S>                                 <C>       <C>       <C>       <C>       <C>     
Noninterest-bearing                 $ 63,641  $ 61,616  $ 63,116  $ 62,269  $ 62,145
Interest-bearing demand
  and savings                        226,517   219,730   211,971   218,896   226,030
Time, less than $100                 275,844   275,262   258,335   212,073   208,716
Time, $100 or more                    99,683    76,948    66,647    57,149    53,459
                                     -------   -------   -------   -------   -------

   Total deposits                   $665,685  $633,556  $600,069  $550,387  $550,350
                                     =======   =======   =======   =======   =======
</TABLE>


The  Corporation  opened new branches in 1997 and 1996,  thereby  increasing the
size of its branch network and expanding into two larger  metropolitan  markets.
With the exception of a Wal-Mart facility in Vincennes,  Indiana opened in 1996,
these  markets  are  essentially  new  to  AMBANC.  New  branches  coupled  with
aggressive  targeting of the jumbo CD market saw total deposits increase $32,129
or 5.07% in 1997 from 1996 and  $33,487 or 5.58% in 1996 from 1995.  The largest
growth in 1997 from 1996 was in time deposits over $100,  accounting for $22,735
of the increase,  while time deposits over $100  increased  $10,301 in 1996 from
1995. Time deposits less than $100 showed a dramatic increase in 1995 because of
aggressive  marketing and favorable rates in this area.  These accounts showed a
more modest  increase in 1996 and leveled off in 1997.  Noninterest-bearing  and
interest-bearing demand and savings deposits have remained flat due to increased
competition from both bank and nonbank competitors.

Year 2000

As with  other  companies,  many of the  Corporation's  computer  programs  were
originally  designed  to  recognize  calendar  years by their  last two  digits.
Calculations  performed using these truncated fields will not work properly with
dates  from the year  2000 and  beyond.  The  Corporation  has  formed a project
committee that is reviewing the status of the conversion. A comprehensive review
to  identify  the  systems  affected  by this issue has been  undertaken  and an
implementation   plan  was  compiled  and  is  currently  being  executed.   The
Corporation  expects to either modify or upgrade  existing systems or to replace
some  systems  altogether,  depending  upon  results  of  testing.  Considerable
progress  has been  made by AMBANC  personnel  and it is  anticipated  that this
project will be largely  completed by internal staff.  Most of the Corporation's
systems are  vendor-supplied,  and the Corporation is working with these vendors
to attain year 2000 compliance.  The Corporation  presently  believes that, with
modifications  to  existing  systems,  conversion  to new  systems,  and  vendor
delivery of  millennium-compliant  systems, the year 2000 compliance issues will
be resolved on a timely basis.  Whether or not costs  associated  with year 2000
compliance  will be  significant is unknown at this time.  However,  any related
costs  should not have a  material  impact on the  operations,  cash  flows,  or
financial  condition  of  future  periods.  The  statements  in  this  paragraph
regarding  the  resolution  of the year 2000  problems  contain  forward-looking
statements  that  may  or may  not be  accurate  due  to  the  impossibility  of
predicting  future  events.  The  project  committee  could  uncover  additional
problems,  and other  factors  might occur,  that could cause  related  costs to
increase.


<PAGE>


                         LIQUIDITY AND CAPITAL RESOURCES
         (Dollar amounts in thousands, except share and per share data)

Liquidity and Rate Sensitivity

Cash  flows for the  Corporation  occur  within  the  operating,  investing  and
financing  categories  as  follows:  Cash flows from  operating  activities  are
derived primarily from interest income and fees, reduced by interest expense and
overhead expense.  Investing  activities  generate or use cash flows through the
origination,  purchase and principal collection of loans; the purchase, maturity
and sale of  investments;  and the acquisition of property and equipment for the
Corporation.  Cash flows from  financing  activities  occur  from  deposits  and
withdrawals of deposit accounts, increases or decreases in short-term borrowings
and long-term debt, and dividends paid by the Corporation.

The  Corporation's  use and source of funds can be  determined by the changes in
average balances of assets and liabilities.  Table XIII summarizes  funding uses
and sources for 1997 and 1996, showing average balances, amount of dollar change
from prior year and the percentage change from the prior year.

                                   Table XIII
<TABLE>

                                                          1997                                   1996
                                                         ------                                 ------
                                           Average     Increase/(decrease)       Average      Increase/(decrease)
                                           Balance      Dollar   Percentage      Balance       Dollar   Percentage
                                          ---------    -------   ---------       -------       ------   ----------
<S>                                      <C>          <C>          <C>         <C>           <C>          <C>
Funding uses
  Loans held for sale                    $    2,021   $   (3,420)    (62.86)%  $     5,441   $    1,134      26.33 %
  Taxable loans, net of unearned income     510,860       48,469      10.48        462,391       51,545      12.55
  Tax-exempt loans                            5,653          535      10.45          5,118         (525)     (9.30)
  Taxable securities                        106,864      (20,657)    (16.20)       127,521       (1,325)     (1.03)
  Tax-exempt securities                      54,435        2,315       4.44         52,120        3,581       7.38
  Interest-bearing deposits in other banks      413         (215)    (34.24)           628         (286)    (31.29)
  Federal funds sold                          7,744       (5,332)    (40.78)        13,076        1,234      10.42
                                             ------       -------    -------       -------       -------     ------

    Total uses                           $  687,990   $   21,695       3.26 %  $   666,295   $   55,358       9.06 %
                                            =======       ======       ====        =======       ======       =====

Funding sources
  Noninterest-bearing deposits           $   56,062   $    1,332       2.43 %  $    54,730   $     (797)     (1.44)%
  Interest-bearing demand and
    savings deposits                        216,034       (2,056)     (0.94)       218,090        5,998       2.83
  Time deposits                             368,061       23,673       6.87        344,388       44,594      14.88
  Short-term borrowings                       5,433       (1,950)    (26.41)         7,383         (746)     (9.18)
  Long-term debt                              2,064         (309)    (13.02)         2,373         (431)    (15.37)
  Other                                      40,336        1,005       2.56         39,331        6,740      20.68
                                            -------       ------      ------       -------       ------      ------

    Total sources                        $  687,990   $   21,695       3.26 %  $   666,295   $   55,358       9.06 %
                                            =======       ======      =====        =======       ======       ====
</TABLE>

Total  average  loans  increased  $49,004  or  10.48% to  $516,513  in 1997 from
$467,509  in 1996.  The average  increase in loans in 1997 was funded  mainly by
$23,673  of  increased  average  time  deposits  and  continued  growth  of  the
Corporation's  capital. The increase in the average balances of deposits was due
to  opening  new  branches  and  offering  more  competitive  rates for  deposit
products.



<PAGE>


                   LIQUIDITY AND CAPITAL RESOURCES - Continued
         (Dollar amounts in thousands, except share and per share data)

The Corporation anticipates healthy loan demand again in 1998. It is anticipated
that this demand will be funded through deposit growth,  particularly in the new
branches  opened  in 1997  and 1998 or  through  the  conversion  of  assets  as
discussed in the next  paragraph.  The  statements in this  paragraph  regarding
increased loan demand and deposit growth contain forward-looking statements that
may or may not be accurate due to the impossibility of predicting future events.
Any number of factors,  including a downturn  in the  economy,  could cause loan
demand and/or deposit growth to decrease. In the alternative, loan demand and/or
deposit growth could increase.  Management  believes its projections in planning
for the future are reasonable,  but any statements about future  occurrences are
inherently uncertain.

Outstanding  loan  commitments  and  customers'  unused lines of credit  totaled
$90,475 at  December  31,  1997,  which was a decrease of $10,071 or 10.02% from
$100,546 at December 31, 1996. Standby letters of credit outstanding at December
31,  1997,  increased  $612 or 6.56% to $9,940 from $9,328 at December 31, 1996.
Letters of credit typically are not funded. To the extent, however, that letters
of credit,  loan  commitments  and  customers'  unused  lines of credit  require
funding,  these  obligations will be met by the normal  conversion of short-term
investments,  which  totaled  $7,738 at  December  31,  1997,  investments  with
maturities of one year or less,  which totaled $47,665 at December 31, 1997, the
sale of loans held for sale plus the  increase in deposits  discussed.  IND is a
member of the Federal Home Loan Bank of Indianapolis and through this membership
has the capacity to borrow funds.  IND has approved  borrowings up to $50,000 as
of February 1997, but had used only a small portion of this available funding as
of December 31, 1997. See Note 10 of the consolidated  financial  statements for
details.  This  additional  funding  from the  Federal  Home Loan Bank  could be
activated  easily  and  might be used in 1998 as a source  of  funding.  Further
liquidity,  if required,  would be provided by conversion of securities or other
assets into cash or accessing sources of incremental funding, such as repurchase
agreements or federal funds.

Interest  rate risk is the potential of economic  losses due to future  interest
rate  changes.  These  economic  losses can be reflected as a loss of future net
interest income and/or a loss of current fair market values. Management realizes
certain  risks are inherent and that the goal is to identify and minimize  these
risks.  The  Corporation  seeks to control its interest  rate risk exposure in a
manner that will allow for adequate  levels of earnings and capital over a range
of possible interest rate environments. The table below represents the scheduled
maturity of market  risk-sensitive  instruments at December 31, 1997, as well as
their fair values.  The  weighted-average  interest rates for the various assets
and liabilities presented are stated as of December 31, 1997.



<PAGE>

                                    Table XIV
                        Market Risk-Sensitive Instruments

                             Expected Maturity Date

<TABLE>
                                                                                                                          Fair
                                               1998       1999       2000       2001       2002      Beyond     Total     Value
                                               ----       ----       ----       ----       ----      ------     -----     -----
<S>                                       <C>         <C>        <C>        <C>         <C>        <C>        <C>
INTEREST-SENSITIVE ASSETS:
Interest-bearing deposits in other banks
 Fixed-rate                                $    99    $    99    $   100     $    -      $   -      $    -    $   298   $   298
 Weighted-average interest rate               6.35%      5.75%      6.00%         -          -           -       6.03%

Securities available for sale
 Variable-rate                              10,250        332      8,504          -          89      17,325    36,500    36,105
 Weighted-average interest rate               4.72%      9.26%      5.01%         -        6.76%       6.61%     5.45%
 Fixed-rate                                 12,863      8,687      7,932      8,046       5,362      69,145   112,035   114,114
 Weighted-average interest rate               7.35%      6.86%      7.75%      7.93%       8.06%       7.35%     7.28%

Loans held for sale                          1,028         22         24         26          21       1,322     2,443     2,474
 Weighted-average interest rate               7.61%      7.66%      7.66%      7.66%       7.66%       7.74%     7.68%

Loans, net of unearned income
 Variable-rate                             147,061     39,142     31,498     17,771      17,971      94,003   347,446   347,739
 Weighted-average interest rate              10.07%     11.19%      8.75%      9.66%     10.38%        8.79%     9.73%
 Fixed-rate                                112,547     32,362     19,729     13,634      4,462       10,253   192,987   193,759
 Weighted-average interest rate               9.80%      9.89%      9.01%      9.99%     11.04%       11.27%     9.86%

INTEREST-SENSITIVE LIABILITIES:
Interest-bearing deposits                  486,454     93,698     10,663      4,144      4,733        2,352   602,044   602,226
 Weighted-average interest rate               4.37%      6.00%      5.97%      6.01%      6.07%        6.01%     5.15%

Short-term borrowings                        6,747          -          -          -         -             -     6,747     6,747
 Weighted-average interest rate               5.61%         -          -          -         -             -      5.61%

Long-term debt                                 659        223        188        167        148          646     2,031     2,031
 Weighted-average interest rate               7.01%      6.04%      5.91%      5.91%      5.91%        5.91%     6.28%
</TABLE>


<PAGE>


                   LIQUIDITY AND CAPITAL RESOURCES - Continued
         (Dollar amounts in thousands, except share and per share data)

Interest rate sensitivity  occurs when assets or liabilities are subject to rate
and  yield  changes  within a  designated  time  period.  The  rate  sensitivity
position,   or  gap,  is  determined   by  the   difference  in  the  amount  of
rate-sensitive  assets  and  rate-sensitive   liabilities  at  various  maturity
intervals.  The  management  of this gap position is required to protect the net
interest rates and to assure a greater degree of earnings stability. Provided in
Tables XV  through  XVIII  are  repricing  matrices  for  securities,  loans and
deposits at December 31, 1997.


