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

                              ---------------------

                                    FORM 10-Q

(Mark One)

X    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

     For the period ended September 30, 1998

     TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
---  EXCHANGE ACT OF 1934

         For the transition period from ___________ to _____________

                         Commission File Number 0-23134

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


           Indiana                                           35-1681096
--------------------------------------------------------------------------------
(State of other jurisdiction                             (I.R.S. Employer
of incorporation or organization)                       identification no.)


130 East Market Street          Indianapolis, Indiana          46204
--------------------------------------------------------------------------------
(Address of principal                                        (Zip Code)
executive offices)

                                 (317) 237-8121
              (Registrant's telephone number, including area code)

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

         Indicate  the  number of  shares  outstanding  of each of the  issuer's
classes of common stock, as of the latest practical date.

         Common Shares, without par value
                  Nonvoting -       2,787,634 shares as of November 13, 1998
                  Voting    -         264,096 shares as of November 13, 1998




<PAGE>
                    

                    PEOPLES BANK CORPORATION OF INDIANAPOLIS

                                      INDEX



PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements


              Consolidated Balance Sheets at September 30, 1998
              and December 31, 1997........................................   2

              Consolidated Statements of Income for the three and 
              nine months ended September 30, 1998 and 1997................   3

              Consolidated Statements of Comprehensive Income for the
              three and nine months ended September 30, 1998 and 1997......   4

              Consolidated Statements of Changes in Shareholders'
              Equity.......................................................   5

              Consolidated Statements of Cash Flows for 
              the nine months ended
              September 30, 1998 and 1997..................................   6

              Notes to Consolidated Financial                                 
              Statements...................................................   7

  Item 2.     Management's Discussion and Analysis of 
              Results of Operations
              and Financial Condition......................................8-16

PART II.  OTHER INFORMATION

      Item 4.     Submission of Matters to a Vote of Security Holders......  17

      Item 6.     Exhibits and Reports on Form 8-K.........................  17

      Signatures     ......................................................  18



<PAGE>
PEOPLES BANK CORPORATION OF INDIANAPOLIS
CONSOLIDATED BALANCE SHEETS
================================================================================
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
                                                                       September 30,          December 31,
                                                                           1998                   1997
                                                                     ------------------     -----------------
Assets
<S>                                                                    <C>                    <C>           
      Cash and due from banks                                          $        19,908        $       25,462
      Federal funds sold                                                             0                     0
                                                                     ------------------     -----------------
        Total cash and equivalents                                              19,908                25,462

      Available-for-sale securities                                            144,699               153,870

      Loans held for sale                                                          373                   561
      Total loans                                                              453,599               406,893
        Allowance for loan losses                                              (7,075)               (5,516)
                                                                     ------------------     -----------------
        Loans, net                                                             446,524               401,377

      Premises and equipment, net                                                7,914                 7,482
      Accrued income and other assets                                           13,100                 9,724
                                                                     ------------------     -----------------
        Total assets                                                           632,518               598,476
                                                                     ==================     =================

Liabilities

      Non interest-bearing deposits                                             80,045                82,132
      Interest-bearing deposits                                                457,960               426,179
                                                                     ------------------     -----------------
        Total deposits                                                         538,005               508,311

      Short-term borrowings                                                     34,853                34,380
      Accrued expenses and other liabilities                                     8,614                 6,968
                                                                     ------------------     -----------------
        Total liabilities                                                      581,472               549,659

Shareholders' equity
      Common shares, no par value:
      Authorized:
        Voting - 300,000 shares
        Nonvoting - 4,000,000 shares
      Issued:
        Voting -  264,096 shares                                                   896                   897
        Nonvoting  -   2,787,634 shares (1998)
                        -  2,812,634 shares                                     12,280                13,085
(1997)
      Retained earnings                                                         36,914                34,220
      Net unrealized gain/(loss) on available-for-sale securities                  956                   615
                                                                     ------------------     -----------------
        Total shareholders' equity                                              51,046                48,817
                                                                     ------------------     -----------------
        Total liabilities and shareholders' equity                      $      632,518         $     598,476
                                                                     ==================     =================
</TABLE>


See accompanying notes.



