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,
          1997.

     [ ]  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 11, 1997
Common Stock, without par value                    2,161,370 shares





                            LAFAYETTE BANCORPORATION

                                      INDEX


PART I.             FINANCIAL INFORMATION

Item 1.

Consolidated Balance Sheets -- September 30, 1997 and December 31, 1996

Consolidated  Statements of Income -- Three Months Ended  September 30, 1997 and
1996

Consolidated  Statements  of Income -- Nine Months Ended  September 30, 1997 and
1996

Consolidated  Statements  of Cash Flows -- Nine Months Ended  September 30, 1997
and 1996

Notes to Consolidated Financial Statements -- September 30, 1997

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

              11    Statement of Computation of Per Share Earnings

              27    Financial Data Schedule

       b)     Reports on Form 8-K



SIGNATURES













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

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


                                                                              September 30,       December 31,
                                                                                   1997               1996
                                                                               ------------       -------------

<S>                                                                           <C>                 <C>   
ASSETS
Cash and due from banks                                                       $       22,297      $      21,330
Federal funds sold                                                                     9,300              8,050
                                                                              --------------      -------------
    Total cash and cash equivalents                                                   31,597             29,380
Securities available-for-sale (at market)                                             67,237             88,206
Securities held-to-maturity, at cost (market value $5,308
  and $6,147)                                                                          5,260              6,156
Loans held for sale                                                                    7,029              5,877
Loans                                                                                302,732            268,940
    Less:  Allowance for loan losses                                                  (3,338)            (3,198)
                                                                              --------------      -------------
       Loans, net                                                                    299,394            265,742
Federal Home Loan Bank stock (at cost)                                                 1,242              1,116
Premises, furniture and equipment, net                                                 6,090              6,355
Accrued interest receivable and other assets                                          11,902             11,559
                                                                              --------------      -------------

          Total assets                                                        $      429,751      $     414,391
                                                                              ==============      =============



LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
    Noninterest-bearing deposits                                              $       37,478      $      43,579
    Interest-bearing demand and savings deposits                                     139,998            135,883
    Interest-bearing time deposits                                                   170,821            162,088
                                                                              --------------      -------------
       Total deposits                                                                348,297            341,550
    Short-term borrowings                                                             19,107             24,521
    Long-term debt                                                                    19,981              9,265
    Accrued interest payable and other liabilities                                     4,773              4,409
                                                                              --------------      -------------
       Total liabilities                                                             392,158            379,745


Shareholders' equity
    Common stock, no par value:  5,000,000 shares authorized;
    2,173,570  shares issued; and 2,161,389 shares outstanding                         1,976              1,976
    Common stock to be distributed                                                       198                  -
    Additional paid-in capital                                                        24,555             19,368
    Retained earnings                                                                 11,198             13,705
    Unrealized gain (loss) on securities available-for-sale,
      net of tax (($156) and ($204))                                                    (237)              (311)
    Less:  Treasury stock, at cost (12,181 and 10,923 shares)                            (97)               (92)
                                                                              --------------      -------------
       Total shareholders' equity                                                     37,593             34,646
                                                                              --------------      -------------

          Total liabilities and shareholders' equity                          $      429,751      $     414,391
                                                                              ==============      =============




</TABLE>

See accompanying notes to consolidated financial
statements.


                           LAFAYETTE BANCORPORATION
                        CONSOLIDATED STATEMENTS OF INCOME
             For the three  months  ended  September  30, 1997 and 1996  (Dollar
              amounts in thousands, except per share data)
                                   (Unaudited)



<TABLE>
<CAPTION>

                                                                                   1997                1996
                                                                                   ----                ----
<S>                                                                           <C>                 <C>
Interest income
    Loans                                                                     $        6,898      $       5,820
Taxable securities                                                                       889              1,006
    Tax exempt securities                                                                182                234
    Other                                                                                169                155
                                                                              --------------      -------------
       Total interest income                                                           8,138              7,215
Interest expense
    Deposits                                                                           3,505              3,299
    Short-term borrowings                                                                160                198
    Long-term debt                                                                       278                123
                                                                              --------------      -------------
       Total interest expense                                                          3,943              3,620
                                                                              --------------      -------------
Net interest income                                                                    4,195              3,595
Provision for loan losses                                                                120                 60
                                                                              --------------      -------------
Net interest income after provision for loan losses                                    4,075              3,535
Noninterest income
    Income from fiduciary activities                                                     221                201
    Service charges on deposit accounts                                                  321                295
    Net realized gain on securities                                                       (4)                 -
    Net gain on loan sales                                                               226                115
    Other service charges and fees                                                       199                119
    Other operating income                                                               127                114
                                                                              --------------      -------------
       Total noninterest income                                                        1,090                844
                                                                              --------------      -------------
Noninterest expense
    Salaries and employee benefits                                                     1,866              1,645
    Occupancy expenses, net                                                              228                197
    Equipment expenses                                                                   265                229
    Other operating expenses                                                             778                716
                                                                              --------------      -------------
       Total noninterest expense                                                       3,137              2,787
                                                                              --------------      -------------
Income before income taxes                                                             2,028              1,592
Income taxes                                                                             723                530
                                                                              --------------      -------------
Net income                                                                    $        1,305      $       1,062
                                                                              ==============      =============

