U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 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 000-22469

                            LAFAYETTE BANCORPORATION
             (Exact name of registrant as specified in its charter)

         INDIANA                                           35-1605492
(State or other jurisdiction of                         (I.R.S. Employer
incorporation or organization)                          Identification No.)

133 North 4th Street, Lafayette, Indiana                   47902
(Address of principal executive offices)                 (Zip Code)

                                 (765) 423-7100
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) filed all reports  required to
be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of 1994 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days: Yes (x) No ( )

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

Class                                             Outstanding at May 11, 1998
Common Stock, without par value                          2,164,195 shares




<PAGE>2



                            LAFAYETTE BANCORPORATION

                                      INDEX


PART I.             FINANCIAL INFORMATION

Item 1.

     Consolidated Balance Sheets -- March 31, 1998 and December 31, 1997

     Consolidated  Statements of Income -- Three Months Ended March 31, 1998 and
     1997

     Consolidated  Statements of Cash Flows -- Three Months Ended March 31, 1998
     and 1997

     Notes to Consolidated Financial Statements -- March 31, 1998

Item 2.

     Management's  Discussion and Analysis of Financial Condition and Results of
     Operations



PART II.            OTHER INFORMATION

Item 6.       Exhibits and Reports on Form 8-K

       a)     Exhibits

              27    Financial Data Schedule

       b)     Reports on Form 8-K



SIGNATURES





<PAGE>3




ITEM 1.
                            LAFAYETTE BANCORPORATION
                           CONSOLIDATED BALANCE SHEETS
                (Dollar amounts in thousands, except share data)
                                   (Unaudited)
<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>                  <C>
March 31,                                                                              December 31,
                                                                                   1998                1997
ASSETS
Cash and due from banks                                                       $       17,694      $      16,901
Federal funds sold                                                                     5,600             14,000
                                                                              --------------      -------------
    Total cash and cash equivalents                                                   23,294             30,901
Securities available-for-sale (at market)                                             69,390             66,577
Securities held-to-maturity (market value $5,473
  and $5,378)                                                                          5,346              5,268
Loans held for sale                                                                    6,087              7,640
Loans                                                                                319,766            312,227
    Less:  Allowance for loan losses                                                  (3,639)            (3,464)
                                                                              --------------      -------------
       Loans, net                                                                    316,127            308,763
Federal Home Loan Bank stock (at cost)                                                 1,242              1,242
Premises, furniture and equipment, net                                                 6,283              6,183
Accrued interest receivable and other assets                                          11,639             12,455
                                                                              --------------      -------------
          Total assets                                                        $      439,408      $     439,029
                                                                              ==============      =============

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
    Noninterest-bearing deposits                                              $       38,218      $      42,752
    Interest-bearing demand and savings deposits                                     151,236            144,028
    Interest-bearing time deposits                                                   172,668            168,415
                                                                              --------------      -------------
       Total deposits                                                                362,122            355,195
    Short-term borrowings                                                             12,987             20,372
    Long-term debt                                                                    19,476             19,886
    Accrued interest payable and other liabilities                                     5,267              5,107
                                                                              --------------      -------------
       Total liabilities                                                             399,852            400,560


Shareholders' equity
    Common stock, no par value:  5,000,000 shares authorized;
    2,176,395 and 2,173,570 shares issued; and 2,164,195
    and 2,161,370 shares outstanding                                                   2,176              2,174
    Additional paid-in capital                                                        24,622             24,555
    Retained earnings                                                                 12,971             11,927
    Unrealized gain / (loss) on securities available-for-sale,
      net of tax (($76) and ($59))                                                      (116)               (90)
    Less:  Treasury stock, at cost (12,200 shares)                                       (97)               (97)
                                                                              --------------      -------------
       Total shareholders' equity                                                     39,556             38,469
                                                                              --------------      -------------
          Total liabilities and shareholders' equity                          $      439,408      $     439,029
                                                                              ==============      =============
</TABLE>