                                    Table XV
               Maturities and Average Yields at December 31, 1997

<TABLE>

                                   1 Year and Less     1 - 5 Years       5 - 10 Years     Over 10 Years        Total
                                   ---------------     -----------       ------------     -------------        -----
                                    Dollar   Yield    Dollar   Yield    Dollar   Yield    Dollar   Yield    Dollar   Yield
                                    ------   -----    ------   -----    ------   -----    ------   -----    ------   -----
<S>                               <C>        <C>    <C>         <C>    <C>        <C>    <C>        <C>    <C>        <C>   
U.S. Government and its agencies  $ 40,530   5.86 % $ 28,194    6.35 % $  3,697   6.76 % $  4,038   7.46 % $ 76,459   6.17 %
State and political subdivisions     5,202   9.04     28,815    8.14     17,603   7.74        947   8.17     52,567   8.09
Corporate obligations                   -      -         244   10.83          -     -       1,896   7.32      2,140   7.72
Collateralized mortgage obligations  1,933   5.77      4,186    6.59      3,031   6.78      1,326   6.21     10,476   6.44
Mutual funds                            -      -       5,504    4.90          -     -       1,389   6.18      6,893   5.15
                                     -----   ----      -----    ----      -----   ----      -----   ----     ------   ----

   Total                          $ 47,665   6.20 % $ 66,943   7.03 %  $ 24,331   7.47 % $  9,596   7.15 % $148,535   6.84 %
                                    ======   ====     ======   ====      ======   ====     ======   ====    =======   ====

</TABLE>

                                    Table XVI
                        Maturity Ranges of Time Deposits
                  with Balances of $100 or More at December 31,

                                                  1997        1996        1995
                                                 ------      ------      ------
Three months or less                           $ 47,316   $ 33,781    $ 29,372
Over three through six months                    15,580     17,572      11,460
Over six through twelve months                   24,864     11,991       9,315
Over twelve months                               11,923     13,604      16,500

Total                                          $ 99,683   $ 76,948    $ 66,647


                                   Table XVII
                      Loan Maturities at December 31, 1997

                                  1 Year      1 - 5       Over 5
                                 and Less     Years       Years       Total
                                 --------     -----       -----       -----
       Commercial               $156,982   $ 57,015    $ 10,471    $224,468
      Agricultural                41,301     12,312       1,654      55,267


        Interest Rate Sensitivity of Above Loans Maturing After One Year

                                            Commercial  Agricultural
                                            ---------   ------------
                   Fixed-rate               $ 22,520       $ 4,271
                   Variable-rate              44,966         9,695
                                              ------         -----
                   Total selected loans     $ 67,486      $ 13,966
                                              ======        ======

There were no material real estate  construction  loans  outstanding at December
31, 1997.


<PAGE>


                   LIQUIDITY AND CAPITAL RESOURCES - Continued
         (Dollar amounts in thousands, except share and per share data)

                                   Table XVIII
         Liquidity and Interest Rate Sensitivity at December 31, 1997
<TABLE>

                                                 0 - 90       91 - 365        1 - 5
                                                  Days          Days          Years
                                                  ----          ----          -----
<S>                                            <C>           <C>           <C>    
Interest-earning assets 
   Loans                                        $ 176,742     $ 153,153     $ 188,973
   Securities                                      24,179        16,158        30,263
   Other                                           14,334            99           199
                                                  -------       -------       -------
      Total                                     $ 215,255     $ 169,410     $ 219,435
                                                  =======       =======       =======

Interest-bearing liabilities
   Savings and demand deposits                  $ 226,175     $     341     $      -
   Time, less than $100                           103,079       107,619        65,954
   Time, $100 or more                              48,110        40,614        11,096
   Other                                            3,838           331           727
                                                  -------       -------        ------
      Total                                     $ 381,202     $ 148,905     $  77,777
                                                  =======       =======        ======

Rate-sensitive gap                              $(165,947)    $  20,505     $ 141,658
Rate-sensitive cumulative gap                    (165,947)     (145,442)       (3,784)
Percent to total assets                           (21.85)%      (19.15)%       (0.50)

</TABLE>

Rate-sensitive  gap as shown in Table XVIII is defined as the difference between
the repricing of  interest-earning  assets and the repricing of interest-bearing
liabilities  within  certain  defined  time frames.  Rate-sensitive  gap is also
expressed as a percentage  of total  assets based upon the  accumulation  of the
defined time frame gap  calculation.  Rate-sensitive  gaps constantly  change as
funds are acquired and invested,  and the Corporation's  analysis as of December
31,  1997,  is shown  above.  As of December 31,  1997,  the  Corporation  had a
negative  gap of  $145,442  and 19.15%  during the next one year  period  with a
negative gap of $165,947 and 21.85%  relating to the first quarter of 1998.  The
effect of these  negative  gaps may result in a negative  impact on  earnings in
1998 if  interest  rates  increase,  but could  result in a  positive  impact on
earnings if interest rates decline in 1998. The above rate-sensitivity  analysis
is significantly impacted by the inclusion of savings and demand deposits in the
first  quarter  of the  gap  analysis.  These  deposits  have  historically  not
exhibited the same degree of sensitivity  to rate changes as other  liabilities.
If  the  above  analysis  were  changed  to  reflect  the  Corporation's  actual
historical  results, a portion of the savings and demand deposits would be moved
to the one to five year time frame. With this change, the Corporation would have
a  positive  gap of  $23,385  or 3.08%  during  the next  one-year  period and a
positive gap of $2,880 or 0.38% relating to the first quarter of 1998.

Shareholders' Equity
Total  shareholders'  equity at December 31, 1997,  increased $6,172 or 8.55% to
$78,355 from $72,183 at December 31, 1996. The change in the  mark-to-market  on
the unrealized gain on securities  available for sale between  December 31, 1996
and 1997, resulted in shareholders equity increasing $767.  Shareholders' equity
contains a new caption, Treasury stock, at December 31, 1996. These 724 treasury
shares were  purchased on the market for future  payments of director fees under
the Director  Stock Grant Plan as approved by the  shareholders  in 1996.  These
treasury  shares are  purchased  routinely  and reissued to the  directors  each
quarter. See Note 17 to the consolidated  financial statements for a description
of the capital requirements for the Corporation and its subsidiary banks. By all
measurements,   the  Corporation  and  its  subsidiary   banks  were  considered
well-capitalized.  At December 31, 1997,  the  Corporation  had a Total  Capital
ratio of 14.33%,  a Tier 1 Capital ratio of 13.37% and a Tier 1 Leverage Capital
ratio of 10.40%.


<PAGE>


                             INTERIM FINANCIAL DATA

Table XIX sets forth the condensed quarterly results of operations and per share
information for the years ended December 31, 1997 and 1996.

                                    Table XIX
<TABLE>

                                                         Quarter Ended
                                                         -------------
                                         December    September       June       March
                                            31          30            30          31
                                         --------     -------        ----       -----
<S>                                     <C>         <C>         <C>         <C>       
1997
Interest income                         $   14,449  $   14,266  $   13,859  $   13,680
Interest expense                             7,251       7,215       7,084       6,891
                                             -----       -----       -----       -----
  Net interest income                        7,198       7,051       6,775       6,789
Provision for loan losses                      300         315         315         315
Noninterest income                           1,104       1,071       1,179         995
Noninterest expense                          4,927       4,936       4,723       4,459
                                             -----       -----       -----       -----
  Income before income taxes                 3,075       2,871       2,916       3,010
Income taxes                                   923         864         904         895
                                             -----       -----       -----       -----
  Net income                            $    2,152  $    2,007  $    2,012  $    2,115
                                            ======       =====       =====       =====

Earnings per average
 common share outstanding               $      .31  $      .29  $      .29  $      .30
Diluted earnings per average
 common share outstanding                      .31         .29         .29         .30
Stock price (Note A)                         25.00       24.53       17.67       17.14

Weighted-average outstanding shares      6,986,084   6,965,328   6,963,723   6,963,499


1996
Interest income                         $   14,048  $   13,488  $   13,133  $   13,338
Interest expense                             7,034       6,800       6,733       6,721
                                             -----       -----       -----       -----
  Net interest income                        7,014       6,688       6,400       6,617
Provision for loan losses                      700         100         299         267
Noninterest income                           1,059         736       1,171         728
Noninterest expense                          4,411       4,682       4,409       4,297
                                             -----       -----       -----       -----
  Income before income taxes                 2,962       2,642       2,863       2,781
Income taxes                                   888         770         824         800
                                             -----       -----       ------      -----
  Net income                            $    2,074  $    1,872  $    2,039  $    1,981
                                             =====       =====       =====       =====

Earnings per average
 common share outstanding               $      .30  $      .27  $      .29  $      .28
Diluted earnings per average
 common share outstanding                      .30         .27         .29         .28
Stock price (Note A)                         13.58       14.63       13.03       13.83

Weighted-average outstanding shares      6,964,494   6,962,456   6,965,436   6,965,509

</TABLE>

Note A - The stock  price  above  represents  the sales price of the last actual
     trade in each  respective  quarter as reported  in the Wall Street  Journal
     restated for a 2-for-1  stock split paid on August 29,  1997,  and 5% stock
     dividends paid on December 8, 1997 and December 2, 1996.



<PAGE>


                                    INFLATION
         (Dollar amounts in thousands, except share and per share data)

For a  financial  institution,  effects  of price  changes  and  inflation  vary
considerably from an industrial organization. Changes in the prices of goods and
services are the primary determinant of an industrial company's profit,  whereas
changes in  interest  rates  have a major  impact on a  financial  institution's
profitability. Inflation affects the growth of total assets, but it is difficult
to assess its impact because neither the timing nor the magnitude of the changes
in the consumer price index directly coincide with changes in interest rates.

During periods of high inflation there are normally  corresponding  increases in
the money supply.  During such times  financial  institutions  often  experience
above-average growth in loans and deposits. Also, general increases in the price
of goods and services will result in increased operating expenses. Over the past
few years,  the rate of inflation has been relatively low, and its impact on the
growth in the balance sheets and increased levels of income and expense has been
nominal.

                           FORWARD-LOOKING STATEMENTS

This  Annual  Report  and  future  filings  made  by the  Corporation  with  the
Securities and Exchange Commission,  as well as other filings, reports and press
releases made or issued by the  Corporation and its subsidiary  banks,  and oral
statements  made by executive  officers of the Corporation and banks may include
forward-looking   statements   relating  to  such  matters  as  (a)  assumptions
concerning  future  economic  and  business  conditions  and their effect on the
economy in general and on the markets in which the  Corporation and the banks do
business,  and (b)  expectations  for  increased  revenues  and earnings for the
Corporation and banks through growth resulting from acquisitions,  attraction of
new  deposit  and  loan  customers  and the  introduction  to new  products  and
services.  Such forward-looking  statements are based on assumptions rather than
historical or current facts and, therefore, are inherently uncertain and subject
to risk.