    Net income per share                                                      $          .60      $         .49
                                                                              ==============      =============



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






                            LAFAYETTE BANCORPORATION
                        CONSOLIDATED STATEMENTS OF INCOME
              For the nine months  ended  September  30,  1997 and 1996  (Dollar
              amounts in thousands, except per share data)
                                   (Unaudited)


<TABLE>
<CAPTION>

                                                                                   1997                1996
                                                                                   ----                ----
<S>                                                                           <C>                 <C>  
Interest income
    Loans                                                                     $       19,491      $      16,551
Taxable securities                                                                     2,989              3,186
    Tax exempt securities                                                                612                683
    Other                                                                                462                371
                                                                              --------------      -------------
       Total interest income                                                          23,554             20,791
Interest expense
    Deposits                                                                          10,403              9,381
    Short-term borrowings                                                                490                551
    Long-term debt                                                                       562                384
                                                                              --------------      -------------
       Total interest expense                                                         11,455             10,316
                                                                              --------------      -------------
Net interest income                                                                   12,099             10,475
Provision for loan losses                                                                270                180
                                                                              --------------      -------------
Net interest income after provision for loan losses                                   11,829             10,295
Noninterest income
    Income from fiduciary activities                                                     631                605
    Service charges on deposit accounts                                                  915                809
    Net realized gain on securities                                                       27                 64
    Net gain on loan sales                                                               507                277
    Other service charges and fees                                                       462                316
    Other operating income                                                               376                361
                                                                              --------------      -------------
       Total noninterest income                                                        2,918              2,432
                                                                              --------------      -------------
Noninterest expense
    Salaries and employee benefits                                                     5,426              4,659
    Occupancy expenses, net                                                              659                576
    Equipment expenses                                                                   727                754
    Other operating expenses                                                           2,368              2,138
                                                                              --------------      -------------
       Total noninterest expense                                                       9,180              8,127
                                                                              --------------      -------------
Income before income taxes                                                             5,567              4,600
Income taxes                                                                           1,942              1,563
                                                                              --------------      -------------
Net income                                                                    $        3,625      $       3,037
                                                                              ==============      =============

    Net income per share                                                      $         1.68      $        1.40
                                                                              ==============      =============
</TABLE>

See accompanying notes to consolidated financial statements.



                            LAFAYETTE BANCORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              For the nine months ended September 30, 1997 and 1996
                          (Dollar amounts in thousands)
                                   (Unaudited)


<TABLE>
<CAPTION>

                                                                          1997            1996
                                                                          ----            ----
<S>                                                                    <C>            <C>

