UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    Form 10-K

                  Annual Report Pursuant to Section 13 or 15(d)
              of The Securities Exchange Act of 1934 [Fee Required]

   For the fiscal year ended December 31, 1995 Commission File Number 0-13030
                           ------------------ -------

                              TRANS FINANCIAL, INC.
             (Exact name of registrant as specified in its charter)

                               Kentucky 61-1048868
      (State or other jurisdiction of (I.R.S. Employer Identification No.)
                         incorporation or organization)

              500 East Main Street, Bowling Green, Kentucky 42101
               (Address of principal executive offices) (Zip Code)

       Registrant's telephone number, including area code: (502)781-5000

  Securities registered pursuant to Section 12(b) of the Act: None Securities
                registered pursuant to Section 12(g) of the Act:
                      Common Stock, no par value per share
                                (Title of Class)
                         Preferred Stock Purchase Rights
                                (Title of Class)

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

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

The aggregate market value of the voting stock held by nonaffiliates of the 
registrant on March 1, 1996: $159,883,000.

The number of shares outstanding of the issuer's class of common stock on
March 26 1996: 11,301,796 shares.

Document Incorporated By Reference
Portions  of  the  registrant's  Proxy  Statement  for  the  Annual  Meeting  of
Shareholders  to be held on April 22, 1996 are  incorporated  by reference  into
Part III of this report.

The Exhibit Index is on page 58. This filing  contains 71 pages  (including this
facing sheet).

<PAGE>







                                                           


                                TABLE OF CONTENTS








   Item                                                                    Page
                                     Part I

   1.  Business..............................................................3
   2.  Properties............................................................6
   3.  Legal Proceedings.....................................................6
   4.  Submission of Matters to a Vote of Security Holders...................6
   4a. Executive Officers of the Registrant..................................7

                                     Part II

   5.  Market for the Registrant's Common Equity and Related Shareholder 
       Matters..............................................................9
   6.  Selected Financial Data..............................................9
   7.  Management's Discussion and Analysis of Financial Condition 
       and Results of Operations............................................9
   8.  Financial Statements and Supplementary Data..........................9
   9.  Changes in and Disagreements with Accountants on Accounting 
       and Financial Disclosure.............................................9

                                    Part III

   10. Directors and Executive Officers of the Registrant...................10
   11. Executive Compensation...............................................10
   12. Security Ownership of Certain Beneficial Owners and Management.......10
   13. Certain Relationships and Related Transactions.......................10

                                     Part IV

   14. Exhibits, Financial Statement Schedules and Reports on Form 8-K......10
   Signatures...............................................................11


<PAGE>


                                     Part I

Item 1. Business
The Company and the Banks
     Trans Financial, Inc.("the company") is a bank and savings and loan 
holding company registered under the Bank Holding Company Act of 1956 and the
Home Owners' Loan Act, which has two commercial bank subsidiaries  -- Trans 
Financial Bank, National Association ("TFB-KY") and Trans Financial Bank
Tennessee, National Association ("TFB-TN") -- and one thrift subsidiary
-- Trans Financial Bank, F.S.B. ("TFB,FSB").
     During 1995, three commercial bank subsidiaries were merged to form TFB-KY
and two thrift subsidiaries were merged to form TFB,FSB. TFB-KY is headquartered
in Bowling Green, Kentucky; and TFB-TN and TFB,FSB are both headquartered in
Nashville, Tennessee.  Collectively, these three institutions are referred to in
this report as "the banks."
     In addition, the company operates as subsidiaries of TFB-KY a full-service
securities broker/dealer, Trans Financial Investment Services, Inc.; a mortgage
banking company, Trans Financial Mortgage Company; and a full-service travel
agency, Trans Travel, Inc.
     On December 31, 1995, the company had total consolidated assets of $1.796
billion, total loans of $1.259 billion, total deposits of $1.444 billion and
shareholders' equity of $129.8 million.
      On July 6, 1993, in a transaction accounted for as a purchase, the company
acquired Trans Kentucky Bancorp, Pikeville, Kentucky, the holding company for
The Citizens Bank of Pikeville.  At the acquisition date, TFB-Pikeville (the
former Citizens Bank of Pikeville) had total assets of $188.7 million, net loans
of $107.6 million and total deposits of $163.9 million.  The aggregate cost,
including consideration and acquisition costs, totaled $18.8 million.  On
February 1, 1995 TFB-Pikeville was converted to a national bank and its name was
changed to Trans Financial Bank of Pikeville, National Association. On March 24,
1995, TFB-Pikeville and TFB-KY were merged.
     On February 15, 1994, the company merged with Kentucky Community Bancorp.
Inc. ("KCB") of Maysville, Kentucky, the holding company for The State National
Bank, Peoples First Bank, and Farmers Liberty Bank, with combined assets of
approximately $175 million.  Under the terms of the merger the shares of KCB
common stock outstanding were converted into 1,374,962 shares of common stock of
the company.  These three banks were consolidated into the operations of TFB-KY
on March 31, 1994.
     On April 22, 1994, the company merged with Peoples Financial Services, Inc.
("PFS") of Cookeville, Tennessee, the holding company for Peoples Bank and Trust
of the Cumberlands ("Peoples Bank") and Citizens Federal Savings Bank
("Citizens"), with combined assets of approximately $120 million.  Under the
terms of the merger the shares of PFS common stock outstanding were converted
into 1,302,254 shares of common stock of the company. Peoples Bank became TFB-TN
and Citizens was consolidated into the operations of TFB,FSB on July 31, 1994.
On April 21, 1995, the company's savings bank subsidiary in Russellville,
Kentucky, was also merged into TFB,FSB.
     On August 31, 1994, the company merged with FGC Holding Company ("FGC") of
Martin, Kentucky, the holding company for First Guaranty National Bank
("TFB-Martin"),  with approximately $125 million in assets.  Under the terms of
the merger,  the shares of FGC common stock outstanding were converted into
1,050,000 shares of common stock of the company and the shares of FGC preferred
stock were retired.  On March 24, 1995,  TFB-Martin was merged with TFB-Pikevile
and TFB-KY.
     The transactions described in the preceding three paragraphs have been
accounted for using the pooling of interests method of accounting and,
accordingly, all financial data has been restated as if the entities were
combined for all periods presented.
     In January 1994, Trans Travel, Inc, a full-service travel agency, was
organized.  Trans Financial Investment Services, Inc., a full-service securities
broker-dealer, began operations in August 1994. In the fourth quarter of 1994,
Trans Financial Mortgage Company, a mortgage banking company, was formed.
Substantially all mortgage banking activities of TFB,FSB were transferred to
Trans Financial Mortgage Company on April 1, 1995.
     On February 21, 1995, TFB-KY assumed $41 million of deposits and acquired
three branch facilities and $360 thousand of consumer loans.  These deposits and
assets were related to the Bowling Green and Scottsville, Kentucky branches of
Fifth Third Bank of Kentucky, Inc. The two offices located in Bowling Green,
Kentucky were consolidated into existing Trans Financial locations.  TFB-KY's
existing location in Scottsville, Kentucky was consolidated into the other
purchased location.  On September 1, 1995, the company acquired AirLanse Travel,
a Louisville, Kentucky, travel agency, for cash and stock of the company.  On
November 6, 1995, the company acquired for cash the assets of Correspondents
Mortgage Company, L.P., located in Greensboro,  North Carolina.  AirLanse Travel
was consolidated into the operations of Trans Travel, Inc. and Correspondents
Mortgage Company was consolidated into the operations of Trans Financial
Mortgage Company.  These three acquisitions have been accounted for using the
purchase method of accounting and, accordingly, their results of operations and
cash flows have been included in the consolidated financial statements since the
dates of acquisition.  In addition to the deposits assumed, the company received
net cash of $36,815,000 and issued 25,000 shares of common stock in connection
with these acquisitions.
      Interest on domestic, commercial and mortgage loans constitutes the
largest contribution to the operating revenues of the banks. TFB-KY, TFB-TN, and
TFB,FSB provide a full range of corporate and retail banking services, including
the acceptance of deposits for checking, savings and time deposit accounts;
making of secured and unsecured loans to corporations, individuals and others;
issuance of letters of credit; rental of safe deposit boxes; financial
counseling for individuals and institutions; and trust and brokerage services.
     TFB-KY provides a wide variety of personal and corporate trust and
trust-related services, including serving as executor of estates; as trustee
under testamentary and inter-vivos trusts; as guardian of the estates of minors
and incompetents; as escrow agent under various agreements; and as financial
advisor to and custodian for individuals, corporations and others.  Corporate
trust services include serving as registrar and transfer agent for corporate
securities and as corporate trustee under corporate trust indentures.  At
December 31, 1995, approximately $358  million in assets were managed by the
trust department of TFB-KY.
     Trans Financial Mortgage Company originates and purchases mortgage loans
for the purpose of constructing, financing or refinancing one- to four-family
dwellings. Generally, these mortgage loans are then sold in the secondary market
with servicing retained by Trans Financial Mortgage Company.  Trans Financial
Mortgage Company also services mortgage loans for others and for subsidiaries of
the company.  The portfolio of mortgage loans serviced for others totaled $2.2
billion at December 31, 1995.
     Trans Financial Investment Services, Inc. offers a wide range of investment
products and services, including financial planning, mutual funds, annuities,
and individual stocks and bonds to customers of the banks and others. In October
of 1995, Trans Financial introduced its own family of proprietary mutual funds,
the Trans Adviser Funds, which added depth to its lineup of investment products.
Trans Travel offers travel services to customers of the banks and others.
Customers can make travel arrangements by visiting a bank branch office or by
using a tollfree number.  In addition to making travel arrangements for
individual and corporate customers, Trans Travel is packaging its own domestic
and international tours.
     TFB-KY has twenty-eight offices; six located in Bowling Green, Kentucky,
three located in Pikeville, Kentucky, two located in Glasgow, Kentucky, two
located in Scottsville, Kentucky, two located in Morehead, Kentucky, two located
in Maysville, Kentucky, and one located in each of Louisville, Augusta, Cave
City, Dawson Springs, Tompkinsville, Elkhorn City, Meta, Belfry, Virgie, Martin,
and Prestonsburg  in  Kentucky.  TFB-FSB has eleven offices; two in Columbia,
Tennessee, and one each in the Tennessee communities of Tullahoma, Mt. Pleasant,
Manchester,  Rockwood, Kingston, Shelbyville, and Winchester and one each in the
Kentucky communities of Russellville and Auburn.  Trans Financial Mortgage
Company has a mortgage operations center in Tullahoma and loan production
offices in the Tennessee communities of Nashville, Chattanooga, Knoxville, and
Jackson, one in Greensboro, North Carolina, and one in Louisville, Kentucky.
TFB-TN has ten offices; two located in Cookeville, Tennessee, and one located in
each of Nashville, Clarksville, Crossville, Franklin, Lebanon, McMinnville,
Murfreesboro, and Sparta in Tennessee.

Competition
     The deregulation of the banking industry and the enactment in Kentucky and
other states of legislation permitting multi-bank holding companies as well as
interstate banking has created a highly competitive environment for banking in
the company's market area.
     As of June 30, 1995 (the latest date for which competitive information is
available), TFB-KY is the largest financial institution in the Bowling Green
area, with 35% of total deposits for all financial institutions.  TFB-KY is also
the largest financial institution in  Glasgow/Cave City with 40% of total
deposits for all financial institutions.  In the Dawson Springs area, TFB-KY is
the fifth largest financial institution with 6% of total deposits for all
financial institutions.  TFB-KY is the second largest financial institution in
the Scottsville area with 35% of total deposits for all financial institutions.
In the Tompkinsville area,  TFB-KY is the third largest financial institution
with 18% of total deposits for all  financial  institutions.  In the Maysville
area, TFB-KY is the largest financial institution with 37% of total deposits for
all financial institutions. In the Morehead area, TFB-KY ranks first with 33% of
total deposits for all financial institutions.  In the Augusta area, TFB-KY is
the second largest financial institution with 30% of total deposits for all
financial institutions.  TFB-KY is the third largest financial institution in
Pikeville as of June 30, 1995, with 19% of total deposits for all financial
institutions. TFB,FSB is the third largest financial institution in Russellville
with 16% of total deposits for all financial institutions.  TFB-KY is the third
largest financial institution in Floyd County with 27% of total deposits for all
financial institutions.  TFB-TN is the fifth largest financial institution in
Cookeville with 6% of total deposits for all financial institutions.  TFB,FSB is
the second largest financial institution in Tullahoma with 13% of total deposits
for all financial institutions.
     The company actively competes in its markets with other commercial banks
and financial institutions for all types of deposits, loans, trust accounts and
the provision of financial, trust, and other services. The company also competes
generally with insurance companies, savings and loan associations, credit
unions, brokerage firms, other financial institutions, and institutions which
have expanded into the financial market.  Many of these competitors have
resources substantially in excess of those of the company, have broader
geographic markets and higher lending limits than the banks and, therefore, are
able to make larger loans, sell a broader product line, and make more effective
use of advertising than can the company or the banks.

Supervision and Regulation
     Bank holding companies, commercial banks and savings banks are extensively
regulated under both federal and state law.  Any change in applicable law or
regulation may have a material effect on the businesses and prospects of the
company and the banks.
     The company, as a registered bank holding company, is subject to the
supervision of and regulation by the Federal Reserve Board under the Bank
Holding Company Act of 1956.  Also, as a registered savings and loan holding
company, the company is subject to the supervision of and regulation by the
Office of Thrift Supervision ("OTS").
     In addition, the company is subject to the provisions of Kentucky's and
Tennessee's banking laws regulating bank acquisitions and certain activities of
controlling bank shareholders.
     TFB-KY and TFB-TN are subject to the supervision of, and regular
examination by, the Office of the Comptroller of the  Currency.  TFB,FSB is
subject to the supervision of, and regular examination by, the OTS. The Federal
Deposit Insurance Corporation insures the deposits of the banks to the current
maximum of $100,000 per depositor.
      The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
(the "Act"), when fully phased in, will remove state law barriers to interstate
bank acquisitions and will permit the consolidation of interstate banking
operations.  Under the Act, effective September 29, 1995, adequately capitalized
and managed bank holding companies may acquire banks in any state, subject to
(i) Community Reinvestment Act compliance, (ii) federal and state antitrust laws
and deposit concentration limits, and (iii) state laws restricting the
acquisition of a bank that has been in existence for less than a minimum period
of time (up to five years).  The Act's interstate consolidation and branching
provisions will become operative on June 1, 1997, although any state can, prior
to that time, adopt legislation to accelerate interstate branching or prohibit
it completely.  The Act's interstate consolidation and branching provisions will
permit banks to merge across state lines and, if state laws permit de novo
branching, to establish a new branch as its initial entry into a state.


Statistical Information
     Certain statistical information is included in a separate section of this
report on pages 18 through 34 and on page 47, and those pages are incorporated
herein by reference.

       Description of Statistical Information                           Page(s)

     Average Consolidated Balance Sheets and Net Interest Analysis........18-19
     Analysis of Year-to-Year Changes in Net Interest Income.................20
     Loans Outstanding.......................................................23
     Loan Maturities and Interest Rate Sensitivity...........................25
     Nonperforming Assets (Including Potential Problem Loans)................26
     Summary of Loan Loss Experience......................................27-28
     Allocation of Allowance for Loan Losses.................................28
     Allocation of Year-End Allowance for Loan Losses and Percentage
        of Each Type of Loan to Total Loans..................................28
     Carrying Value of Securities............................................29
     Maturity Distribution of Securities Available for Sale..................29
     Maturity of Time Deposits of $100,000 or More...........................30
     Short-Term Borrowings...................................................31
     Consolidated Statistical Information....................................34
     Impact of Nonaccrual Loans on Interest Income(Footnote 7, paragraph 2)..47


Item 2. Properties
     The main  banking  office of  TFB-KY,  which also  serves as the  principal
office of the  company,  is  located  at 500 East Main  Street,  Bowling  Green,
Kentucky 42101. In addition,  TFB-KY serves customer needs at twenty-eight other
locations.  All locations,  except for the  Louisville  office (which is a sales
center for trust and investment  services,  corporate banking,  mortgage lending
and travel  services) and the Nashville  office (which provides trust services),
offer a full range of banking  services and most are equipped  with an automated
teller machine for 24-hour  banking  services.  TFB-KY also operates a telephone
Customer Care Center and an operations center. TFB-KY owns all of the properties
at which it conducts its business  except the Ashley Circle and  Nashville  Road
locations in Bowling Green,  the Louisville  sales center,  the Nashville  sales
center,  the Virgie  branch,  and one of its Pikeville  branches (the North Mayo
trail branch).  TFB-KY also leases  property in Bowling Green for its operations
center and owns the facility in which its Customer Care Center operates.
       TFB,FSB owns all the properties at which it conducts business except the
Auburn office.   Trans Financial Mortgage Company leases the property in
Tullahoma, Tennessee, which houses its operations center, with the right to
receive the deed to the propery upon completion of the lease, and also leases
space in Jackson, Chattanooga, Nashville, Knoxville, Louisville, and Greensboro
for its loan production offices.
          TFB-TN owns all the  properties at which it conducts business except
the Franklin and Nashville locations.

     Note 8 to the company's consolidated financial statements included on page
47 of this report contains additional information relating to amounts invested
in premises and equipment.

Item 3. Legal Proceedings
     In the ordinary course of operations, the banks are defendants in various
legal proceedings. In the opinion of management, there is no proceeding pending
or, to the knowledge of management, threatened in which an adverse decision
could result in a material adverse change in the business or consolidated
financial position of the company or the banks.


Item 4. Submission of Matters to a Vote of Security Holders
     No matters were submitted to a vote of security holders during the last
quarter of the period covered by this report.



<PAGE>



Item 4a. Executive Officers of the Registrant
     The following table sets forth the name, age and position with the company
and the banks of the executive officers of the company as of December 31, 1995.
Officers of the company and the banks are elected annually.

                      Served as
                    an Executive                 Position with the
Name                Officer Since    Age       Company and the Banks

Douglas M. Lester      1984          53        Chairman of the Board,President
                                               and Chief Executive Officer of 
                                               the company; Chairman of the 
                                               Board and Chief Executive        
                                               Officer of TFB-KY; Director of  
                                               TFB-KY, Trans Financial Mortgage 
                                               Company, Trans Financial 
                                               Investment Services, Inc., and
                                               Trans Travel, Inc.               
Vince A. Berta         1993          37        Executive Vice President of the  
                                               company; Director of TFB,FSB
Barry D. Bray          1984          49        Executive Vice President, Chief 
                                               Credit Officer and Director of 
                                               the company; Chief Credit Officer
                                               and Director of TFB-KY and TFB-
                                               TN; Chief Credit Officer of TFB,
                                               FSB
Ledean Hamilton        1995          63        President and director of Trans 
                                               Travel, Inc.
Roger E. Lundin        1987          51        Senior Vice President and 
                                               Director of Human Resources of 
                                               the company
Edward R. Matthews     1995          34        Chief Financial Officer and 
                                               Treasurer of the company; 
                                               Treasurer of TFB-KY, TFB-TN, and
                                               TFB,FSB
Michael J. Moser       1994          49        Senior Vice President and 
                                               Director of Marketing for the 
                                               company
Susan Newkirk-Moore    1995          45        Executive Vice President of the 
                                               company
Michael L. Norris      1995          42        President and director of Trans 
                                               Financial Mortgage Company
Dena R. Schaaf         1992          39        Senior Vice President of Risk  
                                               Management and Compliance of the 
                                               company; Director of TFB-TN
Jay B. Simmons         1993          39        Senior Vice President, General
                                               Counsel and Secretary of the 
                                               company; Director of TFB,FSB;
                                               Senior Vice President of TFB-KY, 
Ronald Szejner         1995          47        Executive Vice President and 
                                               Chief Trust Officer of the 
                                               company and of TFB-KY
     All of the above-mentioned executive officers have been with the company
for more than five years, except for the following:
        Mr. Berta joined the company in April 1993.  Prior to that he was
Vice President and Manager of Functional Control with PNC Bank.
        Mr. Matthews joined the company in January 1994.  Prior to that, he was
Chief Financial Officer for First Union National Bank of Tennessee for eighteen
months.  Prior to that he held positions in commercial lending and credit
administration for First Union National Bank of North Carolina.
        Mr. Moser joined the company in July 1994.  Prior to that, he was Senior
Vice President and Director of Corporate Marketing for West One Bancorp in 
Boise, Idaho.
        Ms. Newkirk-Moore joined the company in August, 1995. Prior to that, she
was an Assistant Professor at the University of Louisville College of Business 
for three years.  Prior to that, she was Vice President and Director of 
Education for Kentucky Bankers Association.
        Mr. Norris joined the company in July, 1993.  Prior to that, he was
responsible for all mortgage servicing activities at PNC Mortgage Servicing 
Company.
        Ms. Schaaf joined the company in November 1992.  Prior to that, she was 
Examiner-In-Charge of Asset Quality for regional banks with the Office of 
Comptroller of Currency.
        Mr. Simmons joined the company in November 1993. Prior to that, he was
a partner in a Denver law firm, specializing in financial institutions law, and
was a vice president on the legal staff of Colorado National Bankshares, Inc.
        Mr. Szejner joined the company in March 1995.  Prior to that, he was
President and Chief Executive Officer of First Michigan Bank Brokerage Services
for eighteen months.  He was Vice President and Director of Marketing for First
Michigan Bank Corporation from October 1991 until January 1994. From July 1991
until October 1991, he was Vice President of Mid America National Bank in
Chicago. He served as Vice President of American National Corporation in Chicago
from 1977 until July 1991.
     None of the above officers is related to another and there are no
arrangements or understandings between them and any other person pursuant to
which any of them was elected as an officer, other than  arrangements or
understandings with directors or officers of the company acting solely in their
capacities as such, and other than the employment agreement between Mr. Lester
and the company and TFB-KY, which became effective January 1, 1991.



<PAGE>



                                     Part II

Item 5. Market for the Registrant's Common Equity and Related Shareholder 
Matters
     The  registrant's common stock is traded on the NASDAQ National Market
System under the symbol TRFI.  As of December 31, 1995 there were 1,810
shareholders of record.
     Following is a summary of market prices and dividends declared for the
registrant's common stock for the quarterly periods indicated:

                                   Stock Price
                                   High              Low        Dividend
     First quarter, 1994         $17.25            $14.75         $.14
     Second quarter, 1994         16.00             12.75          .14
     Third quarter, 1994          16.25             15.25          .14
     Fourth quarter, 1994         15.9375           12.75          .14
     First quarter, 1995          15.25             12.75          .15
     Second quarter, 1995         15.50             14.00          .15
     Third quarter, 1995          17.875            15.00          .15
     Fourth quarter, 1995         18.125            16.75          .15

     Additional information for this item is included in Note 10 to the
consolidated financial statements on pages 49 and 50 of this report.


Item 6. Selected Financial Data
     The information for this item is included in the section entitled
"Consolidated Statistical Information" on page 34 of this report.


Item 7. Management's Discussion and Analysis of Financial Condition and Results 
of Operations
     The information for this item is included in the section entitled
"Management's Discussion and Analysis," on pages 15 through 34 of this report.


Item 8. Financial Statements and Supplementary Data
     The following consolidated financial statements of the registrant and
report of independent auditors are included in a separate section of this report
on pages 35 through 57:
     Report of KPMG Peat Marwick LLP, Independent Auditors
     Consolidated Balance Sheets - December 31, 1995 and 1994
     Consolidated Statements of Income - Years ended December 31, 1995, 1994 and
     1993
     Consolidated Statements of Changes in Shareholders' Equity - Years ended
     December 31, 1995, 1994 and 1993  
     Consolidated  Statements of Cash Flows - Years ended December 31, 1995,
     1994 and 1993  
     Notes to Consolidated Financial Statements

     Additional information for this item is included in the table entitled
"Quarterly Results of Operations" on page 33 of this report.


Item 9. Changes in and Disagreements with Accountants on Accounting and 
        Financial Disclosure
     None.



                                    Part III

Item 10. Directors and Executive Officers of the Registrant
     The information set out in the sections entitled "Voting Securities and
Ownership Thereof" and "Election of Directors" of the registrant's Proxy
Statement on pages 2 through 7 and the information set out in the section
entitled "Executive Officers of the Registrant" on pages 7 and 8 of Part I of
this report are incorporated herein by reference.


Item 11. Executive Compensation
     The information set out in the section entitled "Executive Compensation and
Other Information" of the registrant's Proxy Statement at pages 8 through 16 is
incorporated herein by reference.


Item 12. Security Ownership of Certain Beneficial Owners and Management
     The information setout in the section entitled "Voting Securities and
Ownership Thereof" of the registrant's Proxy Statement at pages 2 through 4 is
incorporated herein by reference.


Item 13. Certain Relationships and Related Transactions
     The information set out in the sections entitled "Transactions with
Management and Others" and "Compensation Committee Interlocks and Insider
Participation" of the registrant's Proxy Statement on pages 14 through 16 is
incorporated herein by reference.



                                     Part IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
   (a) (1) Financial statements filed
           The list of consolidated financial statements together with the
           report thereon of KPMG Peat Marwick LLP, as set forth in Part II,
           Item 8 of this report is incorporated herein by reference.
       (2) Financial statement schedules
           Schedules to the consolidated financial statements are omitted, as
           the required information is not applicable.
       (3) List of exhibits
           The list of exhibits listed on the Exhibit Index on pages 58 and 59
           of this report is incorporated herein by reference.  The management
           contracts and compensatory plans or arrangements required to be filed
           as exhibits to this Form 10-K pursuant to Item 14(c) are noted by
           asterisk (*) in the Exhibit Index.

   (b) Reports on Form 8-K
          No reports on Form 8-K were filed during the last quarter of the
period covered by this report.

   (c) Exhibits
       The exhibits listed on the Exhibit Index on pages 58 and 59 of this Form
10-K are filed as a part of this report.

   (d) Financial statement schedules
       No financial statement schedules are required to be filed as a part of
this report.


<PAGE>


                                   SIGNATURES

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

                                                 Trans Financial, Inc..
                                                     (Registrant)



                                           By:   /s/ Douglas M. Lester

                                                 Douglas M. Lester
                                                 Chairman of the Board, 
                                                 President and Chief Executive 
                                                 Officer

                                                 Date: March 26, 1996


   Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on March 26, 1996, by the following persons on
behalf of the registrant and in the capacities indicated.


   (a) Principal Executive Officer:


        /s/ Douglas M. Lester
       Douglas M. Lester
       Chairman of the Board, President
       and Chief Executive Officer


   (b) Principal Financial Officer:



        /s/ Edward R. Matthews
       Edward R. Matthews
       Chief Financial Officer and Treasurer



   (c) Principal Accounting Officer:



        /s/ Ronald B. Pigeon
       Ronald B. Pigeon
       Controller


<PAGE>




                                                       -15-

   (d) Directors:



    /s/ Barry D. Bray
   Barry D. Bray



    /s/ Mary D. Cohron
   Mary D. Cohron



    /s/ Floyd H. Ellis
   Floyd H. Ellis



    
   David B. Garvin



    /s/ Wayne Gaunce
   Wayne Gaunce



    /s/ C.C. Howard Gray
   C.C. Howard Gray



    /s/ Charles A. Hardcastle
   Charles A. Hardcastle




    /s/ Carroll F. Knicely
   Carroll F. Knicely



    /s/ Douglas M. Lester
   Douglas M. Lester



    /s/ C. Cecil Martin
   C. Cecil Martin



<PAGE>




    /s/ Frank Mastrapasqua
   Frank Mastrapasqua



     /s/ James D. Scott
    James D. Scott




    /s/ William B. Van Meter
   William B. Van Meter



    /s/ Thomas R. Wallingford
   Thomas R. Wallingford






<PAGE>








                                                            



                             Trans Financial, Inc.