To comply with the terms of a "safe harbor"  provided by the Private  Securities
Litigation  Reform Act of 1995 that protects the making of such  forward-looking
statements from liability  under certain  circumstances,  the Corporation  notes
that a variety of factors could cause the actual results or experience to differ
materially  from the  anticipated  results or other  expectations  described  or
implied by such forward-looking statements. The risks and uncertainties that may
affect the operations, performance, development and results of the Corporation's
and banks'  business  include the following:  (a) the risk of adverse changes in
business  conditions  in the  banking  industry  generally  and in the  specific
markets  in  which  the  banks  operate;  (b)  changes  in the  legislative  and
regulatory  environment that negatively impact the Corporation and banks through
increased operating expenses; (c) increased competition from other financial and
non-financial  institutions;  (d) the impact of technological  advances; and (e)
other risks  detailed  from time to time in the  Corporation's  filings with the
Securities and Exchange  Commission.  The Corporation and banks do not undertake
any obligation to update or revise any forward-looking  statements subsequent to
the date on which they are made.

                  MARKET PRICE OF AMBANC CORP. COMMON STOCK AND
                           RELATED SHAREHOLDER MATTERS

The Corporation's  common stock is traded on The Nasdaq National Market (NASDAQ)
under the symbol AMBK. The quarterly  range of the low and high trade prices per
share of the  Corporation's  common  stock,  as reported by NASDAQ,  is shown in
Table XX.  This  information  represents  prices  between  dealers  and does not
include  adjustments  for  mark-ups,  mark-downs  or  commissions  and  does not
necessarily represent actual prices on transactions.

                                    Table XX
                                      1997               1996
                                  Stock Range        Stock Range

         1st Quarter               $ 13.81 - 17.86    $ 13.38 - 14.73
         2nd Quarter                 16.42 - 18.33      13.03 - 14.28
         3rd Quarter                 17.73 - 24.88      12.92 - 14.63
         4th Quarter                 21.67 - 25.50      13.27 - 14.73

<PAGE>

As of December 31, 1997, there were approximately  1,650 shareholders of record.
The Corporation pays cash dividends on a quarterly basis. Cash dividends paid by
the Corporation  were $0.41 per share in 1997, $0.38 per share in 1996 and $0.36
per share in 1995. Cash dividends, as restated to reflect the acquisition of FRB
under the pooling of interests  method of accounting,  was $0.31 for 1995. Refer
to Note 17 of the consolidated  financial statements for information  concerning
restrictions on dividends.


                               FIVE YEAR SUMMARY
              (Dollar amounts in thousands, except per share data)

<TABLE>

                                      1997       1996       1995       1994       1993
                                     ------     ------     ------     ------     ------

<S>                                <C>        <C>        <C>        <C>        <C>      
AT PERIOD END
Actual balances
  Assets                           $ 759,395  $ 719,785  $ 682,347  $ 625,240  $ 622,568
  Securities                         150,219    170,724    173,469    186,875    210,774
  Loans                              540,433    494,467    442,657    388,657    342,950
  Allowance for loan losses            5,428      5,630      5,022      4,531      4,238
  Deposits                           665,685    633,556    600,069    550,387    550,350
  Shareholders' equity                78,355     72,183     67,712     58,210     57,722

Daily averages
  Assets                           $ 728,281  $ 702,083  $ 644,456  $ 619,540  $ 601,232
  Securities                         161,299    179,641    177,385    204,664    214,325
  Loans                              516,513    467,509    416,489    368,198    325,544
  Allowance for loan losses            5,448      5,237      4,636      4,377      4,152
  Deposits                            40,157    617,366    567,413    545,393    534,448
  Shareholders' equity                74,397     68,772     62,344     58,113     54,967

OPERATING RESULTS
Interest income                    $  56,254  $  54,007  $  49,392  $  43,053  $  41,758
Net interest income                   27,813     26,719     25,201     23,899     22,751
Provision for loan losses              1,245      1,366      1,182        338      1,492
Income before cumulative
  effect of accounting change          8,286      7,966      7,045      6,502      5,910
Net income                             8,286      7,966      7,045      6,502      6,162
Dividends paid on
  common stock                         2,887      2,653      2,144      1,947      1,701

PER SHARE DATA
Income before cumulative
  effect of accounting change      $    1.19   $   1.14   $   1.01   $    .93 $      .85
Cumulative effect of
  accounting change                        -         -          -           -        .04
Earnings per average
  common share outstanding              1.19       1.14       1.01        .93        .89
Diluted earnings per average
  common share outstanding              1.19       1.14       1.01        .93        .88
Cash dividends before
  pooling of interests                   .41        .38        .36        .36        .34
Cash dividends restated for
  pooling of interests                   .41        .38        .31        .28        .24
Book value at end of period            11.22      10.36       9.72       8.36       8.29
Book value at end of period
  before FAS 115                       11.05      10.31       9.55       8.86       8.19
Tangible book value at
  end of period                        10.99      10.12       9.44       8.32       8.27
Tangible book value at end
  of period before FAS 115             10.82      10.05       9.27       8.82       8.16
Weighted-average
  outstanding shares               6,970,072  6,965,433  6,964,593  6,959,497  6,959,057
Weighted-average
  treasury shares                       (387)      (966)         -         -          -

<PAGE>

RATIOS
Return on average assets                1.14 %     1.13 %     1.09 %     1.05 %     1.02 %
Return on average equity               11.14      11.58      11.30      11.19      11.21
Dividends paid as a
  percentage of net income             34.84      33.30      30.43      29.95      27.61
Tier 1 Leverage Capital                10.40      10.00      10.01       9.87       9.45
Efficiency ratio                       59.22      58.52      61.73      64.66      67.56

</TABLE>


Board of Directors and Shareholders of
AMBANC Corp.
Vincennes, Indiana


We have audited the  consolidated  balance sheets of AMBANC Corp. as of December
31, 1997 and 1996, 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, 1997. These financial  statements are the  responsibility  of
the Corporation's management. Our responsibility is to express an opinion on the
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 AMBANC Corp. as of
December 31, 1997 and 1996, and the results of its operations and its cash flows
for each of the three years in the period ended  December 31, 1997 in conformity
with generally accepted accounting principles.

As discussed in Note 1 to the consolidated financial statements, the Corporation
adopted the provisions of Statement of Financial  Accounting  Standards No. 122,
"Accounting for Mortgage Servicing Rights," on January 1, 1996.



DELOITTE & TOUCHE LLP
Indianapolis, Indiana
January 23, 1998



<PAGE>

                                  AMBANC CORP.
                           Consolidated Balance Sheets
                           December 31, 1997 and 1996
         (Dollar amounts in thousands, except share and per share data)


<TABLE>

                                                             1997          1996
                                                            ------        ------
<S>                                                     <C>           <C> 
ASSETS
Cash and due from banks                                  $   37,313    $   26,409
Federal funds sold                                            7,440         5,875

  Total cash and cash equivalents                            44,753        32,284

Interest-bearing deposits in other banks                        298           590
Securities available for sale-at fair value
  (amortized cost 1997-$148,535 and 1996-$170,249)          150,219       170,724

Loans held for sale-at cost
  (fair value 1997-$2,474 and 1996-$2,404)                    2,443         2,350

Loans, net of unearned income                               540,433       494,467
Allowance for loan losses                                    (5,428)       (5,630)
                                                            --------      -------
   Loans, net                                               535,005       488,837
                                                            -------       -------
Premises, furniture and equipment, net                       12,934        11,184
Accrued interest receivable and other assets                 13,743        13,816
                                                            -------        ------
      Total assets                                       $  759,395    $  719,785
                                                            =======       =======

LIABILITIES
Noninterest-bearing deposits                             $   63,641    $   61,616
Interest-bearing deposits                                   602,044       571,940
                                                            -------       -------
   Total deposits                                           665,685       633,556
                                                            -------       -------
Short-term borrowings                                         6,747         5,285
Long-term debt                                                2,031         2,309
Accrued interest payable and other liabilities                6,577         6,452
                                                            -------        ------
      Total liabilities                                     681,040       647,602
                                                            -------       -------

SHAREHOLDERS' EQUITY
Preferred stock, $10 par value, 200,000 shares
   authorized, no shares issued or outstanding
Common stock, $10 par value, 10,000,000 shares
   authorized at December 31, 1997 and 1996,
  6,985,712 and 3,316,267 shares issued and
  outstanding at December 31, 1997 and 1996                  69,857        33,163
Treasury stock, 34 and 724 shares at cost at
  December 31, 1997 and 1996                                     (1)          (21)
Retained earnings                                             7,422        38,731
Unrealized gain/(loss) on securities available for
  sale, net of deferred taxes of $607 and $165                1,077           310
                                                             ------        ------
         Total shareholders' equity                          78,355        72,183
                                                             ------        ------

         Total liabilities and shareholders' equity      $  759,395    $  719,785
                                                           ========      ========
</TABLE>

          See accompanying notes to consolidated financial statements.


<PAGE>

                                  AMBANC CORP.
                        Consolidated Statements of Income
              For the years ended December 31, 1997, 1996 and 1995
              (Dollar amounts in thousands, except per share data)
<TABLE>

                                                            1997        1996        1995
                                                           ------      ------      ------
<S>                                                     <C>          <C>         <C>     
INTEREST INCOME
Interest and fees on loans                              $  46,164    $ 42,256    $ 37,888
Interest and fees on loans held for sale                      163         389         326
Interest on securities
   Taxable                                                  6,593       7,805       7,680
   Tax-exempt                                               2,882       2,809       2,759
Other interest                                                452         748         739
                                                           ------      ------      ------
   Total interest income                                   56,254      54,007      49,392
                                                           ------      ------      ------
INTEREST EXPENSE
Interest on deposits                                       28,007      26,761      23,593
Interest on short-term borrowings                             305         385         437
Interest on long-term debt                                    129         142         161
                                                           ------      ------      ------
   Total interest expense                                  28,441      27,288      24,191
                                                           ------      ------      ------
      Net interest income                                  27,813      26,719      25,201
Provision for loan losses                                   1,245       1,366       1,182
                                                           ------      ------      ------
      Net interest income after
        provision for loan losses                          26,568      25,353      24,019
                                                           ------      ------      ------
NONINTEREST INCOME
Income from fiduciary activities                              758         654         602
Service charges on deposit accounts                         1,754       1,586       1,520
Net realized gain on securities                                78          28          41
Other operating income                                      1,759       1,426         990
                                                            -----       -----       -----
   Total noninterest income                                 4,349       3,694       3,153
                                                            -----       -----       -----
NONINTEREST EXPENSE
Salaries and employee benefits                             10,679       9,633       9,450
Occupancy expenses, net                                     1,473       1,218       1,051
Equipment expenses                                          1,488       1,220       1,117
Data processing expenses                                      461         480         388
FDIC insurance                                                 75         270         690
Other operating expenses                                    4,869       4,978       4,806
                                                           ------      ------      ------
   Total noninterest expense                               19,045      17,799      17,502
                                                           ------      ------      ------
      INCOME BEFORE INCOME TAXES                           11,872      11,248       9,670
Income taxes                                                3,586       3,282       2,625
                                                           ------      ------       -----

      NET INCOME                                        $   8,286    $  7,966    $  7,045
                                                           ======       ======      =====
 
EARNINGS PER AVERAGE COMMON SHARE OUTSTANDING           $    1.19    $   1.14    $   1.01
DILUTED EARNINGS PER AVERAGE COMMON SHARE 
   OUTSTANDING                                          $    1.19    $   1.14    $   1.01

</TABLE>

          See accompanying notes to consolidated financial statements.


