UNITED STATES
                       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 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 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 November 2, 1998
Common Stock, without par value                                 2,380,427 shares

<PAGE>2

                            LAFAYETTE BANCORPORATION

                                      INDEX


PART I.             FINANCIAL INFORMATION

Item 1.

     Consolidated Balance Sheets -- September 30, 1998 and December 31, 1997

     Consolidated  Statements of Income -- Three Months Ended September 30, 1998
     and 1997

     Consolidated  Statements of Income -- Nine Months Ended  September 30, 1998
     and 1997

     Consolidated  Statements  of Cash Flows -- Nine Months Ended  September 30,
     1998 and 1997

     Notes to Consolidated Financial Statements -- September 30, 1998


Item 2.

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


Item 3.

     Quantitative and Qualitative Disclosures About Market Risk


PART II.            OTHER INFORMATION


Item 5.       Other Events


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)
                                   (Unaudited)

          -----------------------------------------------------------
<TABLE>
<CAPTION>

                                                                September 30,         December 31,
                                                                    1998                  1997
<S>                                                             <C>                   <C>

ASSETS
Cash and due from banks                                         $       17,353        $      16,901
Federal funds sold                                                       5,200               14,000
                                                                --------------        -------------
    Total cash and cash equivalents                                     22,553               30,901
Securities available-for-sale (at market)                               79,160               66,577
Securities held-to-maturity, at cost (market value $6,086
  and $5,378)                                                            5,880                5,268
Loans held for sale                                                      7,592                7,640
Loans                                                                  336,611              312,227
    Less:  Allowance for loan losses                                    (3,868)              (3,464)
                                                                --------------        -------------
       Loans, net                                                      332,743              308,763
Federal Home Loan Bank stock (at cost)                                   1,539                1,242
Premises, furniture and equipment, net                                   6,372                6,183
Accrued interest receivable and other assets                            13,210               12,455
                                                                --------------        -------------

          Total assets                                          $      469,049        $     439,029
                                                                ==============        =============



LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
    Noninterest-bearing deposits                                $       40,862        $      42,752
    Interest-bearing demand and savings deposits                       162,521              144,028
    Interest-bearing time deposits                                     178,558              168,415
                                                                --------------        -------------
       Total deposits                                                  381,941              355,195
    Short-term borrowings                                               15,259               20,372
    Long-term debt                                                      23,946               19,886
    Accrued interest payable and other liabilities                       5,707                5,107
                                                                --------------        -------------
       Total liabilities                                               426,853              400,560

Shareholders' equity
    Common stock, no par value:  5,000,000 shares authorized;
    2,176,395 and 2,173,570 shares issued; and 2,162,808
    and 2,161,370 shares outstanding                                     2,176                2,174
    Common stock to be distributed, 217,640 shares                         218                    -
    Additional paid-in capital                                          32,620               24,555
    Retained earnings                                                    6,977               11,927
    Unrealized gain /(loss) on securities available-for-sale,
      net of tax ($202 and ($59))                                          309                  (90)
    Less:  Treasury stock, at cost (13,587 and 12,200 shares)             (104)                 (97)
                                                                --------------        -------------
       Total shareholders' equity                                       42,196               38,469
                                                                --------------        -------------

          Total liabilities and shareholders' equity            $      469,049        $     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 September 30, 1998 and 1997
              (Dollar amounts in thousands, except per share data)
                                   (Unaudited)

       -----------------------------------------------------------------
<TABLE>
<CAPTION>
                                                    1998                1997
                                                    ----                ----
<S>                                                 <C>                 <C>
Interest income
    Loans                                           $   7,494           $  6,846
Taxable securities                                        813                889
    Tax exempt securities                                 261                182
    Other                                                 226                169
                                                    ---------           --------
       Total interest income                            8,794              8,086
Interest expense
    Deposits                                            3,807              3,505
    Short-term borrowings                                 213                160
    Long-term debt                                        367                278
                                                    ---------           --------
       Total interest expense                           4,387              3,943
                                                    ---------           --------
Net interest income                                     4,407              4,143
Provision for loan losses                                 180                120
                                                    ---------           --------
Net interest income after provision for loan losses     4,227              4,023
Noninterest income
    Income from fiduciary activities                      225                221
    Service charges on deposit accounts                   325                321
    Net realized gain / (loss) on securities                -                 (4)
    Net gain on loan sales                                350                226
    Other service charges and fees                        254                251
    Other operating income                                200                127
                                                    ---------           --------
       Total noninterest income                         1,354              1,142
                                                    ---------           --------
Noninterest expense
    Salaries and employee benefits                      2,056              1,866
    Occupancy expenses, net                               229                228
    Equipment expenses                                    250                265
    Other operating expenses                              822                778
                                                    ---------           --------
       Total noninterest expense                        3,357              3,137
                                                    ---------           --------
Income before income taxes                              2,224              2,028
Income taxes                                              758                723
                                                    ---------           --------
Net income                                              1,466              1,305
                                                    ---------           --------
Other comprehensive income, net of tax:
    Change in unrealized gains/(losses)
      on securities                                       347                145
                                                    ---------           --------
Comprehensive income                                $   1,813          $   1,450
                                                    =========           ========