                           ANNUAL REPORT ON FORM 10-K
                      For the Year Ended December 31, 1995



                      Items 1, 2, 5, 6, 7, 8 and 14 (a)(1)

                   Financial Statements and Supplementary Data
    Market for the Registrant's Common Equity and Related Shareholder Matters
                             Selected Financial Data
                Management's Discussion and Analysis of Financial
                      Condition and Results of Operations


<PAGE>


 Management's Discussion and Analysis

FINANCIAL OVERVIEW
     Trans  Financial,  Inc.  ("the  company") is a bank and savings and loan
holding  company  registered  under the Bank Holding  Company Act of 1956 and 
the Home Owners' Loan Act, which has two commercial  bank  subsidiaries -- 
Trans Financial Bank,  National  Association  ("TFB-KY") and Trans Financial
Bank  Tennessee,  National  Association  ("TFB-TN") -- and one thrift subsidiary
-- Trans Financial Bank, F.S.B. ("TFB,FSB").
     During 1995, three commercial bank  subsidiaries were merged to form TFB-KY
and two thrift subsidiaries were merged to form TFB,FSB. TFB-KY is headquartered
in Bowling Green,  Kentucky;  and TFB-TN and TFB,FSB are both  headquartered  in
Nashville, Tennessee.  Collectively, these three institutions are referred to in
this report as "the banks."
     In addition,  the company operates as subsidiaries of TFB-KY a full-service
securities broker/dealer,  Trans Financial Investment Services, Inc.; a mortgage
banking company,  Trans Financial  Mortgage Company;  and a full-service  travel
agency, Trans Travel, Inc.
     At December 31,  1995,  the company had total  consolidated  assets of $1.8
billion,  total  loans of $1.3  billion,  total  deposits  of $1.4  billion  and
shareholders' equity of $130 million. The company's net income increased 6.2% in
1995,  to $15.3  million,  from $14.4  million in 1994,  and  earnings per share
increased 5.5% to $1.35 per common share, from $1.28 in 1994.
     Over the past several years,  the company has expanded  through mergers and
acquisitions. These mergers and acquisitions are more fully described below.
     On  February  21,  1995,  the company  assumed $41 million of deposits  and
acquired  three branch  facilities  and $360 thousand of consumer  loans.  These
deposits and assets were related to the Bowling Green and Scottsville,  Kentucky
branches  of Fifth  Third Bank of  Kentucky,  Inc.  The two  offices  located in
Bowling  Green,   Kentucky  were  consolidated  into  existing  Trans  Financial
locations.  The  company's  existing  location  in  Scottsville,   Kentucky  was
consolidated  into the other  purchased  location.  On  September  1, 1995,  the
company acquired  AirLanse Travel, a Louisville,  Kentucky,  travel agency,  for
cash and stock of the company.  On November 15, 1995,  the company  acquired for
cash the assets of Correspondents Mortgage Company, L.P., located in Greensboro,
North Carolina.  AirLanse Travel was  consolidated  into the operations of Trans
Travel,  Inc. and  Correspondents  Mortgage  Company was  consolidated  into the
operations of Trans Financial  Mortgage Company.  These three  acquisitions have
been  accounted for using the purchase  method of accounting  and,  accordingly,
their  results  of  operations   and  cash  flows  have  been  included  in  the
consolidated financial statements since the dates of acquisition. In addition to
the deposits  assumed,  the company  received net cash of $36,815,000 and issued
25,000 shares of common stock in connection with these acquisitions.
     The company  merged with  Kentucky  Community  Bancorp,  Inc.  ("KCB") on 
February  15, 1994,  with Peoples  Financial Services, Inc. ("PFS") on 
April 22, 1994, and with FGC Holding Company ("FGC") on August 31, 1994.
     KCB, of Maysville, Kentucky, was the holding company for The State National
Bank,  Peoples First Bank,  and Farmers  Liberty Bank,  with combined  assets of
approximately  $175  million.  These  three  banks  were  consolidated  into the
operations of TFB-KY on March 31, 1994.  Under the terms of the merger with KCB,
the shares of KCB common stock  outstanding were converted into 1,374,962 shares
of common stock of the company.
     PFS, of Cookeville, Tennessee, was the holding company for Peoples Bank and
Trust of the  Cumberlands  ("Peoples  Bank") and Citizens  Federal  Savings Bank
("Citizens"),  with combined assets of approximately $123 million.  Peoples Bank
became TFB-TN and Citizens was  consolidated  into the  operations of TFB,FSB on
July 31, 1994.  Under the terms of the merger with PFS, the shares of PFS common
stock were converted into 1,302,254 shares of common stock of the company.
     FGC,  of Martin,  Kentucky,  was the  holding  company  for First  Guaranty
National  Bank  ("TFB-Martin"),  with  approximately  $127  million  in  assets.
TFB-Martin  was  consolidated  into the  operations of TFB-KY on March 24, 1995.
Under the terms of the merger  with FGC,  the  shares of FGC  common  stock were
converted into 1,050,000 shares of common stock of the company and the shares of
FGC preferred stock were retired.
     Each   of   these   three    mergers   was    accounted   for   using   the
pooling-of-interests method of accounting and, accordingly, financial statements
for all periods  were  restated to reflect  the results of  operations  of these
companies on a combined  basis from the earliest  period  presented,  except for
dividends per share.
     On July 6, 1993, in a transaction  accounted for using the purchase  method
of accounting, the company acquired Trans Kentucky Bancorp, Pikeville, Kentucky,
the holding company for The Citizens Bank of Pikeville ("TFB-Pikeville"). At the
acquisition  date,  TFB-Pikeville  (the former  Citizens Bank of Pikeville)  had
total assets of $207  million,  net loans of $108 million and total  deposits of
$164 million. The aggregate cost, including consideration and acquisition costs,
totaled $19 million.  TFB-Pikeville  was  consolidated  into the  operations  of
TFB-KY on March 24, 1995.
     In recent  years,  the  company  has  emphasized  investments  in staff and
infrastructure in order to control operating risks,  support internal growth and
future   acquisitions,   and  facilitate  the   introduction  of  new  products.
Investments  have been made in data processing  hardware and software  upgrades,
which enable the company to process  transactions more  efficiently,  to realize
economies of scale and to maintain  quality  control.  Management  believes that
these  expenditures  have  enhanced the company's  franchise  and  competitively
positioned it for future growth and entry into new lines of business.
     The  discussion  that  follows  is  intended  to provide  insight  into the
company's results of operations and financial condition.  This discussion should
be  read  in  conjunction  with  the  consolidated   financial   statements  and
accompanying notes, which follow this discussion.
     The company consummated several business  acquisitions in 1993 and in prior
years  which  were  accounted  for using  the  purchase  method  of  accounting.
Accordingly,  the results of operations of those acquired  entities prior to the
acquisition  dates  have  not  been  included  in  the  results  of  operations.
Therefore,  ratios or  analyses  for  periods  before and after  these  purchase
acquisitions may not be comparable.  The KCB, PFS and FGC mergers were accounted
for using the  pooling-of-interests  method of accounting and, accordingly,  all
financial  data for prior  periods  were  restated as if the  entities  had been
combined for all periods  presented.  See note 4 to the  consolidated  financial
statements for additional information regarding business combinations.
     All per share data in this report has been adjusted to give effect to stock
splits.

Income Statement Review
     Net income was $15.3 million in 1995,  compared with $14.4 million in 1994,
and $14.1 million in 1993.  On a per share basis,  net income was $1.35 in 1995,
$1.28 in 1994 and $1.24 in 1993.  Following  is a summary of the  components  of
income  and  expense  and the  changes in those  components  over the past three
years.
<TABLE>

 Condensed Consolidated Statements of Income
 For the years ended December 31
 Dollars in thousands, except per share data 
<CAPTION>
  
                                                   Change                       Change

                                     1995    Amount      %         1994     Amount     %         1993

<S>                             <C>       <C>          <C>    <C>         <C>       <C>     <C>      
Interest income ............... $ 134,228 $  20,246     17.8  $ 113,982   $ 11,163    10.9  $ 102,819
Interest expense ..............    64,599    17,224     36.4     47,375      3,125     7.1     44,250
                                 --------    ------             -------    -------           -------- 
Net interest income ...........    69,629     3,022      4.5     66,607      8,038    13.7     58,569
Provision for loan losses .....     5,260     3,048    137.8      2,212       (582)             2,794
                                 --------     -----              ------      ------            ------
Net interest income after
  provision for loan losses ...    64,369       (26)     --      64,395      8,620    15.5     55,775
Non-interest income ...........    24,411     7,241     42.2     17,170        138     0.8     17,032
Non-interest expenses .........    66,049     5,979     10.0     60,070      7,240    13.7     52,830
                                   ------     -----              ------     ------             ------
Income before income taxes and
  cumulative effect of change
  in accounting principle .....    22,731     1,236      5.8     21,495      1,518     7.6     19,977
Income tax expense ............     7,416       341      4.8      7,075        852    13.7      6,223
                                  -------     -----              ------      -----             ------
Income before cumulative effect
  of change in accounting
principle .....................    15,315       895      6.2     14,420       666      4.8    13,754
Cumulative effect of change in
  accounting principle ........    ------        --       --        --       (296)  (100.0)      296
                                                                 ------      -----         --------- 
Net income .................... $  15,315   $   895      6.2 %  $14,420      $370     2.6%  $ 14,050
                                             ======                           ====          ======== 
Earnings per common share ..... $    1.35   $  0.07      5.5 %  $  1.28      $0.04    3.2%  $   1.24
                                 ==========  ======              ======      =====         ========
</TABLE>

     Each of these  components of income and expense is discussed  separately in
the sections that follow.

<PAGE>



Net Interest Income
     Net interest income totaled $69.6 million in 1995, a 4.5% increase over the
$66.6 million  recorded in 1994.  In 1994 net interest  income was up 13.7% over
1993's $58.6 million.  The increase in net interest income in both 1995 and 1994
was primarily a result of a higher level of interest-earning  assets due to loan
growth,  which was  augmented  in 1994 by a 25  basis-point  increase in the net
interest margin.
     The following  table  summarizes  the changes in the company's net interest
margin over the past three  years.  Net interest  margin is net interest  income
divided by the average balance of interest-earning assets for the year.
<TABLE>

 Net Interest Analysis Summary (1)
 For the years ended December 31
                                                                                Basis Point   Basis Point
<CAPTION>
                                                                            1995 Change  1994   Change 1993

<S>                                                                         <C>    <C>   <C>     <C> <C>  
Average yield on interest-earning assets .................................. 8.78%  97    7.81%   22  7.59%
Average rate on interest-bearing liabilities .............................. 4.74  109    3.65    (3) 3.68
                                                                            ----  ----   ----   ---  ----  
Net interest-rate spread .................................................. 4.04  (12)   4.16    25  3.91
Impact of non-interest-bearing sources and other
   changes in balance sheet composition ................................... 0.52   11    0.41    --  0.41
                                                                            ----  ----   ----   ---  ----  
Net interest margin ....................................................... 4.56% (1)    4.57%   25  4.32%
                                                                            ====  ====   ====  ====  ====  
<FN>

(1)Refer to the tables on pages 18 through 20 for additional data regarding net
interest income.
</FN>
</TABLE>

     Although the net interest-rate spread fell by 12 basis points in 1995, the
net interest margin was virtually flat, due to a change in the composition of
the balance sheet.  In 1994, loans accounted for 74% of earning assets, on
average, while securities represented 24%. In 1995, as the company utilized
maturing securities to fund growth in the loan portfolio, those ratios had
changed to 78% and 20%, respectively.  The increased proportion of assets
invested in relatively higher-earning loans substantially offset the decrease in
the interest-rate spread.  On November 30, 1995, the company reclassified all
securities to available for sale, as permitted by the Financial Accounting
Standards Board in a special one-time reassessment.
     Average interest-earning assets for 1994 increased $104 million over 1993,
while the net interest margin increased 25 basis points. The increased margin in
1994 is a reflection of the positive impact of prime rate increases as well as a
more favorable mix of earning assets.


<PAGE>





================================================================================
<TABLE>

 Average Consolidated Balance Sheets and Net Interest Analysis

 For the years ended December 31
 Dollars in thousands
<CAPTION>
                                     1995                           1994                            1993
                                                                                     
                         Average   Interest  Average   Average   Interest  Average  Average    Interest    Average 
                        Balance(1)    (2)      Rate   Balance(1)   (2)      Rate    Balance(1)   (2)         Rate
<S>                  <C>         <C>          <C>  <C>       <C>           <C>    <C>      <C>          <C>
Interest-earning
assets:
Securities held
to maturity:
U.S. Treasury, 
federal agencies,
and mortgage-backed  $   24,257  $  1,686     6.95$   69,766  $  3,967    75.69$  316,175  $ 19,060     6.03%
backed securities
State and municipal      46,674     2,550     5.46    50,111     2,770     5.53    36,343     2,211     6.08
obligations
Other securities          4,816       355     7.37     5,723       396     6.92    14,441       844     5.84
                     ----------  --------           --------   -------            -------   -------
Total securities
held to maturity         75,747     4,591     6.06   125,600     7,133     5.68   366,959    22,115     6.03
Securities
avail. for sale:
U.S.Treasury,
federal agencies,
and mortgage-
backed securities       209,756    11,847     5.65   214,749    11,477     5.34    19,715       796     4.04
State and municipal
obligations               5,442       310     5.70      --        --       0.00      --        --       0.00
Other securities         13,727       901     6.56    13,526       708     5.23      --        --       0.00
Total securities   
available for sale      228,925    13,058     5.70   228,275    12,185     5.34    19,715       796     4.04
                     ----------  --------           --------   -------            -------   -------
Total securities        304,672    17,649     5.79   353,875    19,318     5.46   386,674    22,911     5.93
Fed funds sold           13,652       804     5.89    13,424       540     4.02    36,334       976     2.69
Interest-bearing
deposits with banks         197        17      NM       235        104       NM     1,001       120       NM
Mortgage loans held
for sale                 18,810     1,644     8.74    17,775     1,152     6.48    31,982     2,247     7.03
Loans, net of
unearned income(3)    1,190,727   114,114     9.58 1,073,718    92,868     8.65   898,834    76,565     8.52
                     ----------  --------           --------   -------            -------   -------
Total interest-
earning assets/
interest income       1,528,058   134,228     8.78 1,459,027   113,982     7.81 1,354,825   102,819     7.59
                     ----------  --------           --------   -------            -------   -------
Less allowance
for loan losses         (13,239)                     (12,742)                     (11,181)
                      ----------                   ---------                    ---------
                      1,514,819                    1,446,285                    1,343,644
Non-interest-
earning assets:
Cash and due
from banks               63,726                       65,788                       55,359
Premises and
 equipment               38,307                       35,275                       30,057
Other assets             56,080                       40,712                       34,774
                     ----------                   ----------                   ----------             
Total assets         $1,672,932                   $1,588,060                   $1,463,834
                     ==========                   ==========                   ==========       
Liabilities and 
Shareholders' Equity
Interest-bearing
liabilities:
Interest-bearing
deposits:
Interest-bearing
demand                 $137,496     3,545     2.58  $143,189     3,434     2.40  $118,939     2,870     2.41
Savings deposits        131,614     3,778     2.87   155,819     4,351     2.79   135,013     3,900     2.89
Money market
 accounts                47,288     1,514     3.20    55,636     1,485     2.67    59,069     1,555     2.63
TransPlus
 (SuperNOW)              93,728     2,602     2.78   100,638     2,462     2.45    97,960     2,463     2.51
Certificates of
deposit                 729,269    40,240     5.52   633,608    26,040     4.11   624,638    25,934     4.15
Individual   
Retirement Accounts      88,547     4,786     5.41    92,122     3,952     4.29    98,471     4,764     4.84
                       --------   -------          ---------   -------          -------    ------   
Total interest-                                                                           
bearing deposits      1,227,942    56,465     4.60 1,181,012    41,724     3.53 1,134,090    41,486     3.66
Fed funds purchased 
and repurchase
agreements               47,219     2,014     4.27    40,303     1,253     3.11    28,084       673     2.40
Other short-term
borrowings               40,652     2,983     7.34    36,669     1,715     4.68     6,624       238     3.59
Long-term debt           46,840     3,137     6.70    40,756     2,683     6.58    33,974     1,853     5.45
                     ----------    ------            -------   -------          --------   ------      -----
Total borrowed funds    134,711     8,134     6.04   117,728     5,651     4.80    68,682     2,764     4.02
                     ----------    ------            -------    ------          -------    ------    
Total interest-
bearing liabilities/
interest expense      1,362,653    64,599     4.74 1,298,740    47,375     3.65 1,202,772    44,250     3.68
                                  --------                      ------                      -------
                                                                                                        
Non-interest-bearing
liabilities:
Non-interest-bearing 
deposits                172,748                      168,746                      145,275
Other liabilities        15,485                        8,687                        9,686
                      ---------                    ---------                     --------
Total liabilities     1,550,886
                                                   1,476,173                    1,357,733
Shareholders' equity    122,046                      111,887                      106,101
                     ----------                    ---------                     --------
Total liabilities
and shareholders' 
equity               $1,672,932                   $1,588,060                   $1,463,834
                     ==========                    =========                   ===========                                          
spread(4)                                   4.04%                         4.16%                         3.91%
Impact of non-interest
bearing sources and
other changes in                                                                         
balance sheet
composition                                  0.52                         0.41                          0.41
                                            ------                        -----                       ------                        
Net interest income /
margin on interest-                                                                        
earning assets (5)               $69,629     4.56%             $66,607    4.57%             $58,569     4.32%
                                 ========   ======             =======    =====             =======    =====

 NM = not meaningful
<FN>

(1)Average balances are based on daily balances.
(2)Interest income on tax-exempt securities and loans has not been adjusted to
reflect fully-taxable-equivalent interest.
(3) For computational purposes, non-accrual loans are included in loans.
(4) Net interest spread is the difference between the average rate of interest
earned on interest-earning assets and the  average   rate  of  interest 
expensed  on   interest-bearing liabilities. 
(5)Net  interest  margin is net interest income divided by average
interest-earning assets.
</FN>
</TABLE>


<PAGE>


Analysis of Year-to-Year Changes in Net Interest Income
     The following table shows changes in interest  income and interest  expense
resulting from changes in volume and interest rates for the years ended December
31,  1995 and 1994,  as compared to the  previous  year.  The change in interest
income and expense due to both rate and volume has been  allocated to changes in
volume and rate in proportion to the relationship of the absolute dollar amounts
of the change in each.

<TABLE>


<CAPTION>
                                                          1995 vs. 1994                   1994 vs. 1993
                                                        --------------                    -------------
                                                       Increase (decrease)              Increase (decrease)
                                                  in interest income and expense   in interest income and expense
 In thousands                                           due to changes in:               due to changes in:
                                                 Rate      Volume      Total     Rate    Volume       Total
 Interest-earning assets:
   Securities held to maturity:
     U.S. Treasury, federal agencies, and
<S>                                          <C>        <C>        <C>        <C>       <C>        <C>      
       mortgage-backed securities            $    736   $ (3,017)  $ (2,281)  $(1,025)  $(14,068)  $(15,093)
     State and municipal obligations              (32)      (188)      (220)     (217)       776        559
     Other securities                              25        (66)       (41)      133       (581)      (448)
                                             --------   --------   --------   -------   --------   --------
     Total securities held to maturity            729     (3,271)    (2,542)   (1,109)   (13,873)   (14,982)
   Securities available for sale:
     U.S. Treasury, federal agencies, and
       mortgage-backed securities                 641       (271)       370       338     10,343     10,681
     State and municipal obligations             --          310        310      --         --         --
     Other securities                             182         11        193      --          708        708
                                             --------   --------   --------   -------   --------   --------
     Total securities available for sale          823         50        873       338     11,051     11,389
                                             --------   --------   --------   -------   --------   --------
     Total securities                           1,552     (3,221)    (1,669)     (771)    (2,822)    (3,593)
   Federal funds sold                             255          9        264       351       (787)      (436)
   Interest-bearing deposits with banks           (72)       (15)       (87)      131       (147)       (16)
   Mortgage loans held for sale                   422         70        492      (163)      (932)    (1,095)
   Loans, net of unearned income               10,577     10,669     21,246     1,194     15,109     16,303
                                             --------   --------   --------   -------   --------   --------
 Total interest-earning assets                 12,734      7,512     20,246       742     10,421     11,163
 Interest-bearing liabilities:
   Interest-bearing deposits:
     Interest-bearing demand                      251       (140)       111       (18)       582        564
     Savings deposits                             119       (692)      (573)     (134)       585        451
     Money market accounts                        271       (242)        29        21        (91)       (70)
     TransPlus (SuperNOW)                         317       (177)       140       (67)        66         (1)
     Certificates of deposit                    9,857      4,343     14,200      (264)       370        106
     Individual Retirement Accounts               993       (159)       834      (517)      (295)      (812)
                                             --------   --------   --------   -------   --------   --------
     Total interest-bearing deposits           11,808      2,933     14,741      (979)     1,217        238
   Federal funds purchased
     and repurchase agreements                    521        240        761       235        345        580
   Other short-term borrowings                  1,065        203      1,268        92      1,385      1,477
   Long-term debt                                  47        407        454       423        407        830
                                             --------   --------   --------   -------   --------   --------  
                                                                                                   
     Total borrowed funds                       1,633        850      2,483       750      2,137      2,887
                                             --------   --------   --------   -------   --------   --------
 Total interest-bearing liabilities            13,441      3,783     17,224      (229)     3,354      3,125
                                                                                                   
                                                                                                   
 Increase (decrease) in net interest income  $   (707)  $  3,729   $  3,022   $   971   $  7,067   $  8,038
</TABLE>
                                                                                


<PAGE>



Provision for Loan Losses
     The provision for loan losses in 1995 was $5.3 million,  or .44% of average
loans,  an increase of $3.1  million from the $2.2  million,  or .21% of average
loans, in 1994 and an increase of $2.5 million from the $2.8 million, or .31% of
average loans recorded in 1993. Net loan  charge-offs were $2.0 million in 1995,
compared  with $2.2 million in 1994 and $2.3 million in 1993. As a percentage of
average loans,  net charge-offs  were 0.17% in 1995, down from 0.20% in 1994 and
0.26% in 1993, and an average of 0.22% for the five year period  1991-1995.  The
provision  for loan losses and the level of the allowance for loan losses result
from  management's  evaluation of the risk in the loan portfolio.  Growth in the
loan portfolio, combined with an increase in certain nonperforming loans, caused
management  to increase  the  provision  in 1995 over 1994.  Of the $5.3 million
provision  recorded in 1995,  $3.2 million was recognized in the fourth quarter.
Nonperforming loans increased $4.2 million in that quarter, primarily attributed
to placing one large commercial loan in nonaccrual status. Further discussion on
loan quality and the allowance for loan losses is included  later in this review
in the Asset Quality discussion.

Non-Interest Income
     Non-interest  income for 1995 increased 42% over 1994,  after increasing
 less than 1% from 1993 to 1994. The increases
in non-interest income were due to:
In thousands                                          1995 vs.1994 1994 vs.1993
                                                      ------------ ------------
o Increase in service charges on deposit accounts           $ 1,088   $ 1,033
o Decrease in gains on sales of securities                      (57)     (892)
o Increase (decrease) in mortgage banking income due to:
     Adoption of SFAS 122                                     1,243      --
     Increased mortgage servicing fees                        1,169       769
     Increase (decrease) in gain on sale
     of mortgage loans held for sale                            845    (1,149)
     Gain on sale of mortgage servicing rights                1,687      --
o Increase in trust service fees                                145       114
  o Increase in brokerage income                                423       456
  o Increase in travel agency fees                              203       112
  o Increase (decrease) in all other non-interest income .      495      (305)
                                                            -------   -------
    Total increase in non-interest income                   $ 7,241   $   138
     The 1995  increases  reflect the  company's  expanding  mortgage  banking 
 business and continued  improvement  in the
brokerage and travel businesses, as well as its more traditional line of banking
products and services.
     In early 1994,  the company  engaged an outside  consulting  firm to review
its products and services.  As a result of this review, the company  implemented
a new product and fee structure in April 1995, which resulted in additional 
service charges on deposit accounts.
     Effective  January 1, 1995,  the  company  adopted on a  prospective  basis
Statement of Financial  Accounting  Standards No. 122,  Accounting  for Mortgage
Servicing Rights ("SFAS 122"). SFAS 122 requires that rights to service mortgage
loans for others be recognized as assets, without regard to whether those assets
were  acquired  in  purchase   transactions   or  were  acquired   through  loan
originations.  In prior years only purchased mortgage servicing rights ("MSR's")
were  recognized as assets.  SFAS 122 also  eliminates the previous  requirement
that gains on the sale of mortgage loans be offset against the related servicing
right asset. As a result of SFAS 122, the company  recognized an additional $1.2
million, before amortization, in noninterest income in 1995 compared with 1994.
     The $1.7 million gain on the sale of mortgage servicing rights shown in the
table relates to a $168 million  portfolio of mortgage loans serviced for others
which was sold during the second quarter of 1995.  Notwithstanding  this sale of
servicing rights,  the portfolio has grown from $690 million at the end of 1993,
to $1.3  billion at December 31,  1994,  and to $2.2  billion at year-end  1995,
primarily  by acquiring  servicing  portfolios,  but also through  originations.
These acquisitions have resulted in a significant increase in mortgage servicing
fees.