<PAGE>

CONSOLIDATED STATEMENTS OF INCOME
================================================================================
<TABLE>
<CAPTION>

(Dollar amounts in thousands, except per share data)
                                                                Three months ended         Nine months ended
                                                                  September 30,              September 30,
                                                               1998          1997          1998           1997
                                                      -------------------------------------------------------------------
Interest income
<S>                                                           <C>           <C>          <C>            <C>    
      Interest and fees on loans                              $9,666        $8,264       $28,034        $23,107
      Interest on federal funds sold                             255           132           486            650
      Interest on investments                                  2,271         2,096         7,041          4,969
                                                      ----------------------------------------------------------
        Total interest income                                 12,192        10,492        35,561         28,726

Interest expense
      Interest on deposits                                     5,823         4,783        16,510         12,471
      Interest on short-term borrowings                          193           136           568            388
                                                      ----------------------------------------------------------
        Total interest expense                                 6,016         4,919        17,078         12,859
                                                      ----------------------------------------------------------
Net interest income                                            6,176         5,573        18,483         15,867

Provision for loan losses                                          0           500         3,500          1,400
                                                      ----------------------------------------------------------
Net interest income after
      provision for loan losses                                6,176         5,073        14,983         14,467

Other operating income
      Trust and Investment Management fees                       638           449         1,771          1,222
      Service charge income                                      795           791         2,181          2,245
      Mortgage banking revenue                                   114            89           471            325
      Net gain (loss)
on
        investments                                               40           (7)            47           (46)
      Other operating income                                     260           213           694            635
                                                      ----------------------------------------------------------
        Total other operating income                           1,847         1,535         5,164          4,381

Other operating expenses
      Salaries and employee benefits                           2,744         2,294         8,034          6,608
      Occupancy expense (net)                                    394           380         1,144          1,215
      Equipment expense                                          368           253         1,026            778
      Advertising Expense                                         85           124           312            397
      Other operating expense                                  1,457         1,054         3,984          3,018
                                                      ----------------------------------------------------------
        Total other operating expenses                         5,048         4,105        14,500         12,016

Income before income taxes                                     2,975         2,503         5,647          6,832

Income Taxes                                                     973           845         1,753          2,203

Net income                                                    $2,002        $1,658        $3,894         $4,629
                                                      ==========================================================
Net income per share (Note 3)
                                                      ==========================================================
  Basic                                                        $0.65         $0.53         $1.27          $1.48
                                                      ==========================================================
  Diluted                                                      $0.63         $0.53         $1.24          $1.47
                                                      ==========================================================
</TABLE>

See accompanying notes.


<PAGE>

PEOPLES BANK CORPORATION OF INDIANAPOLIS
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
================================================================================
<TABLE>
<CAPTION>

(Dollar amounts)

                                                              Three months ended             Nine months ended
                                                                  September 30,                 September 30,
                                                             1998               1997          1998           1997
                                                       -----------------------------------------------------------
<S>                                                          <C>               <C>           <C>            <C>   
Net income                                                   $2,002            $1,658        $3,894         $4,629
  Other comprehensive income, net of tax:                                  
    Change in unrealized gains/losses on securities             346                83           341            177
                                                       ===========================================================
Comprehensive income                                         $2,348            $1,741        $4,235         $4,806
                                                       ============================================================
                                                                        
</TABLE>


<PAGE>

PEOPLES BANK CORPORATION OF INDIANAPOLIS
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
================================================================================
(Dollar amounts in thousands)


                                                   1998         1997
                                                 --------      -------

Balance at January 1                              $48,817      $45,349

      Net Income                                    3,894        4,629

      Cash dividends                               (1,198)      (1,026)

      Proceeds from exercise of stock option            3            0

      Repurchase of common stock                     (811)      (1,734)

      Change in unrealized gains (losses)
      on securities:                                  341          177

                                               -----------     --------
Balance at September 30                           $51,046      $47,395
                                               ===========     ========




<PAGE>

PEOPLES BANK CORPORATION OF INDIANAPOLIS
CONSOLIDATED STATEMENTS OF CASH FLOWS
================================================================================
<TABLE>
<CAPTION>

(Dollar amounts in thousands)

                                                                          Nine months ended
                                                                            September 30,
                                                                        1998            1997
                                                                      ---------       ---------
Cash flows from operating activities
<S>                                                                   <C>             <C>      
       Net Income                                                     $   3,894       $   4,629
       Adjustments to reconcile net income to net cash
         from operating activities
       Depreciation and amortization                                        902             820
       Provision for loan losses                                          3,500           1,400
       Net (gain)/loss on investment securities                             (47)             46
       Net amortization/(accretion) on investments                          (89)            177
       Net gain on the sale of loans                                       (323)           (152)
       Change in interest payable and other liabilities                   1,648           2,133
       Change in interest receivable and other assets                    (4,468)         (3,302)
       Loans originated for sale, net of sales proceeds                     509             436
                                                                      ---------       ---------