Basic earnings per share                            $     .62          $     .55
Diluted earnings per share                          $     .60          $     .54
                                                    =========           ========
</TABLE>
<PAGE>5


                            LAFAYETTE BANCORPORATION
           CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
              For the nine months ended September 30, 1998 and 1997
              (Dollar amounts in thousands, except per share data)
                                   (Unaudited)

        ---------------------------------------------------------------
<TABLE>
<CAPTION>
                                                      1998           1997
                                                      ----           ----
<S>                                                <C>            <C>

Interest income
    Loans                                           $   21,843     $  19,320
Taxable securities                                       2,445         2,989
    Tax exempt securities                                  672           612
    Other                                                  576           462
                                                    ----------      --------
       Total interest income                            25,536        23,383
Interest expense
    Deposits                                            11,066        10,403
    Short-term borrow                                       54           490
    Long-term debt                                         982           562
                                                    ----------      --------
       Total interest expense                           12,593        11,455
                                                    ----------      --------
Net interest income                                     12,943        11,928
Provision for loan losses                                  540           270
                                                    ----------      --------
Net interest income after provision 
      for loan losses                                   12,403        11,658
Noninterest income
    Income from fiduciary activities                       677           631
    Service charges on deposit accounts                    983           915
    Net realized gain on securities                          -            27
    Net gain on loan sales                                 844           507
    Other service charges and fees                         723           633
    Other operating income                                 560           376
                                                    ----------      --------
       Total noninterest income                          3,787         3,089
                                                    ----------      --------
Noninterest expense
    Salaries and employee benefits                       5,970         5,426
    Occupancy expenses, net                                661           659
    Equipment expenses                                     756           727
    Other operating expenses                             2,541         2,368
                                                    ----------      --------
       Total noninterest expense                         9,928         9,180
                                                    ----------      --------
Income before income taxes                               6,262         5,567
Income taxes                                             2,130         1,942
                                                    ----------      --------
Net income                                               4,132         3,625
                                                    ----------      --------
Other comprehensive income, net of tax:
    Change in unrealized gains / (losses)
      on securities                                        399            74
                                                    ----------      --------
Comprehensive income                                $    4,531      $  3,699
                                                    ==========      ========

Basic earnings per share                            $     1.74      $   1.52
                                                    ==========      ========
Diluted earnings per share                          $     1.70      $   1.52
                                                    ==========      ========

</TABLE>

<PAGE>6


                            LAFAYETTE BANCORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              For the nine months ended September 30, 1998 and 1997
                          (Dollar amounts in thousands)
                                   (Unaudited)

         --------------------------------------------------------------
<TABLE>
<CAPTION>

                                                            1998            1997
                                                            ----            ----