<PAGE>



Non-Interest Expenses
     Non-interest expenses for 1995 increased 10% over 1994, after increasing 
14% from 1993 to 1994.  The increases in non-interest expense were due to:
In thousands                                      1995 vs. 1994   1994 vs. 1993
                                                  -------------    -------------
o Increase in compensation and employee benefits        $ 4,258   $ 3,112
o Increase in occupancy and equipment expense             1,106     1,542
o Increase in communications expense                        476       107
o Increase (decrease) in deposit insurance premiums      (1,088)      405
o Increase in advertising and public relations expense      724       182
o Increase (decrease) in professional fees                 (318)    1,324
o Increase in postage, printing and supplies                127       559
o Increase (decrease) in educational expense                424       (50)
o Increase in foreclosed asset expense                      315       243
o Decrease in other non-interest expenses                   (45)     (184)
                                                        -------   -------
Total increase in non-interest expenses                 $ 5,979   $ 7,240
     The increases in  non-interest  expenses over the past two years  reflect
 the  company's  continued  investment in new
technology, product lines, distribution channels and people, to provide enhanced
customer service and support future growth.
     Compensation  and  benefits  increased  $4.3 million in 1995 as compared to
1994,  and  increased  $3.1  million  in 1994  versus  1993 -- the  result of an
expansion  of the  professional  staff.  Of the  increase  in  compensation  and
benefits in 1995, $0.8 million represents increased payments associated with the
company's implementation of an incentive-based compensation system.
     Advertising and public relations expense increased $0.7 million in 1995, as
the company expanded its promotion of the new products and services added during
the year, and an intensified  sales training  program in 1995 resulted in a $0.4
million increase in educational expense.
     Professional  fees declined  $0.3 million in 1995,  after  increasing  $1.3
million from 1993 to 1994.  These expenses were  principally  related to mergers
and acquisitions and the development of new lines of business.  In general,  the
remaining  increases in both 1995 and 1994 were related to an ongoing  effort to
build the company's  infrastructure  to  accommodate  future  growth,  requiring
investments in staff as well as in buildings, equipment and information systems.
Occupancy and furniture and equipment  costs  increased $1.1 million in 1995 and
$1.5 million in 1994.
     The $1.1 million decrease in deposit  insurance expense in 1995 as compared
to 1994 was due to a reduction from $0.23 to $0.04 per $100 of deposits  insured
through the Federal Deposit Insurance Corporation's ("FDIC") Bank Insurance Fund
("BIF"), effective June 1, 1995. Approximately 69% of the company's deposits are
insured through the BIF. The remaining 31% of the company's deposits are insured
through  the FDIC's  Savings  Association  Insurance  Fund  ("SAIF").  Insurance
premiums  on  those  deposits  remain  at  $0.23.  The FDIC  and  other  banking
regulatory  authorities have proposed a plan to strengthen the deposit insurance
system and eliminate the substantial  deposit premium disparity between BIF- and
SAIF-insured institutions.  This plan includes a one-time assessment of $0.75 to
$0.85 per $100 of SAIF-insured  deposits.  If such a plan were enacted into law,
the  company  would  pay a  one-time  assessment  of up to $3.5  million  on its
SAIF-insured  deposits  and would  realize a  subsequent  reduction  in  deposit
insurance premiums of approximately $0.8 million per year.

Income Taxes
     The company had income tax expense of $7.4 million in 1995,  compared  with
$7.1 million in 1994, and $6.2 million in 1993.  These  represent  effective tax
rates of 32.6%,  32.9% and 31.2%,  respectively.  Effective January 1, 1993, the
company adopted Statement of Financial  Accounting Standards No. 109, Accounting
for Income Taxes,  resulting in a $296 thousand increase in net income.  Further
information  on the  company's  income  taxes  can be  found  in  note 12 to the
consolidated financial statements.

Balance Sheet Review
     Assets at year-end  1995 totaled $1.8 billion,  compared with $1.6 billion
at December 31, 1994.  Average total assets increased $85 million in 1995 to 
$1.7 billion,  after  increasing  $124 million in 1994.  Average  interest-
earning assets increased $69 million in 1995, after increasing $104 million in
1994.
Loans
     Total  loans,  net of  unearned  income,  averaged  $1.19  billion in 1995,
compared with $1.07 billion in 1994 and $0.90 billion in 1993. At year-end 1995,
loans  totaled $1.26  billion,  compared with $1.14 billion at December 31, 1994
and $1.01 billion at the end of 1993.
     The company  continues  to  experience  strong loan growth  throughout  its
markets,  with  particular  strength in middle market  commercial and commercial
real estate lending products. The following table presents a summary of the loan
portfolio by category for each of the last five years.
<TABLE>

 Loans Outstanding
 December 31
<CAPTION>
 In thousands 
                                        1995          1994          1993        1992        1991
<S>                              <C>           <C>           <C>           <C>         <C> 
Commercial                       $   372,822   $   318,970   $   320,952   $ 235,922   $ 200,020
Commercial real estate               397,741       334,567       234,308     140,554     114,218
Residential real estate              358,257       339,488       304,990     293,393     171,643
Consumer                             132,401       153,754       150,202     114,820      87,105
                                 -----------   -----------   -----------   ---------   ---------
   Total loans                     1,261,221     1,146,779     1,010,452     784,689     572,986
Less unearned income                  (2,150)       (3,063)       (3,656)     (3,843)     (5,032)
                                 -----------   -----------   -----------   ---------   ---------
  
     
   Loans net of unearned income  $ 1,259,071   $ 1,143,716   $ 1,006,796   $ 780,846   $ 567,954
                                 ===========   ===========   ===========   =========   =========
</TABLE>

Loan Concentrations
     Much of the  increase  in  commercial  and  commercial  real  estate  loans
represents loans to finance the operations of corporate customers. While many of
these  loans  are  structured  as  mortgages,  the  company  is  relying  on the
borrower's  cash flow to  service  the loan and not the sale of the  collateral.
Commercial real estate loans include financing for industrial parks, residential
developments,  retail strip shopping centers,  multi-family apartment complexes,
industrial buildings, fast food and midscale restaurants, and hotels and motels.
The primary source of repayment cannot be traced to any narrow industry group.
     Substantially  all of the  company's  loans  are to  customers  located  in
Kentucky and Tennessee,  in the immediate market areas of the banks. None of the
company's  loans is  considered  to be a  highly  leveraged  transaction.  As of
December 31, 1995, the company had  outstanding  loans and commitments to extend
credit ranging from $5 million to $19.5 million to 37 commercial customers.  The
aggregate amount of these credit  relationships was $348 million,  of which $5.6
million was classified to nonaccrual during the fourth quarter of 1995.
   The  distribution  of the  company's  loans,  by  industry,  is  shown in the
following table.

 Loans by Industry
 December 31, 1995
 As a percentage of total loans

Agriculture ............................................................   4.4 %
Apartment buildings ....................................................   2.8
Construction and land development ......................................   6.9
Finance and insurance ..................................................   2.1
Manufacturing:
   Durable goods .......................................................   6.3
   Nondurable goods ....................................................   3.4
Mining .................................................................   2.6
Services:
   Health ..............................................................   3.2
   Hotels and  motels ..................................................   2.7
   Other than health and hotels ........................................   4.6
Wholesale and retail trade:
   Restaurants .........................................................   4.6
   Other ...............................................................   7.7
Other commercial real estate ...........................................   8.5
All other commercial loans .............................................   1.4
                                                                           ----
                       Total commercial and commercial real estate loans  61.2
Residential real estate loans ..........................................  28.5
Consumer loans .........................................................  10.3
                                                                           ----
                                     Total loans, net of unearned income 100.0 %
                                                                           ====



<PAGE>


The  following  table sets forth the maturity  distribution  and  interest  rate
sensitivity  of selected loan  categories at December 31, 1995.  Maturities  are
based upon contractual terms. The company's policy is to specifically review and
approve all loans renewed;  loans are not  automatically  rolled over. The table
excludes residential real estate and consumer loans.

 Loan Maturities and Rate Sensitivity
 December 31, 1995
 In thousands           One Year  One Through   Over       Total
                         or Less   Five Years Five Years   Loans
 By maturity date:
Commercial ...........   $152,188   $101,761   $118,873   $372,822
Commercial real estate     67,644     78,472    251,625    397,741
                         --------   --------   --------   --------
  Total ..............   $219,832   $180,233   $370,498   $770,563
                         ========   ========   ========   ========

Fixed rate loans .....   $ 63,260   $ 79,521   $ 69,508   $212,289
Floating rate loans ..    156,572    100,712    300,990    558,274
                         --------   --------   --------   --------
  Total ..............   $219,832   $180,233   $370,498   $770,563
                         ========   ========   ========   ========


 By next repricing opportunity:
Commercial ...........   $296,214   $ 47,476   $ 29,132   $372,822
Commercial real estate    307,608     43,657     46,476    397,741
                         --------   --------   --------   --------
  Total ..............   $603,822   $ 91,133   $ 75,608   $770,563
                         ========   ========   ========   ========

Fixed rate loans .....   $ 63,260   $ 79,521   $ 69,508   $212,289
Floating rate loans ..    540,562     11,612      6,100    558,274
                         --------   --------   --------   --------
  Total ..............   $603,822   $ 91,133   $ 75,608   $770,563
                         ========   ========   ========   ========

Asset Quality
     With respect to asset quality,  management  considers  three  categories of
assets to warrant constant  scrutiny.  These categories  include (a) loans which
are currently nonperforming, (b) foreclosed real estate, and (c) loans which are
currently performing but which management believes require special attention.
     Nonperforming  loans, which include  nonaccrual loans,  accruing loans past
due over 90 days and  restructured  loans,  totaled  $17.3 million at the end of
1995, an increase of $9.4 million from 1994. The ratio of nonperforming loans to
year-end  loans was 1.38%,  compared  with 0.69% at  year-end  1994 and 0.98% at
December 31, 1993. As mentioned  previously,  nonperforming loans increased $4.2
million  in the  fourth  quarter of 1995,  primarily  due to  placing  one large
commercial  loan in  nonaccrual  status.  Nonperforming  assets,  which  include
nonperforming  loans,  foreclosed  real  estate and other  foreclosed  property,
totaled $22.3  million at year-end  1995,  and the ratio of total  nonperforming
assets to total  assets  increased  to 1.24% at  year-end  1995,  from  0.81% at
December 31, 1994.
     The following table presents information  concerning  nonperforming assets,
including  nonaccrual and restructured  loans.  Management  classifies a loan as
nonaccrual  when  principal or interest is past due 90 days or more and the loan
is not adequately  collateralized and in the process of collection,  or when, in
the  opinion of  management,  principal  or interest is not likely to be paid in
accordance  with the terms of the  obligation.  Consumer  installment  loans are
charged off after 120 days of delinquency  unless adequately  secured and in the
process of collection.  Loans are not  reclassified  as accruing until principal
and interest  payments are brought current and future payments appear reasonably
certain.  Loans are categorized as  restructured if the original  interest rate,
repayment  terms,  or  both  were  restructured  due to a  deterioration  in the
financial   condition  of  the  borrower.   However,   restructured  loans  that
demonstrate  performance  under the  restructured  terms and that yield a market
rate of interest may be removed from  restructured  status in the year following
the restructure.
<TABLE>

 Nonperforming Assets
 December 31
 Dollars in thousands
<CAPTION>
                                                      1995      1994      1993      1992      1991
<S>                                                <C>       <C>       <C>       <C>       <C>
Nonaccrual loans ................................  $12,708   $ 4,375   $ 5,926   $ 3,986   $ 2,770
Accruing loans which are contractually
  past due 90 days or more ......................    4,617     3,514     2,377     4,262     2,255
Restructured loans ..............................       14        30     1,591       718     5,587
                                                   -------   -------   -------   -------   -------
  Total nonperforming and restructured loans ....   17,339     7,919     9,894     8,966    10,612
Foreclosed real estate ..........................    4,329     4,998     5,869     9,036     6,455
Other foreclosed property .......................      677       199       113      --        --
                                                   -------   -------   -------   -------   -------
  Total nonperforming and restructured loans
    
    and foreclosed property .....................  $22,345   $13,116   $15,876   $18,002   $17,067
                                                   =======   =======   =======   =======   =======

Nonperforming and restructured loans
  as a percentage of loans net of unearned income     1.38%     0.69%     0.98%     1.15%     1.87%
Nonperforming and restructured loans and other
  real estate as a percentage of total assets ...     1.24%     0.81%     0.99%     1.30%     1.75%
</TABLE>

     Three commercial credit relationships account for $10.8 million, or 85%, of
the  company's  nonaccrual  loans  at  December  31,  1995,  and  62%  of  total
nonperforming  and  restructured  loans.  The  largest of these  credits is to a
manufacturer  of metal  products  used  primarily  in the  automotive  industry.
Another of these credits is to a specialty apparel  manufacturer,  and the third
is to a company in the coal mining industry. An allowance for loan losses in the
amount of $4.8 million has been established for these credits in accordance with
Statement of Financial Accounting Standards No. 114, Accounting by Creditors for
the Impairment of a Loan. The remaining  nonaccrual  balance consists of various
commercial  and consumer  loans,  with no single loan  exceeding  $800,000.  The
increase from  December 31, 1994,  to December 31, 1995, in accruing  loans past
due 90 days or more is principally residential real estate loans.
     Foreclosed  real estate at December 31, 1995,  includes two properties with
an aggregate book value of $1.9 million, or 45% of the outstanding  balance. The
first property was acquired  through  foreclosure  in 1986,  with an unsatisfied
loan balance at the time of $1.8 million. In order to facilitate the disposal of
the  property,  the  company  entered  into a joint  venture  with a real estate
developer  and  developed  the land for  industrial  and other  commercial  use.
Subsequently,  the company dissolved the joint venture and retained title to the
property.  Several parcels have been sold to date.  Based on an appraisal of the
property and previous  sales  experience,  management  does not  anticipate  any
significant loss to be incurred on disposition.  The second property included in
foreclosed  real estate is a  manufacturing  facility  which was acquired in the
fourth quarter of 1995. The property is listed for sale and management  does not
anticipate  any  significant  loss on the sale of the  property.  The  remaining
balance of foreclosed real estate consists of several properties, with no single
property exceeding $500,000.
     As of December 31,  1995,  the company had $7.2 million of loans which were
not included in the past due,  nonaccrual or  restructured  categories,  but for
which known information about possible credit problems caused management to have
serious  doubts as to the  ability of the  borrowers  to comply with the present
loan repayment terms. Based on management's evaluation, including current market
conditions, cash flow generated and recent appraisals, no significant losses are
anticipated  in  connection  with  these  loans.  These  loans  are  subject  to
continuing  management  attention and are considered in determining the level of
the allowance for loan losses.
     The allowance for loan losses is  established  through a provision for loan
losses  charged  to  expense.  The  allowance  represents  an amount  which,  in
management's  judgment,  will be adequate to absorb  probable losses on existing
loans.  At December 31, 1995,  the  allowance was $15.8  million,  compared with
$12.5 million at both December 31, 1994 and December 31, 1993.  The allowance as
a percentage of nonperforming loans was 91% at December 31, 1995, as compared to
158% at year-end 1994 and 126% at December 31, 1993.  The ratio of the allowance
for loan  losses to total  loans  (excluding  mortgage  loans  held for sale) at
December  31, 1995,  was 1.25%,  compared  with 1.10% at December 31, 1994,  and
1.24% at the end of 1993.
     Thirty percent of the allowance at December 31, 1995, was allocated for the
three large nonaccrual  credits mentioned above, which covers 44% of the balance
of those credits.  The remaining $11.0 million of the allowance,  therefore,  is
available  for the balance of the  portfolio,  resulting in a coverage  ratio of
168% for the remaining nonperforming and restructured loans.
     Following is a summary of the changes in the  allowance for loan losses for
each of the past five years.
<TABLE>

 Summary of Loan Loss Experience
 For the years ended December 31
 Dollars in thousands 
<CAPTION>
                                                      1995        1994        1993        1992        1991
<S>                                             <C>         <C>         <C>         <C>         <C>
Balance at beginning of year .................  $   12,529  $   12,505  $    9,596  $    7,700  $    7,183
Provision for loan losses ....................       5,260       2,212       2,794       2,618       2,242
Balance of allowance for loan losses
  of acquired subsidiaries at acquisition date        --          --         2,433       1,016        --
Amounts charged off:
  Commercial and commercial real estate ......         993       1,873       2,195       1,623       1,322
  Residential real estate ....................         106          80         315         138         119
  Consumer ...................................       1,426         838         936         738         996
                                                ----------  ----------  ----------  ----------  ----------
  Total loans charged off ....................       2,525       2,791       3,446       2,499       2,437
Recoveries of amounts previously charged off:
  Commercial and commercial real estate ......         228         232         615         323         364
  Residential real estate ....................           8          41         115         106          21
  Consumer ...................................         279         330         398         332         327
                                                ----------  ----------  ----------  ----------  ----------
  Total recoveries ...........................         515         603       1,128         761         712
                                                ----------  ----------  ----------  ----------  ----------
  Net charge-offs ............................       2,010       2,188       2,318       1,738       1,725
                                                ----------  ----------  ----------  ----------  ----------
Balance at end of year .......................  $   15,779  $   12,529  $   12,505  $    9,596  $    7,700
                                                ==========  ==========  ==========  ==========  ==========

Total loans, net of unearned income:

       
  Average ....................................  $1,190,727  $1,073,718  $  898,834  $  719,184  $  553,549
  At December 31 .............................   1,259,071   1,143,716   1,006,796     780,846     567,954
As a percentage of average loans:
  Net charge-offs ............................      0.17 %      0.20 %      0.26 %      0.24 %      0.31 %
  Provision for loan losses ..................      0.44 %      0.21 %      0.31 %      0.36 %      0.41 %
Allowance as a percentage of year-end loans ..      1.25 %      1.10 %      1.24 %      1.23 %      1.36 %
Allowance as a percentage of nonperforming
  and restructured loans .....................      91.0 %     158.2 %     126.4 %     107.0 %      72.6 %
</TABLE>

     The adequacy of the  allowance  for loan losses is determined on an ongoing
basis through analysis of the overall quality of the loan portfolio,  historical
loan loss  experience,  loan  delinquency  trends,  and  current  and  projected
economic  conditions.  Additional  allocations  of the  allowance  are  based on
specifically   identified  potential  loss  situations.   These  potential  loss
situations  are  identified  by  account  officers'   evaluation  of  their  own
portfolios  as  well  as by an  independent  loan  review  function.  Management
believes that the allowance for loan losses at December 31, 1995, is adequate to
absorb losses inherent in the loan portfolio as of that date. That determination
is  based on the best  information  available  to  management,  but  necessarily
involves  uncertainties  and  matters  of  judgment  and,  therefore,  cannot be
determined with precision and could be susceptible to significant  change in the
future. In addition, bank and thrift regulatory authorities,  as a part of their
periodic  examinations of the banks, may reach different  conclusions  regarding
the quality of the loan  portfolio and the level of the  allowance,  which could
result in additional provisions being made in future periods.
     The tables below set forth an  allocation  of the allowance for loan losses
by category of loan and a percentage  distribution of the allowance  allocation.
In  making  the  allocation,   consideration   was  given  to  such  factors  as
management's  evaluation of risk in each category,  current economic  conditions
and charge-off experience.  An allocation of the allowance for loan losses is an
estimate  of the  portion of the  allowance  which will be used to cover  future
charge-offs in each loan  category,  but it does not preclude any portion of the
allowance  allocated  to one type of loan from  being  used to absorb  losses of
another loan type.


 Allocation of Allowance for Loan Losses
 December 31
 In thousands
 
                            1995     1994     1993     1992     1991
Commercial ............  $ 9,133  $ 7,529  $ 6,870  $ 4,813  $ 3,856
Commercial real estate     4,089    1,883    1,718    1,203      964
Residential real estate      640      977    1,358    1,720    1,318
Consumer ..............    1,917    2,140    2,559    1,860    1,562
                         -------  -------  -------  -------  -------
   Total ..............  $15,779  $12,529  $12,505  $ 9,596  $ 7,700
                         =======  =======  =======  =======  =======

<TABLE>

 Allocation of Year-End Allowance for Loan Losses
   and Percentage of Each Type of Loan to Total Loans
 December 31                                                                                 
<CAPTION>
                               1995               1994                1993               1992                  1991                 
                        Allowance  Loans   Allowance  Loans   Allowance   Loans   Allowance   Loans     Allowance    Loans          
<S>                       <C>     <C>     <C>        <C>        <C>       <C>     <C>         <C>          <C>     <C>              
Commercial ...........     57.9%   29.6%   60.1%      27.8%      54.9%     31.7%   50.2%       30.1%        50.1%   34.9%
Commercial real estate     25.9    31.5    15.0       29.2       13.7      23.2    12.5        17.9         12.5    19.9
Residential real .....      4.1    28.4     7.8       29.6       10.9      30.2    17.9        37.4         17.1    30.0
estate
Consumer .............     12.1    10.5    17.1       13.4       20.5      14.9    19.4        14.6         20.3    15.2
                           ----   ----     ----      -----     ------      ----    ----        ----         ----    ----
   
   Total .............    100.0%  100.0%  100.0%     100.0%     100.0%    100.0%  100.0%      100.0%       100.0%  100.0%
                          ======  ======  ======     ======     ======    ======  ======      ======       ======  ======
</TABLE>


Securities, Federal Funds Sold and Resale Agreements
     Securities,  including  those  classified as held to maturity and available
for sale,  decreased  from $386 million at December 31, 1993, to $314 million at
year-end  1994,  and to $298 million at December  31,  1995.  The decline in the
securities  portfolio  in both  1995 and 1994 was  substantially  the  result of
maturities, prepayments and calls. Funds provided by the reduction in securities
were utilized to fund growth in the loan portfolio.
     Effective  December 31, 1993,  the company  adopted  Statement of Financial
Accounting  Standards No. 115,  Accounting  for Certain  Investments in Debt and
Equity  Securities.  Accordingly,  all debt securities in which the company does
not have the ability or management  does not have the positive intent to hold to
maturity are  classified  as  securities  available  for sale and are carried at
market  value,  as are all  equity  securities.  Beginning  December  31,  1993,
unrealized  gains and losses on securities  available for sale are reported as a
separate component of shareholders' equity, net of tax. As mentioned previously,
the company  reclassified  all  securities to available for sale on November 30,
1995.
     The  percentage  of  collateralized   mortgage  obligations  ("CMO's")  and
mortgage-backed  securities to total securities  declined to 27% at December 31,
1995,  from 31% at December 31, 1994, and 39% at December 31, 1993. This decline
was  due to  the  significant  refinancing  of  residential  mortgages  and  the
resulting  prepayment of  mortgage-related  securities coupled with management's
desire to decrease the company's exposure to mortgage-related securities. Due to
the unpredictable  nature of residential mortgage  prepayments,  the average and
final  maturities of the related  securities  vary. In a rising rate environment
these  securities  have a  longer  expected  life,  while  in a  declining  rate
environment they have a shorter expected life. Management limits this prepayment
and payment  extension  risk  principally  by investing in planned  amortization
class CMO's,  which have less volatility than other  mortgage-backed  securities
and have an average life of three to five years.
     The tables below present the carrying  value of securities  for each of the
past three years and the maturities and yield  characteristics  of securities as
of December 31, 1995.
<TABLE>

 Carrying Value of Securities
 December 31
 In thousands 
<CAPTION>
 <S>                                                                   <C>        <C>        <C>
                                                                         1995       1994       1993
U.S. Treasury and federal agencies:    
  Available for sale ..............................................   $142,199   $146,484   $123,677
  Held to maturity ................................................       --        3,081     51,759
Collateralized mortgage obligations and mortgage-backed securities:
  Available for sale ..............................................     81,900     70,895    105,273
  Held to maturity ................................................       --       26,372     45,660
State and municipal obligations:
  Available for sale ..............................................     55,552       --         --
  Held to maturity ................................................       --       49,752     42,162
Other securities:
  Available for sale ..............................................     18,571     12,264     11,086
  Held to maturity ................................................       --        5,553      6,031
                                                                      --------   --------   --------
Total securities:
  Available for sale ..............................................    298,222    229,643    240,036
  Held to maturity ................................................       --       84,758    145,612
                                                                      --------   --------   --------
   Total securities ...............................................   $298,222   $314,401   $385,648
                                                                      ========   ========   ========
</TABLE>

<TABLE>

 Maturity Distribution of Securities Available for Sale                            
 December 31, 1995 
<CAPTION>
                                                   Over     Over Five
                                                 One Year     Years
 In thousands                          One Year   Through    Through     Over     Equity       Total     Market
                                        or Less  Five Years Ten Years Ten Years  Securities  Maturities   Value
 <S>                                      <C>       <C>        <C>       <C>       <C>        <C>        <C>                        
 U.S. Treasury and federal agencies ..   $46,553   $ 74,325   $22,884        $-         $-   $143,762   $142,199
                                                                                                         
 Collateralized mortgage obligations
and mortgage-backed ..................     1,889     49,129    10,561    20,590          --    82,169     81,900
securities:(1)
 State and municipal obligations .....     4,134     13,391    23,428    13,266          --    54,219     55,552
 Other securities ....................       608      1,823     2,473       219      13,525    18,648     18,571
                                         -------   --------   -------   -------   ---------   --------   --------

   Total securities available for sale   $53,184   $138,668   $59,346   $34,075   $  13,525  $298,798   $298,222
                                         =======   ========   =======   =======   =========  ========   ========


 Percent of total ....................    17.80 %  46.41 %      19.86 %  11.41 %      4.52 %  100.00 %
 Weighted average yield(2) ...........     5.40 %   5.11 %       5.44 %   6.47 %      6.37 %    5.44 %
<FN>

(1)  Collateralized  mortgage  obligations  and  mortgage-backed  securities are
grouped into average lives based on December 1995 prepayment projections.
(2) The weighted average yields are based on amortized cost.
</FN>
</TABLE>

Other Assets
       The company  adopted on a prospective  basis  effective  January 1, 1995,
Statement of Financial  Accounting  Standards No. 122,  Accounting  for Mortgage
Servicing Rights ("SFAS 122"). SFAS 122 requires that rights to service mortgage
loans for others be recognized as assets, without regard to whether those assets
were  acquired  in  purchase   transactions   or  were  acquired   through  loan
originations.  In prior years only purchased mortgage servicing rights ("MSR's")
were  recognized  as assets.  As a result of SFAS 122 and purchases of servicing
portfolios,  the company  recognized in the consolidated  balance sheet MSR's of
$28.3 million at December 31, 1995, compared with $9.2 million at year-end 1994.
Servicing  portfolios  purchased  during 1995  totaled  $1.2 billion of mortgage
loans and represented  $20.1 million of the mortgage  servicing  rights asset at
year-end 1995.
     The  carrying  value of MSR's and the related  amortization  are  evaluated
quarterly in relation to their fair values.  The company  evaluates the carrying
value of the MSR's by  estimating  the present value of the future net servicing
income  of the  rights,  using  a  discounted  valuation  method  and  based  on
management's  best  estimate  of  remaining  loan  lives.   Serviced  loans  are
stratified into four interest rate groups and two loan types.  Approximately 77%
of the loans  have  contractual  interest  rates from 7% to 9%.  Impairment  and
subsequent  adjustments  in each stratum,  if any, are recognized by a valuation
allowance and a charge against servicing  income.  Prepayments of mortgage loans
can have a considerable  impact on the value of the MSR  portfolio.  Prepayments
result from a variety of factors,  but a declining  mortgage  loan interest rate
environment  is  generally  considered  to be the  most  significant  of  these.
Therefore,  the  carrying  value of the MSR's  could  become  impaired in future
periods if mortgage  rates should decline  substantially.  Deposits and Borrowed
Funds
     Total deposits  averaged $1.40 billion in 1995, a 4% increase over 1994. In
order to fund  growth in the loan  portfolio,  the  company  issued in the first
quarter of 1995 $30 million of  24-month  brokered  certificates  of deposit and
purchased  $41  million of  deposits  from Fifth  Third Bank of  Kentucky,  Inc.
Excluding these  transactions,  average deposits would have grown  approximately
$10 million from 1994 to 1995.
     In 1994,  total deposits  averaged $1.35 billion,  a 6% increase over 1993.
Most of this  increase was in  interest-bearing  deposits,  which  increased $47
million,   or  4%.   However,   excluding   TFB-Pikeville   from   both   years,
interest-bearing  deposits  decreased $20 million,  or 2%.  Non-interest-bearing
accounts increased $23 million, or 16%, year-to-year.
     Time  deposits of $100,000 or more totaled  $206.9  million at December 31,
1995, and $163.6 million at December 31, 1994. Interest expense on time deposits
of $100,000  or more was $11.8  million in 1995,  $6.3  million in 1994 and $6.7
million in 1993. The table below provides  information on the maturities of time
deposits of $100,000 or more at December 31, 1995.