               Net cash from operating activities                         5,526           6,187
                                                                      ---------       ---------


Cash flows from investing activities
       Proceeds from sales of available-for-sale securities               5,068          16,707
       Proceeds from maturities of available-for-sale securities         46,069          17,645
       Purchase of available-for-sale securities                        (40,462)        (87,373)
       Loans made to customers, net of principal
         collection thereon                                             (48,647)        (56,655)
       Property and equipment expenditures                               (1,270)           (301)
                                                                      ---------       ---------

         Net cash from investing activities                             (39,242)       (109,977)
                                                                      ---------       ---------

Cash flows from financing activities
       Net change in deposits                                            29,693          95,163
       Net change in short-term borrowings                                  472               5
       Proceeds from exercise of stock option                                 3               0
       Dividends paid                                                    (1,195)         (1,026)
       Purchase of common stock                                            (811)         (1,734)
                                                                      ---------       ---------

         Net cash from financing activities                              28,162          92,408
                                                                      ---------       ---------

Net change in cash and cash equivalents                                  (5,554)        (11,382)

Cash and cash equivalents at beginning of year                           25,462          32,252
                                                                      ---------       ---------

Cash and cash equivalents at September 30                             $  19,908       $  20,870
                                                                      =========       =========

</TABLE>

<PAGE>

                    Peoples Bank Corporation of Indianapolis

                   Notes to Consolidated Financial Statements

                               September 30, 1998

1.  Accounting Policies
    -------------------
         Except as noted in Note 3, the significant accounting policies followed
by Peoples Bank  Corporation of  Indianapolis  ("The  Corporation")  for interim
financial  reporting are consistent  with the accounting  policies  followed for
annual financial  reporting.  The consolidated interim financial statements have
been prepared in accordance  with  instructions to Form 10-Q and may not include
all  information  and  footnotes   normally  shown  for  full  annual  financial
statements.  All adjustments which are, in the opinion of management,  necessary
for a fair  presentation  of the  results  for the  periods  reported  have been
included in the accompanying unaudited consolidated financial statements and all
such adjustments are of a normal recurring nature.

2.  Earnings Per Share
    ------------------

The following table presents share data used to compute earnings per share:

<TABLE>
<CAPTION>


                                                                      Year-to-date
                                                                     At September 30,

                                                                  1998            1997
                                                                ---------       ---------
<S>                                                             <C>             <C>      
Weighted average shares outstanding                             3,071,429       3,124,222
Dilutive effect of potential shares                                86,696          32,721
                                                                ---------       ---------
Shares used to compute diluted earnings per share               3,158,125       3,156,943


                                                                   Three Months ended
                                                                      September 30,

                                                                   1998           1997
                                                                ---------       ---------
Weighted average shares outstanding                             3,061,738       3,100,239
Dilutive effect of potential shares                                77,286          57,020
                                                                ---------       ---------
Shares used to compute diluted earnings per share               3,139,024       3,157,259
</TABLE>

3.  Accounting Changes
    ------------------
         Financial  Accounting  Statement No. 131, Disclosures About Segments of
an  Enterprise  and Related  Information,  is  effective  for  reported  periods
included in year-end  financial  statements  for fiscal  years  beginning  after
December 15, 1997 and for all reported periods in interim  financial  statements
for reporting  periods following the first required full fiscal year disclosure.
The  Standard  establishes  new  guidance  for  the  way  that  public  business
enterprises  report  information  about operating  segments in annual  financial
statements and requires that those enterprises report selected information about
reportable   operating   segments  in  interim   financial   reports  issued  to
shareholders.  It  supercedes  the "industry  approach" to segment  disclosures,
previously  required  by  Financial   Accounting  Statement  No.  14,  Financial
Reporting for Segments of a Business  Enterprise,  replacing it with a method of
segment  reporting which is based on the structure of an  enterprise's  internal
organization  reporting.  The Standard also  establishes  guidelines for related
disclosures  about products and services,  geographic areas and major customers.
Management   expects   implementation   of  this   Standard  to  result  in  the
identification of other reportable business segments.