<S>                                                         <C>             <C>

Cash flows from operating activities
    Net income                                              $     4,132     $     3,625
    Adjustments to reconcile net income to net cash
      from operating activities
       Depreciation                                                  476            474
       Premium amortization, net of discount accretion               232            223
       Provision for loan losses                                     540            270
       Net realized gain on securities                                 -            (27)
       Net (gain) loss on:
          Other real estate                                          (43)            22
       Change in assets and liabilities:
          Loans originated for sale                              (57,273)       (36,553)
          Loans sold                                              57,321         35,401
          Accrued interest receivable and other assets            (1,291)          (582)
          Accrued interest payable and other liabilities             600            364
                                                             -----------      ---------
              Net cash from operating activities                   4,694          3,217
Cash flows from investing activities
    Purchase of securities available-for-sale                    (44,935)       (11,902)
    Proceeds from sales of securities available-for-sale           3,286         17,453
    Proceeds from maturities of securities available-for-sale     29,573         15,390
    Purchase of securities held-to-maturity                       (2,532)        (1,153)
    Proceeds from maturities of securities held-to-maturity        1,908          2,036
    Loans made to customers, net of payments collected           (24,520)       (33,922)
    Purchase of FHLB stock                                          (297)          (126)
    Property and equipment expenditures                             (665)          (209)
    Proceeds from sales of other real estate                         251            136
                                                             -----------      ---------
       Net cash from investing activities                        (37,931)       (12,297)
Cash flows from financing activities
    Net change in deposit accounts                                26,746          6,747
    Net change in short-term borrowings                           (5,113)        (5,414)
    Proceeds from long-term debt                                   4,800         11,500
    Payments on long-term debt                                      (740)          (784)
    Common stock issued                                               69              -
    Dividends paid                                                  (866)          (747)
    Purchase of treasury stock                                        (7)            (5)
                                                             -----------     ----------
              Net cash from financing activities                  24,889         11,297
Net change in cash and cash equivalents                           (8,348)         2,217
Cash and cash equivalents at beginning of year                    30,901         29,380
                                                             -----------    -----------
Cash and cash equivalents at end of period                   $    22,553    $    31,597
                                                             ===========    ===========

Supplemental disclosures of cash flow information  
    Cash paid during the period for:
       Interest                                              $    12,401    $    11,556
       Income taxes                                                2,081          1,824

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

</TABLE>
<PAGE>7


                            LAFAYETTE BANCORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1998
              (Dollar amounts in thousands, except 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.

Under a new accounting  standard,  comprehensive income is now presented for all
periods.  Comprehensive  income includes both net income and other comprehensive
income.   Other   comprehensive   income   includes  the  change  in  unrealized
appreciation/depreciation on securities available for sale, net of tax.


NOTE 2 - PER SHARE DATA

In September 1998, the Corporation declared a 10% stock dividend to shareholders
of record  September  30,  1998.  A total of 217,640  common  shares were issued
November  2, 1998 in  connection  with this 10% stock  dividend.  These  217,640
shares are reflected as common stock to be distributed in the September 30, 1998
balance sheet.

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 all  stock
dividends.

<TABLE>
<CAPTION>

                                      Nine Months Ended        Nine Months Ended
                                     September 30, 1998       September 30, 1997
<S>                                       <C>                      <C>
Basic earnings per share
 Net income                               $       4,132            $       3,625
Weighted average shares outstanding           2,380,334                2,377,639
                                          -------------            -------------

    Basic earnings per share              $        1.74            $        1.52
                                          =============            =============

Diluted earnings per share
 Net income                               $       4,132            $       3,625

Weighted average shares outstanding           2,380,334                2,377,639
Stock Options                                   119,123                  106,756
Assumed shares repurchased upon exercise        (68,325)                 (92,377)
                                          --------------           -------------
    Diluted average shares outstanding         2,431,132               2,392,018
                                          --------------           -------------

    Diluted earnings per share            $         1.70           $        1.52
                                          ==============           =============
</TABLE>
<PAGE>8


                            LAFAYETTE BANCORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1998
              (Dollar amounts in thousands, except per share data)
                                   (Unaudited)

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

<TABLE>
<CAPTION>
                                                   Three Months Ended       Three Months Ended
                                                   September 30, 1998       September 30, 1997
<S>                                                  <C>                      <C>

Basic earnings per share
 Net income                                          $       1,466            $       1,305
Weighted average shares outstanding                      2,380,448                2,377,639
                                                     -------------            -------------

    Basic earnings per share                         $         .62            $         .55
                                                     =============            =============


Diluted earnings per share
 Net income                                          $       1,466            $       1,305

Weighted average shares outstanding                      2,380,448                2,377,639
Stock Options                                              119,123                  106,756
Assumed shares repurchased upon exercise                   (65,075)                 (84,326)
                                                     --------------           --------------
    Diluted average shares outstanding                    2,434,496                2,400,069
                                                     --------------           --------------

    Diluted earnings per share                       $          .60           $          .54
                                                     ==============           ==============

</TABLE>

NOTE 3 - SECURITIES

The amortized  cost and estimated  market values of securities are as follows at
September 30, 1998:

<TABLE>
<CAPTION>
                                                         Amortized           Estimated
                                                           Cost              Market Value
<S>                                                      <C>                 <C>
Securities Available-for-Sale
U.S. Government and its agencies                         $    21,544         $    21,664
Obligations of states and political subdivisions              18,371              18,612
Corporate obligations                                          1,008               1,011
Mortgage-backed and other asset-backed securities             37,726              37,873
                                                         -----------         -----------
                                                         $    78,649         $    79,160
                                                         ===========         ===========
Securities Held-to-Maturity