<PAGE>




                                  AMBANC CORP.
           Consolidated Statements of Changes in Shareholders' Equity
              For the years ended December 31, 1997, 1996 and 1995
              (Dollar amounts in thousands, except per share data)
<TABLE>

                                                                       Unrealized
                                                                       Gain/(Loss)        Total
                                     Common     Retained    Treasury       on         Shareholders'
                                     Stock      Earnings     Stock      Securities       Equity

<S>                                 <C>        <C>         <C>         <C>           <C>        
BALANCE, JANUARY 1, 1995            $ 30,086   $  31,649   $    (37)   $   (3,488)   $    58,210

Net income for 1995                                7,045                                   7,045
Cash dividends ($.31 per common
  share)                                          (2,144)                                 (2,144)
Net change in unrealized
  gain/(loss) on securities
  available for sale                                                        4,601          4,601
Issuance of stock for dividend
  reinvestment and stock
  purchase plan                          4            8                                       12
Fractional shares paid for
  acquisition and stock dividend                    (12)                                     (12)
Retired treasury stock                              (37)         37                           -
5% stock dividend                    1,500       (1,500)                                      -
                                     -----        ------         --         -----         ------

BALANCE, DECEMBER 31, 1995          31,590       35,009          -          1,113         67,712

Net income for 1996                               7,966                                    7,966
Cash dividends ($.38 per common
  share)                                         (2,653)                                  (2,653)
Net change in unrealized
  gain/(loss) on securities
  available for sale                                                         (803)          (803)
Net change in treasury stock                                   (21)                          (21)
Fractional shares paid for
  stock dividend                                    (18)                                     (18)
5% stock dividend                    1,573       (1,573)                                       -
                                    ------       ------        ---            ---          ------
BALANCE, DECEMBER 31, 1996          33,163       38,731       (21)            310          72,183

Net income for 1997                               8,286                                     8,286
Cash dividends ($.41 per common
  share)                                         (2,887)                                   (2,887)
Net change in unrealized
  gain/(loss) on securities
  available for sale                                                          767            767
Net change in treasury stock                                   20                             20
Fractional shares paid for
  5% stock dividend                                (14)                                      (14)
5% stock dividend                    3,321      (3,321)                                        -
2 for 1 stock split                 33,162     (33,162)                                        -
Exercised stock options                211        (211)                                        -
                                    ------      ------        ---             ----          ------

BALANCE, DECEMBER 31, 1997        $ 69,857   $   7,422   $    (1)      $    1,077    $     78,355

</TABLE>

          See accompanying notes to consolidated financial statements.


<PAGE>


                                  AMBANC CORP.
               Consolidated Statements of Changes in Shareholders'
          Equity For the years ended December 31, 1997, 1996 and 1995
                          (Dollar amounts in thousands)
<TABLE>

                                                           1997        1996        1995 
                                                          ------      ------      ------
<S>                                                  <C>         <C>         <C>       
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                           $    8,286  $    7,966  $    7,045
Adjustments to reconcile net income to net
   cash from operating activities:
Net premium amortization and discount
  accretion on securities                                   287         319         374
Depreciation                                              1,266       1,081         987
Provision for loan losses                                 1,245       1,366       1,182
Deferred income tax provision                              (407)       (337)       (621)
Gain on sale of securities                                  (78)        (28)        (41)
Gain on sale of loans held for sale                        (558)       (409)       (191)
Proceeds from sales of loans held for sale               28,298      30,385      16,231
Loans held for sale made to customers,
  net of payments collected                             (27,833)    (25,599)    (20,103)
Accrued interest receivable
   and other assets                                        (123)       (748)     (1,290)
Accrued interest payable
   and other liabilities                                    286         417         941
Deferred loan fees, net of costs                           (134)        (48)        (81)
                                                         -------     -------     -------
       Net cash from operating activities                10,535      14,365       4,433
                                                         ------      ------       -----
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of securities
  available for sale                                      6,405      16,893       4,559
Proceeds from maturities and calls of securities
  available for sale                                     23,314      40,395      31,453
Proceeds from maturities and calls of securities
  held to maturity                                                                4,037
Purchases of securities available for sale               (8,214)    (56,084)    (15,816)
Purchases of securities held to maturity                                         (3,938)
Net change in interest-bearing deposits
   in other banks                                           292         102         501
Loans made to customers, net of payments collected      (48,458)    (58,662)    (54,028)
Loans purchased                                                          (8)     (7,386)
Proceeds from sales of loans                              1,179       6,150       6,804
Property and equipment expenditures                      (3,016)     (2,867)     (1,497)
                                                         -------     -------     ------
         Net cash from investing activities             (28,498)    (54,081)    (35,311)
                                                        --------     -------     ------
</TABLE>


<PAGE>


                                  AMBANC CORP.
           Consolidated Statements of Changes in Shareholders' Equity
              For the years ended December 31, 1997, 1996 and 1995
                          (Dollar amounts in thousands)
<TABLE>

                                                          1997        1996        1995
                                                         ------      ------      ------
<S>                                                      <C>         <C>         <C>   
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits                                   32,129      33,389      49,682
Net change in short-term borrowings                       1,462      (1,502)     (2,506)
Payments on long-term debt                                 (408)       (484)       (597)
Proceeds from long-term debt                                130         116          85
Sale/(purchase) of treasury stock                            20         (21)
Payment for fractional shares                               (14)        (18)        (12)
Issuance of stock for dividend reinvestment
  and stock purchase plan                                                            12
Dividends paid                                           (2,887)     (2,653)     (2,144)
                                                         ------      ------      ------
      Net cash from financing activities                 30,432      28,827      44,520
                                                         ------      ------      ------
NET CHANGE IN CASH AND CASH EQUIVALENTS                  12,469     (10,889)     13,642
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR           32,284      43,173      29,531
                                                         ------      ------      ------
CASH AND CASH EQUIVALENTS AT END OF YEAR             $   44,753  $   32,284  $   43,173
                                                         ======      ======      ======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION 
Cash paid during the year for:
      Interest                                       $   35,097  $   26,343  $   22,371
      Income tax                                          4,513       3,850       2,981

</TABLE>

Noncash activities occurred  consisting of the  reclassification of $40,080 from
the held to maturity  securities  portfolio to the available for sale securities
portfolio in 1995.

          See accompanying notes to consolidated financial statements.


<PAGE>


                                  AMBANC CORP.
                   Notes To Consolidated Financial Statements
                        December 31, 1997, 1996 and 1995
         (Dollar amounts in thousands, except share and per share data)

 Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Basis of Reporting

     The consolidated  financial statements include the accounts of AMBANC Corp.
     (Corporation),  and its  wholly-owned  subsidiaries,  AmBank Indiana,  N.A.
     (IND),  AmBank  Illinois,  N.A. (ILL),  and American  National Realty Corp.
     (ANR).  On June 30, 1996,  The  American  National  Bank of  Vincennes  and
     Citizens'  National Bank of Linton were merged and renamed AmBank  Indiana,
     N.A. The First National Bank in Robinson (ROB) and Bank of Casey (CAS) were
     also renamed AmBank Illinois,  N.A. and AmBank Illinois,  respectively,  on
     June 30,  1996.  On March 1, 1997,  AmBank  Illinois was merged into AmBank
     Illinois,  N.A. Upon consolidation,  all significant  intercompany accounts
     and transactions have been eliminated. As discussed in Note 2, AMBANC Corp.
     acquired  First  Robinson  Bancorp  (FRB) on  November  1, 1995,  under the
     pooling of interests method of accounting.

     The  preparation  of financial  statements  in  conformity  with  generally
     accepted  accounting  principles  requires management to make estimates and
     assumptions  that affect the amounts  reported in the financial  statements
     and accompanying notes. Actual results could differ from those estimates.

     Description of Business

     IND and ILL operate primarily in the banking  industry,  which accounts for
     more than 90 percent of the  Corporation's  revenues,  operating income and
     assets.  IND  and  ILL  generate  commercial,   real  estate  mortgage  and
     installment  loans and receive  deposits from customers  located in Greene,
     Knox,  Gibson,  Vanderburgh,  Vigo and surrounding  counties in Indiana and
     Crawford, Clark, Wabash and surrounding counties in Illinois.  Although the
     overall loan  portfolio is  diversified,  the economy of these  counties is
     heavily dependent upon the agricultural industry. The majority of the loans
     are secured by specific items of collateral including business assets, real
     property and consumer assets.

     ANR owns  various real  estate,  which is leased to IND for normal  banking
     activities,   such  as  parking,   drive-in   banking  and  branch  banking
     facilities.

     Securities

     Statement of Financial  Accounting  Standards  (FAS) 115,  "Accounting  for
     Certain Investments in Debt and Equity Securities,"  requires securities to
     be classified as held to maturity, available for sale or trading. Available
     for sale  securities are reported at fair value with  unrealized  after-tax
     gains and losses included in shareholders' equity. The Corporation does not
     maintain any securities classified as held to maturity or trading. Realized
     securities gains or losses are reported in the  consolidated  statements of
     income. The cost of securities sold is based on the specific identification
     method.

     Loans Held for Sale
    
     Loans held for sale  consist of fixed rate  mortgage  loans  conforming  to
     established  guidelines and held for sale to the secondary mortgage market.
     Mortgage loans held for sale are carried at the lower of cost or fair value
     determined  on an  aggregate  basis.  Gains and losses on the sale of these
     mortgage loans are included in other noninterest income.


<PAGE>

                                  AMBANC CORP.
                   Notes To Consolidated Financial Statements
                        December 31, 1997, 1996 and 1995
         (Dollar amounts in thousands, except share and per share data)

 Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

      The Corporation adopted FAS 122, "Accounting for Mortgage Servicing Rights
      (MSRs),"  on  January  1,  1996.  FAS 122  requires  that the  Corporation
      recognize as separate assets,  rights to service mortgage loans for others
      that have been acquired  through  either the purchase or  origination of a
      loan.  An entity  that sells or  securitizes  those  loans with  servicing
      rights  retained  should  allocate the total cost of the mortgage loans to
      the MSRs and the loans based on their  relative  fair values.  These costs
      are initially capitalized and subsequently amortized in proportion to, and
      over the period of, estimated net loan servicing income. Additionally, FAS
      122 requires  that MSRs be reported on the  consolidated  balance sheet at
      the lower of cost or fair value. The Corporation is required to assess its
      capitalized  MSRs for impairment  based upon the fair value of the rights.
      MSRs  are  stratified  based  upon  one or  more of the  predominant  risk
      characteristics of the underlying loans.  Impairment is recognized through
      a valuation allowance for each impaired stratum. The provisions of FAS 122
      were applied prospectively beginning in fiscal 1996. The ongoing impact of
      FAS  122 is  dependent  upon,  among  other  things,  the  volume  of loan
      originations,  the general levels of market interest rates and the rate of
      estimated loan prepayments.  Accordingly,  management is unable to predict
      with  any  reasonable  certainty  what  effect  FAS 122  will  have on the
      Corporation's future results of operations or its financial condition. FAS
      122 prohibits  restatement of prior years' financial  statements.  FAS 122
      was  superseded  by FAS 125,  "Accounting  for  Transfers and Servicing of
      Financial Assets and Extinguishments of Liabilities," effective January 1,
      1997.  FAS 125 did not  have any  additional  effect  on the  consolidated
      financial statements.

      Loans

      Loans are stated at the principal amount outstanding adjusted for unearned
      discounts,  unamortized  premiums and net deferred fees.  The  Corporation
      defers loan fees, net of certain direct loan  origination  costs.  The net
      amount deferred is reported on the consolidated  balance sheets as part of
      loans and is recognized  into interest income over the term of the loan on
      a level yield basis.  Any  unamortized  fees on loans sold are credited to
      gain on sale of loans at time of sale. Interest on real estate, commercial
      and  installment  loans is  accrued  over the term of the loans on a level
      yield basis.  The recognition of interest income is discontinued  when, in
      management's  judgment, the interest will not be collectible in the normal
      course of business.