          See accompanying notes to consolidated financial statements.
<PAGE>4


                            LAFAYETTE BANCORPORATION
           CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
               For the three months ended March 31, 1998 and 1997
              (Dollar amounts in thousands, except per share data)
                                   (Unaudited)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>                  <C>
                                                                                  1998                1997
                                                                                   ----                ----
Interest income
    Loans                                                                     $        7,071      $       6,025
Taxable securities                                                                       820              1,060
    Tax exempt securities                                                                191                238
    Other                                                                                170                169
                                                                              --------------      -------------
       Total interest income                                                           8,252              7,492
Interest expense
    Deposits                                                                           3,569              3,424
    Short-term borrowings                                                                163                182
    Long-term debt                                                                       297                140
                                                                              --------------      -------------
       Total interest expense                                                          4,029              3,746
                                                                              --------------      -------------
Net interest income                                                                    4,223              3,746
Provision for loan losses                                                                180                 60
                                                                              --------------      -------------
Net interest income after provision for loan losses                                    4,043              3,686
Noninterest income
    Income from fiduciary activities                                                     226                204
    Service charges on deposit accounts                                                  325                288
    Net realized gain on securities                                                        -                 29
    Net gain on loan sales                                                               225                131
    Other service charges and fees                                                       214                169
    Other operating income                                                               231                114
                                                                              --------------      -------------
       Total noninterest income                                                        1,221                935
                                                                              --------------      -------------
Noninterest expense
    Salaries and employee benefits                                                     1,957              1,705
    Occupancy expenses, net                                                              215                219
    Equipment expenses                                                                   254                228
    Other operating expenses                                                             824                780
                                                                              --------------      -------------
       Total noninterest expense                                                       3,250              2,932
                                                                              --------------      -------------
Income before income taxes                                                             2,014              1,689
Income taxes                                                                             689                569
                                                                              --------------      -------------
Net income                                                                             1,325              1,120
                                                                              --------------      -------------
Other comprehensive income, net of tax:
    Change in unrealized gains / (losses) on securities                                  (26)              (463)
                                                                              ---------------     --------------
Comprehensive income                                                          $        1,299      $         657
                                                                              ==============      =============

Basic earnings per share                                                      $             .61   $         .52
                                                                              =================================
Diluted earnings per share                                                    $             .60   $         .52
                                                                              =================================
</TABLE>

          See accompanying notes to consolidated financial statements.
<PAGE>5


                            LAFAYETTE BANCORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
               For the three months ended March 31, 1998 and 1997
                          (Dollar amounts in thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>            <C>
                                                                          1998            1997
                                                                          ----            ----

Cash flows from operating activities
    Net income                                                         $     1,325    $     1,120
    Adjustments to reconcile net income to net cash
      from operating activities
       Depreciation                                                            157            159
       Premium amortization, net of discount accretion                          59             98
       Provision for loan losses                                               180             60
       Net realized gain on securities                                           -            (29)
       Net realized (gain) loss on sale of :
          Other real estate                                                    (43)             1
       Change in assets and liabilities:
          Loans originated for sale                                        (14,795)        (8,015)
          Loans sold                                                        16,348          9,478
          Accrued interest receivable and other assets                         603            691
          Accrued interest payable and other liabilities                       160            491
                                                                       -----------    -----------
              Net cash from operating activities                             3,994          4,054
Cash flows from investing activities
    Purchase of securities available-for-sale                              (17,650)        (6,217)
    Proceeds from sales of securities available-for-sale                     2,982          5,991
    Proceeds from maturities of securities available-for-sale               11,778          6,004
    Purchase of securities held-to-maturity                                    (92)          (160)
    Proceeds from maturities of securities held-to-maturity                     11            118
    Loans made to customers, net of payments collected                      (7,544)        (5,424)
    Property and equipment expenditures                                       (257)           (23)
    Proceeds from sales of other real estate                                   251             99
                                                                       -----------    -----------
              Net cash from investing activities                           (10,521)           388
Cash flows from financing activities
    Net change in deposit accounts                                           6,927         (1,533)
    Net change in short-term borrowings                                     (7,385)       (14,495)
    Payments on long-term debt                                                (410)          (434)
    Common stock issued                                                         69              -
    Dividends paid                                                            (281)          (236)
                                                                       ------------   ------------
              Net cash from financing activities                            (1,080)       (16,698)
Net change in cash and cash equivalents                                     (7,607)       (12,256)
Cash and cash equivalents at beginning of year                              30,901         29,380
                                                                       -----------    -----------
Cash and cash equivalents at end of period                             $    23,294    $    17,124
                                                                       ===========    ===========

Supplemental  disclosures of cash flow  information  Cash paid during the period
    for:
       Interest                                                        $     3,867    $     3,748
       Income taxes                                                             50            114


Non-cash investing activity
    Loans transferred to other real estate                             $         -    $         -

</TABLE>
          See accompanying notes to consolidated financial statements.