<PAGE>

PART I. FINANCIAL INFORMATION

Item 2.  Management's Discussion and Analysis
         ------------------------------------
 (Dollar amounts in thousands, except per share data)

General

The  business  of Peoples  Bank  Corporation  of  Indianapolis  ("The  Company")
consists  of holding and  administering  its  interest  in Peoples  Bank & Trust
Company  ("Peoples").  The principal  business of Peoples consists of attracting
deposits from consumer and commercial  customers and making loans to individuals
and  businesses.  Peoples  offers  various  products  for  depositors  including
checking and savings  accounts,  certificates of deposit and safe deposit boxes.
Loans consist  principally of loans to individuals  secured by mortgage liens on
residential  properties,  consumer loans generally  secured by personal property
and loans to businesses  generally secured by liens on business assets.  Peoples
also offers trust services to individuals, businesses and institutions.

The Company  operates 11 branch  locations,  a twelve  story  office in downtown
Indianapolis,  and an  operations  center.  Peoples  occupies five floors of the
downtown office building and leases six floors to tenants.  The top floor houses
the board room and a training area.  Leased tenant space at the downtown  office
remains at near capacity.

The Board of Directors of the Company approved on July 18, 1996, the repurchase,
from time to time, of 200,000  nonvoting  common shares on the open market.  The
Board  believed that the shares had been at times  undervalued in the market and
that it was in the best interest of the  shareholders  and the Company to effect
such share  repurchases.  At September  30, 1998, a total of 128,454  shares had
been repurchased at an average price of $24.23.

The book value per share of Peoples  nonvoting  common  shares at September  30,
1998,  was $16.73.  For the third  quarter,  the low trading price per share was
$27.625, and the high trading price per share was $36.00.

On September 17, 1998,  Peoples  declared a cash dividend in the amount of $.135
per share,  payable October 16, 1998, to  shareholders  of record  September 30,
1998.  This dividend  represents a 4.00%  increase over the second  quarter 1998
dividend and is the ninth  consecutive  quarter in which Peoples has declared an
increase in dividends.

Selected ratios and summary data.
                                              At or for the Nine Months Ended
                                                      September 30,
                                                 1998               1997
                                               ---------          ---------
Assets                                          $632,518           $570,824
Loans (includes loans held for sale)             453,972            389,564
Deposits                                         538,005            506,968
Shareholders Equity                               51,046             47,395
Book value per share                               16.73              15.40

Earnings per share (basic)                         $1.27              $1.48
Earnings per share (diluted)                       $1.24              $1.47
Dividends per share                                $0.39              $0.33
Net Interest Margin (FTE)                           4.29%              4.53%
Return on Average Assets                            0.83%              1.20%
Return on Average Equity                           10.73%             13.29%

Average Shares Outstanding
         -   Basic                             3,071,429          3,124,222
         -   Diluted                           3,158,125          3,156,943

Total Shares Outstanding                       3,051,730          3,077,090

Net Income
----------

Net income for the third  quarter of 1998 was $2,002  compared to $1,658 for the
third quarter of 1997,  an increase of 20.75% or $344.  Net income for the first
nine months of 1998 was $3,894 compared to $4,629 for the same period in 1997, a
decrease of 15.88% or $735.  Basic net income per share for the third quarter of
1998 was $0.65,  an increase of $0.12 or 22.64% from $0.53 for the third quarter
of 1997. Basic net income per share for the first nine months of 1998 was $1.27,
a  decrease  of $0.21 or  14.19%  from  $1.48 for the same  period in 1997.  The
decrease in net income for the year to date is attributable to management's  and
the board of directors'  election to recognize  losses on impaired  loans and to
write down a low-income  housing tax credit  investment during the first quarter
of 1998.  Additionally,  loan loss  reserves  were  strengthened  in response to
increased levels of criticized and nonperforming loans.

<PAGE>

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

Net interest income is the principal component of net income for the Company and
represents the difference  between  interest earned on loans and investments and
the interest  cost of deposits and other  borrowed  funds.  For the three months
ended September 30, net interest income was $6,176 and $5,573 for 1998 and 1997,
respectively.  This reflects an increase of $603, or 10.82%. For the nine months
ended  September 30, net interest  income was $18,483 and $15,867,  for 1998 and
1997, respectively. This reflects an increase of $2,616 or 16.49%.

Interest  income for the three months ended September 30 was $12,192 and $10,492
for 1998 and 1997,  respectively,  an  increase of $1,700,  or 16.20%.  Interest
income for the nine months  ended  September 30 was $35,561 and $28,726 for 1998
and 1997, respectively, an increase of $6,835, or 23.79%. Total interest expense
was $6,016 and $4,919 for the three months ended  September 30, 1998,  and 1997,
respectively,  an  increase of $1,097,  or 22.30%.  Total  interest  expense was
$17,078 and $12,859 for the nine months  ended  September  30,  1998,  and 1997,
respectively, an increase of $4,219, or 32.81%. This increase in interest income
is primarily attributable to loan growth of 16.53%.