Obligations of states and political subdivisions         $     5,880         $     6,086
                                                         ===========         ===========
</TABLE>

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

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>
<PAGE>9

                            LAFAYETTE BANCORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1998
                          (Dollar amounts in thousands)
                                   (Unaudited)

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

NOTE 4 - LOANS

Loans are comprised of the following:
<TABLE>
<CAPTION>
                                                                          September 30,           December 31,
                                                                              1998                    1997

    <S>                                                                 <C>                     <C>

    Commercial and agricultural loans                                   $        114,250        $       112,586
    Real estate construction loans                                                25,178                 17,117
    Residential real estate loans                                                147,708                127,574
    Installment loans to individuals                                              49,475                 54,950
                                                                        ----------------        ---------------

             Total loans                                                $        336,611        $       312,227
                                                                        ================        ===============
</TABLE>


NOTE 5 - ALLOWANCE FOR LOAN LOSSES

The activity in the allowance for loan losses is as follows:
<TABLE>
<CAPTION>

                                                            1998               1997
                                                            ----               ----
<S>                                                       <C>               <C>


Balance, January 1                                        $   3,464         $   3,198
Provision charged to operations                                 540               270
Loans charged off                                              (267)             (313)
Recoveries on loans previously charged off                      131               183
                                                          ---------         ---------

Balance, September 30                                     $   3,868         $   3,338
                                                          =========         =========
</TABLE>


NOTE 6 - SHORT-TERM BORROWINGS

Short-term borrowings are comprised of the following:
<TABLE>
<CAPTION>
                                                        September 30,       December 31,
                                                             1998                1997
         <S>                                            <C>                 <C>

         Repurchase agreements                          $     14,534        $    17,340
         Treasury tax and loan open-end note                     725              3,032
                                                        ------------        -----------

             Total short-term borrowings                $     15,259        $    20,372
                                                        ============        ===========
</TABLE>

NOTE 7 - PENDING ACQUISITION

On October 20, 1998, Lafayette Bank and Trust Company, a wholly-owned subsidiary
of  Lafayette  Bancorporation  signed a  definitive  agreement  with  Bank  One,
Indiana,  N.A. to acquire  three  branches  located in DeMotte,  Remington,  and
Rensselaer,  Jasper  County,  Indiana.  Lafayette  Bank and Trust  Company  will
acquire all of the deposits totaling approximately $118 million,  selected loans
totaling  approximately $24 million,  in addition to all physical facilities and
certain other fixed assets.  The  transaction  is subject to the approval of the
Indiana Department of Financial Institutions and the FDIC, and is expected to be
effective in the first quarter of 1999.

<PAGE>10

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 fourteen 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 $1,466,  or $.62 per share (basic) for the third quarter
of 1998  compared to $1,305,  or $.55 per share (basic) for the third quarter of
1997.  Net income  increased  $507, or 14.0% to $4,132 for the nine month period
ending September 30, 1998 compared to that same 1997 time period. Basic earnings
per share were $1.74 and $1.52 for the nine month period  ending  September  30,
1998 and 1997,  respectively.  Net interest  income  remains the single  largest
contributing  factor in the net income  increase  realized  by the  Corporation.
Other fee-based  income,  such as gains on mortgages  originated and sold in the
secondary  market,  fees  generated by the  Corporation's  investment  brokerage
department,  as well as ATM  fees  all  contributed  to the  noninterest  income
growth.  Partially  offsetting  the  increases  in income  were higher loan loss
provisions,  increases  realized in salary and benefits expense,  in addition to
certain other noninterest expenses, primarily advertising.

Return on average assets (ROA) was 1.27% and 1.24% for the third quarter of 1998
and 1997, respectively. Return on average equity (ROE) for that same time period
was 14.15% and 14.07%, respectively.  For the nine month period ending September
30, 1998 and 1997, ROA was 1.23% and 1.17%,  respectively,  while ROE was 13.68%
and  13.43%  for  those  same  periods  ending  September  30,  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. For
the nine months  ended  September  30, 1998 and 1997,  net  interest  income was
$12,943 and $11,928,  respectively.  This represents a $1,015,  or 8.5% increase
over the prior year. Net interest income for the third quarter of 1998 was $264,
or 6.4% higher than for that same three month period ending  September 30, 1997.
Continued loan growth the Corporation  has experienced is primarily  responsible
for the net interest income increase recorded during the year.