<PAGE>6


                            LAFAYETTE BANCORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 1998
         (Dollar amounts in thousands, except share and per share data)
                                   (Unaudited)

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

NOTE 1 - BASIS OF PRESENTATION

The significant  accounting  policies followed by Lafayette  Bancorporation (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 Generally
Accepted Accounting  Principles and in accordance with instructions to Form 10-Q
and may not include all  information and footnotes  normally  disclosed 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.  Certain
prior period  information  has been  reclassified  to  correspond  with the 1998
presentation.

Under a new accounting  standard,  comprehensive  income is now reported for all
periods.  Comprehensive  income includes both net income and other comprehensive
income.  Other comprehensive  income includes the change in unrealized gains and
losses on securities available-for-sale, net of tax.


NOTE 2 - PER SHARE DATA

The following  illustrates  the  computation  of basic and diluted  earnings per
share,  and includes the weighted  average  number of shares used in calculating
earnings and dividends per share amounts for the periods presented. The weighted
average number of shares have been retroactively restated for stock dividends.
<TABLE>
<CAPTION>
<S>                                                      <C>                <C>

                                                             March 31,           March 31,
                                                                1998                1997
Basic earnings per share
 Net income                                               $       1,325      $        1,120
Weighted average shares outstanding                           2,163,850           2,161,386
                                                           -------------      --------------

    Basic earnings per share                              $         .61      $          .52
                                                          ==================================


Diluted earnings per share
 Net income                                                $       1,325      $        1,120

Weighted average shares outstanding                            2,163,850           2,161,386
Stock Options                                                    111,112              79,220
Assumed shares repurchased upon exercise                         (68,824)            (71,261)
                                                           --------------     ---------------
    Diluted average shares outstanding                          2,206,138          2,169,345
                                                           --------------     --------------

    Diluted earnings per share                             $         .60      $         .52
                                                           ==================================

</TABLE>
<PAGE>7

                            LAFAYETTE BANCORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 1998
         (Dollar amounts in thousands, except share and per share data)
                                   (Unaudited)
--------------------------------------------------------------------------------

NOTE 3 - SECURITIES

The amortized  cost and estimated  market values of securities are as follows at
March 31, 1998:
<TABLE>
<CAPTION>
<S>                                                  <C>                           <C>   

                                                         Amortized                      Estimated
                                                           Cost                       Market Value
Securities Available-for-Sale
U.S. Government and its agencies                       $    21,424                    $    21,416
Obligations of states and political subdivisions            12,433                         12,510
Mortgage-backed and other asset-backed securities           35,725                         35,464
                                                       -----------                    -----------
                                                       $    69,582                    $    69,390
                                                       ===========                    ===========

Securities Held-to-Maturity

Obligations of states and political subdivisions       $     5,346                    $     5,473
                                                       ===========                    ===========
</TABLE>



The amortized  cost and estimated  market values of securities are as follows at
December 31, 1997:
<TABLE>
<CAPTION>
<S>                                                    <C>                          <C>    

                                                         Amortized                      Estimated
                                                           Cost                       Market Value
Securities Available-for-Sale
U.S. Government and its agencies                       $    21,946                    $    21,906
Obligations of states and political subdivisions             9,892                          9,981
Corporate obligations                                          250                            250
Mortgage-backed and other asset-backed securities           34,637                         34,440
                                                       -----------                    -----------
                                                       $    66,725                    $    66,577
                                                       ===========                    ===========
Securities Held-to-Maturity

Obligations of states and political subdivisions       $     5,268                    $     5,378
                                                       ===========                    ===========
</TABLE>

NOTE 4 - LOANS

Loans are comprised of the following:
                                                  March 31,         December 31,
                                                    1998                1997

         Commercial and agricultural loans     $     113,393      $     112,586
         Real estate construction loans               21,927             17,117
         Residential real estate loans               131,741            127,574
         Installment loans to individuals             52,705             54,950
         Commercial paper                                 -                  -
                                               --------------      -------------

             Total loans                       $     319,766      $     312,227
                                               ==============     ==============