      FAS 114 and 118,  "Accounting  by Creditors  for  Impairment of a Loan and
      Income  Recognition and  Disclosures," as amended,  requires that impaired
      loans be measured based on the present value of expected future cash flows
      discounted at the loan's effective  interest rate or the fair value of the
      underlying  collateral,  and specifies alternative methods for recognizing
      interest  income on loans that are  impaired or for which there are credit
      concerns. For purposes of applying this standard, impaired loans have been
      defined as all nonaccrual loans.

<PAGE>

      Allowance for Loan Losses

      The balance in the  allowance for loan losses and the amount of the annual
      provision  charged to expense  are  judgmentally  determined  based upon a
      number of factors.  The  allowance is  maintained by management at a level
      considered   adequate  to  cover   possible   losses  that  are  currently
      anticipated  based on past loss experience,  general economic  conditions,
      information about specific borrower  situations  including their financial
      position and collateral  values,  and other factors that are  particularly
      susceptible  to changes that could result in a material  adjustment in the
      near  term.  While  management  endeavors  to  use  the  best  information
      available in making its evaluations,  future allowance  adjustments may be
      necessary if economic conditions change substantially from the assumptions
      used in making the evaluations. While management may periodically allocate
      portions of the allowance for specific problem loan situations, the entire
      allowance is available for any loan charge-offs which occur.  Increases to
      the allowance are recorded by a provision for possible loan losses charged
      to  expense.  A loan is charged  off by  management  as a loss when deemed
      uncollectible,  although collection efforts continue and future recoveries
      may occur.




<PAGE>

                                  AMBANC CORP.
                   Notes To Consolidated Financial Statements
                        December 31, 1997, 1996 and 1995
         (Dollar amounts in thousands, except share and per share data)

 Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-Continued

      Premises, Furniture and Equipment

      Premises,  furniture  and  equipment  are stated at cost less  accumulated
      depreciation  and are depreciated  over the estimated  useful lives of the
      assets  ranging  from 3 to 40  years,  principally  on  the  straight-line
      method.  Maintenance and repairs are expensed,  and major improvements are
      capitalized.

      Other Real Estate

      Real estate acquired  through  foreclosure or acceptance of a deed in lieu
      of  foreclosure  is  recorded  at the lower of cost (fair value at date of
      foreclosure)  or fair value less  estimated  selling  costs.  The costs of
      holding the real estate are charged to operations while major improvements
      are capitalized.

      Income Taxes

      The Corporation and its subsidiaries file  consolidated tax returns.  Each
      entity is charged or credited for taxes as if separate returns were filed.
      Deferred income tax assets and liabilities reflect the impact of temporary
      differences  between  amounts  of assets  and  liabilities  for  financial
      reporting purposes and basis of such assets and liabilities as measured by
      tax laws and regulations.

      Statements of Cash Flows

      Cash  and  cash   equivalents   is  defined  to  include   cash  on  hand,
      noninterest-bearing  deposits due from other banks and federal funds sold.
      Generally,  federal funds are sold for one-day  periods.  The  Corporation
      reports   net  cash  flows  for  loans  held  for  sale,   customer   loan
      transactions,  deposit transactions and deposits made with other financial
      institutions.

      Earnings Per Share

      Earnings per share is  calculated by dividing net income for the period by
      the  weighted-average  number of shares of common stock outstanding during
      the  period.  The  assumed  exercise  of stock  options is included in the
      calculation of diluted earnings per share.

      The Corporation  adopted FAS 128,  "Earnings Per Share," for 1997 with all
      prior-period earnings per share data restated. The statement requires dual
      presentation  of earnings per share and diluted  earnings per share on the
      consolidated  statements of income and other  computational  changes.  The
      adoption of FAS 128 did not have a material effect on previously  reported
      earnings per share.

      New Accounting Pronouncements

      FAS 130, "Reporting  Comprehensive Income," was issued in June 1997 and is
      effective  for  fiscal  years  beginning  after  December  15,  1997.  The
      statement requires additional reporting of items that affect comprehensive
      income but not net income.  Examples  relevant to the Corporation  include
      unrealized  gains  and  losses on  securities  available  for  sale.  This
      statement will result in additional  financial statement  disclosures upon
      adoption.

      FAS  131,  "Disclosures  about  Segments  of  an  Enterprise  and  Related
      Information,"  was issued in June 1997 and is  effective  for fiscal years
      beginning  after  December  15, 1997.  The  statement  requires  financial
      disclosure  and  descriptive   information   about  reportable   operating
      segments. Management has not yet determined the effect, if any, of FAS 131
      on the consolidated financial statements.

      Financial Statement Presentation

     Certain  items  in  the  1996  and  1995  financial  statements  have  been
     reclassified to correspond with the 1997 presentation.


<PAGE>


                                  AMBANC CORP.
              Notes To Consolidated Financial Statements-Continued
                        December 31, 1997, 1996 and 1995
         (Dollar amounts in thousands, except share and per share data)

 Note 2 - BUSINESS COMBINATION

                                                         Common
                                                         Shares     Method of
                                      Date Completed     Issued     Accounting
                                      --------------     ------     ----------
 First Robinson Bancorp (FRB)         November 1, 1995   701,647     Pooling

      FRB was merged into the  Corporation and ceased to exist at the conclusion
      of the merger.  The  contribution of FRB to consolidated  interest income,
      net interest income and net income for the periods prior to the merger was
      as follows:

                                               Ten
                                          Months Ended
                                           October 31,
                                              1995    
                                          ------------

               Interest income
                  Previously reported     $     33,967
                  FRB                            6,826
                                                ------
                     Total                $     40,793
                                                ======

               Net interest income
                  Previously reported     $     17,362
                  FRB                            3,624
                                                ------
                     Total                $     20,986
                                                ======

               Net income
                  Previously reported     $      5,042
                  FRB                              678
                                                 -----
                     Total                $      5,720
                                                 =====
<PAGE>

 Note 3 - SECURITIES

      The amortized cost and estimated fair value of securities are as follows:

<TABLE>

                                                               December 31, 1997
                                                               -----------------
                                                                Gross       Gross     Estimated
                                                  Amortized   Unrealized  Unrealized    Fair
                                                     Cost       Gains       Losses      Value
                                                     ----       -----       ------      -----
            <S>                                  <C>         <C>         <C>        <C>   
            Securities available for sale
            U.S. Government and its agencies      $  76,459   $    550   $   (426)   $  76,583
            States and political subdivisions        52,567      1,676        (10)      54,233
            Corporate obligations                     2,140                              2,140
            Collateralized mortgage obligations      10,476         75        (29)      10,522
            Mutual funds                              6,893                  (152)       6,741
                                                    -------      -----       -----     -------
              Total                               $ 148,535   $  2,301   $   (617)   $ 150,219
                                                    =======      =====       =====     =======

</TABLE>



<PAGE>


                                  AMBANC CORP.
              Notes To Consolidated Financial Statements-Continued
                        December 31, 1997, 1996 and 1995
         (Dollar amounts in thousands, except share and per share data)


 Note 3 - SECURITIES - Continued

<TABLE>
                                                                  December 31, 1996
                                                                  ------------------
                                                                Gross        Gross     Estimated
                                                  Amortized   Unrealized   Unrealized    Fair
                                                     Cost       Gains        Losses      Value
            <S>                                  <C>          <C>        <C>        <C>
            Securities   available   for sale
            U.S. Government and its agencies      $ 102,163   $    670   $ (1,014)   $ 101,819
            States and political subdivisions        54,696      1,235       (155)      55,776
            Corporate obligations                     1,823                              1,823
            Collateralized mortgage obligations       9,253          2        (89)       9,166
            Mutual funds                              2,314                  (174)       2,140
                                                    -------      -----     ------      -------
              Total                               $ 170,249   $  1,907   $ (1,432)   $ 170,724
                                                    =======      =====      =====      =======
</TABLE>

      The amortized  cost and estimated fair value of securities at December 31,
      1997,  by  contractual  maturity  are  shown  in the  following  schedule.
      Expected  maturities  will  differ  from  contractual  maturities  because
      borrowers may have the right to call or prepay obligations with or without
      call or prepayment penalties.
  
                                                                 Estimated
                                                    Amortized       Fair
                                                       Cost        Value
                                                    ---------    ---------
          Due in 1 year or less                     $   22,291  $  22,275
          Due after 1 year through 5 years              44,605     45,204
          Due after 5 years through 10 years            41,360     42,017
          Due after 10 years                            10,493     10,842
                                                        ------     ------
            Subtotal                                   118,749    120,338

          Collateralized mortgage obligations           10,476     10,522
          U.S. agency mortgage-backed
            securities                                  12,417     12,618
          Mutual funds                                   6,893      6,741
                                                        ------     ------
            Total                                   $  148,535  $ 150,219
                                                       =======    =======

      Proceeds from sales of securities  available for sale were $6,405 in 1997,
      $16,893  in 1996  and  $4,559  in 1995.  Sales  and  calls  of  securities
      available  for sale resulted in gross gains and gross losses of $79 and $1
      in 1997,  $56 and $28 in 1996 and $21 and $3 in 1995.  Sales  and calls of
      securities held to maturity resulted in gross gains and gross losses of $0
      and $0 in 1997 and 1996 and $24 and $1 in 1995.

      Securities  with a carrying  value of $48,246 and $50,609 at December  31,
      1997 and 1996,  were  pledged  to  secure  public  deposits  and for other
      purposes required or permitted by law.


<PAGE>

                                  AMBANC CORP.
              Notes To Consolidated Financial Statements-Continued
                        December 31, 1997, 1996 and 1995
         (Dollar amounts in thousands, except share and per share data)


 Note 4 - LOANS

      Loans at December 31 are comprised of the following:

                                                     1997          1996
                                                    ------        ------
               Commercial                       $    224,468   $   201,092
               Agricultural                           55,267        55,404
               Real estate                           147,016       129,116
               Installment                           110,310       105,464
               Credit cards                            3,430         3,686
                                                     -------       -------
                 Total loans                         540,491       494,762
              Unearned income                           (58)         (295)
                                                     -------       -------

            Total loans, net                    $    540,433   $   494,467
                                                     =======       =======

      Certain loans have been  restructured in a manner that grants a concession
      to the  borrower  because of the  borrower's  financial  difficulties.  At
      December 31, 1997, 1996 and 1995,  these loans totaled $2,422,  $3,089 and
      $45.  Interest income recorded on these loans was $168, $310 and $3 during
      1997, 1996 and 1995.  Interest income which would have been recorded under
      the original  terms of the loans was $192,  $310 and $4 during 1997,  1996
      and 1995.

      Directors and executive  officers of the Corporation and its  wholly-owned
      subsidiaries  were  customers  of, and had other  transactions  with,  the
      banking subsidiaries in the ordinary course of business. A schedule of the
      aggregate activity involving loans to related parties is as follows:

               Balance, January 1, 1997                           $   11,529
               New loans                                               4,271
               Loan reductions                                        (1,651)
                                                                      ------
                 Balance, December 31, 1997                       $   14,149
                                                                      ======


<PAGE>

                                  AMBANC CORP.
              Notes To Consolidated Financial Statements-Continued
                        December 31, 1997, 1996 and 1995
         (Dollar amounts in thousands, except share and per share data)


 Note 5 - ALLOWANCE FOR LOAN LOSSES

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

                                               1997        1996        1995
                                              ------      ------      ------
        Balance, January 1                $    5,630  $    5,022  $    4,531
        Provision charged to operations        1,245       1,366       1,182
        Loans charged off                     (1,767)     (1,266)     (1,019)
        Recoveries                               320         508         328
                                               -----       -----      ------
          Balance, December 31            $    5,428  $    5,630  $    5,022
                                               =====       =====       =====

   Impaired loan information under FAS 114 and 118 is as follows at December 31:

                                                           1997        1996
                                                          ------      ------
       Impaired loans with a valuation reserve       $      331  $      843
       Impaired loans with no valuation reserve             318         578
                                                           ----       -----
         Total impaired loans                        $      649  $    1,421
                                                           ====       =====

       Valuation reserve on impaired loans           $      147  $      469
       Average impaired loans                               710       2,495

      Income recorded on these loans during 1997, 1996 and 1995 totaled $17, $89
      and $18. Income which would have been recorded on these loans during 1997,
      1996 and 1995, had they been accruing all year, was $75, $149 and $41.