Total  interest  income for the nine month period ending  September 30, 1998 and
1997 was $25,536 and $23,383, respectively.  Total interest income for the third
quarter of 1998 was $708,  or 8.8%  greater  than for that same quarter in 1997.
Interest and fees on loans increased  $2,523, or 13.1%, to $21,843 for the first
nine months of 1998,  compared to $19,320 for the first nine months of 1997. For
the third quarter of 1998,  interest and fees on loans  increased  $648, or 9.5%
compared to the third quarter of 1997. While the  Corporation's  loan growth has
not  been as  dramatic  as the  last  two  years,  average  loan  balances  rose
approximately  $25,704,  or 8.4%, through September 1998,  compared to September
1997, and primarily accounted for the higher interest income totals.  Investment
security income also aided in the increase in overall interest income as average
balances  increased  approximately  $9,795,  or 13.2%,  from  September  1997 to
September 1998.  Softer loan demand in conjunction  with the increasing  deposit
growth resulted in additional funds to be invested.

<PAGE>11

Total interest  expense for the nine month period ending  September 30, 1998 and
1997 was $12,593 and $11,455, respectively. For the third quarter of 1998, total
interest  expense  increased  $444,  or  11.3%,  compared  to the same 1997 time
period.  Total  interest-bearing  liability balances have increased $34,888,  or
10.1% from  September  1997 to  September  1998.  Overall  interest  expense has
increased mainly due to the higher  interest-bearing  liability  volume,  as the
average cost of funds between the two periods has not significantly changed.

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>
                                       Nine Months                         Change from
                                   Ended September 30,                    Prior Period
                                   1998             1997             Amount        Percent
                                   ----             ----             ------        -------
<S>                              <C>               <C>               <C>              <C>
Interest income                  $25,934           $23,776           $2,158           9.1%

Interest expense                  12,593            11,455            1,138           9.9%
                                  ------            ------           ------
     Net interest income         $13,341           $12,321           $1,020           8.3%
                                 =======           =======           ======
</TABLE>

<TABLE>
<CAPTION>
                                      Three Months                         Change from
                                   Ended September 30,                    Prior Period
                                   1998             1997             Amount        Percent
                                   ----             ----             ------        -------

<S>                               <C>               <C>                <C>           <C>
Interest income                   $8,938            $8,205             $733           8.9%

Interest expense                   4,387             3,943              444          11.3%
                                   -----             -----            -----
     Net interest income          $4,551            $4,262            $ 289           6.8%
                                  ======            ======            =====
</TABLE>

Net interest  income,  on a tax equivalent  basis,  for the first nine months of
1998 was  $1,020,  or 8.3% higher  than for that same nine month  period  ending
September 30, 1997. For the third quarter of 1998, net interest income, on a tax
equivalent  basis,  was $289, or 6.8% higher than for the same 1997 time period.
The net interest  margin,  on a tax equivalent  basis for the nine months ending
September  30,  1998  and 1997  was  4.29%  and  4.33%,  respectively.  Although
increases in earning  asset  balances  continue to outpace  increases in earning
liabilities, lower earning asset yields are the major contributing factor in the
declining net interest margin.


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 $540 and $270 for the first nine
months of 1998 and 1997,  respectively.  The provision for loan losses increased
$60 for the third  quarter  of 1998,  compared  to the same  1997  time  period.
Although  management  believes the allowance is sufficient,  an attempt is being
made to  increase  the  allowance  as a result of the  significant  loan  growth
experienced  over the last two years. The allowance for loan losses at September
30, 1998 was $3,868,  or 1.15% of total  loans  compared to $3,464,  or 1.11% of
total loans at December 31, 1997.  Net  charge-off's  were $136 and $130 for the
first nine months of 1998 and 1997, respectively. Although net charge-off's have
increased slightly over the prior year, primarily due to increased  charge-off's
in the credit card portfolio,  total gross  charge-off's are $46, or 14.7% lower
than a year ago.