<PAGE>8



                            LAFAYETTE BANCORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 1998
         (Dollar amounts in thousands, except share and per share data)
                                   (Unaudited)
--------------------------------------------------------------------------------


NOTE 5 - ALLOWANCE FOR LOAN LOSSES

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

<TABLE>
<CAPTION>
<S>                                                      <C>                <C>  

                                                               1998                1997
                                                               ----                ----

    Balance, January 1                                     $       3,464      $        3,198
    Provision charged to operations                                  180                  60
    Loans charged off                                                (86)               (155)
    Recoveries on loans previously charged-off                        81                  57
                                                           -------------      --------------

    Balance, March 31                                      $       3,639      $        3,160
                                                           =============      ==============
</TABLE>



NOTE 6 - SHORT-TERM BORROWINGS

Short-term borrowings are comprised of the following:
<TABLE>
<CAPTION>
<S>                                                                         <C>                  <C>
                                                                                 March 31,         December 31,
                                                                                   1998                1997

         Repurchase agreements                                               $         11,952    $        17,340
         Treasury tax and loan open-end note                                            1,035              3,032
                                                                             ----------------    ---------------

                                                                             $         12,987    $        20,372
                                                                             ================    ===============

</TABLE>

<PAGE>9


ITEM 2.
                            LAFAYETTE BANCORPORATION
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
              (Dollar amounts in thousands, except per share data)

Lafayette  Bancorporation  (the  "Corporation")  is a one-bank  holding  company
located in Lafayette,  Indiana,  and conducts  business from thirteen offices in
Tippecanoe and White Counties, Indiana. The Corporation provides a wide range of
commercial and personal banking activities, including accepting deposits; making
commercial and consumer loans;  originating  mortgage loans;  providing personal
and  corporate  trust  services;  providing  investment  advisory and  brokerage
services; and providing auto, homeowners, and other insurance products.

RESULTS OF OPERATIONS

Net Income

The Corporation  earned $1,325,  or $.61 per share for the first quarter of 1998
compared to $1,120,  or $.52 per share for the first quarter of 1997.  The $205,
or 18.3% increase in net income is attributable primarily to higher net interest
income.  Realized  gains on the sale of  mortgage  loans in addition to improved
earnings from the  Corporation's  investment  brokerage  department  and ATM fee
income were contributing  factors in enhancing earnings. A gain from the sale of
an other real estate owned property was recognized  which also attributed to the
increase  in  noninterest  income.  The  increase  in 1998  profits  were offset
partially  by an increase in the loan loss  provision  and salaries and benefits
expense.

Return on average  assets (ROA) was 1.21% and 1.10% for the periods ending March
31, 1998 and 1997,  while  return on average  equity (ROE) was 13.56% and 12.79%
for the periods ending March 31, 1998 and 1997, respectively.

Net Interest Income

Net  interest  income is the most  significant  component  of the  Corporation's
earnings.  Net  interest  income is the  difference  between  interest  and fees
realized on earning assets, primarily loans and securities, and interest paid on
deposits and other borrowed  funds.  The net interest  margin is this difference
expressed as a percentage  of average  earning  assets.  Net interest  income is
determined  by several  factors,  including  the  volume of  earning  assets and
liabilities,  the mix of earning assets and liabilities, and interest rates. Net
interest  income for the first  quarter of 1998 was $477,  or 12.7%  higher than
that same three month period ending March 31, 1997. The continued  growth in the
Corporation's  loan  portfolio  contributed  to the  1998  net  interest  income
increase.


Total  interest  income  for the first  quarter  of 1998 and 1997 was $8,252 and
$7,492,  respectively. A shift in asset mix along with the continued loan growth
primarily  accounted for the $760, or 10.1%  increase.  From March 1997 to March
1998, average loan balances increased $49,004,  or 18.1%, while average balances
of investment securities declined $21,129, or 22.5% for that same time period.

For the first quarter of 1998,  total interest  expense  increased $283, or 7.6%
compared to the same 1997 time period.  Although the average  deposit  growth of
approximately  4.6% from March 1997 to March 1998 resulted in increased interest
expense,  the overall average cost of these funds remained relatively  unchanged
between the two years. Additionally,  Federal Home Loan Bank borrowings acquired
in the second quarter of 1997 to fund a portion of the Corporation's loan growth
also attributed to the higher overall interest expense.