Interest and fees on loans  increased from $ 8,264 for the third quarter of 1997
to $9,666 for that period in 1998, an increase of $1,402 or 16.97%. Interest and
fees on loans  increased  from  $23,107  for the  first  nine  months of 1997 to
$28,034  for that  period  in 1998,  an  increase  of $4,927  or  21.32%.  These
increases are attributable to an increase in loans outstanding. Total loans were
$453,872 at September  30, 1998,  compared to $389,564 at September 30, 1997, an
increase of $64,408 or 16.53%.

The Company's net interest margin,  or margin on earning assets,  decreased from
4.36% for the third quarter of 1997 to 4.18% for the third quarter of 1998. On a
tax equivalent basis, the Company's net interest margin decreased from 4.53% for
the third  quarter of 1997 to 4.29% for the third  quarter of 1998.  The primary
reason for this decrease in the net interest  margin in 1998 was growth in loans
outstanding funded by growth in higher-priced certificates of deposit, resulting
in a thinner net interest margin on new business.


Provision & Allowance for Loan Losses
-------------------------------------

The  provision  for loan  losses was $3,500 for the first nine months of 1998 as
compared to $1,400 for the first nine  months of 1997,  an increase of $2,100 or
150.00%.  The  allowance  for loan losses at September  30, 1998,  was $7,075 or
1.56% of total loans  compared to $5,516 or 1.36% of total loans at December 31,
1997.  Gross  charge-offs  during the first nine  months of 1998 were $2,543 and
recoveries were $602.


<PAGE>

The adequacy of the allowance for loan loss is evaluated at least quarterly by a
credit review officer and management  based upon the review of identified  loans
with more than a normal degree of risk,  historical loan loss  percentages,  and
present and forecasted economic conditions.  During the first quarter, provision
expense of $3,000 was  necessitated  by net  charge-offs  of $2,183.  Management
expects additional  recoveries against these loans during the remainder of 1998.
Management  believes  that the  allowance for loan losses should be maintained a
strong  level  given the mature  status of the  economy.  Therefore,  management
anticipated  maintaining  the allowance for loan losses in the range of 1.50% to
1.75%.  Management's  analysis  indicated  that the allowance for loan losses at
September 30, 1998, was adequate to cover potential  losses on identified  loans
with credit problems and potential  losses on the remaining loan portfolio based
on historical percentages.

Other Operating Income
----------------------

Non-interest  income totaled  $1,840 for the third quarter of 1998,  compared to
$1,535 for that  period of 1997,  an  increase  of $305 or 19.87%.  Non-interest
income totaled $5,157 for the first nine months of 1998,  compared to $4,381 for
that period in 1997, an increase of $776 or 17.71%.

Trust and Investment Management fees were $638 and $449 for the third quarter of
1998 and 1997,  respectively,  an increase of $189 or 42.09%. For the first nine
months of 1998 and 1997, trust fees were $1,771 and $1,222,  an increase of $549
or 44.93%.  During  the  second  quarter  of 1997,  the  Company  began to offer
additional   products--debt   and  equities   securities,   mutual  funds,   and
annuities--through  Peoples  Investment  Services,  Inc.,  a  subsidiary  of the
Company,  which are serviced  through a  third-party  vendor,  Invest  Financial
Corporation.  This area of  business  has grown and the  Company  has  increased
staffing to meet the growth.  The  increase in Trust and  Investment  Management
fees is  primarily  associated  with income of $402 for the first nine months of
1998 from the sale of products through Peoples Investment Services, Inc.

Service  charges on deposit  accounts,  which comprise the largest  component of
non-interest  income,  were up slightly for the third  quarter of 1998  compared
with the same periods of 1997. For the three month periods ending  September 30,
1998,  and  1997,  service  charge  income  was $795 and $791  respectively,  an
increase of $4 or 0.51%.  For the nine month periods ending  September 30, 1998,
and 1997, service charge income was $2,181 and $2,245  respectively,  a decrease
of $64 or  2.85%.  The  decrease  in  service  charge  income  can be  traced to
unusually high fees received in 1997 for nonsufficient funds (NSF).