Cash flows from operating activities
    Net income                                                         $     3,625    $     3,037
    Adjustments to reconcile net income to net cash
      from operating activities
       Depreciation                                                            474            533
       Unrealized loss on other real estate                                      -             64
       Premium amortization, net of discount accretion                         223            210
       Provision for loan losses                                               270            180
       Net realized gain on securities                                         (27)           (64)
       Net (gain) loss on :
          Other real estate                                                     22              -
       Change in assets and liabilities:
          Loans held for sale                                               (1,152)        (4,170)
          Accrued interest receivable and other assets                        (582)          (646)
          Accrued interest payable and other liabilities                       364            436
                                                                       -----------    -----------
              Net cash from operating activities                             3,217           (420)
Cash flows from investing activities
    Purchase of securities available-for-sale                              (11,902)       (23,430)
    Proceeds from sales of securities available-for-sale                    17,453         18,073
    Proceeds from maturities of securities available-for-sale               15,390         13,011
    Purchase of securities held-to-maturity                                 (1,153)        (4,430)
    Proceeds from maturities of securities held-to-maturity                  2,036          3,026
    Loans made to customers, net of payments collected                     (33,922)       (24,509)
    Purchase of FHLB stock                                                    (126)           (36)
    Property and equipment expenditures                                       (209)        (1,457)
    Proceeds from sales of other real estate                                   136            300
                                                                       -----------    -----------
       Net cash from investing activities                                  (12,297)       (19,452)
Cash flows from financing activities
    Net change in deposit accounts                                           6,747            228
    Cash received in branch acquisition for liabilities
       assumed, net of assets acquired                                           -         16,298
    Net change in short-term borrowings                                     (5,414)           844
    Proceeds from long-term debt                                            11,500              -
    Payments on long-term debt                                                (784)        (1,054)
    Dividends paid                                                            (747)          (655)
    Purchase of treasury stock                                                  (5)             -
                                                                       ------------   -----------
              Net cash from financing activities                            11,297         15,661
Net change in cash and cash equivalents                                      2,217         (4,211)
Cash and cash equivalents at beginning of year                              29,380         34,229
                                                                       -----------    -----------
Cash and cash equivalents at end of period                             $    31,597    $    30,018
                                                                       ===========    ===========
Supplemental  disclosures of cash flow  information  Cash paid during the period
    for:
       Interest                                                        $    11,556    $    10,262
       Income taxes                                                          1,824          1,601

Non-cash investing activity
    Loans transferred to other real estate                             $         -    $        99

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

 
                            LAFAYETTE BANCORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1997
                          (Dollar amounts in thousands)
                                   (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.

NOTE 2 - PER SHARE DATA

In September 1997, the Corporation declared a 10% stock dividend to shareholders
of record  September  30,  1997.  A total of 197,597  common  shares were issued
November 1, 1997 in connection  with this 10% stock  dividend,  and these shares
are  reflected  as common  stock to be  distributed  in the  September  30, 1997
balance sheet.  The weighted  average  number of shares have been  retroactively
restated for all stock dividends.  The weighted average number of shares used in
calculating  earnings and  dividends  per share  amounts were  2,161,389 for the
three and nine months ending  September 30, 1997 and 2,161,659 for the three and
nine months ending September 30, 1996.

NOTE 3 - SECURITIES

The amortized  cost and estimated  market values of securities are as follows at
September 30, 1997:

<TABLE>
<CAPTION>

                                                         Amortized                      Estimated
                                                           Cost                       Market Value
<S>                                                    <C>                            <C>  
Securities Available-for-Sale
U.S. Government and its agencies                       $    27,023                    $    26,913
Obligations of states and political subdivisions            10,326                         10,375
Corporate obligations                                          250                            250
Mortgage-backed and other asset-backed securities           30,031                         29,699
                                                       -----------                    -----------
                                                       $    67,630                    $    67,237
                                                       ===========                    ===========
Securities Held-to-Maturity

Obligations of states and political subdivisions       $     5,260                    $     5,308
                                                       ===========                    ===========

The amortized  cost and estimated  market values of securities are as follows at
December 31, 1996:

                                                         Amortized                      Estimated
                                                           Cost                       Market Value
Securities Available-for-Sale
U.S. Government and its agencies                       $    36,116                    $    35,938
Obligations of states and political subdivisions            17,358                         17,480
Corporate obligations                                        1,249                          1,301
Mortgage-backed and other asset-backed securities           33,998                         33,487
                                                       -----------                    -----------
                                                       $    88,721                    $    88,206
                                                       ===========                    ===========
Securities Held-to-Maturity

Obligations of states and political subdivisions       $     6,156                    $     6,147
                                                       ===========                    ===========
</TABLE>


                            LAFAYETTE BANCORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1997
                          (Dollar amounts in thousands)
                                   (Unaudited)


NOTE 4 - LOANS

Loans are comprised of the following:
<TABLE>
<CAPTION>

                                                                               September 30,       December 31,
                                                                                   1997                1996

<S>                                                                          <C>                 <C>            
         Commercial and agricultural loans                                   $        119,012    $       108,470
         Residential real estate loans                                                127,111            104,547
         Installment loans to individuals                                              56,609             54,924
         Commercial paper                                                                   -                999
                                                                             ----------------    ---------------

             Total loans                                                     $        302,732    $       268,940
                                                                             ================    ===============

</TABLE>


NOTE 5 - ALLOWANCE FOR LOAN LOSSES

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

                                                               1997                1996
                                                               ----                ----