<PAGE>10


The following  table  summarizes  the  Corporation's  net interest  income (on a
tax-equivalent  basis) for each of the  periods  presented.  A marginal  federal
income tax rate of 34% for each period was used.
<TABLE>
<CAPTION>

                                      Three Months                         Change from
                                     Ended March 31,                      Prior Period
                                   1998             1997             Amount        Percent
                                   ----             ----             ------        -------
<S>                               <C>               <C>                <C>            <C> 
Interest income                   $8,371            $7,640             $731           9.6%

Interest expense                   4,029             3,746              283           7.6%
                                   -----            -----              ----
     Net interest income          $4,342            $3,894             $448          11.5%
                                  ======            ======             ====
</TABLE>


Net interest  income,  on a tax equivalent  basis, for the first three months of
1998 was $448,  or 11.5%  higher  than for that same three month  period  ending
March 31, 1997. The net interest margin, on a tax equivalent basis for the three
months ending March 31, 1998 and 1997 was 4.30% and 4.15%, respectively.

The ongoing shift in earning  assets,  the higher yields realized as a result of
such asset shift,  and the length of time those higher yielding assets have been
in place  contributed  to the  increase in interest  income,  in addition to the
current year growth experienced in the Corporation's loan portfolio.


Provision for Loan Losses and Asset Quality

The provision for loan losses represents charges made to earnings to maintain an
adequate  allowance  for loan losses.  The  allowance is maintained at an amount
believed by management to be sufficient to absorb losses  inherent in the credit
portfolio.  Management conducts,  on a quarterly basis, a detailed evaluation of
the adequacy of the allowance.

The consolidated  provision for loan losses was $180 and $60 for the first three
months  of  1998  and  1997,  respectively.  Although  management  believes  the
allowance to be  sufficient,  management is attempting to increase the allowance
due to the significant loan growth experienced by the Corporation. The allowance
for loan losses at March 31, 1998 was $3,639,  or 1.14% of total loans  compared
to  $3,469,  or 1.11% of total  loans at  December  31,  1997.  During the first
quarter of 1998 net charge-off's were $5, a decline of $93, or 94.9% compared to
the same 1997 time period as a result of a  reduction  in net  installment  loan
charge-off's along with increases in commercial loan recoveries.

<PAGE>11

Nonperforming  loans include  nonaccrual  loans,  restructured  loans, and loans
delinquent 90 days or more.  Loans are classified as nonaccrual  when management
believes that  collection of interest is doubtful,  typically  when payments are
past due 90 days,  unless  the  loans are well  secured  and in the  process  of
collection.


The following table indicated the composition of nonperforming loans:

<TABLE>
<CAPTION>
<S>                                                                        <C>                  <C> 
                                                                                 March 31,         December 31,
                                                                                   1998                1997

         Loans past due 90 days or more                                      $            967    $           505
         Non-accrual loans                                                                134                127
         Restructured loans                                                               234                350
                                                                             ----------------    ---------------

             Total nonperforming loans                                       $          1,335    $           982
                                                                             ================    ===============

</TABLE>

Management  believes  overall asset quality has not declined despite an increase
in the nonperforming loan totals. During the first three months of 1998, a total
of $1,964 were removed from  management's  watch list. Loans past due 90 days or
more increased  primarily due to the addition of one large  commercial  loan and
three mortgage  loans.  Although  non-accrual  loan totals  increased  slightly,
restructured loan totals declined $116 during the first quarter.

Noninterest Income and Expense

Noninterest  income increased $286, or 30.6% for the first three months of 1998,
compared to the same 1997 time  period.  The largest  component  on  noninterest
income,  service  charges on deposit  accounts,  increased 12.8% to $325 for the
quarter  ended March 31, 1998  primarily as a result of an  increased  number of
accounts  being  assessed  fees,  in  conjunction  with an  increase  in the fee
structure which was effective November 1, 1997.

Net gain on loans originated and sold in the secondary mortgage market increased
71.8% to $225 for the  first  quarter  of 1998  compared  to $131 for the  first
quarter of 1997. Additional loan originators and support staff were added to the
department which led to an increase of $6,870, or 72.5% in loan fundings for the
first quarter of 1998 compared to the first quarter of 1997.

Other  service  charges  and fees were $214 for the first  three  months of 1998
compared to $169 for the first three  months of 1997.  The  Corporation  did not
begin surcharging non-bank customer ATM transactions until May 1997,  therefore,
the $45, or 26.6% increase is attributed primarily to ATM surcharge income.