 Maturity of Time Deposits of $100,000 or More
 December 31, 1995
 In thousands
 Three months or less                                                 $48,764
 Over three through six months                                         34,916
 Over six through twelve months                                        57,652
 Over twelve months                                                    65,535
                                                            ------------------
    Total                                                           $206,867

   Information regarding short-term borrowings is presented below.

 Short-term Borrowings
 Dollars in thousands
                                                        1995      1994     1993
Federal funds purchased and repurchase agreements:
  Balance at year end ............................  $ 75,594  $ 74,553  $29,704
  Weighted average rate at year end ..............    4.83 %    3.50 %   2.38 %
  Average balance during the year ................    47,219    40,303   28,084
  Weighted average rate during the year ..........    4.27 %    3.11 %   2.40 %
  Maximum month-end balance ......................    82,607    74,553   35,784
Other short-term borrowings:
  Balance at year end ............................    45,014    48,033   15,000
  Weighted average rate at year end ..............    6.67 %    6.36 %   3.45 %
  Average balance during the year ................    40,652    36,669    6,624
  Weighted average rate during the year ..........    7.34 %    4.68 %   3.59 %
  Maximum month-end balance ......................    61,831    48,840   15,000
Total short-term borrowings:
  Balance at year end ............................   120,608   122,586   44,704
  Weighted average rate at year end ..............    5.52 %    4.62 %   2.74 %
  Average balance during the year ................    87,871    76,972   34,708
  Weighted average rate during the year ..........    5.69 %    3.86 %   2.63 %
  Maximum month-end balance ......................   120,608   122,586   50,784

     Substantially all federal funds purchased and repurchase  agreements mature
in one business day. Other short-term  borrowings  principally represent Federal
Home Loan Bank ("FHLB")  advances to TFB,FSB and TFB-KY (with  varying  maturity
dates), which are funding residential mortgage and commercial loans.
     The company  has a $5 million  unsecured  operating  line of credit with an
unaffiliated  commercial  bank that is used from  time-to-time to supplement the
company's  cash  requirements.  The line was not in use at December  31, 1995 or
1994.
     Long-term debt averaged $46.8 million in 1995,  compared with $40.8 million
in 1994 and $34.0  million in 1993.  The increase in 1995 as compared to 1994 is
due to the  issuance in the fourth  quarter of $50 million of senior bank notes.
That program is described in the Capital  Resources  and  Liquidity  discussion,
which  follows.  The 1994 increase is due to an FHLB advance to TFB-KY which had
an original  maturity  exceeding one year. The advance,  which was drawn upon in
order  to fund  fixed-rate  commercial  loans,  was  rewritten  during  1994 and
classified as a short-term borrowing.
     Long-term debt also includes financing from an unaffiliated commercial bank
for the company's  leveraged ESOP.  Total ESOP debt was $3.0 million at December
31, 1995, and $3.7 million at December 31, 1994.
     See  note  9  to  the  consolidated  financial  statements  for  a  further
description of the terms of these borrowings.

Capital Resources and Liquidity
     The company's capital ratios at December 31, 1995 and 1994 (calculated in 
accordance with regulatory  guidelines) were as follows:
December 31                 1995     1994
Tier 1 risk based ...       8.64%    9.47%
   Regulatory minimum       4.00     4.00
Total risk based ....      12.15    13.31
   Regulatory minimum       8.00     8.00
Leverage                    6.70     6.95
   Regulatory minimum       3.00     3.00

     The decrease in these capital ratios over the past year is primarily due to
growth in the balance  sheet --  particularly  commercial  and  commercial  real
estate loans. Capital ratios of all of the company's  subsidiaries are in excess
of applicable  minimum  regulatory  capital ratio  requirements  at December 31,
1995.
     Approximately  half of the $18.1 million  increase in equity capital during
1995 was provided by retained earnings. Most of the remaining portion was due to
a $7.7 million  decline in the unrealized  net loss on securities  available for
sale. In 1994,  retained earnings provided $8.6 million in equity,  however this
was  offset  by an $8.8  million  increase  in the  unrealized  net  loss on the
portfolio of securities available for sale.
     Generally  speaking,  the  company  relies  upon net  inflows  of cash from
financing  activities,  supplemented  by net  inflows  of  cash  from  operating
activities,  to provide cash used in its investing activities.  As is typical of
most banking  companies,  significant  financing  activities include issuance of
common stock and long-term debt,  deposit  gathering,  and the use of short-term
borrowing facilities,  such as federal funds purchased,  repurchase  agreements,
FHLB advances and lines of credit.  The company's primary  investing  activities
include purchases of securities and loan
originations,  offset by maturities,  prepayments  and sales of securities,  and
loan  payments.  At December 31, 1995,  the aggregate  retained  earnings of the
banks was $67.2 million, of which $25.5 million was available for the payment of
dividends to the parent company.
     In order to  support  internally-generated  growth  in the loan  portfolio,
TFB-KY issued in the fourth  quarter of 1995,  $20 million of two-year notes and
$30 million of three-year  notes under a $250 million  senior bank note program.
The notes  issued  to date  bear  interest  at fixed  rates of 6.32% and  6.48%,
respectively,  and have been effectively  converted to floating rate instruments
through  the use of interest  rate swap  transactions.  Interest  rate swaps are
discussed more fully in the Asset/Liability Management section which follows and
in note 14 to the consolidated financial statements.  An additional $200 million
of bank notes may be issued from time to time under this  book-entry  program in
maturities of from 30 days to 30 years.

Asset/Liability Management
     Managing  interest  rate  risk is  fundamental  to the  financial  services
industry.  The company manages the inherently  different  maturity and repricing
characteristics  of the  lending  and  deposit-acquisition  lines of business to
achieve  a  desired  interest-sensitivity  position  and to  limit  exposure  to
interest rate risk. The maturity and repricing  characteristics of the company's
lending and deposit activities create a naturally asset-sensitive  structure. By
using a combination  of on- and  off-balance-sheet  financial  instruments,  the
company manages interest rate sensitivity within established policy guidelines.
     The  company's   Asset/Liability   Committee  approves  policy  guidelines,
provides oversight to the asset/liability  management process,  and monitors and
adjusts exposure to interest rates in response to loan and deposit flows.
Asset/liability   activity  is  reviewed  monthly  by  the  company's  board  of
directors.
     An earnings  simulation  model is used to monitor and evaluate the exposure
and impact of changing interest rates on earnings.  The simulation model used by
the   company   reflects   the   dynamics   of  all   interest-earning   assets,
interest-bearing  liabilities and off-balance-sheet  financial  instruments.  It
combines the various factors affecting rate sensitivity into a two-year earnings
outlook that  incorporates  management's  view of the most likely  interest rate
environment.  The model is updated at least  monthly for multiple  interest rate
scenarios,  projected  changes in balance sheet  categories  and other  relevant
assumptions.  In developing  multiple rate  scenarios,  an econometric  model is
employed to forecast  key rates,  based on the  cyclical  nature of those rates,
with a probability  assigned to potential future events which might affect those
rates.
     Among the factors the model utilizes are rate-of-change differentials, such
as federal funds rates versus savings account rates;  maturity effects,  such as
calls on securities;  and rate barrier effects, such as caps or floors on loans.
It also captures  changing  balance sheet levels,  such as loans and  investment
securities,  and  floating-rate  loans  that may be tied or  related  to  prime,
treasury  notes, CD rates or other rate indices,  which do not necessarily  move
identically as rates change. In addition,  it captures leads and lags that occur
as rates  move away from  current  levels,  and the  effects of  prepayments  on
various assets, such as residential  mortgages,  mortgage-backed  securities and
consumer  loans.  These,  and certain  other  effects,  are evaluated to develop
multiple scenarios from which the sensitivity of earnings to changes in interest
rates is determined.
     The following  illustrates  the effects on net interest  income of multiple
rate environments  compared to the rate environment of December 1995 (the "flat"
scenario).  For example,  in the scenario  considered  "most likely" the company
assumed  that the  federal  funds  rate and prime rate would be 5.00% and 8.00%,
respectively,  at the end of 1996, and would be slightly higher for seven of the
twelve months from December 31, 1995 to December 31, 1996.

<PAGE>



                                   Most
                           Flat  Likely   Rising  Declining
Assumptions:
  Prime rate .........     8.50%   8.00%   11.50%   5.75%
  Federal funds rate .     5.50%   5.00%    8.50%   3.00%

Increase (decrease) in
  net interest income        - %  (0.24)%  (0.07)% (2.14)%

     The  company's  simulation  model  shows  that  under  each  of  the  three
scenarios,  net interest income would be lower than if rates remained  constant,
with a declining rate environment  having the greatest  negative impact.  Due to
the recent  restructuring  of the balance  sheet,  along with  off-balance-sheet
transactions,  management believes that the company's rate sensitivity  position
is  essentially  balanced at December  31,  1995,  indicating  that net interest
income would not be impacted significantly under a reasonably foreseeable rising
or falling  interest rate  scenario.  It should be noted that the results of the
simulation  model do not take into  account  any future  actions  which could be
undertaken  to reduce an adverse  impact if there were a change in interest rate
expectations or in the actual level of interest rates.
     To assist in achieving a desired  level of interest  rate  sensitivity  the
company has entered into off-balance-sheet interest rate swap transactions which
effectively  neutralize  the asset  sensitive  position which is inherent in the
balance  sheet.  The  company  pays a  variable  interest  rate on each swap and
receives a fixed rate.  In a higher  interest-rate  environment,  the  increased
contribution   to  net  interest  income  from   on-balance-sheet   assets  will
substantially  offset any negative  impact on net interest  income from interest
rate swap transactions.  Conversely,  if interest rates decline,  the swaps will
mitigate the company's exposure to reduced net interest income.
     These  swap  transactions  are  described  more  fully  in  note  14 to the
consolidated financial statements.
<TABLE>

 Quarterly Results of Operations
 In thousands, except per share data                                                            
 <CAPTION>
                                                                                              
                                                              1995                                1994
                                                 4th Qtr  3rd Qtr 2nd Qtr   1st Qtr  4th Qtr  3rd Qtr  2nd Qtr  1st Qtr
<S>                                              <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>    
 Interest income ..............................  $35,097  $34,222  $33,236  $31,673  $30,294  $28,926  $28,137  $26,625
 Interest expense .............................   17,244   16,686   16,039   14,630   12,703   11,972   11,467   11,233
                                                 -------  -------  -------  -------  -------  -------  -------  -------
 Net interest income ..........................   17,853   17,536   17,197   17,043   17,591   16,954   16,670   15,392
 Provision for loan losses ....................    3,180      780      780      520      645      555      574      438
                                                 -------  -------  -------  -------  -------  -------  -------  -------
 Net interest income after ....................   14,673   16,756   16,417   16,523   16,946   16,399   16,096   14,954
 provision
 Non-interest income ..........................    7,062    5,764    6,925    4,660    4,941    4,274    3,867    4,088
 Non-interest expenses ........................   17,500   15,801   17,185   15,563   15,873   14,996   14,900   14,301
                                                 -------  -------  -------  -------  -------  -------  -------  -------
 Income before income taxes ...................    4,235    6,719    6,157    5,620    6,014    5,677    5,063    4,741
 Income tax expense ...........................    1,378    2,175    2,038    1,825    1,963    1,870    1,638    1,604
                                                 -------  -------  -------  -------  -------  -------  -------  -------
 Net income ...................................  $ 2,857  $ 4,544  $ 4,119  $ 3,795  $ 4,051  $ 3,807  $ 3,425  $ 3,137
                                                 =======  =======  =======  =======  =======  =======  =======  =======
 Net income applicable to common stock ........  $ 2,857  $ 4,544  $ 4,119  $ 3,795  $ 4,051  $ 3,793  $ 3,405  $ 3,117
                                                 =======  =======  =======  =======  =======  =======  =======  =======


 Earnings per common share ....................  $  0.25  $  0.40  $  0.36  $  0.34  $  0.36  $  0.34  $  0.30  $  0.28
                                                 =======  =======  =======  =======  =======  =======  =======  =======
</TABLE>



<PAGE>


<TABLE>

 Consolidated Statistical Information (1)(2)
 For the years ended December 31
 Dollars in thousands, except per share data

<CAPTION>
<S>                                                      <C>         <C>         <C>         <C>         <C>
                                                              1995        1994        1993        1992      1991
Interest income ......................................  $  134,228  $  113,982  $  102,819  $   95,343  $ 79,727
Interest expense .....................................      64,599      47,375      44,250      46,763    46,819
                                                        ----------  ----------  ----------  ----------  --------
Net interest income ..................................      69,629      66,607      58,569      48,580    32,908
Provision for loan losses ............................       5,260       2,212       2,794       2,618     2,242
                                                        ----------  ----------  ----------  ----------  --------
Net interest income after provision for loan losses ..      64,369      64,395      55,775      45,962    30,666
Non-interest income ..................................      24,411      17,170      17,032      13,793     9,237
Non-interest expenses ................................      66,049      60,070      52,830      39,890    29,228
------------------------------------------------------  ----------  ----------  ----------  ----------  --------
Income before income taxes and cumulative
  effect of change in accounting principle ...........      22,731      21,495      19,977      19,865    10,675
Income tax expense ...................................       7,416       7,075       6,223       6,400     3,083
------------------------------------------------------  ----------  ----------  ----------  ----------  --------
Income before cumulative effect
  of change in accounting principle ..................      15,315      14,420      13,754      13,465     7,592
Cumulative effect of change in accounting principle ..        --          --           296        --        --
------------------------------------------------------  ----------  ----------  ----------  ----------  --------
Net income ...........................................  $   15,315  $   14,420  $   14,050  $   13,465  $  7,592
                                                        ==========  ==========  ==========  ==========  ========
Net income applicable to common stock ................  $   15,315  $   14,366  $   13,969  $   13,328  $  7,198
                                                        ==========  ==========  ==========  ==========  ========

Per common share:(3)
  Primary earnings per share .........................  $     1.35  $     1.28  $     1.24  $     1.25  $   1.03
  Fully-diluted earnings per share ...................        1.34        1.28        1.24        1.25      0.99
  Common shareholders' equity at year end ............       11.49        9.96        9.96        9.01      7.78
  Cash dividends declared ............................        0.60        0.56        0.51        0.44      0.36
  Year-end stock price ...............................       17.88       13.00       16.50       15.19     12.00
At year end: 
  Total assets .......................................   1,795,649   1,617,835   1,597,453   1,380,626   976,405
  Total loans, net of unearned income ................   1,259,071   1,143,716   1,006,796     780,846   567,954
  Total deposits .....................................   1,444,483   1,335,509   1,376,227   1,222,050   857,663
  Long-term debt .....................................      86,605      37,334      54,217      21,957    18,958
  Total shareholders' equity .........................     129,767     111,632     112,036      99,406    66,172
  Common shareholders' equity ........................     129,767     111,632     111,026      98,396    62,877
  Allowance for loan losses ..........................      15,779      12,529      12,505       9,596     7,700
Selected ratios:
  Return on average assets ...........................      0.92 %      0.91 %      0.96 %      1.10 %    0.86 %
  Return on average shareholders' equity .............       12.55       12.89       13.24       14.56     13.65
  Return on average common shareholders' equity ......       12.55       12.92       13.29       14.57     14.64
  Average shareholders' equity to average total assets        7.30        7.05        7.25        7.58      6.31
  Leverage ratio .....................................        6.70        6.95        6.47        6.57      5.99
  Tier 1 risk-based capital ratio ....................        8.64        9.47        9.36       11.05      9.21
  Total risk-based capital ratio .....................       12.15       13.31       13.50       12.51     11.58
  Common dividend payout ratio .......................       44.49       43.88       41.05       35.10     35.03
  Allowance for loan losses as a percentage
    of year-end loans ................................        1.25        1.10        1.24        1.23      1.36
  Nonperforming loans as a percentage
    of year-end loans ................................        1.38        0.69        0.98        1.15      1.87
  Net charge-offs as a percentage of average loans ...        0.17        0.20        0.26        0.24      0.31
  Net interest margin ................................        4.56        4.57        4.32        4.31      4.04
Other data:
  Number of full-time-equivalent employees at year end         932         836         829         672       473
<FN>

(1) During 1995,  1993, 1992 and 1991, the company acquired one commercial bank,
three thrift  institutions and certain branches of two other thrift institutions
in transactions accounted for using the purchase method of accounting. Financial
data pertaining to the acquired  entities since the  acquisition  dates has been
included  in  the  consolidated   financial  statements.   See  note  4  to  the
consolidated financial statements. (2) In 1994 and 1992, the company merged with
four  bank  holding   companies  in   transactions   accounted   for  using  the
pooling-of-interests method of accounting.  Accordingly,  all financial data has
been restated as if the entities were  combined for all periods  presented.  See
note 4 to the consolidated  financial statements.  (3) All per common share data
has been  adjusted to reflect the 4-for-3  stock  splits  effected  December 18,
1992, and December 16, 1991.
</FN>
</TABLE>



<PAGE>




                          Independent Auditors' Report




   We have  audited  the  accompanying  consolidated  balance  sheets  of  Trans
Financial,  Inc.  and  subsidiaries  as of December  31, 1995 and 1994,  and the
related consolidated  statements of income,  changes in shareholders' equity and
cash flows for each of the years in the  three-year  period  ended  December 31,
1995. These  consolidated  financial  statements are the  responsibility  of the
company's  management.  Our  responsibility  is to  express  an opinion on these
consolidated 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 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 Trans
Financial,  Inc.  and  subsidiaries  as of December  31, 1995 and 1994,  and the
results  of their  operations  and their cash flows for each of the years in the
three-year period ended December 31, 1995, in conformity with generally accepted
accounting principles.
   As discussed in note 2 to the  consolidated  financial  statements,  in 1995 
the company  adopted the provisions of the Financial Accounting Standards  
Board's Statement of Financial Accounting Standards No. 122, Accounting for 
Mortgage Servicing Rights, and in 1993 it adopted  Statements of Financial 
Accounting Standards No. 109, Accounting for Income Taxes, and No. 115, 
Accounting for Certain Investments in Debt and Equity Securities.


                            /s/ KPMG Peat Marwick LLP
                                KPMG Peat Marwick LLP
Louisville, Kentucky
January 15, 1996


<PAGE>




 Consolidated Balance Sheets
 December 31 - In thousands, except share data
                                                        1995          1994
 Assets
Cash and due from banks (note 5) ..............  $    81,703   $    80,828
Interest-bearing deposits with banks ..........          197           197
Mortgage loans held for sale (note 2) .........       45,751         6,541
Securities available for sale (amortized cost
   of $298,798 as of December 31, 1995, and
   $242,079 as of December 31, 1994) (note 6) .      298,222       229,643
Securities held to maturity (market value of
   $81,209 as of December 31, 1994) (note 6) ..         --          84,758
Loans, net of unearned income (notes 7 and 9) .    1,259,071     1,143,716
Less allowance for loan losses ................       15,779        12,529
                                                 -----------   -----------
   Net loans ..................................    1,243,292     1,131,187
Premises and equipment, net (note 8) ..........       41,458        36,440
Mortgage servicing rights (note 2) ............       28,284         9,166
Other assets (note 4) .........................       56,742        39,075
                                                 -----------   -----------
   Total assets ...............................  $ 1,795,649   $ 1,617,835
                                                 ===========   ===========

Liabilities and Shareholders' Equity
Deposits:
   Non-interest bearing .......................  $   206,725   $   192,433
   Interest bearing ...........................    1,237,758     1,143,076
                                                 -----------   -----------
   Total deposits .............................    1,444,483     1,335,509
Federal funds purchased and
   repurchase agreements ......................       75,594        74,553
Other short-term borrowings (note 9) ..........       45,014        48,033
Long-term debt (note 9) .......................       86,605        37,334
Other liabilities .............................       14,186        10,774
                                                 -----------   -----------
   Total liabilities ..........................    1,665,882     1,506,203
Commitments and contingencies (notes 13 and 14)
Shareholders' equity:
   Preferred stock (note 10) ..................         --            --
   Common stock, no par value. Authorized
      50,000,000 shares; issued and
      outstanding 11,293,291 and
      11,203,247 shares, respectively .........       21,175        21,006
   Additional paid-in capital .................       43,872        42,810
   Retained earnings (note 11) ................       68,152        59,587
   Unrealized net loss on
      securities available for sale,
      net of tax (note 6) .....................         (403)       (8,073)
   Employee Stock Ownership Plan shares
      purchased with debt (notes 9 and 13) ....       (3,029)       (3,698)
                                                 -----------   -----------
   Total shareholders' equity .................      129,767       111,632
                                                 -----------   -----------
   Total liabilities and shareholders' equity .  $ 1,795,649   $ 1,617,835
                                                 ===========   ===========

 See accompanying notes to consolidated financial statements.



<PAGE>



 Consolidated Statements of Income
 Years Ended December 31
 In thousands, except per share data                                    

 Interest income                                   1995      1994      1993
   Loans, including fees ....................  $115,757  $ 94,020  $ 78,812
   Federal funds sold and resale
     agreements .............................       804       540       976
   U.S. Treasury and federal agency securities   13,532    15,444    19,856
   State and municipal obligations ..........     2,861     2,770     2,211
   Other securities .........................     1,257     1,104       844
   Interest-bearing deposits with banks .....        17       104       120
                                               --------  --------  --------
   Total interest income ....................   134,228   113,982   102,819
 Interest expense
   Deposits .................................    56,465    41,724    41,486
   Federal funds purchased
     and repurchase agreements ..............     2,014     1,253       673
   Other short-term borrowings (note 9) .....     2,983     1,715       238
   Long-term debt (note 9) ..................     3,137     2,683     1,853
---------------------------------------------  --------  --------  --------
   Total interest expense ...................    64,599    47,375    44,250
                                               --------  --------  --------
 Net interest income ........................    69,629    66,607    58,569
   Provision for loan losses (note 7) .......     5,260     2,212     2,794
                                               --------  --------  --------
 Net interest income after
   provision for loan losses ................    64,369    64,395    55,775
 Non-interest income
   Service charges on deposit accounts ......     8,472     7,384     6,351
   Mortgage banking income ..................     6,009     2,752     3,132
   Gain on sale of mortgage servicing rights      1,687      --        --
   Gain on sale of securities, net (note 6) .       200       257     1,149
   Trust services ...........................     1,392     1,247     1,133
   Brokerage income .........................     1,728     1,305       849
   Other ....................................     4,923     4,225     4,418
                                               --------  --------  --------
   Total non-interest income ................    24,411    17,170    17,032
 Non-interest expenses
   Compensation and benefits (note 13) ......    30,588    26,330    23,218
   Net occupancy expense ....................     4,836     4,572     4,071
   Furniture and equipment expense ..........     6,126     5,284     4,243
   Deposit insurance ........................     2,095     3,183     2,778
   Professional fees ........................     3,424     3,742     2,418
   Postage, printing & supplies .............     3,643     3,516     2,957
   Communications ...........................     1,607     1,131     1,024
   Other ....................................    13,730    12,312    12,121
                                               --------  --------  --------
   Total non-interest expenses ..............    66,049    60,070    52,830
                                               --------  --------  --------
 Income before income taxes and
   cumulative effect of change
   in accounting principle ..................    22,731    21,495    19,977
 Income tax expense (note 12) ...............     7,416     7,075     6,223
                                               --------  --------  --------
 Income before cumulative effect
   of change in accounting principle ........    15,315    14,420    13,754
 Cumulative effect of change in
   accounting principle (note 12) ...........      --        --         296
                                               --------  --------  --------
 Net income .................................  $ 15,315  $ 14,420  $ 14,050
                                               ========  ========  ========
 Net income applicable
   to common stock ..........................  $ 15,315  $ 14,366  $ 13,969
                                               ========  ========  ========
 Primary earnings per common share (note 2):
   Before cumulative effect of change
     in accounting principle ................  $   1.35  $   1.28  $   1.22
   Based on net income ......................      1.35      1.28      1.24
                                                                   
 See accompanying notes to consolidated financial statements.