 Note 6 - MORTGAGE BANKING ACTIVITIES

      Loans serviced for others,  amounting to $110,484,  $97,606 and $79,990 at
      December 31,  1997,  1996 and 1995,  are not included in the  consolidated
      financial  statements.  Net gain on sales of loans was $558, $409 and $191
      for the years ended December 31, 1997, 1996 and 1995.  Servicing loans for
      others generally  consists of collecting  mortgage  payments,  maintaining
      escrow  accounts,   disbursing   payments  to  investors  and  foreclosure
      processing.  Loan servicing income includes  servicing fees from investors
      and certain charges collected from borrowers, such as late payment fees.

      MSR activity is as follows:

                                                          1997        1996
                                                         ------      ------
        Carrying Value, January 1                       $   291    $      -
        Additions                                           235         307
        Amortization                                        (25)        (16)
        Net change in valuation allowance                     -           -
                                                           ----        ----
           Carrying Value, December 31                  $   501    $    291
                                                           ====        ==== 

      The fair value of MSRs was $501 and $291 as of December 31, 1997 and 1996.
      Fair value is  estimated by  discounting  the net  servicing  income to be
      received over the estimated  servicing  term using a current  market rate.
      The  significant  risk  characteristics  of the  underlying  loans used to
      stratify MSRs for  impairment  measurement  were term and rate of note. No
      valuation  allowance  existed  for the years ended  December  31, 1997 and
      1996.

<PAGE>

                                  AMBANC CORP.
              Notes To Consolidated Financial Statements-Continued
                        December 31, 1997, 1996 and 1995
         (Dollar amounts in thousands, except share and per share data)


 Note 7 - PREMISES, FURNITURE AND EQUIPMENT

      Premises, furniture and equipment are comprised of the following:

                                                         1997        1996
                                                        ------      ------
       Land and improvements                         $    1,879  $    1,351
       Buildings and improvements                        13,198      12,133
       Furniture and equipment                           11,588      10,340
                                                         ------      ------
         Total cost                                      26,665      23,824
       Accumulated depreciation                         (13,731)    (12,640)
                                                         ------      ------
         Total, net                                  $   12,934  $   11,184
                                                         ======      ======


      Depreciation expense for the years ended December 31, 1997, 1996 and 1995,
      totaled $1,266, $1,081 and $987.


 Note 8 - INTEREST-BEARING DEPOSITS

     Interest-bearing  deposits  issued  in  denominations  of $100  or  greater
     totaled $99,683 and $76,948 at December 31, 1997 and 1996.


 Note 9 - SHORT-TERM BORROWINGS

     Short-term borrowings are comprised of the following:


                                                          1997        1996
                                                         ------      ------
       Repurchase agreements                         $    3,236  $    3,048
       Demand notes issued to the U.S. Treasury           3,511       2,237
                                                         ======      ======
         Total                                       $    6,747  $    5,285


     Borrowings   under  the   Federal   Reserve   Bank  note  option  plan  are
     collateralized  by certain  securities and are reduced at the discretion of
     the U.S. Treasury.



<PAGE>


                                  AMBANC CORP.
              Notes To Consolidated Financial Statements-Continued
                        December 31, 1997, 1996 and 1995
         (Dollar amounts in thousands, except share and per share data)


Note 10 - LONG-TERM DEBT

      Long-term  debt is comprised of a deferred  compensation  plan of $340 and
      $218 in 1997 and 1996 as  discussed  in Note 11 and two Federal  Home Loan
      Bank Mortgage Advances  (Advances)  totaling $1,691 and $2,091 at December
      31, 1997 and 1996.  The Advances have an average rate of 5.84% at December
      31,  1997 and 1996,  interest  payable  monthly and  principal  payable in
      annual  installments  with the final  payment due March 15, 2004,  and are
      secured by various securities.  The principal maturities of these Advances
      in each of the five years after December 31, 1997, are $332,  $211,  $188,
      $167 and $148.


Note 11 - EMPLOYEE BENEFITS

      The Corporation maintains a retirement savings plan covering substantially
      all employees. To be eligible to participate,  the Plan requires employees
      to complete  one year of service  and be 21 years of age.  The Plan covers
      all  employees  and  allows  for the  matching  of 50% of the  first 4% of
      employee salary  contributions and an annual  discretionary  contribution.
      The Corporation's contributions to the Plan are vested by employees at 20%
      per year  starting  with the second year of service and become 100% vested
      after six years. The Corporation's total contributions were $971, $615 and
      $473 for 1997, 1996 and 1995.

      The  Corporation  has a  deferred  compensation  plan for the  benefit  of
      certain  executive  officers  and  directors.  In return for the  officers
      relinquishing  the right to a portion of their current  compensation,  the
      Corporation  agrees to pay the  participants at retirement or termination,
      in the form of 120 monthly  payments or one lump-sum  payment,  the amount
      deferred plus any interest earned during the deferral period.  Interest is
      paid annually at prime rate and the liability of $340 and $218 is included
      with long-term debt.  During 1997,  1996 and 1995 the Corporation  accrued
      approximately  $23, $13 and $6 of interest  expense towards its obligation
      under the plan.



<PAGE>


                                  AMBANC CORP.
              Notes To Consolidated Financial Statements-Continued
                        December 31, 1997, 1996 and 1995
         (Dollar amounts in thousands, except share and per share data)


Note 12 - POSTRETIREMENT BENEFITS

      The  Corporation  sponsors an unfunded  postretirement  benefit plan which
      provides defined medical and death benefits to certain eligible employees.
      Retirees as of December 31, 1992, receive  postretirement medical benefits
      and death benefits for themselves and medical  benefits for their spouses.
      These  medical  expenses  were fixed in 1992 and all future  increases are
      passed on to the  retirees.  Employees  hired before April 1990 who retire
      after January 1, 1993,  are eligible to receive a  postretirement  medical
      benefit for  themselves,  if they have  completed  20 years of service and
      attained  age 62.  This  benefit is sixty  dollars  per month to pay up to
      fifty  percent  of the  retirees'  medical  benefits  provided  under  the
      Corporation's  group major  medical  insurance  plan until age 65 and then
      under a medicare supplement plan.

      Accumulated postretirement benefit obligations at December 31:

                                                          1997        1996
                                                         ------      ------
      Retirees                                     $     (323)   $   (415)
      Fully eligible active participants                  (73)        (30)
      Other active plan participants                     (268)       (310)
                                                         -----       -----
         Accumulated postretirement benefit
            obligation                                   (664)       (755)
       Unrecognized prior service cost                    130         142
       Unrecognized loss                                 (156)        (20)
       Unrecognized transition obligation                 436         465
                                                         -----        ----
              Accrued postretirement
               benefit liability                   $     (254)   $   (168)
                                                         =====       =====

     Net periodic postretirement benefit cost for the years ended December 31:

                                                  1997        1996        1995
                                                  ----        ----        ----
     Service cost-benefits attributed to
       service during the period                $     24   $      23   $    13
     Interest cost on accumulated
       postretirement benefit obligation              52          49        39
     Amortization of transition
       obligation over 20 years                       29          29        29
     Amortization of unrecognized
       prior service cost                             12          12        -
                                                     ---         ---       ---
          Postretirement benefit cost           $    117   $     113   $    81
                                                     ===         ===       ===

      Benefit payments of $51, $45 and $48 were made for postretirement  medical
benefits in 1997, 1996 and 1995.



<PAGE>

                                  AMBANC CORP.
              Notes To Consolidated Financial Statements-Continued
                        December 31, 1997, 1996 and 1995
         (Dollar amounts in thousands, except share and per share data)


Note 12 - POSTRETIREMENT BENEFITS - Continued

      For  measurement  purposes,  the annual rate of increase in the per capita
      cost of covered  health care benefits was assumed to be 9.25% for 1997 and
      9.5% for 1996 and 1995 with the rate  gradually  decreasing to 6% in 2010.
      The health  care cost trend  assumption  has a  significant  effect on the
      amounts reported.  An increase in the assumed health care cost trend rates
      by 1% in each year would increase the accumulated  postretirement  benefit
      obligation as of December 31, 1997,  1996 and 1995, by  approximately  $96
      and would have  virtually  no effect on the  aggregate  of the service and
      interest cost components of net periodic  postretirement  benefit cost for
      1997, 1996 and 1995.

      The  weighted-average  discount rate used in determining  the  accumulated
      postretirement  benefit  obligation was 7% at December 31, 1997,  1996 and
      1995.

Note 13 - STOCK OPTION PLAN

      The Corporation had a Nonqualified Stock Option Plan, (Option Plan), which
      expired in April  1993 and a Reload  Option  Plan,  (Reload  Plan),  which
      expires in July 2002. Under the terms of both plans,  options were granted
      at  amounts  not less than the fair value of the shares at the date of the
      grant and any options  granted must be  exercised  within ten years of the
      grant  for the  Option  Plan and  within  five  years of the grant for the
      Reload Plan.


      The following is an analysis of the stock option  activity for each of the
      years in the three year period  ended  December  31,  1997,  and the stock
      options outstanding at the end of the respective periods:

<TABLE>
   
                                                  Option                    Reload
                                                    Plan                      Plan
                                                   Shares      Price         Shares     Price
                                                   ------      -----         ------     -----
              <S>                                <C>          <C>        <C>          <C> 
               Outstanding January 1, 1995         55,566     $ 8.64           -          N/A
               Granted                                 -         N/A           -          N/A
               Expired                                 -         N/A           -          N/A
               Exercised                               -         N/A           -          N/A
                                                   ------      -----         -----       ----
               Outstanding December 31, 1995       55,566     $ 8.64           -          N/A
               Granted                                 -         N/A           -          N/A
               Expired                                 -         N/A           -          N/A
               Exercised                               -         N/A           -          N/A
                                                   ------      -----         -----       ----
               Outstanding December 31, 1996       55,566     $ 8.64           -          N/A
               Granted                                 -         N/A       12,380     $ 24.11
               Expired                                 -         N/A           -          N/A
               Exercised                           34,548     $ 8.64           -          N/A
                                                   ------       ----       ------       -----
               Outstanding December 31, 1997       21,018     $ 8.64       12,380     $ 24.11
                                                   ======      =====       ======       =====
</TABLE>

      As of December 31, 1997,  Option Plan  outstanding  shares had a remaining
      contractual  life of 1 year  and  Reload  Plan  outstanding  shares  had a
      remaining contractual life of 4.5 years.


<PAGE>


                                  AMBANC CORP.
              Notes To Consolidated Financial Statements-Continued
                        December 31, 1997, 1996 and 1995
         (Dollar amounts in thousands, except share and per share data)


Note 13 - STOCK OPTION PLAN - Continued

      The Corporation  applies APB Opinion No. 25,  "Accounting for Stock Issued
      to Employees," and related interpretations in accounting for the plans. No
      compensation  cost has been  recognized  for the plans  because  the stock
      option price is equal to or greater than the fair value at the grant date.
      Had  compensation  cost for the plans  been  determined  based on the fair
      value at the grant dates for awards  under the plans  consistent  with the
      fair value method of FAS 123,  "Accounting for Stock-Based  Compensation,"
      the  Corporation's  net income  and net  income per share  would have been
      reported as indicated below:


                                              Years Ended December 31,
                                                  1997         1996
                                                 ------       ------
               Net income:
                  As reported                   $ 8,286      $ 7,966
                  Pro forma                     $ 8,250      $ 7,966

               Net income per share:
                  As reported                   $  1.19      $  1.14
                  Pro forma                     $  1.18      $  1.14


      The fair value of options  granted was  approximately  $4.40 per option in
      1997. The fair value of the option grants are estimated on the date of the
      grant  using an  option  pricing  model  with the  following  assumptions:
      dividend  yield of  1.66%,  risk-free  interest  rate of  5.91%,  expected
      volatility  of 23% and expected  life of 2.5 years.  The pro forma amounts
      are not  representative  of the effects on reported  net income for future
      years.