<PAGE>12

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 indicates the composition of nonperforming loans:
<TABLE>
<CAPTION>
                                               September 30,       December 31,
                                                   1998                1997

    <S>                                         <C>               <C>

    Loans past due 90 days or more              $   1,245         $   505
    Nonaccrual loans                                  124             127
    Restructured loans                                237             350
                                                ---------         -------

        Total nonperforming loans               $   1,606         $   982
                                                =========         =======
</TABLE>

Nonperforming loan totals at December 31, 1997 were at their lowest level in the
last  five  years.  Although  total  nonperforming  loans  increased  by $624 at
September 30, 1998,  management continues to believe overall asset quality to be
good. The $740 increase in loans past due 90 days or more is  attributable  to a
$460 net increase in mortgage  loans and a $164 net increase in the  installment
loan  portfolio,  of  which  $116  related  to the  indirect  lending  function.
Nonaccrual loans remained at their five year low as of September 30, 1998, while
restructured  loan totals  declined  $113 from the $350 reported at December 31,
1997.


Noninterest Income and Expense

Noninterest income increased $698, or 22.6% to $3,787 for the nine months ending
September 30, 1998, compared to $3,089 for that same period of 1997. Noninterest
income for the third quarter  increased $212, or 18.6% to $1,354 compared to the
prior year.

Service  charges on deposit  accounts,  which comprise the largest  component of
noninterest  income,  increased  for the first  nine  months of 1998  while only
showing a slight  increase  for the third  quarter of 1998 when  compared to the
same 1997 time period. The Corporation introduced  relationship-based pricing on
selected products,  which has benefited customers by way of reduced bank service
charges.

Net gain on loans originated and sold in the secondary mortgage market were $844
and $507 for the first nine months of 1998 and 1997 respectively, an increase of
$337, or 66.5%. For the third quarter of 1998, net gain on loan sales were $350,
an increase of $124, or 54.9% from the prior year. The continued strength of the
local economy, along with the declining mortgage loan interest rate environment,
spurred  not only an  increase  in new home  sales,  but also the volume of loan
refinancings.  These  factors,  in addition  to an increase in the  departmental
staffing level has led to an increase of $21,920,  or 61.9% in loan fundings for
the nine months ended  September 30, 1998  compared to September 30, 1997.  Loan
fundings for the third quarter of 1998  increased  51.0% to $21,215  compared to
$14,051 recorded for the third quarter of the previous year.

Other  service  charges and fees were $723 and $633 for the first nine months of
1998 and 1997, respectively,  an increase of $90, or 14.2%. The third quarter of
1998 realized only a slight increase compared to the 1997 third quarter results.
ATM surcharge fees account for the majority of the increase over the prior year.
The Corporation  began  surcharging  non-bank  customer ATM  transactions in May
1997.

Other  operating  income rose $184, or 48.9%, to $560 for the nine months ending
September  30, 1998,  compared to the $376 recorded in the prior year. A gain on
the sale of an other real  estate  property  recorded in the first  quarter,  in
addition to income recognized in the investment  brokerage  department accounted
for the  majority  of the  increase.  Commissions  in the  investment  brokerage
department  increased $111, or 64.5%, to $283 for the first nine months of 1998.
Management  believes the increase in the  investment  brokerage  department  was
partially  due to the  perception  that the  decline in the U.S.  stock  markets
during the current quarter created many investment  opportunities.  As a result,
the investment brokerage department's commissions increased $84, or 200% for the
third quarter, compared to the third quarter results posted one year ago.

<PAGE>13

Noninterest  expense  totaled $9,928 for the first nine months ending  September
30, 1998,  compared to $9,180 for that same period of 1997, an increase of $748,
or 8.1%.  Total  noninterest  expense for the third quarter of 1998 was $220, or
7.0% higher than the prior year.

Salary and  employee  benefits  expense  was $5,970 for the first nine months of
1998, an increase of $544,  or 10.0%,  from the $5,426 for the first nine months
of 1997. Total salaries and employee  benefits for the third quarter of 1998 was
$2,056, a $190, or 10.2% increase from the 1997 amount.  The number of full-time
equivalent  employees  increased to 216 from 209 at September 30, 1998 and 1997,
respectively.  These  additional  staffing  needs  were a result of a new branch
being opened in March, 1998, in addition to additional  staffing needs being met
in the secondary mortgage market department to increase loan origination volume.
The improvement in the income  generated by the secondary  mortgage  market,  as
well as the Investment  Center,  also led to an increase in the commissions paid
to certain  employees.  Compared to a year ago, health insurance costs increased
32.8% due to the rise in staffing  levels,  as well as an increase in the number
of claims incurred.