<PAGE>





Consolidated Statements of Changes in Shareholders' Equity                      
In thousands, except share and per share data
                              Preferred Stock   Common Stock                 
                                                                             
                              Number            Number                  Addtl   
                               of                 of                   Paid-in  
                              shares  Amount    shares       Amount    Capital  
                             -------  ------    ----------   ------    -------  

 Balance 12/31/92             1,010    $1,010    8,191,520   $20,479   $40,913


 Net income for the year
 Cash dividends declared:
 Common stock, $.51 per
 share
 Preferred stock
 Stock options exercised                             8,577        16        36
 Common stock issued in
 connection
 with dividend
 reinvestment and stock
 purchase plans and other                           47,613        89       738
 issuances
 Four-for-three stock split                      2,730,025
 Common stock issued in                            171,738       322       572
 public offering
 Decrease in unrealized loss
 on marketable equity
 securities
 Net unrealized gain on
 securities
 available for sale, net
 of tax
 ESOP debt reduction, net
 Reissue treasury stock                                249                   3
                             ------     ------  ----------   -------   -------  
 Balance 12/31/93             1,010     $1,010  11,149,722   $20,906   $42,256


 Net income for the year
 Cash dividends declared:
 Common stock, $.56 per
 share
 Preferred stock
Redemption of preferred
stock (note 10)             (1,010)     (1010)
Stock options exercised                             22,018        41       178
Common stock issued in
connection
with dividend
reinvestment and stock
purchase plan and other                             31,507        59       376
issuances
Net unrealized loss on
securities
available for sale, net
of tax
ESOP debt reduction, net
                            -------    ------   ----------   -------  --------  

Balance 12/31/94                 --        $-   11,203,247   $21,006   $42,810



Net income for the year
Cash dividends declared:
Common stock, $.60 per
share
Common stock issued in
connection
with business combination
accounted
for as a purchase                                   25,000        47       384
(note4)
Stock options exercised,
net of
shares redeemed                                     30,887        58       205
Common stock issued in
connection
with dividend
reinvestment and stock
purchase plan                                       34,157        64       473
Decrease in net
unrealized loss on
securities available
for sale, net of tax
ESOP debt reduction, net
                            -------    ------  -----------  --------    ------  
Balance 12/31/95                 --        $-   11,293,291   $21,175   $43,872
                            =======    ======   ==========   =======   =======  
                                                                             
                                                                  


 See accompanying notes to consolidated financial statements.
<PAGE>


Consolidated Statements of Changes in Shareholders' Equity                      
 In thousands, except share and per share data            


                                                  Unrealized  Employee          
                                    Unrealized    Net Gain    Stock             
                                     Loss on       (Loss) on  Ownership         
                                   Marketable    Securities Plan Shares         
                          Retained  Equity        Available  Purchased    Total 
                          Earnings  Securities    for Sale   With Debt          
                          -------  ----------     --------   ---------   -------
 Balance 12/31/92        $41,039      $(163)           $-     $(3,872)  $99,406 
                                                                                
                                                                                
 Net income for the year  14,050                                         14,050 
 Cash dividends declared:                                                       
 Common stock, $.51 per  (4,002)                                        (4,002) 
 share                                                                          
 Preferred stock            (81)                                           (81) 
 Stock options exercised                                                     52 
 Common stock issued in                                                         
 connection                                                                     
 with dividend                                                                  
 reinvestment and stock                                                         
 purchase plans and other                                                   827 
 issuances                                                                      
 Four-for-three stock spli   (6)                                            (6) 
 Common stock issued in                                                     894 
 public offering                                                                
 Decrease in unrealized lo                                                      
 on marketable equity                    163                                163 
 securities                                                                     
 Net unrealized gain on                                                         
 securities                                                                     
 available for sale, net                              719                   719 
 of tax                                                                         
 ESOP debt reduction, net                                           11       11 
 Reissue treasury stock                                                         
                         -------       -----        -----      -------  ------- 
                                                                                
 Balance 12/31/93        $51,006          $-         $719     $(3,861) $112,036 
                                                                              
                                                                                
 Net income for the year  14,420                                         14,420 
 Cash dividends declared:                                                       
 Common stock, $.56 per  (5,785)                                        (5,785) 
 share                                                                          
 Preferred stock            (54)                                           (54) 
Redemption of preferred                                                 (1,010) 
stock (note 10)                                                                 
Stock options exercised                                                     219 
Common stock issued in                                                          
connection                                                                      
with dividend                                                                 8 
reinvestment and stock                                                          
purchase plan and other                                                     435 
issuances                                                                       
Net unrealized loss on                                                          
securities                                                                    6 
available for sale, net                           (8,792)               (8,792) 
of tax                                                                          
ESOP debt reduction, net                                           163      163 
                         -------       -----     --------      -------  ------- 
                                                                                
Balance 12/31/94         $59,587          $-     $(8,073)     $(3,698) $111,632 
                                                                                
                                                                               
                                                                                
Net income for the year   15,315                                         15,315 
Cash dividends declared:                                                        
Common stock, $.60 per   (6,750)                                        (6,750) 
share                                                                           
Common stock issued in                                                          
connection                                                                      
with business combination                                                       
accounted                                                                       
for as a purchase                                                           431 
(note4)                                                                         
Stock options exercised,                                                        
net of                                                                          
shares redeemed                                                             263 
Common stock issued in                                                          
connection                                                                      
with dividend                                                                   
reinvestment and stock                                                          
purchase plan                                                               537 
Decrease in net                                                                 
unrealized loss on                                                              
securities available                                7,670                 7,670 
for sale, net of tax                                                            
ESOP debt reduction, net                                          669       669
                         -------       -----       ------     -------- -------- 
Balance 12/31/95         $68,152          $-       $(403)     $(3,029) $129,767 
                         =======       =====       ======     ======== ======== 
See accompanying notes to consolidated financial statements.                    
<PAGE>

<TABLE>


 Consolidated Statements of Cash Flows
 Years Ended December 31
 In thousands, except per share data                                            
<CAPTION>

Cash flows from operating activities:                         1995        1994        1993
<S>                                                      <C>         <C>         <C>      
Net income ............................................  $  15,315   $  14,420   $  14,050
Adjustments to reconcile net income to cash
  provided by operating activities:
    Provision for loan losses .........................      5,260       2,212       2,794
    Deferred tax expense ..............................     (2,387)       (882)       (522)
    Gain on sale of securities ........................       (200)       (257)     (1,149)
    Loss (gain) on sale of mortgage loans held for sale     (1,888)        200        (949)
    Loss (gain) on sale of premises and equipment .....       (174)       (231)         14
    Gain on sale of mortgage servicing rights .........     (1,687)       --          --
    Depreciation and amortization of fixed assets .....      5,473       5,032       3,466
    Amortization of intangible assets .................      1,394       1,087       1,085
    Amortization of premium on securities
      and loans, net ..................................      1,077       2,094       2,090
    Amortization of mortgage servicing rights .........      2,720       1,013         389
Increase in accrued interest receivable ...............     (1,736)     (1,593)     (1,370)
Decrease (increase) in other assets ...................    (10,759)     (3,159)      2,912
Increase (decrease) in accrued interest payable .......      3,588         114        (449)
Increase (decrease) in other liabilities ..............     (4,993)      4,197      (2,331)
Sale of mortgage loans held for sale ..................    150,359     133,598     201,840
Originations of mortgage loans held for sale ..........   (187,681)    (95,161)   (221,072)
                                                         ---------   ---------   ---------
  Net cash provided by (used in) operating activities .    (26,319)     62,684         798
Cash flows from investing activities:
Net decrease in interest-bearing deposits
  with banks ..........................................       --           250       8,460
Net decrease in federal funds sold
  and resale agreements ...............................       --        32,778      36,888
Proceeds from sale of securities:
  Available for sale ..................................     33,247       5,183      23,787
  Held to maturity (note 6) ...........................      2,486        --          --
Proceeds from prepayment and call of securities:
  Available for sale ..................................     22,940      50,975       3,872
  Held to maturity ....................................      4,758      12,363     111,270
Proceeds from maturities of securities:
  Available for sale ..................................     33,726      20,412      12,920
  Held to maturity ....................................      3,140       9,492      44,854
Purchase of securities:
  Available for sale ..................................    (70,136)    (21,566)    (49,965)
  Held to maturity ....................................     (3,000)    (20,047)    (94,514)
Net increase in loans .................................   (118,498)   (140,434)   (117,798)
Purchase and origination of mortgage servicing rights .    (22,331)     (7,778)     (1,131)
Proceeds from sale of mortgage servicing rights .......      2,180        --          --
Proceeds from sale of foreclosed assets ...............      1,705       1,950       2,949
Purchases of premises and equipment ...................    (10,555)     (9,785)     (5,423)
Proceeds from disposal of premises and equipment ......        836       1,569         112
Net cash and cash equivalents inflow (outflow)
  from acquisitions (note 4) ..........................     36,815        --        (7,996)
                                                         ---------   ---------   ---------
  Net cash used in investing activities ...............    (82,687)    (64,638)    (31,715)
Cash flows from financing activities:
Net increase (decrease) in deposits ...................     67,869     (40,718)     (9,707)
Net increase (decrease) in federal funds purchased
  and repurchase agreements ...........................      1,041      44,849        (431)
Net increase (decrease) in other short-term borrowings      (3,019)     23,033      14,400
Proceeds from issuance of long-term debt ..............     50,000        --        36,603
Repayment of long-term debt ...........................        (60)     (6,720)     (4,332)
Proceeds from issuance of common stock ................        800         654       1,770
Redemption of preferred stock .........................       --        (1,010)       --
Dividends paid ........................................     (6,750)     (5,839)     (4,083)
                                                         ---------   ---------   ---------
  Net cash provided by financing activities ...........    109,881      14,249      34,220
                                                         ---------   ---------   ---------
Net increase in cash and cash equivalents .............        875      12,295       3,303
Cash and cash equivalents at beginning of year ........     80,828      68,533      65,230
                                                         ---------   ---------   ---------
Cash and cash equivalents at end of year (note 3) .....  $  81,703   $  80,828   $  68,533
                                                         =========   =========   =========

 See accompanying notes to consolidated financial statements.

</TABLE>

<PAGE>



Notes to Consolidated Financial Statements
(1) Nature of Operations
     Trans  Financial,  Inc.  ("the  company")  is a bank and  savings  and loan
holding  company  registered  under the Bank Holding Company Act of 1956 and the
Home Owners' Loan Act. The company's principal subsidiaries are: Trans Financial
Bank, National Association,  headquartered in Bowling Green, Kentucky; and Trans
Financial  Bank  Tennessee,  National  Association,  and Trans  Financial  Bank,
F.S.B., both headquartered in Nashville,  Tennessee.  Collectively,  these three
subsidiaries  are referred to in this report as "the banks." In addition,  Trans
Financial Bank,  National  Association has three operating  subsidiaries:  Trans
Financial Investment Services, Inc., a securities broker/dealer; Trans Financial
Mortgage Company, a mortgage banking company;  and Trans Travel,  Inc., a travel
agency.
     The  company's  financial  services  network  is  comprised  of  56  office
locations   serving  38  communities  in  Kentucky  and  Tennessee  by  offering
commercial and consumer banking, brokerage, mortgage, trust and travel services.
As of December 31, 1995,  the company  employed 988  employees and serviced more
than 140 thousand customer households.
     The company actively  competes in its markets with other commercial  banks,
savings  and  loan  associations,  credit  unions,  brokerage  firms,  insurance
companies,  other financial  institutions and  institutions  which have expanded
into the financial market.
     Bank  holding  companies,  commercial  banks and savings  institutions  are
extensively  regulated  under both federal and state law.  Changes in applicable
laws or regulations  may have a material  effect on the businesses and prospects
of the company and the banks.
 (2) Summary of Significant Accounting Policies
     The consolidated financial statements have been prepared in accordance with
generally  accepted  accounting  principles,  which  require  management to make
estimates and  assumptions  that affect both the reported  amounts of assets and
liabilities  at the date of the  financial  statements,  and  also the  reported
amounts of revenues and expenses  during the reporting  periods.  Actual results
could differ from those estimates. Generally accepted accounting principles also
require  disclosure  of  contingent  assets and  liabilities  at the date of the
financial statements.
     A description of the more significant accounting policies follows.
     Principles of Consolidation
     The  consolidated  financial  statements  include  the  accounts  of  Trans
Financial,  Inc. (parent company) and its subsidiaries,  all of which are wholly
owned.  All  significant  intercompany   transactions  and  accounts  have  been
eliminated in  consolidation.  Certain prior year amounts have been reclassified
to conform with 1995 presentations.
     Securities
     Effective  December 31, 1993,  the company  adopted  Statement of Financial
Accounting  Standards No. 115,  Accounting  for Certain  Investments in Debt and
Equity  Securities.  Accordingly,  all debt securities in which the company does
not have the ability or management  does not have the positive intent to hold to
maturity are  classified  as  securities  available  for sale and are carried at
market  value.  All equity  securities  are  classified  as available  for sale.
Unrealized  gains and losses on securities  available for sale are reported as a
separate  component of  shareholders'  equity (net of income taxes).  Securities
classified as held to maturity are carried at amortized cost. The company has no
securities classified as trading securities.
     Amortization  of premiums  and  accretion  of  discounts  are recorded by a
method   which   approximates   a  level  yield  and  which,   in  the  case  of
mortgage-backed   securities,    considers   prepayment   risk.   The   specific
identification method is used to determine the cost of securities sold.
     Loans and Allowance for Loan Losses
     Loans are stated at the unpaid principal balance.  Interest income on loans
is recorded on the accrual  basis except for those loans in a nonaccrual  income
status. Loans are placed in nonaccrual status when principal or interest is past
due 90 days or more and the  loan is not  adequately  collateralized  and in the
process of  collection,  or when,  in the opinion of  management,  principal  or
interest  is  not  likely  to be  paid  in  accordance  with  the  terms  of the
obligation.  Loans are not reclassified as accruing until principal and interest
payments are brought  current and future  payments  appear  reasonably  certain.
Unearned  income,  arising  principally from consumer  installment  loans or the
deferral  of certain  loan fees,  is  recognized  as income  using a method that
approximates the interest method.
     The  allowance  for loan losses is  maintained  at a level that  adequately
provides for estimated losses in the loan portfolio.  The level of the allowance
is based on management's  evaluation of the loan  portfolio,  which includes the
review of individual credits,  consideration of past loan loss experience,  loan
delinquency  trends,  changes in the  composition  of the loan portfolio and the
impact of current and  projected  economic  conditions.  The  allowance for loan
losses  is  increased  by the  provision  for loan  losses  and  reduced  by net
charge-offs. The level of the allowance and the amount of the provision for loan
losses involve  uncertainties and matters of judgment and, therefore,  cannot be
determined with precision.
     The  company  adopted on a  prospective  basis  effective  January 1, 1995,
Statement of Financial Accounting Standards No. 114, Accounting by Creditors for
Impairment  of a Loan ("SFAS 114").  SFAS 114 requires  that  impaired  loans be
measured at the present value of expected  future cash flows,  discounted at the
loan's effective interest rate, at the loan's observable market price, or at the
fair value of the  collateral  if the loan is collateral  dependent.  Generally,
impaired loans are also in nonaccrual status,  however, in certain circumstances
the company may continue to accrue  interest on an impaired loan.  Such interest
income on accruing  impaired loans is accrued  daily.  Cash receipts on impaired
loans are applied to the recorded investment in the loan,  including any accrued
interest receivable.  The adoption of SFAS 114 did not have a material effect on
the company's consolidated financial statements.
     Mortgage Loans Held for Sale
     Mortgage  loans held for sale are carried at the lower of aggregate cost or
market value, as determined by outstanding  loan  commitments  from investors or
current yield  requirements.  Gain or loss is recorded at the time of sale in an
amount reflecting the difference  between the contractual  interest rates of the
loans sold and the current market rate.
     Mortgage Servicing Portfolio
     The  company  adopted on a  prospective  basis  effective  January 1, 1995,
Statement of Financial  Accounting  Standards No. 122,  Accounting  for Mortgage
Servicing Rights ("SFAS 122"). SFAS 122 requires that rights to service mortgage
loans for others be recognized as assets, without regard to whether those assets
were  acquired  in  purchase   transactions   or  were  acquired   through  loan
originations.  SFAS 122 also eliminates the previous  requirement  that gains on
mortgage  loan sales be offset  against the  related  mortgage  servicing  right
asset.  The  adoption of this  statement  resulted in a  $1,243,000  increase in
mortgage  banking  income  in  1995,  which is  included  in the gain on sale of
mortgage loans held for sale shown on the consolidated statement of cash flows.
     At December 31, 1995,  the portfolio of mortgage  loans serviced for others
totaled $2.2 billion,  as compared  with $1.3 billion at December 31, 1994.  The
cost of mortgage  servicing  rights  ("MSR's")  associated  with that  portfolio
($28,284,000 and $9,166,000 at December 31, 1995 and 1994, respectively,  net of
accumulated amortization), is amortized against service fee income in proportion
to, and over the period of, estimated net servicing revenues. During 1995, MSR's
totaling   $1,243,000  were  recognized  on  mortgage  loans   originated,   and
$21,088,000 was recognized on servicing portfolios purchased.
     The  carrying  value of MSR's and the related  amortization  are  evaluated
quarterly in relation to estimated  future net servicing  revenues.  The company
evaluates the carrying value of the MSR's by estimating the future net servicing
income  of the  rights,  stratified  by  interest  rate and loan  type,  using a
discounted valuation method and based on management's best estimate of remaining
loan lives.  Impairment and subsequent  adjustments in each stratum,  if any, is
recognized by a valuation allowance and a charge against servicing income.
     The  normal  agency  (GNMA,  FNMA or FHLMC)  servicing  fee was used in the
capitalization of any excess service fees. When participating interests in loans
sold had an average contractual  interest rate, as adjusted for normal servicing
costs,  which differed from the agreed yield to the  purchaser,  gains or losses
were  recognized  equal  to the  present  value  of such  differential  over the
estimated  remaining  life of such loans.  Amortization  of  capitalized  excess
servicing fees was reflected as a reduction of loan  servicing  income using the
interest  method over the estimated  remaining life of such loans,  adjusted for
actual prepayments.
     Interest Rate Swaps
     The company uses interest rate swaps to manage its  sensitivity to interest
rate  risk.  Interest  income  and  expense  is  accrued  over the  terms of the
agreements,  and transaction  fees are deferred and amortized  through  interest
income and expense  over the terms of the  agreements.  The fair market value of
these instruments is not included in the financial statements.
     Premises and Equipment
     Premises and equipment are carried at cost, less  accumulated  depreciation
and  amortization.  Depreciation of premises and equipment is computed using the
straight-line  method over the estimated  useful lives of the assets.  Leasehold
improvements  are  amortized  on the  straight-line  method over the term of the
related lease or over the useful life of the improvements, whichever is shorter.
Leasing commitments are insignificant.
     Other Assets
     Included in other assets is real estate  acquired in  settlement  of loans,
which is  carried  at the lower of cost or fair  value  less  estimated  selling
costs.  The excess of cost over fair value less  estimated  costs to sell at the
time of foreclosure is charged to the allowance for loan losses.  Provisions for
subsequent  declines in fair value are included in other  non-interest  expense.
Other costs relating to holding real estate  acquired in settlement of loans are
charged to other non-interest expense as incurred.  Costs related to real estate
in the process of development  are capitalized to the extent that total carrying
value does not exceed fair value less costs to sell.
     Income Taxes
     The  company  adopted  as  of  January  1,  1993,  Statement  of  Financial
Accounting Standards No. 109, Accounting for Income Taxes. Under this statement,
a current or deferred  income tax  liability is  recognized,  subject to certain
limitations,  for the current or deferred  tax  consequences  of all events that
have been  recognized  in the  financial  statements.  The  deferred  income tax
liability  or asset is measured by the  provisions  of enacted tax laws.  Income
taxes for prior years were determined in accordance  with Accounting  Principles
Board  Opinion  No.  11.  The  cumulative  effect of this  change in  accounting
principle,  determined  as of January 1, 1993,  is  reported  separately  in the
consolidated statement of income for the year ended December 31, 1993.
     Stock Options
     The company  accounts for employee  stock  options in  accordance  with the
provisions of Accounting  Principles Board Opinion No. 25,  Accounting for Stock
Issued to Employees ("APB 25"). Under APB 25, no compensation cost is recognized
on stock options granted to employees if the exercise price is at least equal to
the fair market value of the underlying stock at the date of grant.
     Earnings Per Common Share
     Primary earnings per share is computed by dividing net income applicable to
common stock by the weighted average number of shares of common stock and common
stock equivalents outstanding during the period. Net income applicable to common
stock is net income reduced by dividends on preferred stock.
     The weighted  average number of shares  outstanding used in the calculation
of primary earnings per share follows:

     In thousands                        1995              1994             1993
                                       11,353            11,258           11,245
(3) Statement of Cash Flows
   For purposes of reporting cash flows, cash and cash equivalents  include cash
on hand and amounts due from banks. The following  summarizes  supplemental cash
flow data for the years ended December 31, 1995, 1994 and 1993:

In thousands                    1995      1994      1993
Cash paid for interest ...   $60,366   $47,261   $44,309
Cash paid for income taxes    10,323     8,537     7,163

   Certain  non-cash  investing and  financing  transactions  are  summarized as
follows: 
                                                         1995     1994      1993
Issuance of stock in business combination ...........     431       --        --
Change in unrealized gain (loss) on
securities available for sale, net of tax ...........   7,670   (8,792)      882
Effect on shareholders' equity of reductions
in Employee Stock Ownership Plan debt (net) .........     669      163        11
Loans transferred to foreclosed real estate
and other foreclosed assets .........................   1,493    1,326     1,019
Other assets transferred to loans ...................      --       --       274
Securities transferred from held-to-maturity
to securities available for sale:
Upon adoption of SFAS No. 115 .......................      --       --   171,530
Related to business combinations ....................      --   58,641        --
Under special one-time reassessment guidance
issued by the Financial Accounting
Standards Board .....................................  76,921       --        --
Other transfers .....................................      --       --     7,359
Reclassification of debt from long-term to short-term      --   10,000        --


<PAGE>


(4) Business Combinations
   On  February  21,  1995,  the company  assumed  $41  million of deposits  and
acquired  three branch  facilities  and $360 thousand of consumer  loans.  These
deposits and assets were related to the Bowling Green and Scottsville,  Kentucky
branches  of Fifth  Third Bank of  Kentucky,  Inc.  The two  offices  located in
Bowling  Green,   Kentucky  were  consolidated  into  existing  Trans  Financial
locations.  The  company's  existing  location  in  Scottsville,   Kentucky  was
consolidated  into the other  purchased  location.  On  September  1, 1995,  the
company acquired  AirLanse Travel, a Louisville,  Kentucky,  travel agency,  for
cash and stock of the company.  On November 15, 1995,  the company  acquired for
cash the assets of Correspondents Mortgage Company, L.P., located in Greensboro,
North Carolina.
   These three acquisitions have been accounted for using the purchase method of
accounting  and,  accordingly,  their results of operations  and cash flows have
been  included  in the  consolidated  financial  statements  since  the dates of
acquisition.  The company received  $36,815,000 of cash and issued 25,000 shares
of common stock in connection with these acquisitions.
   Following  is a summary of the assets  acquired  and  liabilities  assumed in
these transactions:

In thousands
Cash and due from banks ...................  $ 36,815
Loans, net of unearned income .............       360
Premises and equipment ....................       598
Other assets ..............................       154
Deposits ..................................   (41,105)
Other liabilities .........................      (628)
Common stock issued .......................      (431)
   Excess of costs over net assets acquired     4,237

   The excess of the costs over the value of net assets acquired was recorded as
goodwill.
   Following is a presentation of pro forma financial information of the company
for the years ended December 31, 1995 and 1994,  assuming these acquisitions had
occurred  on January  1,  1994.  The pro forma  financial  information  does not
necessarily  reflect the results of operations  that would have occurred had the
entities been combined throughout those periods.
 In thousands,  except per share data
                                                        1995     1994
Net interest income after provision for loan losses  $69,781  $67,942
Net income ........................................   15,590   14,778
Primary earnings per common share .................  $  1.37  $  1.31

   On February 15, 1994, Trans Financial merged with Kentucky Community Bancorp,
Inc. ("KCB") of Maysville,  Kentucky, the holding company for The State National
Bank,  Peoples  First  Bank,  and  Farmers  Liberty  Bank.  As of  the  date  of
consummation,  KCB  had  consolidated  assets  of  approximately  $175  million,
year-to-date   net  interest  income  of   approximately   $915  thousand,   and
year-to-date net income of approximately  $325 thousand.  Under the terms of the
merger, the shares of KCB common stock outstanding were converted into 1,374,962
shares of common stock of the company.
   On April 22, 1994,  Trans Financial merged with Peoples  Financial  Services,
Inc. ("PFS") of Cookeville,  Tennessee, the holding company for Peoples Bank and
Trust of the  Cumberlands  and Citizens  Federal Savings Bank. As of the date of
consummation,  PFS  had  consolidated  assets  of  approximately  $123  million,
year-to-date  net  interest  income  of  approximately   $1,520  thousand,   and
year-to-date net income of approximately  $330 thousand.  Under the terms of the
merger,  the shares of PFS common stock were converted into 1,302,254  shares of
common stock of the company.
   On August 31, 1994,  Trans Financial merged with FGC Holding Company ("FGC"),
of Martin, Kentucky, the holding company for First Guaranty National Bank. As of
the date of  consummation,  FGC had consolidated  assets of  approximately  $127
million,  year-to-date net interest income of approximately $3,420 thousand, and
year-to-date net income of approximately $1,290 thousand. Under the terms of the
merger,  the shares of FGC common stock were converted into 1,050,000  shares of
common stock of the company and the shares of FGC preferred stock were retired.
   The  consolidated  financial  statements  of the company give effect to these
three  mergers,  each of which  was  accounted  for as a pooling  of  interests.
Accordingly,  financial  statements for all periods were restated to reflect the
results of operations of these  companies on a combined  basis from the earliest
period presented.
   On July 6, 1993,  Trans Financial  acquired all of the  outstanding  stock of
Trans  Kentucky  Bancorp,  Inc.,  the holding  company for The Citizens  Bank of
Pikeville.  The aggregate costs,  including  consideration and acquisition costs
were  approximately $19 million.  The excess of the costs over the fair value of
net assets acquired of $117,000 was recorded as goodwill.  This  acquisition was
accounted for using the purchase  method of  accounting  and,  accordingly,  the
results of  operations  and cash flows of this entity have been  included in the
consolidated financial statements since the date of acquisition.
   On February 1, 1993, PFS sold 31,225 shares  (equivalent to 171,738 shares of
common stock of the company, based on the exchange ratio of 5.5 shares of common
stock of the company for each share of PFS common stock) of newly-issued  common
stock in  connection  with its  acquisition  of Citizens  Federal  Savings Bank,
Rockwood,  Tennessee,  ("Citizens")  pursuant to a definitive  agreement entered
into by PFS and Citizens in May, 1992. In connection with the  acquisition,  PFS
and Citizens adopted a Plan of Conversion/Acquisition  ("Plan") whereby Citizens
was   converted   from   a   federally-chartered   mutual   institution   to   a
federally-chartered  stock institution.  Pursuant to the Plan, shares of capital
stock of PFS were offered initially for subscriptions to eligible  members of
Citizens and to certain other persons as of specified dates and subject to
various subscription priorities as provided by the Plan. The capital stock was
offered at a price determined by PFS's Board of Directors based upon an
appraisal made by an independent appraisal firm.  The offering raised gross
proceeds of approximately $1,405,000, all of which was used in the acquisition
of Citizens.  PFS incurred costs of $511,000 associated with the offering.  All
costs incurred associated with the sale of stock and acquisition were deducted
from the proceeds of the sale of stock.  The transaction was accounted for as a
pooling of interests and, accordingly, all financial data was restated as if the
entities were combined for all periods presented.
   Goodwill and deposit base  premium  from the above transactions,  as well as
acquisitions consummated in prior years, are being amortized over periods
ranging from five to twenty years using straight-line and accelerated methods
and had a combined unamortized balance of $10,409,000 and $7,409,000 at December
31, 1995 and 1994, respectively.  These intangible assets are reviewed for
possible impairment when events or changed circumstances may affect the
underlying basis of the asset. (5) Cash and Due from Banks
     Regulatory authorities require the banks to maintain reserve balances on
customer deposits.  The amounts of required reserves totaled approximately
$27,706,000 at December 31, 1995, and $21,911,000 at December 31, 1994.