Mortgage  banking  revenue  includes net gains and losses realized when mortgage
loans are sold into the  secondary  market and service  fee revenue  earned from
servicing  those loans  after they are sold.  Mortgage  banking  revenue for the
third  quarter  of 1998 was  $114,  reflecting  an  increase  of $25 or  28.09%,
compared to $89 for the same period in 1997.  Mortgage  banking  revenue for the
first nine  months of 1998 was $471,  reflecting  an increase of $146 or 44.92%,
compared to $325 for the same period in 1997.  The increase in mortgage  banking
revenue can be  associated  with  stronger  activity in the first nine months of
1998  due  to an  increase  in  refinancing  activities  associated  with  lower
long-term interest rates.


<PAGE>

Other operating  income  increased during the third quarter of 1998 to $260 from
$213 for the same period in 1997, an increase of $47 or 22.07%.  Other operating
income  increased during the first nine months of 1998 to $694 from $635 for the
same period in 1997,  an increase of $59 or 9.29%.  This  increase was primarily
associated  with an increase in commissions  and fees received for the servicing
of merchant credit card business.

Other Operating Expenses
------------------------

Total other operating  expenses were $5,041 for the three months ended September
30,  1998,  compared  with $4,105 for that period in 1997.  This  represents  an
increase  of $936,  or 22.80%.  For the first nine  months of 1998,  total other
operating expenses were $14,493,  compared with $12,016 for that period in 1997,
an increase of $2,477, or 20.61%. Salary and employee benefit expense was $2,744
for the three months ended September 30,1998, an increase of $450 or 19.62% from
$2,294 for the same  period of 1997.  Salary and  employee  benefit  expense was
$8,034 for the first nine  months of 1998,  an increase of $1,426 or 21.58% from
$6,608 for the same period in 1997. This increase was primarily  associated with
salary and wage rate increases, and increases in staff.

Occupancy expense was $394 for the third quarter of 1998, an increase of $14, or
3.68%  from $380 for the third  quarter of 1997.  For the first  nine  months of
1998,  occupancy  expense was $1,144, a decrease of $71 or 5.84% from $1,215 for
the same period in 1997.  Equipment  expenses were $368 and $253,  respectively,
for the third  quarter of 1998 and 1997,  an  increase  of $115 or  45.45%.  The
reduction  in occupancy  expense is  primarily  associated  with  reductions  in
operating  and  maintenance  expenses  in the first  nine  months  of 1998.  The
increase in equipment  expense is  primarily  the result of  investments  in new
technology  including a bank-wide  network,  platform  automation for the branch
system, and new office equipment.

Advertising  expenses were $85 and $124, for the third quarter of 1998 and 1997,
respectively, a decrease of $39 or 31.45%. For the first nine months of 1998 and
1997, advertising expenses were $312 and $397,  respectively,  a decrease of $85
or 21.41%. Other operating expenses were $1,450 and $1,054 for the third quarter
of 1998 and 1997,  respectively,  an increase  of $396 or 37.57%.  For the first
nine months of 1998 and 1997,  other operating  expenses were $3,977 and $3,018,
respectively,  an  increase  of $959 or 31.78%.  The  principal  reason for this
increase was  management's  decision to recognize a loss of $530 on a low-income
housing investment through the third quarter.

Income Taxes
------------

Income  taxes were $973 for the first nine months of 1998 and $845 for the first
nine  months of 1997.  The  increase  in taxes can be  primarily  attributed  to
increased income recognized during the third quarter.


<PAGE>

Balance sheet
-------------

Total assets were $632,518 at September  30, 1998,  and $598,476 at December 31,
1997,  an increase of $34,072,  or 5.69%.  The  portfolio of  available-for-sale
securities  decreased  from  $153,870  at  December  31,  1997,  to  $144,699 at
September 30, 1998, a decrease of $9,171 or 5.96 %. Total loans, excluding loans
held for sale,  increased  during the first nine months of 1998 from $406,893 at
December 31, 1997, to $453,599 at September 30, 1998.  This reflects an increase
of $46,706 or 11.48%. Commercial loans increased $26,783 or 14.47% from $185,089
at December 31,  1997,  to $211,872 at September  30, 1998.  Real estate  loans,
which consist of  construction  loans and permanent  residential  and commercial
mortgages,  increased  $12,795 or 10.69% from  $119,640 at December 31, 1997, to
$132,435 at September 30, 1998.  Consumer loans  increased  $7,193 or 7.18% from
$100,139 at December 31, 1997, to $107,332 at September 30, 1998. Loans held for
sale consist of conforming  fixed rate mortgage  loans that Peoples sells in the
secondary market (having  retained  servicing rights with respect to such loans)
and that are  pending  funding.  Loans held for sale were $561 at  December  31,
1997,  compared to $373 at September 30, 1998.  The amount of loans  outstanding
(excluding loans held for sale) are reflected in the following table.