Other  operating  income  increased  $117, or 102.6% to $231 for the first three
months of 1998 compared to the $114 recorded for the first three months of 1997.
A $56 increase in revenues  generated by the Investment  Center,  a full service
brokerage  operation  offered  through Robert Thomas  Securities,  Inc.,  member
NASD/SIPC,  in  addition to a $43 gain  recognized  on the sale of an other real
estate  owned  property  accounted  for a  significant  portion  of the  overall
increase.

<PAGE>12

Noninterest  expense increased $318, or 10.8% to $3,250 for the first quarter of
1998 compared to that same 1997 time period. Salaries and employee benefits, the
largest noninterest expense component, increased $252, or 14.8% during the first
quarter of 1998. On March 23, 1998, the Corporation opened a new branch location
which required an increase in the number of personnel. Additional staffing needs
were met in the secondary  mortgage market department which has led to increased
loan originations.  The improved fee generation of the secondary mortgage market
department and of the Investment  Center also led to increased  commissions paid
to these  employees.  The  increased  level of staffing also gave rise to higher
health insurance costs incurred during the first quarter of 1998.

Other operating expenses increased $44, or 5.6% to $824 for the first quarter of
1998  compared  to the same 1997 time  period.  An  increase  in legal fees as a
result  of the  Corporations  year-end  regulatory  reporting  requirements,  in
addition to  increased  office  supply  costs  primarily  as a result of the new
branch facility accounted for a majority of the overall increase.

Income Taxes

Income taxes were $689 for the first three  months of 1998  compared to $569 for
the first three months of 1997, an increase of $120, or 21.1%. This increase can
be attributed to the combination of increased  corporate earnings in addition to
lower  tax-exempt  income  realized  as a result  of  $4,200  in 1997  municipal
security sales.


FINANCIAL CONDITION

Total  assets were  $439,408 at March 31, 1998  compared to $439,029 at December
31,  1997,  an increase of $379,  or .1%.  Investment  securities  and net loans
increased  $2,891 and $7,364 for the first quarter of 1998,  while cash and cash
equivalents and loans held for sale decreased $7,607 and $1,553, respectively.

Total  deposits  increased  $6,927 to  $362,122  at March 31,  1998  compared to
$355,195 at December 31, 1997. Short-term borrowings decreased $7,385 during the
first quarter of 1998  primarily as a result of $6,187 of repurchase  agreements
maturities.  Long-term  debt at March  31,  1998 was  $19,476  and  consists  of
mortgage advances and other borrowings  obtained from the Federal Home Loan Bank
of Indianapolis.  The $410 decline during the first quarter of 1998 in long-term
debt is attributed to principal repayments.

<PAGE>13

Capital

The Corporation and Bank are subject to various regulatory capital guidelines as
required by federal and state  banking  agencies.  These  guidelines  define the
various components of core capital and assign risk weights to various categories
of assets.

Tier 1 capital consists of  shareholders'  equity less goodwill and core deposit
intangibles,  as defined by bank  regulators.  The  definition of Tier 2 capital
includes the amount of allowance  for loan losses which does not exceed 1.25% of
gross  risk  weighted  assets.  Total  capital  is the sum of Tier 1 and  Tier 2
capital.

The minimum requirements under the capital guidelines are a 4.00% leverage ratio
(Tier 1 capital divided by average assets less intangible  assets and unrealized
gains/losses),  a 4.00% Tier 1 risk-based  capital ratio (Tier 1 capital divided
by risk-weighted  assets),  and a 8.00% total capital ratio (Tier 1 capital plus
Tier 2 capital divided by risk-weighted assets).

The Federal  Deposit  Insurance  Corporation  Improvement  Act of 1991  (FDICIA)
requires  federal  regulatory  agencies  to define  capital  tiers.  These  are:
well-capitalized,   adequately  capitalized,   undercapitalized,   significantly
undercapitalized,  and critically  undercapitalized.  Under these regulations, a
"well-capitalized" institution must achieve a Tier 1 risk-based capital ratio of
at least 6.00%,  and a total capital  ratio of at least  10.00%,  and a leverage
ratio of at least 5.00% and not be under a capital  directive order.  Failure to
meet  capital  requirements  can  initiate  regulatory  action that could have a
direct material effect on the Corporation's financial statements.  If adequately
capitalized;  regulatory  approval is required to accept brokered  deposits.  If
undercapitalized, capital distributions, asset growth, and expansion is limited,
in addition to the  institution  being required to submit a capital  restoration
plan.