(6) Securities
   Effective December 31, 1993, the company  adopted  Statement of Financial
Accounting  Standards No. 115,  Accounting for Certain Investments in Debt and
Equity Securities ("SFAS 115").  Accordingly, all debt securities in which the
company does not have the ability or management does not have the  positive
intent to hold to maturity are classified as securities available for sale and
are carried at market value.  All equity securities are classified as available
for sale beginning December 31, 1993. In conjunction with the adoption of SFAS
115, the company transferred $171.5 million of investment securities to
securities available for sale.  Unrealized gains and losses on securities
available for sale are reported as a separate component of shareholders' equity
(net of tax) beginning December 31, 1993. Securities available for sale prior to
December 31, 1993, were carried at the lower of aggregate cost or market value.
     On November 30, 1995, $76,921,000 of held-to-maturity securities were
reclassified to available for sale as permitted by the Financial Accounting
Standards Board in a special one-time reassessment.
     The following summarizes securities available for sale at December 31, 1995
and 1994.
<TABLE>

   December 31, 1995 (In thousands)
<CAPTION>
                                                                           Amortized    Unrealized       Market
                                                                              Cost    Gains   Losses      Value
                                                                           ---------  ------  -------  --------

<S>                                                                         <C>       <C>     <C>      <C>     
U.S.Treasury and federal agency securities ...............................  $143,762  $  116  $ 1,679  $142,199
Collateralized mortgage obligations
  and mortgage-backed securities .........................................    82,169     481      750    81,900
State and municipal obligations ..........................................    54,219   1,588      255    55,552
Corporate debt securities ................................................     5,123      67       10     5,180
Equity securities ........................................................    13,525      98      232    13,391
                                                                            --------  ------  -------  --------
Total securities available for sale ......................................  $298,798  $2,350  $ 2,926  $298,222
                                                                            ========  ======  =======  ========


December 31, 1994 (In thousands)
U.S.Treasury and federal agency securities ...............................  $153,535      $-  $ 7,051  $146,484
Collateralized mortgage obligations
  and mortgage-backed securities .........................................    75,855    --      4,960    70,895
Equity securities ........................................................    12,689      27      452    12,264
                                                                            --------  ------  -------  --------
Total securities available for sale ......................................  $242,079  $   27  $12,463  $229,643
                                                                            ========  ======  =======  ========
</TABLE>
                                                                           
  The amortized cost and approximate market values of securities held to
maturity as of December 31, 1994, follows:
<TABLE>

                                                                                            
December 31, 1994 (In thousands)
<CAPTION>
                                                                       Amortized    Unrealized     Market
                                                                            Cost  Gains   Losses    Value
                                                                         -------  ------  ------  -------

<S>                                                                      <C>          <C> <C>     <C>    
U.S.Treasury and federal agency securities ............................  $ 3,081      $-  $  356  $ 2,725
Collateralized mortgage obligations
  and mortgage-backed securities ......................................   26,372      --     954   25,418
State and municipal obligations .......................................   49,752     254   2,130   47,876
Corporate debt securities .............................................    5,553      --     363    5,190
                                                                         -------  ------  ------  -------
Total securities held to maturity .....................................  $84,758  $  254  $3,803  $81,209
                                                                         =======  ======  ======  =======
</TABLE>

   Included in equity securities at December 31, 1995, are Federal Home Loan
Bank and Federal Reserve Bank stock of $6,009,300 and $1,976,800 respectively.
At December 31, 1994, these stock investments were $5,617,000 and $1,533,000,
respectively.
   The  amortized cost and approximate market value of debt securities at
December 31, 1995, by contractual maturity, are shown below. Expected maturities
may differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
Mortgage-backed obligations generally have contractual maturities in excess of
ten years, but shorter expected maturities as a result of prepayments.
   In thousands
                                        Amortized   Market
                                           Cost      Value
                                        ---------  ---------
Due in one year or less ..............  $ 51,295  $ 51,300
Due after one year through five years     89,539    88,504
Due after five years through ten years    48,785    49,168
Due after ten years ..................    13,485    13,959
                                        --------  --------
                                         203,104   202,931
Collateralized mortgage obligations
  and mortgage-backed securities .....    82,169    81,900
                                        --------  --------
                                        $285,273  $284,831
                                        ========  ========
   Securities with a carrying value of approximately $162,779,000 and
$148,348,000 at December 31, 1995 and 1994, respectively, were pledged to secure
public funds, trust funds and for other purposes.
   Gross gains of $293,000; $257,000; and $1,236,000; and gross losses of
$93,000; $-0-; and $87,000 were realized on sales of securities in 1995, 1994,
and 1993, respectively.  In 1995, the company sold mortgage-backed securities
with a carrying value of $2,568,000 from the held to maturity portfolio.  A net
loss of $82,000 was recognized on these sales, which is included in the gross
realized gains and losses shown above for 1995.  These sales qualified under the
requirements of SFAS 115, as the outstanding principal balances at the time of
sale were less than 15% of the outstanding principal balances at the time the
securities were acquired.


<PAGE>


(7) Loans
   The company extends credit in the form of commercial  loans, commercial and
residential real estate loans and consumer loans to customers primarily in the
immediate market areas of its subsidiaries. The composition of loans at December
31, 1995 and 1994, follows:

 In thousands                            1995           1994
Commercial ....................   $   372,822    $   318,970
Commercial real estate ........       397,741        334,567
Residential real estate .......       358,257        339,488
Consumer ......................       132,401        153,754
Unearned income ...............        (2,150)        (3,063)
                                  -----------    -----------
   Loans net of unearned income   $ 1,259,071    $ 1,143,716
                                  ===========    ===========

   The principal balance of nonaccrual and restructured loans at December 31,
1995 and 1994, was $12,722,000 and $4,405,000, respectively.  The interest that
would have been recorded if all those loans were in an accrual status in
accordance with their original terms was approximately $1,441,000 in 1995,
$519,000 in 1994, and $452,000 in 1993.  The amount of interest income that was
actually recorded for those loans was approximately $490,000 in 1995, $81,000 in
1994, and $37,000 in 1993.
   The company adopted on a prospective basis effective January 1, 1995,
Statement of Financial Accounting Standards No. 114, Accounting by Creditors for
Impairment of a Loan ("SFAS 114"). The company's recorded investment in impaired
loans was $12,444,000 at December 31, 1995.  Of that amount, $11,130,000
represents loans for which an allowance for loan losses, in the amount of
$4,912,000, has been established under SFAS 114. For the year ended December 31,
1995, the recorded investment of impaired loans averaged $7,491,000.  Interest
income recognized on impaired loans totaled $57,000 for 1995.
   An analysis of the changes in the allowance for loan losses follows:

 In thousands                                    1995        1994        1993

Balance at January 1 .....................   $ 12,529    $ 12,505    $  9,596
Provision for loan losses ................      5,260       2,212       2,794
Balance of allowance for loan losses
of acquired subsidiaries .................         --            --     2,433
Loans charged off ........................     (2,525)     (2,791)     (3,446)
Recoveries of loans previously charged off        515         603       1,128
                                             --------    --------    --------
Net charge-offs ..........................     (2,010)     (2,188)     (2,318)
                                             --------    --------    --------
Balance at December 31 ...................   $ 15,779    $ 12,529    $ 12,505
                                             ========    ========    ========

   Loans to executive officers and directors and their associates, including
loans to affiliated companies for which these individuals are principal owners,
amounted to approximately $52,832,000 at December 31, 1995 and $42,127,000 at
December 31, 1994.  During 1995, new loans of $50,671,000 were made and
repayments of $32,169,000 were received. Other changes include net decreases for
changes in executive officers and directors of $7,797,000. These loans were made
on substantially the same terms, including interest rates and collateral,  as
those prevailing at the time for other customers.

(8) Premises and Equipment
   A summary of premises and equipment at December 31, 1995 and 1994, follows:
       In thousands
                                                    1995      1994
Land and improvements ........................   $ 7,017   $ 5,827
Buildings and improvements ...................    34,249    30,561
Furniture and equipment ......................    36,743    31,714
                                                 -------   -------
                                                  78,009    68,102
Less accumulated depreciation and amortization    36,551    31,662
                                                 -------   -------
   Total premises and equipment ..............   $41,458   $36,440
                                                 =======   =======



<PAGE>


(9) Long-Term Debt and Other Short-Term Borrowings
   Long-term debt consisted of the following at December 31, 1995 and 1994:
       In thousands
                                                           1995      1994
7.25% Subordinated Notes; due September 15,
  2003; interest payable quarterly ..................   $32,870   $32,930
Senior bank notes; due October 23, 1998; interest
  at 6.48%; interest payable semi-annually ..........    30,000      --
Senior bank notes; due October 17, 1997; interest
  at 6.32%, interest payable semi-annually ..........    20,000      --
Employee Stock Ownership Plan (ESOP) note payable
 to bank; due September 30, 2000; interest at the
 prime rate; principal and interest payable quarterly     2,854     3,223
Employee Stock Ownership Plan (ESOP) note
 payable to bank; due July 31, 1996; interest at
 82.5% of the prime rate, principal and interest
 payable quarterly ..................................       175       475
Unsecured demand notes; interest at the
  prime rate, payable quarterly .....................       706       706
                                                        -------   -------
   Total long-term debt .............................   $86,605   $37,334
                                                        =======   =======

   Other short-term borrowings consisted of the following at December 31, 1995
and 1994:
       In thousands    
                                                  1995      1994
Advance from the Federal Home Loan Bank,
   due January 12, 1996; interest at 7.45%
    payable monthly ........................    $25,000        $-
Advance from the Federal Home Loan Bank,
    due January 12, 1996; interest at 5.70%,
     payable monthly .......................     20,000       --
Advance from the Federal Home Loan Bank;
  due March 27,1995; interest at 6.45%,
  payable monthly ..........................        --    15,000
Advance from the Federal Home Loan Bank;
  due December 27,1995; interest at 7.7%,
  payable monthly ..........................        --     3,000
Advance from the Federal Home Loan Bank;
  due January 13, 1995; interest at 5.6%,
  payable monthly ..........................        --    20,000
Advance from the Federal Home Loan Bank;
  due December 1, 1995; interest at 7.35%,
  payable monthly ..........................        --    10,000
All other short-term borrowings ............        14        33
                                               -------   -------
   Total other short-term borrowings .......   $45,014   $48,033
                                               =======   =======

   The prime interest rate associated with certain of the above obligations was
8.5% at December 31, 1995, and 1994.
  The company has a $5,000,000 unsecured operating line of credit with an 
unaffiliated bank. This obligation has substantially the same restrictive 
covenants as the ESOP loan due September 30, 2000, as described below. The line 
was not in use at December 31, 1995 or 1994.
   The advances from the Federal Home Loan Bank are collateralized by the
company's Federal Home Loan Bank stock and certain first mortgage loans in the
approximate amount of 150% of the debt.
   The ESOP note payable due September 30, 2000, is guaranteed by the company.
The related loan agreement has a number of restrictive covenants, including
maintaining capital levels of the company and the banks at least at the minimum
levels required by applicable regulatory agencies; maintaining the company's
risk-weighted capital ratio, as defined, at not less than 9.25%; maintaining the
company's leverage ratio, as defined, at not less than 5.25%; maintaining the
company's annualized return on assets at the date of financial reports required
by regulations at no less than .50%; maintaining nonperforming loans, as
defined, at less than 2.50% of gross loans at the date of required financial
reports; and maintaining on a consolidated basis an allowance for loan losses of
at least .75% of gross loans.
   The ESOP note payable due July 31, 1996, is also guaranteed by the company.
The loan obligations of the ESOP are recorded on the consolidated balance sheet
with a corresponding amount recorded as a reduction of the company's
shareholders' equity.  Both the loan obligation and the reduction of
shareholders' equity are reduced by the amount of any loan repayments made by
the ESOP. The company's Employee Stock Ownership Plan is described in note 13 to
the consolidated financial statements.
   Principal payments required on long-term debt as of December 31, 1995, are as
follows:

   In thousands
   Year ended December 31
       1996   $   578
       1997    20,604
       1998    30,672
       1999       671
       2000       504
Later years    33,576

(10) Shareholders' Equity
Common Stock
   The company has incentive stock option plans which permit options to be
granted for a maximum of 857,888 shares of common stock of the company.  Under
the terms of the plans, options with ten-year terms may be granted to certain
key employees to purchase common stock at not less than fair value of the common
stock at the date of grant.  A summary of share data related to the option plan,
adjusted for stock splits, follows:

                                        Number     Option price
                                        shares      per share
Options outstanding December 31, 1992   214,255   $4.55-$11.53
Granted .............................    79,673   $      16.00
Exercised ...........................    (8,577)  $ 6.13-$8.16
Terminated or canceled ..............   (28,374)
                                     -----------
Options outstanding December 31, 1993   256,977     4.55-$16.00
Granted .............................   141,550   $15.25-$16.50
Exercised ...........................   (18,018)  $ 6.13-$11.53
Terminated or canceled ..............   (32,852)
                                     ------------
Options outstanding December 31, 1994   347,657   $ 4.55-$16.50
Granted .............................   233,350   $13.00-$17.50
Exercised ...........................   (29,807)  $4.55-$11.531
Terminated or canceled ..............   (56,273)
                                     ------------
Options outstanding December 31, 1995   494,927   $8.156-$17.50
                                       ========   ==============

Of the options outstanding, 128,484 were exercisable as of December 31, 1995.
   The company adopted in 1995 a non-qualified stock option plan which permits
options to purchase up to 313,000 shares of common stock to be granted to
certain executive officers of the company at 120% of fair market value at the
date of grant.  Options granted under the plan have ten-year terms and become
exercisable three years after the date of grant.  During 1995, options for
165,000 shares were granted at $17.85 per share and 37,000 at $16.875 per share.
All 202,000 options were outstanding at December 31, 1995, and none was
exercisable on that date.
   In addition, an executive officer of the company is granted each year under
an employment agreement an option to purchase 4,000 shares of common stock at
$5.625 per share, exercisable only in the year of grant.

Preferred Stock and Rights Plan
   The company's Articles of Incorporation authorize 5,000,000 shares of Class B
Preferred  Stock, Series 1992, to be issued in connection with the Shareholder
Rights Plan.  These shares carry the right to cumulative annual dividends of
$6.00 per share or 133 times dividends per common share (subject to adjustment),
whichever is greater.
   On January 20, 1992, the company's Board of Directors adopted a Shareholder
Rights Plan. Under the plan, the Board declared a dividend of one right for each
outstanding share of common stock. In addition, the company will issue one right
with respect to each share of common stock issued subsequent to that date. Each
right, when and if it becomes exercisable, will entitle the registered holder to
purchase from the company 1/100 of a share of Series 1992 Class B Preferred
Stock, subject to adjustment, at an exercise price of $45. The description and
terms of the rights are set forth in a Rights Agreement, dated as of January 20,
1992,  between the company and First Union National  Bank, as Rights Agent.  The
Board may redeem the rights in whole, but not in part, at a price of $.01 per
right.
   The rights become exercisable only if a person or group acquires, or obtains
the right to acquire, beneficial ownership of 15% or more of the company's
outstanding common stock, the Board determines that a beneficial owner of at
least 10% of the company's outstanding common stock has a detrimental effect on
the company or its shareholders, or a tender or exchange offer is commenced for
25% or more of the outstanding common stock.
   After the rights become exercisable, if any person becomes the beneficial
owner of more than 15% of the outstanding  common stock, or the Board determines
that a beneficial owner of at least 10% of the company's outstanding common
stock has a detrimental effect on the company or its shareholders, then the
rights will entitle each holder of a right to purchase, for the exercise price,
the number of shares of preferred stock which at the time of the transaction
would have a market value twice the exercise price.
   FGC had authorized, issued and outstanding two classes of preferred stock,
Class A and Class B, which were redeemed on September 1, 1994.

(11) Dividend Restrictions
   Payment of dividends by the company's subsidiaries is restricted by national
banking and thrift laws and regulations.  Also, certain notes payable described
in note 9 include restrictive covenants related to the maintenance of minimum
capital ratios by the banks, which effectively restrict the payment of
dividends.  At December 31, 1995, the aggregate retained earnings of the banks
was approximately $67.2 million, of which approximately $25.5 million is 
available as of January 1, 1996, for the payment of dividends under the 
most restrictive of the above restrictions.
   State law restricts the payment of dividends by the company.  Also, certain
notes payable described in note 9 include restrictive covenants related to the
maintenance of minimum capital ratios, and regulatory capital requirements of
the banks and of the company effectively restrict the company's ability to pay
dividends to its shareholders. At December 31, 1995, the most restrictive of the
covenants limited the payment of dividends by the company to approximately $26.0
million.

(12) Income Taxes
   As  discussed in note 2, the company  adopted in 1993  Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes. The cumulative effect
of this change in accounting for income taxes, determined as of January 1, 1993,
was an  increase in net income of $296,000 and is reported separately in the
consolidated statement of income for 1993.
   Total income tax expense (benefit) for the years ended December 31, 1995,
1994 and 1993 was allocated as follows:

 In thousands                                      1995     1994     1993
Income from operations .......................  $ 7,416  $ 7,075   $6,223
Shareholders' equity, for unrealized net
  gain (loss) on securities available for sale    4,188   (4,818)     455
                                                -------  -------   ------
                                                $11,604  $ 2,257   $6,678
                                                =======  =======   ======

   The components of income tax expense (benefit) were as follows:
   In thousands
                          1995      1994      1993
Current federal tax .  $ 9,303   $ 7,574   $ 6,580
Current state tax ...      500       383       165
Deferred income taxes   (2,387)     (882)     (522)
                       -------   -------   -------
                       $ 7,416   $ 7,075   $ 6,223
                       =======   =======   =======
<PAGE>

   An analysis of the differences between the effective tax rates and the 
statutory U.S. federal income tax rate is as follows:

                                                    1995      1994      1993
U.S. federal income tax rate ................      35.0%     35.0%     35.0%
Changes from the statutory rate:
  Tax exempt investment income ..............      (4.4)     (5.1)     (4.5)
  Amortization of goodwill ..................       0.8       0.8       0.8
  Acquisition costs .........................        --       1.2        --
  State income taxes, net federal tax benefit       1.3       1.2       1.0
  Surtax exemption ..........................        --        --      (0.5)
  Other, net ................................     (0.1)     (0.2)      (0.6)
                                                  ------    ------    ------
                                                   32.6%     32.9%     31.2%
                                                  ======    ======    ======

   The tax  effects  of  temporary  differences  that give  rise to  significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1995 and 1994, are presented below:
    In thousands
                                          1995      1994
Deferred tax assets:
Allowance for loan losses ...........  $ 5,463   $ 3,200
Deferred compensation ...............      285       293
Investment securities ...............      302     4,480
Purchase accounting adjustments .....      667       745
                                       -------   -------
      Total gross deferred tax assets    6,717     8,718
      Less valuation allowance ......     (108)     (108)
                                       -------   -------
      Total deferred tax assets .....    6,609     8,610
Deferred tax liabilities:
Purchase accounting adjustments .....    1,681     1,734
Deferred loan fees ..................      110       239
Depreciation ........................      206       228
FHLB stock ..........................      209       178
Other ...............................       52        79
                                       -------   -------
      Total deferred tax liabilities     2,258     2,458
                                       -------   -------
      Net deferred tax asset ........  $ 4,351   $ 6,152
                                       =======   =======

   The valuation allowance for deferred tax assets as of January 1, 1993,  was
$108,000.  There was no change in the total valuation allowance for the years
ended December 31, 1995, 1994 and 1993.  In assessing the realizability of
deferred tax assets, management considers whether it is more likely than not
that some portion or all of the deferred tax assets will not be realized.  The
ultimate realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary differences
become deductible.  Management considers the scheduled reversal of deferred tax
liabilities, projected future taxable income, and tax planning strategies in
making this assessment.  Based upon the level of historical taxable income and
projections for future taxable income over the periods in which the deferred tax
assets are deductible, management believes it is more likely than not the
company will realize the benefits of these deductible differences, net of the
existing valuation allowance at December 31, 1995.
   Shareholder's equity of Trans Financial Bank, F.S.B., at December 31, 1995,
includes $5,101,000 for which no deferred federal income tax liability has been
recognized.  This amount represents an allocation of income to bad debt
deductions for tax purposes only. Reduction of amounts so allocated for purposes
other than tax bad debt losses or  adjustments  arising from  carrying  back net
operating losses to prior years may create income for tax purposes only, which
would be subject to the then current corporate income tax rate.




<PAGE>


(13) Employee Benefit Plans
   The company has an employee stock ownership plan ("ESOP") under which the
company and its subsidiaries contribute to the ESOP an amount determined by the
respective Boards of Directors at their discretion.  In November 1993 Statement
of Position ("SOP") 93-6, Employers' Accounting for Employee Stock Ownership
Plans, was issued by the American Institute of Certified Public Accountants. The
SOP  prescribes changes in the accounting for the company's ESOP once all
unallocated shares held by the ESOP on December 31, 1992, are exhausted.  Shares
acquired after December 31, 1992, are subject to the accounting prescribed in
the SOP. The changes include recognition of compensation cost, accounting for
dividends on allocated and unallocated shares and the inclusion in earnings per
share calculations of shares committed to be released from the ESOP. As debt is
repaid, shares are released from collateral and allocated to active employees
based on total debt service for the year.  At December 31, 1995, the ESOP owned
300,836 allocated and 262,283 unallocated shares.  The company recognized
expenses related to the ESOP based on cash contributions, with such amounts
exceeding the amount computed under the shares allocated  method.  The interest
incurred on the ESOP note payable, the amount contributed by the company to the
ESOP, and the amount of dividends on ESOP shares used for debt service by the
ESOP for 1995, 1994, and 1993 were as follows:
In thousands
                                 1995  1994  1993
Interest incurred .............  $290  $263  $236
Contributions .................   839   894   597
Dividends used for debt service   155   118     6

   The company has a profit sharing plan qualified under Section 401(k) of the
Internal Revenue Code.  Under the amended  profit sharing plan, the company and
its subsidiaries  provide funds to match the contribution made by the
participating employee up to a maximum of 4% of the employee's salary.
Contributions in accordance with the profit sharing plan were approximately
$668,000 in 1995, $509,000 in 1994, and $360,000 in 1993.
   KCB was the sponsor of a profit-sharing plan qualified under Section 401(k)
of the Internal Revenue Code. Under the profit sharing plan, KCB provided funds
to match the contributions made by the participating employees up to a maximum
of 6% of the employee's salary.   Contributions in accordance with the
profit-sharing plan were $-0- in 1995, and approximately $9,000 in 1994, and
$31,000 in 1993.
   Former full-time employees of Kentucky State Bank who meet certain
requirements as to age and length of service are covered by a defined  benefit
pension plan.  Pension expense for this plan was $-0- in 1995,  $5,000 in 1994,
and $2,000 in 1993.  The plan's funded status at December 31, 1995, was composed
of plan assets of $510,000 and a projected benefit obligation of approximately
$585,000.
   Full-time employees of KCB who meet certain requirements as to age and length
of service were covered by a defined  benefit pension plan. On May 31, 1993, KCB
froze the plan, thereby eliminating the accrual of benefits for participants
after that date.  The consolidated financial statements for 1993 include the
recognition of the cost of curtailment of the plan for the freezing in 1993
($45,000) and recognition of prior unrecognized loss in anticipation of plan
termination ($309,000).  Net pension expense for this plan was $-0- in 1995 and
1994, and $367,000 in 1993.  The  plan was terminated in 1994 and final
distributions totaling $1,180,455 were made in 1995.
   Former full-time employees of PFS who meet certain requirements as to age and
length of service are covered by a defined benefit pension plan.  PFS was a
member of the Financial Institutions Retirement Fund, which is a nonprofit
pension trust through which the Federal Home Loan Bank, savings banks and
similar institutions may cooperate in providing for the retirement of their
employees. No contributions were required in 1995, 1994, or 1993.
   The company has no significant commitments to pay post-retirement or
post-employment benefits other than as described above.
   Stock options granted to key employees are described in note 10 to the
consolidated financial statements.



<PAGE>


(14) Commitments and Contingent Liabilities
Off-Balance-Sheet Financial Instruments
     The company's consolidated financial statements do not reflect  various
commitments and contingent liabilities which arise in the normal course of
business to meet the financing needs of customers.  These include commitments to
extend credit, standby letters of credit, and derivative financial instruments.
These instruments involve, to varying degrees, elements of credit, interest rate
and liquidity risk in excess of the amount recognized in the consolidated
balance sheets. The extent of the company's involvement in various commitments
is expressed by the contract amount of such instruments.
     Commitments to extend credit, which amounted to $286,673,000 at December
31, 1995, and $247,621,000 at December 31, 1994, are agreements to lend to a
customer, provided all conditions established in the contract are fulfilled.
Commitments generally have fixed expiration dates or other termination clauses
and generally require payment of a fee.  Market risk arises on fixed rate
commitments if interest rates rise subsequent to the date the fixed rate is
determined.  Management believes that market risk related to these commitments
is not significant.  Since many of the commitments are expected to expire 
without being drawn upon, the total commitments do not necessarily represent
future cash requirements.  The company evaluates each customer's creditworthi-
ness on a case-by-case basis. The amount of collateral obtained, if deemed 
necessary upon extension of credit, is based upon management's credit evaluation
of the customer.  Collateral varies, but may include accounts receivable, 
inventory, property, plant and equipment, residential properties, income-
producing commercial properties, marketable securities and interest-bearing time
deposits.
     Standby letters of credit are conditional commitments issued by the company
guaranteeing the performance of a customer to a third party.  Those guarantees
primarily consist of performance assurances made on behalf of customers who have
a contractual commitment to produce or deliver goods or services.  Most
guarantees are for one year or less.  The company had standby letters of credit
outstanding totaling $36,816,000 and $35,759,000 at December 31, 1995 and 1994,
respectively. The risk to the company arises from its obligation to make payment
in the event of the customer's contractual default and is essentially the same
as that involved in extending loan commitments to customers.  The amount of
collateral obtained, if deemed necessary, is based upon management's credit
evaluation of the customer.  Collateral held varies.  Management believes that
market risk related to the standby letters of credit is not significant.
     Commercial letters of credit are short-term commitments generally used to
finance a commercial contract for the shipment of goods from seller to buyer. At
December 31, 1995 and 1994, the company had no commercial letters of credit
outstanding.
     Derivative financial instruments are financial instruments whose values and
characteristics are derived from those of other financial instruments or
indices.  Derivatives can be a cost- and capital-efficient method of modifying
the repricing or maturity characteristics of on-balance-sheet assets and
liabilities -- a necessary component of the company's strategy for managing its
overall interest rate risk.  Off-balance-sheet derivative transactions used for
interest rate sensitivity management could include interest rate swaps,
forwards, futures and options with indices that directly relate to the pricing
of specific assets and liabilities of the company.  Management believes there is
minimal risk that the derivatives used for rate sensitivity management will have
any significant unintended effect on the company's financial condition or
results of operations.
     The company enters into forward contracts to sell residential mortgage
loans in order to hedge the interest rate risk in its portfolio of mortgage
loans held for sale and its residential mortgage loan commitments.  At December
31, 1995 and 1994, the company had forward contracts outstanding totaling
$32,330,000 and $11,680,000, respectively.
     As of December 31, 1995 and 1994, the company's balance sheet was in an
asset sensitive position, as the repricing characteristics of the asset and
liability portfolios were such that an increase in interest rates would have a
positive effect on earnings and a decrease in interest rates would have a
negative effect on earnings.  To assist in achieving a desired level of interest
rate sensitivity the company has entered into off-balance-sheet interest rate
swap transactions, which effectively convert the bank notes (described in note
9) and certain certificates of deposit from fixed interest rates to floating
rates and certain commercial loans from floating rates to fixed rates.  The
result is that the asset-sensitive position which is inherent in the balance
sheet is largely neutralized.
     Off-balance-sheet derivative instruments do not expose the company to
credit risk equal to the notional amount, although the company is exposed to
credit risk equal to the aggregate of the positive fair values of the swaps,
plus any accrued interest receivable due from all counterparties.  Fair values
are determined by discounting to present value the future cash flows which would
result from the difference between current market rates and the actual swap
rates.  The company minimizes the credit risk in these instruments by dealing
only with high quality counterparties and each transaction is specifically
approved for applicable credit exposure. The credit exposure of each outstanding
off-balance-sheet derivative instrument is either collateralized with U.S.
Government or agency securities or is with a counterparty who has credit ratings
of investment grade or better from one of the major rating agencies.  Further,
the company's policy is to require all transactions be governed by an
international Swap Dealers Association Master Agreement and be subject to
bilateral collateral arrangements.
     The company pays a variable interest rate on each swap and receives a fixed
rate.  Interest income and expense is accrued over the terms of the agreements.
Interest rate swap transactions as of December 31, 1995, are shown below:
<TABLE>