      Additionally,  under  provisions  of the Option Plan,  stock  appreciation
      rights  have been  granted  coinciding  with the  number of stock  options
      granted.  The value of each stock  appreciation right at any time is equal
      to 50% of the excess of the fair value of one share of common stock of the
      Corporation  over the  exercise  price of the option to which it  relates.
      Employee benefits  charged/(credited) to operations in 1997, 1996 and 1995
      includes $325, $(1) and $12 related to stock appreciation rights.



<PAGE>


                                  AMBANC CORP.
              Notes To Consolidated Financial Statements-Continued
                        December 31, 1997, 1996 and 1995
         (Dollar amounts in thousands, except share and per share data)


Note 14 - INCOME TAXES

     Income taxes consist of the following:
<TABLE>

                                                                1997      1996      1995
                                                                ----      ----      ----
               <S>                                          <C>       <C>       <C>     
               Current expense                               $  3,993  $  3,619  $  3,246
               Deferred benefit                                  (407)     (337)     (409)
               Change in valuation allowance                                         (212)
                                                               ------    ------    ------
                   Income taxes                              $  3,586  $  3,282  $  2,625
                                                               ======    ======    ======
</TABLE>


     Income taxes applicable to security  transactions  were $18, $18 and $14 in
     1997, 1996 and 1995.

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

<TABLE>


                                                                 1997      1996      1995
                                                                 -----     -----     -----
             <S>                                              <C>       <C>       <C>     
               Statutory rate applied to income               $  4,037  $  3,824  $  3,288
               Adjustments
                  Tax-exempt interest income                    (1,083)   (1,053)   (1,048)
                  Non-deductible interest                          167       160       144
                  State income taxes                               443       531       374
                  Merger expenses                                                      111
                  Other                                             22      (180)      (32)
                  Change in valuation allowance                                       (212)
                                                                  -----     -----     -----
                     Total income taxes                        $  3,586  $  3,282  $  2,625
                                                                  =====     =====     =====
</TABLE>

     The Corporation's deferred income tax assets and liabilities consist of the
     following:


                                                                1997      1996
                                                                ----      ----
               Deferred tax assets
                 Allowance for loan losses                   $  1,608  $  1,175
                 Accrued employee benefits                        783       519
                 Alternative minimum tax carryforward              -        166
                 Other                                             -         17
                                                                -----     -----
                                                                2,391     1,877
                                                                -----     -----
               Deferred tax liabilities
                 Depreciation                                     738       684
                 Unrealized gain on securities
                   available for sale                             607       165
                 Mark-to-market adjustment on
                   loans held for sale                            234       225
                 Accretion of securities discount                 156       131
                 Other                                             20        -
                                                                -----     -----
                                                                1,755     1,205
                                                                -----     -----
                   Net deferred tax asset                    $    636  $    672
                                                                  ===       ===


<PAGE>


                                  AMBANC CORP.
              Notes To Consolidated Financial Statements-Continued
                        December 31, 1997, 1996 and 1995
         (Dollar amounts in thousands, except share and per share data)


Note 15 - COMMITMENTS AND CONTINGENT LIABILITIES

      The  Corporation  leases various  facilities  and equipment.  These leases
      expire at various  times  during the years 1998  through 2008 with renewal
      options  through  the  year  2038.   Certain  leases  are  with  companies
      controlled by directors of the Corporation and its subsidiaries  which had
      total  lease  payments  of $2, $30 and $42 in 1997,  1996 and 1995.  Total
      rental expense for all leases for the years 1997, 1996 and 1995, was $379,
      $308 and  $166.  The  following  is a  schedule  of future  minimum  lease
      payments:

                              1998         $ 308
                              1999           201
                              2000           195
                              2001           136
                              2002           113
                              Thereafter   1,314
                                           -----
                              Total      $ 2,267
                                           =====

      In the ordinary course of business, the Corporation's banking subsidiaries
      have loans, commitments and contingent liabilities, such as guarantees and
      commitments to extend credit,  which are not reflected in the consolidated
      balance sheets. The Corporation's  exposure to credit loss in the event of
      nonperformance  by  the  other  party  to  the  financial  instrument  for
      commitments to make loans and standby  letters of credit is represented by
      the contractual amount of those instruments. The Corporation uses the same
      credit policy to make such  commitments  as is used for  on-balance  sheet
      items.  Outstanding loan commitments and customers' unused lines of credit
      amounted  to  $90,475  and   $100,546  at  December  31,  1997  and  1996.
      Outstanding  standby  letters of credit were $9,940 and $9,328 at December
      31, 1997 and 1996.  Since many  commitments  to make loans expire  without
      being used, the  outstanding  amount of commitments  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.

      The  Corporation  was  required to have $8,261 and $8,137 at December  31,
      1997 and 1996,  on deposit with the Federal  Reserve or as cash on hand or
      on deposit with other banks. These reserves do not earn interest.


Note 16 - SHAREHOLDERS' EQUITY

      A 2-for-1 stock split effected in the form of a stock dividend was paid on
      August  29,  1997.  A 5% stock  dividend  was paid on  December  8,  1997,
      December 2, 1996,  and November 30,  1995,  and all average  share and per
      share amounts have been retroactively  adjusted to reflect the stock split
      and stock dividends.

      The directors of the  Corporation are being paid in stock per the Director
      Stock Grant Plan approved by the  shareholders in 1996. The  Corporation's
      stock is  purchased  routinely  on the market and held as  treasury  stock
      until it is reissued as payment of director fees each quarter.



<PAGE>


                                  AMBANC CORP.
              Notes To Consolidated Financial Statements-Continued
                        December 31, 1997, 1996 and 1995
         (Dollar amounts in thousands, except share and per share data)

Note 17 - EARNINGS PER SHARE (EPS)

      The  following  is a  reconciliation  of  earnings  per  share to  diluted
earnings per share for the years ended December 31:

<TABLE>
                                         1997                           1996                          1995
                                         ----                           ----                          ---- 
                                                            Per-Share                     Per-Share                    Per-Share
                                        Income    Shares    Amount     Income    Shares    Amount    Income    Shares    Amount
                                        ------    ------    ------     ------    ------    ------    ------    ------    ------
     <S>                               <C>       <C>       <C>        <C>       <C>        <C>       <C>     <C>         <C>   
      EPS
      Income available to
        common stockholders             $8,286  6,970,072   $ 1.19    $7,966    6,965,433   $ 1.14   $7,045   6,964,593  $ 1.01
      Effect of dilutive
        securities-stock options                   11,672                          20,679                        20,985

      Diluted EPS
      Income available to
        common stockholders             $8,286  6,981,744   $ 1.19    $7,966    6,986,112   $ 1.14   $7,045   6,985,578  $ 1.01

</TABLE>


Note 18 - REGULATORY MATTERS

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

      Quantitative measures established by regulation to ensure capital adequacy
      require the Corporation to maintain  minimum amounts and ratios (set forth
      in the  table  below)  of Total  and Tier 1  Capital  (as  defined  in the
      regulations) to risk-weighted assets (as defined),  and of Tier 1 Leverage
      Capital (as defined) to average  assets (as  defined).  As of December 31,
      1997, the Corporation met all capital adequacy requirements to which it is
      subject.

      As of December 31, 1997, the most recent  notifications from the Office of
      the Comptroller of the Currency  categorized the bank subsidiaries as well
      capitalized under the regulatory  framework for prompt corrective  action.
      To be  categorized  as well  capitalized,  the  Corporation  must maintain
      minimum Total Capital,  Tier 1 Capital and Tier 1 Leverage  Capital ratios
      as set forth in the table.  There are no  conditions  or events since that
      notification  that  management  believes  have  changed the  institutions'
      categories.

      The Corporation's consolidated and individual banking subsidiaries' actual
      capital amounts and ratios are also presented in the table.



<PAGE>


                                  AMBANC CORP.
              Notes To Consolidated Financial Statements-Continued
                        December 31, 1997, 1996 and 1995
         (Dollar amounts in thousands, except share and per share data)

Note 18 - REGULATORY MATTERS - Continued

<TABLE>

                                                                                                              To Be Well
                                                                                          For Capital      Capitalized Under
                                                                                           Adequacy        Prompt Corrective
                                                                        Actual             Purposes        Action Provisions
                                                                        ------             --------        -----------------
                                                                    Amount    Ratio     Amount    Ratio     Amount     Ratio
                                                                    ------    -----     -----     -----     ------     -----
              <S>                                                  <C>       <C>       <C>       <C>      <C>        <C>
               As of December 31, 1997
                 Total Capital (to Risk-Weighted Assets)
                   Consolidated                                    $ 80,959  14.33%    $ 45,199  8.00%        N/A       N/A
                   AmBank Indiana, N.A.                              46,214  12.46       29,673  8.00     $ 37,091    10.00%
                   AmBank Illinois, N.A.                             32,335  16.90       15,309  8.00       19,137    10.00

                 Tier 1 Capital (to Risk-Weighted Assets)
                   Consolidated                                    $ 75,531  13.37%    $ 22,599  4.00%       N/A        N/A
                   AmBank Indiana, N.A.                              42,755  11.53       14,836  4.00     $ 22,254     6.00%
                   AmBank Illinois, N.A.                             30,366  15.87        7,655  4.00       11,482     6.00

                 Tier 1 Leverage Capital (to Average Assets)
                   Consolidated                                    $ 75,532  10.40%    $ 29,054  4.00%       N/A        N/A
                   AmBank Indiana, N.A.                              42,755   9.50       18,006  4.00     $ 22,508     5.00%
                   AmBank Illinois, N.A.                             30,375  10.90       11,146  4.00       13,933     5.00

           
</TABLE>

<TABLE>
                                                                                                              To Be Well
                                                                                          For Capital      Capitalized Under
                                                                                           Adequacy        Prompt Corrective
                                                                        Actual             Purposes        Action Provisions
                                                                        ------             --------        -----------------
                                                                    Amount    Ratio     Amount    Ratio     Amount     Ratio
                                                                    ------    -----     -----     -----     ------     -----
              <S>                                                  <C>       <C>       <C>       <C>      <C>        <C>
                As of December 31, 1996
                 Total Capital (to Risk-Weighted Assets)
                   Consolidated                                    $ 75,594  14.33%   $ 42,195  8.00%         N/A      N/A
                   AmBank Indiana, N.A.                              43,308  12.82      27,024  8.00     $ 33,780    10.00%
                   AmBank Illinois, N.A.                             31,217  16.49      15,141  8.00       18,926    10.00

                 Tier 1 Capital (to Risk-Weighted Assets)
                   Consolidated                                    $ 69,964  13.26%   $ 21,098  4.00%         N/A       N/A
                   AmBank Indiana, N.A.                              39,823  11.79      13,512  4.00     $ 20,268     6.00%
                   AmBank Illinois, N.A.                             29,072  15.36       7,570  4.00       11,356     6.00

                 Tier 1 Leverage Capital (to Average Assets)
                   Consolidated                                    $ 69,964  10.00%   $ 27,993  4.00%         N/A      N/A
                   AmBank Indiana, N.A.                              39,823   9.37      16,997  4.00     $ 21,247     5.00%
                   AmBank Illinois, N.A.                             29,072  10.54      11,028  4.00       13,785     5.00
</TABLE>

      The  Corporation  and its  wholly-owned  subsidiary  banks are  subject to
      regulations  which require the  maintenance of certain capital levels and,
      as a result, limit the amount of dividends which may be paid by the banks.
      IND and ILL are regulated by the  Comptroller  of the Currency,  while the
      Corporation  is  regulated  by  the  Federal   Reserve  Board.   The  most
      restrictive of the regulations  generally requires the banks to maintain a
      minimum  leverage  capital  to total  asset  ratio.  As a  result  of this
      limitation,  approximately  $36,538 of the $75,953 equity of the banks was
      restricted and unavailable for the payment of dividends to the Corporation
      at December 31, 1997.