                                   September 30,    December 31,   September 30,
                                       1998             1997           1997  
                                   -------------    ------------   -------------
Real Estate                          $132,435         $119,640       $126,267
Commercial                            211,872          185,089        165,037
Consumer                              107,332          100,139         96,064
Tax exempt                              1,960            2,025          2,059
                                     --------         --------       --------
Total Loans                           453,599          406,893        389,427
Less: Allowance for Loan Losses         7,075            5,516          5,119
                                     ========         ========       ========
                                     $446,524         $401,377       $384,308
                                     ========         ========       ========
                                                                 
Deposits  represent the primary source of funds for the Company.  Total deposits
increased $29,694 or 5.84%,  from $508,311 at December  31,1997,  to $538,005 at
September 30, 1998.  Non-interest-bearing  deposits  decreased $2,087, or 2.54%,
from  $82,132 at December  31,  1997,  to $80,045 at  September  30,  1998.  The
Company's deposit balances are reflected in the following table.
<PAGE>

                                     September 30,   December 31,  September 30,
                                         1998           1997           1997
                                     -------------   ------------  -------------
Deposits:
           Non-interest-bearing        $ 80,045       $ 82,132       $ 83,919
           Interest-bearing             457,960        426,179        423,049
                                       --------       --------       --------
                     Total deposits    $538,005       $508,311       $506,968
                                       --------       --------       --------

Total deposits/total assets               85.05%         84.93%         88.81%


Short-term  borrowings in the form of Federal funds, Federal Home Loan advances,
and  repurchase  agreements  are  acquired,  as  needed,  to  satisfy  temporary
liquidity  needs.  Overnight  repurchase  agreements  continue to be a source of
funds for  Peoples.  Many of the  funds  are from  businesses  with  large  cash
balances.  Short-term borrowings were $34,853 at September 30, 1998, as compared
to $34,380 at December 31, 1997.  This  represents an increase of $473 or 1.38%.
At September 30, 1998, the bank had $11,541 in overnight repurchase  agreements,
$9,000 in federal funds  purchased,  $6,000 in Federal Home Loan Bank  advances,
and $8,312 in borrowings through the Treasury Tax and Loan Note Option program.

Total  shareholders'  equity increased $2,229 or 4.57% for the nine months ended
September 30, 1998, to $51,046,  from $48,817 at December 31, 1997. The increase
in shareholders'  equity was the result of net income of $3,894,  less dividends
paid of $1,197,  plus the adoption of FAS No. 115 resulted in a $340 increase in
equity,  less the  repurchase of $811 of common  stock,  plus the issue of $3 of
common stock due to the exercise of stock options.

Credit Quality
--------------

Nonaccrual  loans are loans on which the  Company  no longer  accrues  interest.
Management  places a loan on nonaccrual status when the collection of additional
interest is unlikely  and the loan is not  considered  to be well secured and in
the  process of  collection.  Nonperforming  loans  consist of loans that are on
nonaccrual  status,  that  are 90 days  or  more  past  due as to  principal  or
interest,  or that are restructured.  If a loan is designated as a nonperforming
loan, management,  as a result of delinquent status or significant concern about
the ultimate  collectibility of the loan, typically ceases to recognize interest
income with respect to such loan and places it on nonaccrual status.

At September 30, 1998,  Management  designated $1,562 in loans as "impaired" for
the  purpose  of FAS  No.  114.  Management  has  further  determined  that  all
commercial non-accrual loans will be considered as impaired.