 Dollars in thousands
<CAPTION>
                                         Notional   Fixed Rate  Floating Rate                      Fair    Credit
                                           Amount   (Receiving)  (Paying)          Maturity        Value    Exposure
                                         --------   ---------  --------------    --------------   -------    ------
<S>      <C>                             <C>           <C>     <C>               <C>              <C>            <C>
Swap No. 1                               $ 20,000      4.380%  5.875% (LIBOR)         May, 1996   $   (78)       $-
Swap No. 2                                 50,000       9.58%  8.50% (Prime)       August, 1996        384       384
Swap No. 3                                 50,000       9.25%  8.50% (Prime)     November, 1996        413       446
Swap No. 4                                 30,000      10.40%  8.50% (Prime)      January, 1997        666       763
Swap No. 5                                 50,000       8.33%  8.50% (Prime)         June, 1997        155       155
Swap No. 6                                 50,000       8.50%  8.50% (Prime)         July, 1997        295       295
Swap No. 7                                 20,000       8.60%  8.50% (Prime)      October, 1997        163       163
Swap No. 8                                 30,000       8.60%  8.50% (Prime)      October, 1998        343       343
                                           ------      ------  -----             --------------    -------    ------
 Total/
 weighted average                        $300,000       8.71%  8.33%                April, 1997    $ 2,341    $2,549
                                         ========      ======  ======               =============  =======   =======  
</TABLE>

     At December 31, 1994, the company's only interest rate swap transaction was
the $20 million LIBOR-based  swap shown in the table above.  The floating  rate
associated with this swap was 5.64% on that date, and its fair value was
$(880,000).
     In a higher interest rate environment, the increased contribution to net
interest income from on-balance-sheet assets will substantially offset any
negative impact on net interest income from these swap transactions. Conversely,
if interest rates decline, these off-balance-sheet transactions will mitigate
the company's exposure to reduced net interest income.
     The company requires all off-balance-sheet transactions be employed solely
with respect to asset/liability management or for hedging specific transactions 
or positions, rather than for speculative trading activity.
Other Off-Balance-Sheet Risks
     With respect to mortgage loans sold to investors, such loans are generally
sold with servicing rights retained, with only the normal legal representations
and warranties regarding recourse to the company.  Management believes that any
liabilities which may result from such recourse provisions are not significant.
Legal Proceedings
     As of December 31,  1995, there were various pending legal actions and
proceedings against the company in which claims for damages are asserted.
Management, after discussion with legal counsel, believes that the ultimate
result of these legal actions and proceedings will not have a material adverse
effect upon the consolidated financial statements of the company.  
Regulatory Risk
     The company is subject to regulation by bank and thrift regulatory
authorities, including the Federal Reserve Board, the Office of the Comptroller
of the Currency, the Office of Thrift Supervision and the Federal Deposit
Insurance Corporation  ("FDIC").  The FDIC is authorized to establish separate
deposit insurance premium rates for members insured through its Bank Insurance
Fund ("BIF") and its Savings Association Insurance Fund ("SAIF").  Approximately
69% of the company's deposits are insured through the BIF and the remaining 31%
are insured through the SAIF.  Insurance  premiums on BIF-insured deposits were
reduced from $0.23 per $100 of insured deposits to $0.04, effective June 1,
1995, and to zero effective January 1, 1996.  Insurance premiums on SAIF-insured
deposits, however, remain at $0.23.  The FDIC and the other bank and thrift
regulatory authorities have proposed a plan to strengthen the deposit insurance
system and eliminate the substantial deposit premium disparity between BIF- and
SAIF-insured institutions.  This plan includes a one-time assessment of $0.75 to
$0.85 per $100 of SAIF-insured  deposits.  If such a plan were enacted into law,
the company would pay a one-time assessment of up to $3.5 million on its
SAIF-insured deposits.


<PAGE>


(15) Fair Value of Financial Instruments

The estimated fair values of the company's financial instruments are as follows:

<TABLE>

    In thousands

<CAPTION>
                                      December 31, 1995          December 31, 1994
                                                                                       
                                     Carrying      Fair       Carrying        Fair
                                       Amount      Value        Amount        Value
                                   ----------  ----------  ----------    -----------
Financial assets:

<S>                               <C>          <C>          <C>          <C>        
Cash and short-term investments   $   81,900   $   81,900   $   81,025   $    81,025
Securities ....................      298,222      298,222      314,401       310,852
Loans .........................    1,289,043    1,287,873    1,137,728     1,126,713
Financial liabilities:
Deposits ......................    1,444,483    1,446,836    1,335,509     1,328,893
Federal funds purchased
and repurchases ...............       75,594       75,594       74,553        74,553
Short-term borrowings .........       45,014       45,052       48,033        47,890
Long-term debt ................       86,605       89,388       37,334        34,723

Interest rate swaps ...........         --          2,341         --            (880)

</TABLE>

   The following methods and assumptions were used to estimate the fair value of
each class of financial instruments:
Cash, Short-Term Investments, Federal Funds Purchased and Repurchases
   For these short-term instruments, the financial statement carrying amount
approximates fair value.
Securities
   The fair value of securities is based on quoted market prices or, if market
prices are not available, is estimated by discounting future cash flows using
current rates at which investments would be made in similar instruments with 
similar credit ratings and equivalent remaining maturities.
Loans
   The fair value of loans is estimated by discounting the future cash flows 
using current rates at which similar loans would be made to borrowers with 
similar credit ratings and for the same remaining maturities.
Deposits
   The fair value of demand deposits, savings accounts, and certain money market
deposits is the amount payable on demand at the reporting date. The fair value
of fixed-maturity certificates of deposit is estimated by discounting the future
cash flows using the rates currently offered for deposits of similar remaining
maturities.
Long-term Debt and Other Short-term Borrowings
   Rates currently available to the company for debt with similar terms and
remaining maturities are used to estimate fair value of existing debt.
Off-Balance-Sheet Financial Instruments
   The fair value of interest rate swap agreements is based on quoted market
prices or, if market prices are not available, is estimated by discounting
future cash flows using prevailing market rates for instruments of a similar
type.  The fair values of loan commitments and letters of credit are estimated
using the fees currently charged to enter into similar agreements, taking into
account the remaining terms of the agreements and the present creditworthiness
of the counterparties. The value of these financial instruments was not material
at December 31, 1995 and 1994. Limitations on Fair Value Reporting
   The fair value estimates are made at a discrete point in time based on
relevant market information and information about the financial instruments.
Because no market exists for a significant portion of the company's financial
instruments,  fair value estimates are based on judgments regarding future
expected loss experience, current economic conditions, risk characteristics of
various financial instruments, and other factors. These estimates are subjective
in nature and involve uncertainties and matters of significant judgment and,
therefore, cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.
   The fair value estimates are based on financial instruments only. The company
has not attempted to estimate the value of assets and liabilities not considered
to be financial instruments, such as premises and equipment, the mortgage
banking operation and the intangible value of its core deposits and branch
system.  Accordingly, the fair value estimates do not represent a fair value for
the company as a whole.


(16) Parent Company Financial Statements
Condensed financial data for Trans Financial, Inc. (parent  company only) 
as of December 31, 1995 and 1994 and for the years ended December 31, 1995, 1994
and 1993 are as follows:

 Condensed Balance Sheets
 December 31 - In thousands                         1995       1994
 Assets
Cash on deposit with subsidiaries ...........   $  1,608   $  2,507
Investment in subsidiaries ..................    161,142    143,303
Other investments ...........................        130         74
Other assets ................................      5,527      4,346
                                                --------   --------
   Total assets .............................   $168,407   $150,230
                                                ========   ========

Liabilities and Shareholders' Equity
Long-term debt and other notes payable ......   $ 36,605   $ 37,334
Other liabilities ...........................      2,035      1,264
Shareholders' equity ........................    129,767    111,632
                                                --------   --------
   Total liabilities and shareholders' equity   $168,407   $150,230
                                                ========   ========


 Condensed Statements of Income
 Years Ended December 31
 In thousands                              1995      1994      1993
 Income
  Dividends from subsidiaries .......   $10,000   $15,860   $12,675
  Other interest and dividends ......       180       285       146
  Management fees from subsidiaries
    and other income ................     5,317     3,732     4,620
                                        -------   -------   -------
  Total income ......................    15,497    19,877    17,441
Expenses
  Interest on long-term debt
    and other notes payable .........     2,462     2,657     1,400
  Other expenses ....................     9,819    10,071     8,478
                                        -------   -------   -------
  Total expenses ....................    12,281    12,728     9,878
                                        -------   -------   -------
Income before income tax benefit
  and equity in undistributed
  earnings of subsidiaries ..........     3,216     7,149     7,563
Federal income tax benefit ..........     2,083     2,621     1,661
                                        -------   -------   -------
Income before equity in undistributed
  earnings of subsidiaries ..........     5,299     9,770     9,224
Equity in undistributed
  earnings of subsidiaries ..........    10,016     4,650     4,826
                                        -------   -------   -------
Net income ..........................   $15,315   $14,420   $14,050
                                        =======   =======   =======



<PAGE>


<TABLE>

 Condensed Statements of Cash Flows
 Years Ended December 31

<CAPTION>
 In thousands                                              1995        1994        1993
Cash flows from operating activities:
<S>                                                    <C>         <C>         <C>     
Net income .........................................   $ 15,315    $ 14,420    $ 14,050
Adjustments to reconcile net income to cash
provided by operating activities:
    Amortization ...................................        680         932         526
    Equity in undistributed
      earnings of subsidiaries .....................    (10,016)     (4,650)     (4,826)
Increase in other assets ...........................     (1,639)       (986)     (2,351)
Increase (decrease) in other liabilities ...........        771         143        (102)
                                                       --------    --------    --------
  Net cash provided by operating activities ........      5,111       9,859       7,297

Cash flows from investing activities:
Investments in and acquisitions of subsidiaries ....       --       (10,440)    (22,716)
                                                       --------    --------    --------
  Net cash used in investing activities ............       --       (10,440)    (22,716)

Cash flows from financing activities:
Proceeds from issuance of long-term debt ...........       --          --        36,129
Repayment of long-term debt and other notes payable         (60)     (6,694)     (4,542)
Proceeds from issuance of common stock .............        800         654       1,770
Redemption of preferred stock ......................       --        (1,010)       --
Dividends paid .....................................     (6,750)     (5,839)     (4,083)
                                                       --------    --------    --------
Net cash provided by (used in) financing activities      (6,010)    (12,889)     29,274
                                                       --------    --------    --------
Net increase (decrease) in cash and cash equivalents       (899)    (13,470)     13,855
Cash and cash equivalents at beginning of year .....      2,507      15,977       2,122
                                                       --------    --------    --------
Cash and cash equivalents at end of year ...........   $  1,608    $  2,507    $ 15,977
                                                       ========    ========    ========

Supplemental information:
  Cash paid for interest ...........................   $  1,866    $  2,710    $  1,402
  Non-cash transactions (note 3) ...................      8,770      (8,629)        893


</TABLE>



<PAGE>

  Exhibits
                                                                   Sequentially
                                                                  Numbered Pages
    3(a)   Restated Articles of Incorporation of the registrant
           are incorporated by reference to Exhibit 4(a) of the 
           registrant's report on Form 10-Q for the quarter 
           ended March 31, 1995.

    3(b)   Articles of Amendment to the Restated  Articles of  
           Incorporation of the registrant are  incorporated  
           by reference to Exhibit 4(b) of the registrant's  
           report on Form  10-Q for the  quarter  ended  
           March 31, 1995.

   3(c)    Restated  Bylaws of the registrant are  incorporated
           by reference to Exhibit  4(b) of the  registrant's  
           report  on Form 10-K for the year ended December 
           31, 1993.

   4(a)    Rights Agreement dated January 20, 1992 between 
           Manufacturers Hanover Trust Company and Trans 
           Financial,  Inc. is incorporated by reference
           to Exhibit 1 to the registrant's report on Form 
           8-K dated January 24, 1992.

   4(b)    Form of Indenture (including Form of Subordinated
           Note) dated as of September 1, 1993,  between the 
           registrant and First Tennessee Bank National  
           Association as Trustee, relating to the issuance 
           of 7.25% Subordinated Notes due 2003, is incorporated 
           by reference to Exhibit 4 of Registration Statement 
           on Form S-2 of the registrant (File No.33-67686).

   4(c)    Subordinated Note dated as of September 16, 1993, 
           by Trans Financial, Inc. is incorporated by  
           reference to Exhibit 1 to Registration Statement 
           on Form S-2 of the registrant (File No. 33-67686).

   10(a)   Trans Financial, Inc. 1987 Stock Option Plan is 
           incorporated by reference to Exhibit 4(a) of 
           Registration Statement on Form S-8 of the 
           registrant (File No. 33-43046).*

   10(b)   Trans Financial, Inc. 1990 Stock Option Plan is 
           incorporated by reference to Exhibit 10(d) of 
           the registrant's Report on Form 10-K for the year 
           ended December 31, 1990.*

   10(c)   Trans Financial, Inc. 1992 Stock Option Plan is 
           incorporated by reference to Exhibit 28 of the   
           registrant's Report on Form 10-Q for the quarter 
           ended March 31, 1992.*

   10(d)   Trans Financial, Inc. 1994 Stock Option Plan is 
           incorporated by reference to the registrant's 
           Proxy Statement dated March 18, 1994, for the 
           April 25, 1994 Annual Meeting of Shareholders.*

   10(e)   Employment Agreement between Douglas M. Lester 
           and Trans Financial, Inc........................................63-71

   10(f)   Description of the registrant's Performance 
           Incentive Plan is incorporated by reference to 
           Exhibit 10(g) of the regristrant's Report on 
           Form 10-K for the year ended December 31, 1994.*

   10(g)   Form of Deferred Compensation Agreement between 
           registrant and certain officers of the registrant
           is incorporated by reference to Exhibit 10(g) of 
           the registrant's Report on Form 10-K for the year
           ended December 31, 1992.*

   10(h)   Trans Financial, Inc. Dividend Reinvestment and 
           Stock Purchase Plan is incorporated by reference 
           to Registration Statement on Form S-3 of the 
           registrant dated May 15, 1991 (File No. 33-40606).


<PAGE>


                                                                   Sequentially
                                                                 Numbered Pages
   10(i)   Warrant dated as of February 13, 1992 between 
           Morgan Keegan & Company, Inc.and Trans Financial, 
           Inc. incorporated by reference to Exhibit 10(m) 
           of Registration Statement on Form S-2 of the 
           registrant (File No. 33-45483).

   10(j)   Loan Agreement dated as of July 6, 1993 between 
           First Tennessee Bank National Association and 
           Trans Financial, Inc. is incorporated by reference
           to Exhibit 10(p) to the Registration Statement 
           on Form S-2 of the registrant (File No. 33-67686).

   10(k)   Distribution  Agreement dated September 28, 1995 
           between Registrant, Trans Financial Bank, N.A. 
           and Donaldson, Lufkin & Jenrette Securities 
           Corporation is incorporated by reference to 
           Exhibit 10(a)of the registrant's report on Form 
           10-Q for the quarter ended September 30,1995.

    10(l)  Fiscal and Paying Agency Agreement dated September 
           28, 1995 between Trans Financial Bank, N.A. and 
           First Fidelity Bank, N.A. is incorporated by 
           reference to Exhibit 10(b) of the registrant's report 
           on Form 10-Q for the quarter ended September 30, 1995.

    10(m)  1995 Executive Stock Option Plan is incorporated by   
           reference to the registrant's Proxy Statement dated 
           March 9, 1995, for the April 24, 1995, Annual Meeting 
           of Shareholders.*

    11     Statement of Computation of Per Share Earnings.....................60

    21     List of Subsidiaries of the Registrant.............................61

    23     Consent of Independent Auditors....................................62

    27     Financial Data Schedule(for SEC use only).........................---
       * Denotes a management contract or compensatory plan or arrangement of 
the registrant required to be filed as an exhibit pursuant to Item 601(10)(iii)
of Regulation S-K.




<PAGE>


Exhibit 11

              Statement Regarding Computation of Per Share Earnings
Years ended December 31                      1995       1994       1993
                                             ----       ----       ----
In thousands, except per share data

Primary earnings per common share:
   Average common shares outstanding ...    11,246    11,175     11,124
   Common stock equivalents ............       107        83        121
                                          --------  --------   --------
       Average shares and share ........    11,353    11,258     11,245
          equivalents
   Income before cumulative effect of ..  $ 15,315  $ 14,420   $ 13,754
     change in accounting principle
   Primary earnings per common share
     before cumulative effect of change
     in accounting principle ...........  $   1.35  $   1.28   $   1.22
                                          ========  ========   ========

   Net income ..........................  $ 15,315  $ 14,420   $ 14,050
   Less preferred stock dividends ......         0       (54)       (81)
                                          --------  --------   --------
   Income available for common stock ...  $ 15,315  $ 14,366   $ 13,969

   Primary net income per share ........  $   1.35  $   1.28   $   1.24
                                          ========  ========   ========



Fully-diluted earnings per common share:
   Average common shares outstanding ...    11,246    11,175     11,124
   Common stock equivalents ............       156        83        121
                                          --------  --------   --------
       Average equivalents .............    11,402    11,258     11,245

   Income before cumulative effect of ..  $ 15,315  $ 14,420   $ 13,754
     change in accounting principle
   Fully-diluted earnings per common
       share before cumulative effect of
       change in accounting principle ..  $   1.34  $   1.28   $   1.22
                                          ========  ========   ========

   Net income ..........................  $ 15,315  $ 14,420   $ 14,050
   Less preferred stock dividends ......         0       (54)       (81)
                                          --------  --------   --------

   Income available for common stock ...  $ 15,315  $ 14,366   $ 13,969

   Fully-diluted net income per share ..  $   1.34  $   1.28   $   1.24
                                          ========  ========   ========





<PAGE>


 Exhibit 21

                     List of Subsidiaries of the Registrant


Trans Financial  Bank,  National  Association
 Real Estate Holding Company
 Trans Financial Mortgage Company 
 Trans Financial Investment Services, Inc.
 Trans Travel, Inc.

Trans Financial Bank, Federal Savings Bank
    General Service Corporation
    
Trans Financial Bank Tennessee, National Association

Cracker Jack Aviation, Inc.



<PAGE>


Exhibit 23

                         Consent of Independent Auditors


The Board of Directors
Trans Financial, Inc.:


   We consent to incorporation by reference in the Registration Statement Nos.
33-40606, 33-60844, 33-56761, and 33-64601 on Form S-3, and Registration
Statement Nos. 33-21517, 33-43046, 33-53960, 33-72492, 33-65347, and 33-65349 on
Form S-8 of Trans  Financial, Inc. of our report dated January 15, 1996,
relating to the consolidated balance sheets of Trans Financial, Inc. and
subsidiaries as of December 31, 1995 and 1994 and the related consolidated
statements of income, changes in shareholders' equity and cash flows for each of
the years in the three-year period ended December 31, 1995, which report appears
in the December 31, 1995 annual report on Form 10-K of Trans Financial, Inc.
   Our report refers to changes in the methods of accounting for mortgage
servicing rights in 1995 and income taxes and certain investments in debt and
equity securities in 1993.

                                                /s/ KPMG PEAT MARWICK LLP
                                                    KPMG PEAT MARWICK LLP



Louisville, Kentucky
March 29, 1996


<PAGE>



                                  Exhibit 10(e)
EMPLOYMENT AGREEMENT

                  This  Agreement  made and  entered  into as of this 1st day of
January, 1991, by and among TRANS FINANCIAL BANCORP, INC., a Kentucky
corporation having its principal place of business located in Bowling  Green,
Kentucky ("Holding Company"), TRANS FINANCIAL BANK, N.A., a banking association
organized under the laws of the United States and headquartered in Bowling
Green, Kentucky ("Bank"), and DOUGLAS M. LESTER, an individual ("Lester").

                              W I T N E S S E T H :

         WHEREAS, Holding Company is a registered bank holding company under the
Bank Holding Company Act of 1956, as amended, and owns 100% of the outstanding
stock of Bank and Trans Financial Savings Bank, F.S.B., a federal savings bank
headquartered in Russellville, Kentucky ("Savings Bank"). Bank, Savings Bank and
any other corporations or entities substantially owned by them or Holding
Company are referred to collectively as ("Subsidiaries"); and

         WHEREAS, Lester presently is employed as the Chairman of the Board of
Directors, President and Chief Executive Officer of Holding Company and of Bank
pursuant to the terms of an Employment Agreement dated as of April 1, 1984, as
amended, between Lester and Bank (then known as The Citizens National Bank of
Bowling  Green), and joined in by Holding Company (the "1984 Employment
Agreement"); and

         WHEREAS, Lester, Holding Company and Bank desire to enter into this
Agreement to set out the terms and conditions of Lester's continued employment
by Holding Company and Bank and to supersede and replace the 1984 Employment
Agreement;

         NOW, THEREFORE, for and in consideration of the previous promises,
covenants, undertakings and agreements of Holding Company, Bank and Lester
(which are formalized hereby), and for and in consideration of the mutual
promises, covenants and undertakings of Holding Company, Bank and Lester as
hereinafter set forth, it is hereby mutually agreed as follows:

      1. Employment.  Holding Company and Bank hereby employ Lester, and Lester
hereby accepts employment with Holding Company and Bank, as the Chairman of the
Board of Directors, President and Chief Executive Officer of each of Holding
Company and Bank.  Such positions are hereinafter collectively referred to as
"the Position."

     2.  Term of Employment.
     A.  This  Agreement and Lester's employment hereunder shall commence on and
be effective as of January 1, 1991 (the "Commencement Date"), and continue 
through 12:00 midnight on December 31, 1993, subject to renewal and to 
termination in accordance with the terms of this Agreement. On January 1 of 
each year (the "Anniversary Date"), commencing with January 1, 1992, this 
Agreement will be automatically renewed for a new three-year term, subject to 
renewal and to termination in accordance with the terms of this Agreement, 
unless either Holding Company or Bank, by action of its Board of Directors,  
or Lester gives written notice to the other parties hereto at least 90 days 
prior to the Anniversary Date that it does not intend to renew this Agreement.
(Lester's initial term of employment and anyv subsequent renewal thereof shall 
hereinafter be referred to as the "Term.)
      The  delivery of notice of intent not to renew by Holding Company or 
Bank shall, for purpose of this Agreement, be deemed to be delivery of notice of
termination of Lester's employment without cause pursuant to Paragraph 17.

    3.   Responsibilities in Position.  During the Term, except for illness, and
reasonable vacation periods as hereinafter provided and reasonable involvement
in civic affairs and in organizations which benefit, promote or complement the
interests of Holding Company and the Subsidiaries, and except as otherwise
provided in this Agreement, or as approved by the Board of Directors of either
Holding Company or Bank, Lester shall devote substantially all of his business
time, attention, skill and efforts to the faithful performance of his duties
hereunder and in the Position, and shall use his best efforts, skill and
experience to promote the business, interests and welfare of Holding Company and
the Subsidiaries.  Lester shall not, during the Term, without the consent of the
Board of Directors of either Holding Company or Bank, be engaged in any other
business activity, whether or not such activity is pursued for gain, profit or
pecuniary advantage; provided, however, that he may do the following:

      A.  Own interests in other companies, corporations and profit-making 
entities;
      B.  Provide advice for such companies, corporations or entities, provided,
however, that he shall not assume any active part in the operation of the 
business or enterprises of such companies, corporations or entities;
and,
      C.  Invest his assets, from time to time, in such form or manner as will 
not require any substantial services on his part in the operation of the affairs
of the companies, businesses or enterprises in which he makes investments.

     4.   Specific Description of Authority.  Lester is hereby employed
in the Position, and he shall have, exercise and carry out the authorities
powers, duties and responsibilities conferred upon persons occupying each of the
capacities contained in the Position by the Bylaws of Holding Company and Bank,
as such Bylaws are from time to time in effect, and shall exercise and carry out
such duties and responsibilities, and shall observe such directions and
restrictions, as the Board of Directors of Holding Company or Bank may from time
to time confer or impose upon him. In the absence of specific directions, Lester
shall have the following duties,  responsibilities and authorities with respect
to each of Holding Company and Bank:

       A.  He shall act as the Chairman of its Board of Directors, and shall 
chair all meetings of the Board of Directors;

       B.  He shall have complete charge of the day to day management,  
operation and supervision of its business, and shall be in charge of all of its 
officers and employees;

       C.  He shall discharge all of those duties and responsibilities
customarily discharged by a President and Chief Executive Officer of a banking
institution and its holding company, and shall have all of the powers and 
authorities customarily conferred upon an individual holding such offices,
including, without limitation, the authority to formulate policies and  
administer its business, subject to the policies and directions from time to 
time adopted or given by its Board of Directors;

      D.   He shall have the general management and control of its business 
activity;

      E.   He and those working under his supervision, acting with his 
authority, shall have the responsibility and authority to hire, appoint,  
discipline and dismiss all of its employees and shall have the general
supervision of all of its employees and officers;

      F.   He shall be responsible for supervising the day to day conduct of the
business of Holding Company and the Subsidiaries;

      G.   He shall be responsible for carrying out such other acts and duties,
not otherwise specified herein, as shall be necessary for the management of its
business, as its Board of Directors shall from time to time direct.

      5.   Compensation.  For all services rendered or to be rendered by
Lester for Holding Company and the Subsidiaries, for the benefit of Holding
Company, during the Term, Holding Company shall pay, and Lester hereby agrees to
accept, compensation as follows:

      A.   Base Salary.  Lester shall receive a Base Salary as follows:

         (1)     1991.  Beginning  with the  Commencement  Date, and ending  
         December 31, 1991,  Lester shall receive a Base Salary at an 
         an annualized  rate of  $155,000.00  per year, payable in 
         consecutive equal monthly installments.

         (2)     Years after 1991.  Lester's Base Salary for any calendar year 
         after 1991 shall be at the annualized rate established by Holding 
         Company's Board of Directors at the commencement of each such year;  
         provided that the Base Salary for any calendar year shall never be less
         than the Base Salary for the preceding calendar year.

                All base Salary shall be paid in consecutive equal monthly
         installments, as described above or in other installments mutually 
         convenient to Holding Company and Lester.  All deductions required by 
         law, and voluntary deductions consented to by Lester, shall be deducted
         from each installment of Base Salary.