Other  operating  expenses  were  $2,541 for the first nine  months of 1998,  an
increase of $173, or 7.3%, compared to $2,368 for the first nine months of 1997.
For the third quarter of 1998, other operating  expenses  increased $44, or 5.7%
from the prior year.  Accounting  for the  majority of the overall  increase was
higher office supply costs attributed to the opening of the new branch facility,
along with the continued marketing and advertising efforts of the Corporation.


Income Taxes

The effective income tax rate was 34.01% and 34.88% for the first nine months of
1998 and 1997, respectively, and 34.08% and 35.65% for the third quarter of 1998
and  1997,  respectively.  The  lower  effective  tax  rates  in 1998 are due to
increased tax-exempt interest income.


FINANCIAL CONDITION

Total  assets  were  $469,049  at  September  30,  1998  compared to $439,029 at
December 31, 1997, an increase of $30,020,  or 6.8%.  Increases of $13,195,  and
$23,980 were realized in investment securities, and net loans, respectively, for
the first  nine  months of 1998,  while  the cash and cash  equivalents  balance
decreased $8,348 for the same time period.

Total  deposits and long-term  debt for the first nine months of 1998  increased
$26,746 and $4,060, respectively,  while short-term debt decreased $5,113 during
that same time period. Increases in interest-bearing  deposits accounted for all
of the total deposit increase, as noninterest-bearing  deposit balances actually
declined by $1,890. The increase in long-term debt is primarily  attributable to
an additional $4,800 in borrowings, not including principal repayments, from the
Federal Home Loan Bank in Indianapolis.


Capital

Shareholders'  equity totaled $42,196,  or 9.0% of total assets at September 30,
1998, and $38,469, or 8.8% of total assets at December 31, 1997.

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, or core, 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.

<PAGE>14

The minimum  requirements  under the capital guidelines are generally at least a
4.00%  leverage  ratio  (Tier 1 capital  divided  by  average  assets  excluding
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 only
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  September  30,  1998  and  December  31,  1997,  and  were
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 September  30, 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.

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>
                                                           September 30,       December 31,
                                                                1998                1997
  <S>                                                      <C>                 <C>

  Tier 1 capital
   Shareholders' equity                                    $  42,196           $  38,469
    Less:  Intangibles                                          (824)               (908)
    Add/less:  Unrealized loss/(gain) on securities             (309)                 90
                                                           ---------           ---------

        TOTAL TIER 1 CAPITAL                               $  41,063           $  37,651
                                                           =========           =========

  Total capital
    Tier 1 capital                                         $  41,063           $  37,651
    Allowable allowance for loan losses                        3,868               3,464
                                                           ---------           ---------

        TOTAL  CAPITAL                                     $  44,931           $  41,115
                                                           =========           =========


       RISK WEIGHTED ASSETS                                $ 336,941           $ 310,170
                                                           =========           =========

       AVERAGE ASSETS                                      $ 457,698           $ 430,555
                                                           =========           =========
</TABLE>

<PAGE>15
<TABLE>
<CAPTION>

                                   Actual ratios as of
                              September 30,    December 31,       Capital Adequacy       Well-Capitalized
                                  1998             1997              Requirement            Requirement
                                  ----             ----              -----------            -----------
<S>                              <C>              <C>                   <C>                   <C>    
Tier I Capital
  (to average assets)             9.0%             8.8%                 4.0%                   5.0%

Tier I Capital
  (to risk
  weighted assets)               12.2%            12.1%                 4.0%                   6.0%

Total Capital
  (to risk
   weighted assets)              13.3%            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 nine
months ended  September 30, 1998 and 1997.  Including net income of $4,132,  the
net cash from  operating  activities for the first nine months of 1998 generated
$4,694 of available cash. Net cash from investing activities utilized $37,931 of
available cash, primarily as a result of purchasing $12,700, net of maturity and
sale proceeds,  in investment  securities and funding $24,520 in net loans.  The
$26,746  increase in  deposits,  along with $4,800 in long-term  debt  proceeds,
offset by the net decrease in short-term borrowings and long-term debt principal
repayments  account  for the  majority  of the  $24,889 in cash  generated  from
financing  activities.  Total cash  outflows  for the nine month  period in 1998
exceeded cash inflows by $8,348 resulting in a cash and cash equivalent  balance
of $22,553 at September 30, 1998.