<PAGE>

The following table shows the composition of nonperforming loans.
<TABLE>
<CAPTION>


                                               September 30,      December 31,    September 30,
                                                   1998              1997              1997
                                               -------------      ------------    -------------
Nonperforming loans:                                                              
<S>                                               <C>               <C>               <C>   
          Total nonaccrual loans                  $1,879            $3,626            $2,006
           Loans past due more than                                               
           ninety days and still accruing             10                16                17
                                                  ======            ======            ======
         Total                                    $1,889            $3,642            $2,023
                                                  ======            ======            ======
</TABLE>
                                                                            
At  September  30,  1998,  nonperforming  loans  were  comprised  of  $1,562  of
commercial  loans,  $327  of  real  estate  loans  and  $0  of  consumer  loans.
Nonperforming  loans were comprised of $2,694 of commercial  loans, $944 of real
estate loans and $4 of consumer  loans at December 31,  1997.  At September  30,
1997,  nonperforming loans consisted of $1,855 of commercial loans, $151 of real
estate  loans  and $17 of  consumer  loans.  Asset  quality  continues  to be an
important  area of focus for the  Company.  Nonperforming  loans as a percent of
assets were 0.30% at  September  30, 1998,  and 0.61% at December 31, 1997.  The
Company  maintains  asset  quality  through  the use of  well-defined  policies,
underwriting criteria, and review processes.

Capital
-------

The  Company  and Peoples  are  required  to comply  with  capital  requirements
promulgated  by their  primary  regulators  that  affect  their  ability  to pay
dividends and that can affect their operations.  Those  regulations  require the
maintenance of specified  levels of capital to total assets (leverage ratio) and
to risk weighted  assets (the  risk-based  capital  ratios).  These  regulations
require  the  maintenance  of a  leverage  ratio of at least  3.00%  and a total
risk-based  capital ratio of at least 8.00%. A financial  institution's  deposit
insurance assessment and, in certain circumstances,  operations will be affected
by its capital  level.  Institutions  with leverage  ratios of 5.00% or more and
total  risk-based  capital  ratios  of  10.00%  or more are  deemed  to be "well
capitalized," and accordingly,  pay the lowest deposit insurance  assessment and
are not subject to operational restrictions as outlined within the regulation.

As of September 30, 1998,  the  Company's  Tier I and total  risk-based  capital
ratios were 10.45% and 11.70%,  respectively.  The Company's  leverage ratio was
7.78% at September 30, 1998. As of September 30, 1998,  Peoples was in excess of
the minimum capital and leverage requirements necessary to be considered a "well
capitalized"  banking company as defined by Federal regulators.  The Company and
Peoples were in full  compliance  with all regulatory  capital  requirements  at
September 30, 1998.

<PAGE>



The following table provides the capital ratios for the entities.

                                          At September 30, 1998
                                                         Consolidated
                                       Bank Only           Company
                                       ---------           -------

Total assets                            $629,384           $632,518

Risked-based assets                      476,182            479,098

Tier I capital                            45,079             50,049

Total risk-based capital                  51,045             56,051

Leverage ratio                              7.04%              7.78%

Tier I risk-based capital ratio             9.47%             10.45%

Total risk-based capital                   10.72%             11.70%


Year 2000 Readiness

Peoples is engaged in an aggressive  program to coordinate its Year 2000 efforts
with business  partners,  vendors,  service  providers and regulators.  In 1997,
Peoples  established  a Year 2000 Project to address the  challenges  associated
with Year 2000 and to resolve  Year 2000 risks to  business  operations.  A risk
assessment system is in place which  incorporates a vendor  management  program,
assessment of mission  critical  applications,  and a  comprehensive  validation
process with specific time lines. Peoples has targeted December 31, 1998, as the
date when critical  systems and  applications  will be Year 2000 compliant.  The
Year 2000  Project has been  reviewed by both  Federal  and State  Examiners  to
ensure its compliance with regulatory  guidelines.  Peoples currently  estimates
costs of compliance with the Year 2000 issue at $100,000.

The foregoing statements regarding Management's estimation of Peoples' Year 2000
readiness are  forward-looking  and are subject to important  factors that could
cause Management's  expectations to be materially  inaccurate.  Such as the Year
2000   readiness  of  vendors  or   electricity   suppliers  or  delays  in  the
implementation of compliant systems.


<PAGE>

PART II.  OTHER INFORMATION

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
        ---------------------------------------------------

         None


Item 6. EXHIBITS AND REPORTS ON FORM 8-K
        --------------------------------

         A.  Exhibits -

                  27       Financial Data Schedule

         B.   Form 8-K - No reports on Form 8-K were filed during the quarter
              ended September 30, 1998.


<PAGE>



                                   SIGNATURES


         Pursuant to the  requirements  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.


                                       PEOPLES BANK CORPORATION
                                       OF INDIANAPOLIS

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

                                       By: /s/ Charles R. Hageboeck
                                           ----------------------------
                                           Charles R. Hageboeck
                                           Senior Vice President and Chief
                                           Financial Officer

                                      DATE: November 16, 1998