Management   believes  the   Corporation  and  the  Bank  met  all  the  capital
requirements  as of  March  31,  1998  and  December  31,  1997,  and  was  well
capitalized under the guidelines  established by the banking  regulators.  To be
well-capitalized,  the Corporation and Bank must maintain the prompt  corrective
action capital guidelines described above.

At March 31, 1998 and December 31, 1997, management was not aware of any current
recommendations  by banking  regulatory  authorities  which,  if they were to be
implemented,  would have, or are reasonably likely to have, a material effect on
the Corporation's consolidated liquidity, capital resources or operations


<PAGE>14


The Corporation's  actual consolidated  capital amounts and ratios are presented
in the following  table.  The Bank's actual  capital  amounts and ratios are not
materially different from the consolidated amounts below.
<TABLE>
<CAPTION>
<S>                                                                         <C>                 <C>
                                                                                 March 31,         December 31,
                                                                                   1998                1997

       Tier 1 capital
         Shareholders' equity                                                $         39,556    $        38,469
         Less:  Intangibles                                                              (859)              (908)
         Add/less:  Unrealized loss/(gain) on securities                                  116                 90
                                                                             ----------------    ---------------

             TOTAL TIER 1 CAPITAL                                            $         38,813    $        37,651
                                                                             ================    ===============

       Total capital
         Tier 1 capital                                                      $         38,813    $        37,651
         Allowable allowance for loan losses                                            3,639              3,464
                                                                             ----------------    ---------------

             TOTAL  CAPITAL                                                  $         42,452    $        41,115
                                                                             ================    ===============

       RISK WEIGHTED ASSETS                                                  $        315,198    $       310,170
                                                                             ================    ===============

       AVERAGE ASSETS                                                        $        435,775    $       430,555
                                                                             ================    ===============

</TABLE>


<TABLE>
<CAPTION>
                                   Actual ratios as of
                                March 31,      December 31,             Capital Adequacy          Well-Capitalized
                                  1998             1997                    Requirement               Requirement
                                  ----             ----                    -----------               -----------

<S>                             <C>               <C>                     <C>                        <C>   
Tier I Capital
  (to average assets)             8.9%               8.8%                     4.0%                      5.0%

Tier I Capital
  (to risk
  weighted assets)               12.3%              12.1%                     4.0%                      6.0%

Total Capital
  (to risk
   weighted assets)              13.5%              13.3%                     8.0%                     10.0%

</TABLE>


Liquidity

The  consolidated  statement of cash flows  illustrates  the elements which gave
rise to the change in the Corporation's  cash and cash equivalents for the three
months ended March 31, 1998 and 1997.  Including  net income of $1,325,  the net
cash from  operating  activities  for the first three  months of 1998  generated
$3,994 of available cash. Net cash from investing activities utilized $10,521 of
available  cash  primarily  as a result  of $2,971  in net  investment  security
purchases, in addition to $7,544 of loans funded by the Corporation. An increase
in deposits,  offset by the short-term  borrowings maturities and long-term debt
principal  repayments  resulted in utilization of the majority of the $1,080 net
cash from financing  activities.  Total cash outflows for the three month period
in 1998 exceeded cash inflows by $7,607  resulting in a cash and cash equivalent
balance of $23,294 at March 31, 1998.


<PAGE>15

PART II.   OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K

        (a)   Exhibits

                 27   Financial Data Schedule for March 31, 1998


        (b)   Reports on Form 8-K

                      No Form 8-K was  filed  with the SEC  during  the  quarter
                      ended March 31, 1998.


SIGNATURES

Pursuant to the  requirements  of the  Securities  and Exchange Act of 1934, the
registrant  has duly  cause  this  report  to be  signed  on its  behalf  by the
undersigned thereunto duly authorized.


Date:  May 12, 1998                      By /s/ Robert J. Weeder
                                         ---------------------------------------
                                         Robert J. Weeder
                                         President


Date:  May 12, 1998                      By /s/ Marvin S. Veatch
                                         ---------------------------------------
                                         Marvin S. Veatch
                                         Controller