Year 2000

The  Corporation's  Board of Directors  and  management is aware of the possible
consequences the Year 2000 may pose with regard to the computer systems utilized
to conduct  business on a daily basis.  A "Year 2000  Committee",  which reports
monthly to the Board of Directors,  has prepared a detailed plan to address this
issue.  In  addition  to  developing  contingency  plans,  the  Corporation  has
conducted internal employee training,  as well as customer awareness seminars in
an effort to not only  communicate the Year 2000 issue, but also to inform these
individuals of the Corporation's  approach to address this issue. Testing of the
Corporation's  core  processing  systems began early in the third quarter and is
scheduled to be completed no later than the end of the first quarter of 1999.

Because  the Year 2000  issue  could  affect the  ability  of the  Corporation's
customers to conduct  their  business and  operations  in a timely and effective
manner,  the result could adversely  impact the Corporation.  The  Corporation's
ability to process loan and deposit transactions could be affected,  which could
limit  sources of revenues  and funding  from  customers,  as well as impact the
quality of the loan portfolio.  In order to assess the potential  credit risk in
the Corporation's loan portfolio,  a comprehensive review of all commercial loan
customers  whose  aggregate  borrowings  were $200,000 or greater was performed.
Although  no  borrowers  were  classified  as  having a high  credit  risk,  the
Corporation  took a conservative  approach and considered those credits having a
medium  credit  risk as part of the  quarterly  loan loss  reserve  analysis.  A
$350,000 specific reserve was allocated to these loans due to the uncertainty of
the  actual  Year  2000  impact.  This  specific  reserve  did not  result in an
additional loan loss reserve provision because  management's  quarterly analysis
of the  allowance  concluded  that the  allowance  balance was  adequate.  These
credits will be monitored and reviewed on a quarterly basis until March 31, 2000
in conjunction with the on-going quarterly loan loss reserve analysis.

While  management  does not believe the necessary steps involved to resolve this
issue will  significantly  impair  the  organization's  ability  to operate  and
conduct  business in a normal fashion,  the Corporation  does estimate the total
cost to address this issue to be  approximately  $1.6 million.  The expenditures
related to this issue are  comprised  primarily of system  upgrades,  consisting
both of hardware and software, in addition to dedicated personnel costs.

<PAGE>16

The above  discussion  of Year 2000  issues  includes  numerous  forward-looking
statements reflecting management's current assessment and estimates with respect
to the  Corporation's  Year 2000 compliance  efforts and the impact of Year 2000
issues on the Corporation's business and operations. Various factors could cause
actual results to differ materially from those  contemplated by such assessment,
estimates and forward-looking statements, including many factors that are beyond
the control of the Corporation.  These factors included, but are not limited to,
representations by vendors and customers,  technological advancements,  economic
conditions, and competitive considerations.


ITEM 3.           QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk of the Corporation  encompasses  exposure to both liquidity risk and
interest rate risk and is reviewed  quarterly by the  Asset/Liability  Committee
and the  Board  of  Directors.  There  have  been  no  material  changes  in the
quantitative and qualitative  disclosures about market risks as of September 30,
1998 from the analysis and disclosures  provided in the Corporation's  Form 10-K
for the year ended December 31, 1997.


PART II.   OTHER INFORMATION


Item 5.  Other Events

     On October 20,  1998,  Lafayette  Bank and Trust  Company,  a  wholly-owned
     subsidiary of Lafayette  Bancorporation  signed a definitive agreement with
     Bank One,  Indiana,  N.A.  to acquire  three  branches  located in DeMotte,
     Remington, and Rensselaer, Jasper County, Indiana.

     Under the terms of the  agreement,  Lafayette  Bank and Trust  Company will
     acquire all of the deposits,  totaling approximately $118 million, selected
     loans  totaling  approximately  $24  million,  in addition to all  physical
     facilities and certain other fixed assets. These three branches account for
     approximately 30% of Jasper County's deposits.

     The  transaction  is subject to the approval of the Indiana  Department  of
     Financial Institutions and the FDIC, and is expected to be effective in the
     first quarter of 1999.


Item 6.  Exhibits and Reports on Form 8-K

        (a)   Exhibits

               27   Financial Data Schedule for September 30, 1998

        (b)   Reports on Form 8-K

               No Form 8-K was  filed  with the SEC  during  the  quarter  ended
               September 30, 1998.

<PAGE>17

                                   SIGNATURES

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


Date:  November 2, 1998                           By /s/ Robert J. Weeder
                                                  ------------------------------
                                                  Robert J. Weeder
                                                  President


Date:  November 2, 1998                           By /s/ Marvin S. Veatch
                                                  ------------------------------
                                                  Marvin S. Veatch
                                                  Controller