<PAGE>


                                  AMBANC CORP.
              Notes To Consolidated Financial Statements-Continued
                        December 31, 1997, 1996 and 1995
         (Dollar amounts in thousands, except share and per share data)

Note 18 - REGULATORY MATTERS - Continued

      Additionally, the amount of dividends the banks may pay to the Corporation
      in  a  single  year  without   approval  from  regulators  is  limited  by
      regulation.  Under the most restrictive regulations,  approximately $9,087
      of  undistributed  earnings of the banks was available for distribution to
      the Corporation at December 31, 1997. As a practical matter, dividends are
      ordinarily  restricted to a lesser amount  because of the need to maintain
      an adequate capital structure.

      On  September  30,  1996,  the  President   signed  into  law  an  omnibus
      appropriations act for fiscal year 1996 that included, among other things,
      the recapitalization of the Savings Association Insurance Fund (SAIF) in a
      section entitled, "The Deposit Insurance Funds Act of 1996" (the Act). The
      Act included a provision where all insured  depository  institutions would
      be charged a one-time special assessment on their SAIF-assessable deposits
      as of March 31, 1995.  The  Corporation  recorded a pre-tax charge of $191
      during the year ended  December 31,  1996,  which  represented  65.7 basis
      points of the March 31, 1995, assessable deposits.



<PAGE>


                                  AMBANC CORP.
              Notes To Consolidated Financial Statements-Continued
                        December 31, 1997, 1996 and 1995
         (Dollar amounts in thousands, except share and per share data)


Note 19 - FAIR VALUES OF FINANCIAL INSTRUMENTS

      The following  table shows the carrying amount and estimated fair value of
      financial  instruments  held by the  Corporation  at December 31, 1997 and
      1996:

<TABLE>

                                                  December 31, 1997       December 31, 1996
                                                  -----------------       -----------------
                                                Carrying   Estimated    Carrying   Estimated
                                                 Amount    Fair Value    Amount    Fair Value  
                                                 ------    ----------    ------    ---------
               <S>                            <C>         <C>         <C>         <C>       
               Cash and cash equivalents      $   44,753  $   44,753  $   32,284  $   32,284
               Interest-bearing deposits
                 in other banks                      298         298         590         590
               Securities available for sale     150,219     150,219     170,724     170,724
               Loans held for sale                 2,443       2,474       2,350       2,404
               Loans, less allowance for
                 loan losses                     535,005     536,070     488,837     488,033
               Demand and savings deposits       290,158     290,158     281,346     281,346
               Time deposits                     375,527     375,709     352,210     353,556
               Short-term borrowings               6,747       6,747       5,285       5,285
               Long-term debt                      2,031       2,031       2,309       2,309

</TABLE>

      For  purposes  of the above  disclosures  of  estimated  fair  value,  the
      following  assumptions  were used as of December  31,  1997 and 1996.  The
      estimated  fair  value  for cash and cash  equivalents  is  considered  to
      approximate  cost.  The  estimated  fair value for  securities is based on
      quoted  market  values for the  individual  securities  or for  equivalent
      securities.  The  estimated  fair value for  commercial  loans is based on
      estimates of the  difference  in interest  rates the bank would charge the
      borrowers  for  similar  loans  with  similar  maturities  applied  for an
      estimated time period until the loan is assumed to reprice or be paid. The
      estimated  fair value for other loans is based on  estimates  of the rates
      the bank would charge for similar  such loans  applied for the time period
      until estimated repayment. The estimated fair value for demand and savings
      deposits is based on their  carrying  value.  The estimated fair value for
      time  deposits  is based on  estimates  of the rates the bank would pay on
      such deposits  applied for the time period until  maturity.  The estimated
      fair value for short-term  borrowings is considered to  approximate  cost.
      Rates  currently  available to the Corporation for debt with similar terms
      and remaining  maturities  are used to estimate the fair value of existing
      long-term debt. The estimated fair value for other  financial  instruments
      and  off-balance  sheet  loan  commitments  approximate  cost  and are not
      considered  significant to this presentation because the majority of these
      items are  primarily  at  variable  rates  and are not made for  long-term
      periods.

      While these estimates of fair value are based on management's  judgment of
      the  most  appropriate  factors,  there  is no  assurance  that  were  the
      Corporation  to have disposed of such items at December 31, 1997 and 1996,
      the  estimated  fair values would  necessarily  have been achieved at that
      date, since market values may differ  depending on various  circumstances.
      The  estimated  fair  values at  December  31,  1997 and 1996,  should not
      necessarily be considered to apply at subsequent dates.

      In addition,  other assets and liabilities of the Corporation that are not
      defined  as   financial   instruments   are  not  included  in  the  above
      disclosures,   such  as  property  and  equipment.   Also,   non-financial
      instruments typically not recognized in financial statements  nevertheless
      may have  value  but are not  included  in the  above  disclosures.  These
      include,  among other items, the estimated  earnings power of core deposit
      accounts,  the earnings  potential of loan servicing rights,  the earnings
      potential of trust  departments,  a trained work force,  customer goodwill
      and similar items.


<PAGE>

                                  AMBANC CORP.
              Notes To Consolidated Financial Statements-Continued
                        December 31, 1997, 1996 and 1995
         (Dollar amounts in thousands, except share and per share data)

Note 20 - PARENT COMPANY STATEMENTS

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

                            Condensed Balance Sheets
                           December 31, 1997 and 1996

                                                           1997        1996
                                                          ------      ------
       ASSETS
       Cash on deposit with subsidiaries               $      648  $      806
       Investment in bank subsidiaries                     75,952      71,114
       Investment in non-bank subsidiaries                    413         494
       Premises, furniture and equipment, net                 665         178
       Other assets                                         1,797         243
                                                           ------      ------
           Total assets                                $   79,475  $   72,835
                                                           ======      ======

        LIABILITIES
        Other liabilities                              $    1,121  $      652
                                                            -----        ----
        SHAREHOLDERS' EQUITY
        Common stock                                       69,857      33,163
        Treasury stock                                        (1)        (21)
        Retained earnings                                   7,421      38,731
        Unrealized gain/(loss) on securities
          available for sale, net of deferred tax           1,077         310
                                                            -----        ----
             Total shareholders' equity                    78,354      72,183
                                                           ------      ------
             Total liabilities and 
             shareholders' equity                      $   79,475  $   72,835
                                                           ======      ======

                         Condensed Statements Of Income
              For the years ended December 31, 1997, 1996 and 1995
<TABLE>

                                                                   1997      1996      1995
                                                                  ------    ------     -----
               <S>                                             <C>        <C>        <C>   
               OPERATING INCOME
               Dividends received from bank subsidiaries        $  4,960  $  3,450  $  2,678
               Rental income
               Other income                                           -          8        35
                                                                   -----     -----     -----
                     Total operating income                        4,960     3,458     2,713
                                                                   -----     -----     -----
               OPERATING EXPENSE
                  Other expenses                                   2,992     1,871     2,315
                                                                   -----     -----     -----
                    INCOME BEFORE INCOME TAXES AND EQUITY IN
                    UNDISTRIBUTED EARNINGS OF SUBSIDIARIES         1,968     1,587       398
               Income tax credit                                    (446)     (354)     (351)
                                                                   ------    ------    ------
                     INCOME BEFORE EQUITY IN UNDISTRIBUTED
                     EARNINGS OF SUBSIDIARIES                      2,414     1,941       749
               Equity in undistributed earnings
                  of subsidiaries                                  5,872     6,025     6,296
                                                                   -----     -----     -----
                     NET INCOME                                 $  8,286  $  7,966  $  7,045
                                                                   =====     =====     =====
</TABLE>



<PAGE>


                                  AMBANC CORP.
              Notes To Consolidated Financial Statements-Continued
                        December 31, 1997, 1996 and 1995
         (Dollar amounts in thousands, except share and per share data)


Note 20 - PARENT COMPANY STATEMENTS - Continued

                       Condensed Statements Of Cash Flows
              For the years ended December 31, 1997, 1996 and 1995
<TABLE>
 
                                                                1997         1996        1995
                                                               ------        -----       -----
               <S>                                           <C>          <C>        <C>   
               CASH FLOWS FROM OPERATING ACTIVITIES
               Net income                                     $  8,286    $  7,966    $  7,045
               Adjustments to reconcile net income to
               net cash from operating activities:
                     Depreciation                                   92          47          19
                     Equity in undistributed income of
                        subsidiaries                            (4,960)     (3,450)     (2,678)
                     Other liabilities                             469         (98)        547
                     Other assets                               (1,554)         33          13
                                                                -------      ------      -----
                     Net cash from operating activities          2,333       4,498       4,946
                                                                -------      ------      -----

               CASH FLOWS FROM INVESTING ACTIVITIES
               Investment in subsidiaries                          969      (1,646)     (2,664)
               Purchase of furniture and equipment                (579)        (27)       (147)
                                                                  -----     -------     -------
                     Net cash from investing activities            390      (1,673)     (2,811)
                                                                  ----      -------     -------

               CASH FLOWS FROM FINANCING ACTIVITIES
               Dividends paid                                   (2,887)     (2,653)     (2,144)
               Payment for fractional shares                       (14)        (18)        (12)
               Treasury stock                                       20         (21)         37
               Issuance of stock for dividend reinvestment
                  and stock purchase plan                            -           -          12
                                                                -------      ------      ------
                     Net cash from financing activities         (2,881)     (2,692)     (2,107)
                                                                -------      ------      ------

               NET CHANGE IN CASH AND CASH EQUIVALENTS            (158)        133          20

               CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR      806         673         645
                                                                  ----         ---         ---

               CASH AND CASH EQUIVALENTS AT END OF YEAR       $    648    $    806    $    673
                                                                  ====        ====        ====
</TABLE>

<PAGE>

The  management  of  AMBANC  Corp.  is  responsible  for  the  integrity  of all
information  contained  in  the  accompanying  financial  statements  and  other
sections of this annual report.  The statements have been prepared in conformity
with generally accepted accounting principles and include amounts that are based
on management's best estimates and judgment.

In meeting  its  responsibility,  management  relies on the  systems of internal
control  which are  designed  to provide  reasonable  assurance  that assets are
safeguarded  and that  transactions  are  properly  executed and  recorded.  The
development and  dissemination of written  policies and procedures,  appropriate
segregation  of duties and  responsibilities  and the conducting of a continuing
comprehensive  program of internal  audits provide  further  enhancements to the
systems of internal control.

The Audit  Committee  of the Board of  Directors,  consisting  solely of outside
directors,  meets  periodically  with management,  the internal auditors and the
independent  auditors to review  audits,  financial  reporting and other related
matters.  The internal auditors and the independent  auditors have full and free
access to the Audit Committee to further assure their independence.

The financial statements have been audited by Deloitte & Touche LLP, independent
auditors for the years ended December 31, 1997, 1996 and 1995. They were engaged
to audit the financial statements and to express an opinion thereon. Their audit
was conducted in accordance with generally accepted auditing standards.





Robert G. Watson                               Troy D. Stoll, CPA
Chairman of the Board,                         Secretary, Treasurer and C.F.O.
President and C.E.O.