       B.  Board of  Directors.  In  addition to Lester's Base Salary,
Lester shall receive a fee for serving as a member of the Board of Directors of
each of Holding Company and the Subsidiaries as established by such Board of
Directors for compensation of its members, provided the fee paid to Lester shall
in no event be less than the compensation paid to any other director for his
services on such Board.

       C.  Performance Incentives.  In addition to the Base Salary and
director's fees described above, Lester shall receive performance incentive
bonuses for each year during the Term in accordance with the Performance
Incentive Plan of Holding Company, and Bank, as such Plan is now in effect or as
hereafter amended, provided no such amendment shall decrease the bonuses payable
to Lester pursuant to such Plan.

        6.     Stock Options.   In  addition  to Lester's  compensation
hereinabove provided for in Paragraph 5 of this Agreement, on the first day
following the close of each calendar year which expires during the Term, Lester
shall have an option to purchase from Holding  Company, at any time during the
immediately following calendar month of July, up to 2,250 shares of Holding
Company's common stock, for the price of Ten Dollars ($10.00) per share;
provided, however, that in order to exercise any such right and option, Lester
must be employed by Holding Company and/or Bank at the time of exercise.  Such
option and right to purchase granted following the close of each calendar year
can be exercised in whole or in part by Lester's giving to Holding Company,
during the immediately following calendar month of July, written notice of
Lester's intention to exercise the right and option.  The purchase and sale of
the shares pursuant to Lester's exercise of such right and option granted after
the end of each Fiscal Year shall be closed within thirty (30) days after Lester
gives to Holding Company written notice of Lester's intention to exercise the
right and option.  At the time of closing, Lester shall pay the entire purchase
price for the number of shares to be purchased, in cash, and Holding Company
shall transfer to Lester the number of shares to be purchased and shall cause
the certificates for such shares to be reissued in Lester's name. The right to
purchase, at the conclusion of any calendar year during the Term, that number of
shares of common stock of Holding Company hereinabove described, shall not be
cumulative from year to year, and Lester shall, therefore, lose the right and
option to purchase any shares, to the extent he does not exercise such right and
option to purchase such shares during the calendar month of July following the
end of such calendar  year.  In the event the outstanding shares of Holding
Company's common stock are changed into or are exchanged for a different number
or kind of shares or other securities of Holding Company, or of another
corporation by reason of merger, consolidation, or other reorganization,
recapitalization, reclassification, combination of shares, stock split-ups, or
stock dividends:

        A.     The aggregate number and kind of shares subject to Lester's
right and option shall be adjusted appropriately;

        B.     The  rights under outstanding options granted hereunder both as 
to the numberof subject shares, and the option price, shall be adjusted 
appropriately;

        C.     Where  dissolution or liquidation of Holding  Company or any 
merger or combination in which Holding Company is not a surviving corporation is
involved, each outstanding option granted  pursuant to this Paragraph 6 shall  
terminate, but Lester shall have the right, immediately prior to such 
dissolution, liquidation, merger or combination, to exercise his option, in 
whole or in part, to the extent that he shall not have exercised same, without
regard to any installment exercise provisions, meaning that he may exercise  his
option to purchase that total number of shares, as to which he has not 
previously forfeited options, for which he would otherwise have had options in 
accordance with the above provisions of this Paragraph 6, if each year during 
the Term were to then end immediately; and

         D.    Such new or additional or different shares or securities which 
are distributed to Lester, shall be considered to be restricted stock and shall 
be subject to all of the conditions and restrictions provided for by this 
Paragraph 6.

               The above provisions of this Paragraph 6 to the contrary
notwithstanding, Lester shall not have a right or option, pursuant to this
Paragraph 6, to purchase such number of shares of Holding Company common stock
as would cause, immediately after the exercise of the right and option, the
total number of shares of Holding Company's common stock owned by Lester, or
subject to options exercisable by Lester as held by Lester, to exceed five
percent (5%) of the total combined voting power of all classes of Holding
Company's common stock. No right or option possessed by Lester pursuant to this
Paragraph 6 shall be transferred by Lester in any manner whatsoever, and all
such rights and options shall be nontransferable. There shall be no voluntary or
involuntary lifetime transfer, or transfer by reason of death, of any rights or
options, including, but not limited to, transfers by will or by laws of descent
and distribution.  The option and right of Lester to purchase shares of Holding
Company's common stock shall be personal to him and shall be exercisable only by
him, and by no other person under any circumstances. Lester shall have no rights
as a shareholder with respect to any shares subject to a right and option to
purchase until he has acquired such shares by exercise of such option, and by
payment of the purchase price, as hereinabove provided.  The death of Lester, or
the termination of Lester's employment under this Agreement, whether voluntary
or involuntary, and whether with or without cause, and whether justified or
unjustified, for any reason whatsoever, shall terminate all rights and options
which he has not previously exercised.

     7.  Automobile.  ln recognition of Lester's need for an automobile for
business purposes in order to facilitate his transaction of the business of
Holding Company and Bank, Holding Company, shall, during the Term, provide
Lester, for business purposes, with a late model, luxury automobile and shall
provide all maintenance, repairs, insurance and all costs incidental thereto.
All Lester's rights with respect to such automobile shall expire at the end of
the Term.

     8.  Country Club  Membership.  In recognition of the requirements
which will be imposed upon Lester to entertain customers, clients and employees
of Holding Company and the Subsidiaries, and to maintain those social contacts
required of a person in the Position for purposes of generating additional
business for Holding Company and the Subsidiaries, and in order to provide to
Lester (and maintain for Lester) those contacts with persons of the community
which are required for maintaining and improving the business of Holding Company
and the Subsidiaries, Holding Company shall provide for Lester, during the
entire Term, a full membership at Bowling Green Country Club.  Holding Company
shall pay all initiation fees and initial purchase costs required for the
acquisition of such membership, all monthly or other periodic dues required to
maintain "such  membership in full force and effect and any special assessments
required to maintain such membership in full force and effect.  Lester shall,
however, personally pay for all food, drink and other items purchased by him
from such Country Club, except to the extent that he is entitled to 
reimbursement therefor in accordance with the following provisions of this
Agreement. Ownership of all stock in such Country Club shall remain with Holding
Company; provided, that Lester shall be permitted to vote all such stock during
the Term of this Agreement.

      9.  Reimbursement.  Holding Company will reimburse Lester for all
reasonable and necessary expenses incurred by him in carrying out his duties
under this Agreement; provided that such expenses shall be incurred by him only
pursuant to the policies and procedures of Holding Company's Board of Directors,
from time to time in effect, and that all such expenses must be reasonable and
necessary expenses incurred by him solely for the purpose of carrying out his
duties under this Agreement.  Lester shall present to Holding Company from time
to time an itemized account of such expenses in such form as may be required by
Holding Company's Board of Directors. Any such itemized account shall be subject
to approval by Holding Company Board of Directors.

     10.   Vacation.  Lester shall be entitled to have four (4) full calendar 
weeks of paid vacation during each calendar year during the Term. Such
number of weeks of paid vacation shall be prorated to the last day of the Term,
for that calendar year which includes the ending date of the Term.  Lester shall
be responsible for arranging to have other officers of Holding Company and Bank
discharge his duties and responsibilities during any vacation period.  Vacation
shall be taken only at those times during which such vacation will be calculated
to cause a  minimum of disruption in the business of Holding and Bank.
Notwithstanding the foregoing, if the paid vacation period provided during each
such calendar year for other executive officers of Holding Company or Bank is
increased to more than four (4) weeks, Lester's paid vacation period shall be
increased accordingly.

      11. Sick Leave.  Lester shall be entitled to have, during each
calendar year during the Term, a period of paid sick leave equivalent to that
period of time during which Lester must be "disabled" in order to qualify for
disability insurance payments under the disability insurance provided in
accordance with Paragraph 15 of this Agreement; provided, however, that such
sick leave shall be taken only if Lester is incapacitated by illness or injury
from performing his duties in the Position, and that such sick leave shall not
be taken if not required by Lester by reason of such incapacitating illness or
injury.  Such sick leave shall not, in any event, become additional vacation
time. If Lester becomes Disabled, as hereinafter defined in this Agreement, or
if Lester becomes entitled to receive benefits under the disability policy
described in Paragraph 15 of this Agreement, then all rights to sick leave
compensation shall end. All rights to unused sick leave shall end at the end of
the Term.

      12.  Accrual.  Vacation time and sick leave shall not be accrued from 
calendar year to calendar year.

      13.  Deferred  Compensation.  Lester  shall be entitled to receive
deferred compensation but only as set forth in a Deferred Compensation Agreement
entered into on March 8, 1988 by and between Lester and Holding Company.

      14.  Other Employee Benefits.  Lester shall be entitled to such
additional employee benefits as are not herein specifically described as are
conferred by Holding Company or Bank, from time to time, upon its other
executive officers, including the following:

       A.  The right to participate in any profit sharing plan,  pension
plan, or other incentive program, retirement benefit plan or similar program
established by Holding Company or Bank; provided, that Lester must be a
"qualified" participant, as defined in the legal documentation establishing such
plans;

       B.  Such medical and  hospitalization insurance as is provided by Holding
Company or Bank for such personnel, from time to time (provided, however, that 
Holding Company represents to Lester that Holding Company will provide for 
Lester and his immediate family a reasonably sufficient policy of medical and
hospitalization insurance coverage).

      15.  Disability Insurance.   Holding Company shall obtain for Lester, and 
shall pay for, a policy of disability insurance which will provide to Lester  
(and will pay to  Lester), in the event he becomes "disabled," as defined in 
such policy, a monthly benefitin a sum not less than sixty percent (60%) of the 
monthly installments of Lester's Base Salary, which Lester is entitled to 
receive, from time to time, as provided by Subparagraph A of Paragraph 5 of this
Agreement.  Said policy shall be obtained from a substantial insurance company 
which is reasonably acceptable to Lester and shall be subject to Lester's 
reasonable approval, and must contain reasonable definitions of "disability" 
and provisions for a waiting period which does not extend beyond the date of 
termination of Lester's rights to his Base Salary.  Holding Company shall pay 
for the insurance provided for by such policy during the entire Term.

      16.  Termination.  Lester's employment under the terms of this Agreement 
may be terminated by the Board of Directors of either Holding Company or Bank 
(and, if Lester is a member of such Board of Directors, he shall not be
permitted to vote on such issue, or to attend without invitation by a majority
of the other Board member, the meeting of such Board of Directors at which such
issue is being considered) at any time during the Term, if such Board of
Directors reasonably, properly, and in good faith determines by majority vote of
those members present and voting at any meeting at which a quorum is present,
that any of the following causes for terminating Lester's employment exist
(provided that Lester shall be entitled to arbitration, as described below):

      A.  Lester has appropriated to his personal use funds, rights or property
of Holding Company or Bank or of any of the customers of Holding Company or
Bank;

      B.   Lester has engaged in any other act of substantial dishonesty in the
performance of his duties or responsibilities;

      C.   Lester has, in any substantial respects, failed to discharge his 
duties and responsibilities in the Position, and fails or refuses to correct 
such failings within thirty (30) days of receipt of written notice to him from 
the Board of Directors of Holding Company or Bank of the failings, which such 
notice shall specifically describe Lester's failings and the steps required to
remedy same;

      D.   Lester is engaging in competition  with Holding Company or the 
Subsidiaries in any manner or in activities substantially harmful to the 
business of Holding Company or the Subsidiaries;

      E.   Lester is regularly  making a frequent,  substantial  abusive use of 
alcohol, drugs or similar substances, and such abuse has affected his ability to
conduct the business of Holding Company or Bank in a proper and prudent manner;

      F.   Lester has become "disabled" or "incompetent," as hereinafter defined
 in this Agreement;

      G.   Lester is convicted of a felony, or of a substantial misdemeanor 
involving moral turpitude;

      H.   For any reason,  Bank is unable to procure upon Lester a substantial
fidelity bond, or bonding company refuses to issue a bond to Bank if Lester is
employed in the Position;

      I.   Lester is guilty of gross professional misconduct, or of a gross 
breach of this Agreement of such a serious nature as would reasonably render his
service entirely unacceptable to reasonable persons in the position of the Board
of Directors of Holding Company or Bank.

          If its Board of Directors reasonably, properly, and in good faith  
determines that any one or more of the above causes for terminating Lester's 
employment exists, then Holding Company or Bank may, by giving Lester
ninety (90) days written notice of its intention to terminate Lester's
employment, terminate this Agreement, the Term, and Lester's employment, and all
rights, duties and obligations of the parties under this Agreement. Lester shall
be entitled to receive all compensation and fringe benefits, hereinabove
provided for, for such period of ninety (90) days, plus any accrued vacation
time (prorated to the end of such ninety (90) day  period), plus any rights to
any  fringe benefits or other compensation hereinabove described in this
Agreement which accrue during such period of 90 days.  Nevertheless, although
Lester shall be entitled to his compensation and fringe benefits for such
period, such Board of Directors may, if it, in its discretion deems it prudent
to do so, terminate Lester's employment, effective on the date when such notice
is given, although Lester will be entitled to receive his compensation and other
fringe benefits hereinabove described during such period of 90 days, and all
rights to compensation and fringe benefits which accrue during such period of 90
days.  Any of the following provisions of this Agreement to the contrary
notwithstanding (including those dealing with termination pay), Lester shall not
be entitled to any further compensation of any kind or nature whatsoever from
Holding Company or Bank following such termination.

      17.  All determinations by the Board of Directors of Holding
Company or Bank that sufficient grounds exist for the termination of Lester's
employment under the above provisions of this Paragraph 16 must be made
reasonably, properly and in good faith.

         Termination Otherwise.  The above provisions of this Agreement to the
contrary notwithstanding, Lester's employment may be terminated, upon delivery
to Lester of thirty (30) days notice of termination, at any time during the
Term, for any reason whatsoever, with or without cause, if the Board of
Directors of either Holding Company or Bank, for any reason whatsoever,
determines that such employment should be terminated.  It is understood that
Lester has no continuing right to employment by Holding Company and Bank, and
that Holding Company or Bank may, therefore, terminate Lester's employment at
any time of its choosing, and for any reasons which are satisfactory to it.

         If notice is delivered pursuant to this Paragraph 17 that Lester's 
employment is terminated, or if Holding Company or Bank timely delivers
notice to Lester that it does not intend to renew this Agreement pursuant to
Paragraph 2 above, then Lester shall be entitled to receive all compensation and
fringe benefits to which he is otherwise entitled (and which would otherwise
accrue) under this Agreement during the period of 30 days following delivery of
such notice. At the conclusion of such period of 30 days, Lester's employment in
the Position shall be terminated and the only rights to compensation and fringe
benefits which Lester shall thereafter have under this Agreement shall be: (a)
the right to receive from Holding Company, on the next scheduled salary payment
date, the value of fringe benefits accruing to Lester under this Agreement as of
the effective date of the termination (subject to the terms and conditions of
any plan or agreement pursuant to which such benefits are made available); and
(b) the right to receive from Holding Company the total amount of the Base
Salary, at the annual rate then in effect, that would be due Lester over the
then remaining term of this Agreement (disregarding the termination) (such total
amount being referred to as "Severance  Pay").  In December of each year during
the Term, Lester shall have the right, by delivery of written notice to Holding
Company, to require that, if Holding Company should deliver notice to terminate
(or fail to renew) this Agreement during the following calendar year, the
Severance Pay due him from Holding Company upon termination shall be paid by
Holding Company in equal installments on each scheduled salary payment date
during the remaining term of this Agreement, as if there had been no 
termination.  In the absence of such a notice by Lester,  Holding Company shall
pay to Lester, on the next scheduled salary payment date following termination
of his employment in the Position, the present value of the Severance Pay
(calculated by using the U.S. Treasury rate then in effect) and, upon such
payment, Lester shall be entitled to no further compensation hereunder.

    18.  Voluntary  Termination.  Lester may terminate his employment in the
Position, and this Agreement, at any time during the Term, provided that he
shall give to the Board of Directors of each of Holding Company and Bank at
least sixty (60) days written notice of such termination.  Any of the above
provisions of this Agreement to the contrary notwithstanding, if Lester shall
voluntarily terminate his employment in the Position and this Agreement at any
time during the Term, then all rights to compensation and fringe benefits shall
terminate as of the effective date of such termination; provided, however, that
Lester shall be entitled to receive payment for any accrued  vacation,  prorated
as of the date of such termination.

    19.  Accrued  Vacation Pay. If Lester's employment is terminated,
at any time during the Term, then Lester shall be entitled to receive, as
additional compensation, payment (at the rate of Lester's Base Salary then in
effect) for any unused vacation which Lester may elect in writing receive from
Holding Company has accrued to Lester during the calendar year of his 
employment, but which has been unused.  All accrued vacation time, for the
calendar year within which Lester's employment is terminated,  shall be prorated
as of the date of the termination of such employment.

     20.  Death of Lester.  Lester's death shall terminate the Term and
Lester's  employment and shall terminate all of Lester's right to all salary,
compensation and fringe benefits effective as of the date of such death;
provided, however, that Holding Company shall maintain that policy of life
insurance hereinabove described in full force and effect until such death, and
that Holding Company shall pay to Lester's lawful spouse at the time of his
death or his designee, or to Lester's estate, as designated by Lester (or if not
so  designated  then to his spouse,  if any, or his estate,  if there is no such
spouse) those installments of Lester's Base Salary, which would otherwise be
due, for a term of 120 days following the date of Lester's death, and shall pay
all accrued vacation time of Lester (which shall be prorated as of the date of
death) and any sum otherwise due Lester, as of the date of his death, for
incentive bonuses earned for the immediately preceding calendar year. If such
death occurs less than 90 days prior to the close of any calendar year, then the
persons entitled to receive payment in accordance with the above provisions of
this Paragraph 20 shall be entitled to receive any incentive bonuses which
Lester would have received by reason of the performance of Holding Company and
Bank during "such  calendar year, had he been living at the end of such calendar
year.

     21.  Disability.  Lester shall be deemed to be "disabled" or shall
be deemed to be suffering from a "disability" under the provisions of this
Agreement if a competent physician, acceptable to Lester and Holding  Company,
states in writing that it is such physician's opinion that Lester will be
permanently (or for a continuous period of four (4) calendar months) unable to
perform a substantial number of the usual and customary duties of Lester's
employment.  In the event Lester and Holding Company are unable to agree upon
such a suitable physician for the purposes of making such a determination, then
each of Lester and Holding Company shall select a  physician, and such two
physicians as selected by Holding Company and Lester shall select a third
physician who shall make the determination, and the determination made by such
third physician shall be binding upon Lester and Holding Company.  It is further
agreed that if a guardian is appointed for Lester's person, or a conservator or
curator is appointed for Lester's estate, or he is adjudicated "incompetent" or
as suffering or operating under a mental "disability" by a court of appropriate
jurisdiction, then Lester shall be deemed to be "disabled" for all purposes
under this Agreement. In the event Lester becomes "disabled," as defined in this
Paragraph 21, then his employment shall terminate, effective as of the date of
such  disability; provided that Lester shall, nevertheless, be entitled to
receive those sums which would otherwise have been paid had he died on the
effective date of such disability.
Such sums, as determined in accordance with Paragraph 20, shall be paid to
Lester.

    22.  Faithfulness.  Lester shall diligently employ himself in the
Position and in the business of Holding Company and Bank and shall be faithful
to Holding Company and the Subsidiaries in all transactions relating to them and
their business and shall give, whenever required, a true account to the Boards
of Directors Holding Company and Bank of all business transactions arising out
of or connected with Holding Company and Bank or their business, and shall not,
without first obtaining the consent of the Boards of Directors, employ either
his interest in Holding Company or Bank, or his interests in this Agreement or
the capital or credit of Holding Company or Bank for any purposes other than
those of Holding Company and Bank.  Lester shall keep the Boards of Directors of
Holding Company and Bank fully informed of all work for and transactions on
behalf of Holding Company and Bank.  He shall not, except in accordance with
regular policies of the Boards of Directors from time to time in effect, borrow
money in the name Holding Company or Bank, use collateral owned by Holding
Company or Bank as security for loans or lease or dispose of or in any way deal
with any of the property, assets or interests Holding Company or Bank other than
in connection with the proper conduct of the business Holding Company and Bank.

    23.  Nonassignability.  Neither this Agreement, nor any rights or
interests hereunder, shall be assignable by Holding Company or Bank, or by
Lester, his beneficiaries or legal representatives, without the prior written
consent of the other parties hereto.  All services to be performed hereunder by
Lester must be personally performed by him.

    24.  Consolidation.  Merger or Sale of  Asset.  Nothing in this Agreement 
shall preclude Holding Company or Bank from consolidating or merging into or 
with, or transferring all or substantially all of its assets to another
bank or corporation which assumes this Agreement and all obligations and
undertakings of it hereunder.  Upon such a consolidation, merger or transfer of
assets and assumption, "Holding Company" or "Bank," as used herein, shall mean
such other bank or corporation, as the case may be, and this Agreement shall
continue in full force and effect.

     25.  Binding  Effect.  This Agreement shall be binding upon, and
shall inure to the benefit of Holding Company and Bank and their successors and
assigns, and Lester and his heirs, executors, administrators and personal
representatives.

     26.  Amendment of Agreement.  This Agreement may not be amended or
modified except by an instrument in writing signed by the parties hereto.
Although Lester's compensation may be increased, from time to time, by Holding
Company's Board of Directors, in order for any purported agreement to increase
Lester's compensation to be enforceable by Lester, the provisions for increased
compensation must be set forth in a resolution of Holding Company's Board of
Directors, duly adopted by such Board of Directors, and properly reflected in
the minutes of such Board of Directors.  Any purported agreement for additional
compensation or for an adjustment in compensation which is not so evidenced by a
written resolution of Holding Company's Board of Directors shall not be
enforceable, and shall be of no force or effect whatsoever.

     27.  Waiver.  No term or condition of this Agreement shall be deemed to
have been waived, nor shall there be any estoppel against the enforcement of any
provisions of this Agreement, except by written instrument of the party charged 
with such waiver or estoppel.  No such written waiver shall be deemed to be a 
continuing waiver unless specifically stated therein, and each such waiver shall
operate only as to the specific term or condition waived, and shall not 
constitute a waiver of such term or condition in the future or as to any act 
other than that specifically waived.

     28.  Severability.  If for any reason any provision of this Agreement is 
held invalid, such invalidity shall not affect any other provision of this 
Agreement not held invalid, and each such other provision shall, to the full 
extent consistent with law, continue in full force and effect.  If any
provisions of this Agreement shall be invalid in part, such partial invalidity
shall in no way affect the rest of such provision not held invalid, and the rest
of such provision,  together with all other provisions of this Agreement, shall,
to the extent consistent with law, continue in full force and effect.

     29.  Trade  Secrets.  Lester shall not, at any time or in any manner, 
either directly or indirectly, divulge, disclose or communicate to any person,
firm or corporation, in any manner whatsoever, any information concerning  any  
matters affecting or relating to Holding Company, the Subsidiaries or their
respective businesses, including, without limiting the generality of the 
foregoing, any information concerning any of their customers, or any other 
information concerning any of them or any of their businesses, its manner of 
operation, its plans, process or other data, without regard to whether all or 
any part of the foregoing matters will be deemed confidential, material
or important, as the parties hereto stipulate that as between them, the same are
important, material and confidential and gravely affect the effective and
successful conduct of the business and goodwill of Holding Company and the
Subsidiaries, and that any breach of the terms of this Paragraph 29 shall be a
substantial and material breach of this Agreement.  All terms of this Paragraph
29 shall remain in full force and effect after the termination of Lester's
employment and of this Agreement.  Lester acknowledges that it is necessary and
proper that Holding Company and the Subsidiaries preserve and protect their
proprietary rights and unique, confidential and special information and
goodwill, and the confidential nature of their respective businesses and of the
affairs of their customers, and that it is therefore appropriate that Holding
Company prevent Lester from engaging in any breach of the provisions of this
Paragraph 29. Lester, therefore, agrees that a violation by Lester of the terms
of this Paragraph 29 would result in irreparable and continuing injury to
Holding  Company, for which there might well be no adequate remedy at law.
Therefore in the event Lester shall fail to comply with the provisions of this
Paragraph 29, Holding Company shall be entitled to such injunctive and other
relief as may be necessary or appropriate to cause Lester to comply with the
provisions of this Paragraph 29, and to recover, in addition to such relief, its
reasonable costs and attorney's fees incurred in obtaining same. Such right to
injunctive relief shall be in addition to, and not in lieu of, such rights to
damages or other remedies as Holding Company shall be entitled to receive.

    30.  Attorney's Fees. If either party to this Agreement shall seek
to enforce any of the provisions of this Agreement or any rights, duties or
obligations provided for herein, against the other party to this Agreement, by
legal or equitable proceedings, then the a party in such legal or equitable
proceedings shall be entitled to receive from the other party to such legal or
equitable proceedings, in addition to all other rights and remedies to which
such prevailing party shall be entitled, such prevailing party's reasonable
costs and expenses incurred in such proceedings and in the preparation for such
proceedings, including such prevailing party's reasonable attorney's fees. Such
prevailing party shall be entitled to judgment for said costs, expenses and
attorney's fees in addition to judgment for such other sums and remedies to
which such prevailing party shall be entitled.

    31.  Interest. If any party to this Agreement shall be entitled to
receive any sums from the other parties to this Agreement by reason of the
provisions of this Agreement or any breach of the provisions of this. Agreement,
then all such sums to which such party shall be entitled shall, to the extent
permitted by law, bear interest at Bank's prime interest rate then in effect
plus one percent (1%); provided that such rate shall never be less than the rate
of thirteen percent (13%) per annum.  Interest shall be earned from a date which
follows the date when such sums are due by fifteen (15) days, until the date
when such sums are paid.

     32.  Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when executed and delivered, shall constitute an
original, but all such counterparts shall constitute one and the same
instrument.

      33. Entire Agreement.  The parties acknowledge and agree that, under 
Paragraph 6 of the 1984 Employment Agreement, Lester has the option to
purchase as many as 2,250 shares of common stock of Holding Company at a price
of $10.00 per share, exercisable on or before April 30, 1991, and nothing in
this Agreement shall impair, alter or otherwise affect such right and option to
purchase. This Agreement, together with the Agreements and/or plans referred to
herein, contains the entirety of the agreements between Holding Company,  Bank
and Lester with respect to Lester's employment by Holding Company and Bank on
and after the Commencement Date. Each of the parties acknowledges that the other
parties have made no agreements or representations with respect to the subject
matter of this Agreement other than those hereinabove specifically set forth in
this Agreement.  Any prior agreements, undertakings or understandings of the
parties with respect to Lester's employment by Holding Company and Bank
(including, without limitation, the 1984 Employment Agreement)shall, except to
the extent specifically set forth herein be (and they are hereby) rendered null
and void.

         IN WITNESS WHEREOF,  the parties hereto have executed this Agreement as
of the day and year first above written.

                                HOLDING COMPANY:

                                TRANS FINANCIAL BANCORP, INC.



                                By          s/FLOYD H. ELLIS

                                         Title       Director


                                BANK:

                                TRANS FINANCIAL BANK, N.A.



                                By          s/FLOYD H. ELLIS

                                         Title       Director



                                LESTER:



                                s/DOUGLAS M. LESTER
                                  DOUGLAS M. LESTER