<S>                                                        <C>                <C>           
    Balance, January 1                                     $       3,198      $        3,200
    Provision charged to operations                                  270                 180
    Loans charged off                                               (313)               (414)
    Recoveries on loans previously charged off                       183                 277
                                                           -------------      --------------

    Balance, September 30                                  $       3,338      $        3,243
                                                           =============      ==============

</TABLE>


NOTE 6 - SHORT-TERM BORROWINGS

Short-term borrowings are comprised of the following:
<TABLE>
<CAPTION>


                                                                               September 30,       December 31,
                                                                                   1997                1996

<S>                                                                          <C>                 <C>
         Repurchase agreements                                               $         16,044    $        23,497
         Treasury tax and loan open-end note                                            3,063              1,024
                                                                             ----------------    ---------------

             Total short-term borrowings                                     $         19,107    $        24,521
                                                                             ================    ===============


</TABLE>





<PAGE>




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 $1,305,  or $.60 per share for the third quarter of 1997
compared to $1,062,  or $.49 per share for the third quarter of 1996. Net income
for the nine months  ended  September  30, 1997 was $3,625,  or $1.68 per share,
which was $588, or 19.4% greater than the $3,037,  or $1.40 per share earned for
the same period in 1996.  Higher net  interest  income and  noninterest  income,
offset by increases in certain noninterest  expense categories,  account for the
increase in the Corporation's net income.

Return on  average  assets  (ROA) was  1.17%  and 1.09% for the  periods  ending
September 30, 1997 and 1996, respectively,  while return on average equity (ROE)
was 13.43% and 12.38% for those same nine months  ending  September 30, 1997 and
1996,  respectively.  For the quarter ending September 30, 1997 and 1996, return
on average  assets was 1.24% and 1.11%,  respectively,  while  return on average
equity was 14.07% and 12.80%, respectively, for those same time periods.


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, 1997 and 1996,  net  interest  income was
$12,099 and $10,475,  respectively.  This represents a $1,624, or 15.5% increase
over the prior year. Net interest income for the third quarter of 1997 was $600,
or 16.7% higher than for that same three month period ending September 30, 1996.
The increase in net interest  income  during 1997 is primarily  attributable  to
loan growth and a reduction in rates paid on certain deposits.

Interest income for the nine month period ending September 30, 1997 and 1996 was
$23,554 and $20,791, respectively. Interest income for the third quarter of 1997
was $923, or 12.8% greater than for that same quarter in 1996.  Interest  income
increased  during 1997  primarily  due to increased  interest and fees on loans.
Interest and fees on loans increased  $2,940, or 17.8%, to $19,491 for the first
nine months of 1997,  compared to $16,551 for the first nine months of 1996. For
the third quarter of 1997, interest and fees on loans increased $1,078, or 18.5%
compared  to the third  quarter of 1996.  Contributing  to these  increases  was
$49,798,  or 19.3%  growth in the  average  balance  of the  Corporation's  loan
portfolio from September 1996 to September 1997.

Total interest  expense for the nine month period ending  September 30, 1997 and
1996 was $11,455 and $10,316, respectively. For the third quarter of 1997, total
interest expense increased $323, or 8.9%, compared to the same 1996 time period.
Average  deposit growth of  approximately  9.9% from September 1996 to September
1997 contributed to the higher interest expense.  In addition,  interest expense
on long-term  debt  increased  $178, or 46.4% from the prior year as a result of
additional  current year Federal Home Loan Bank borrowings  required to fund the
aforementioned loan growth. 

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
                                   1997             1996             Amount        Percent
                                   ----             ----             ------        -------


<S>                              <C>               <C>               <C>             <C>  
Interest income                  $23,947           $21,173           $2,774          13.1%

Interest expense                  11,455            10,316            1,139          11.0%
                                  ------            ------           ------
     Net interest income         $12,492           $10,857          $ 1,635          15.1%
                                 =======           =======          =======


</TABLE>

<TABLE>
<CAPTION>

                                      Three Months                         Change from
                                   Ended September 30,                    Prior Period
                                   1997             1996             Amount        Percent
                                   ----             ----             ------        -------


<S>                               <C>               <C>              <C>             <C>  
Interest income                   $8,257            $7,349           $  908          12.4%

Interest expense                   3,943             3,620              323           8.9%
                                   -----             -----            -----
     Net interest income          $4,314            $3,729           $  585          15.7%
                                  ======            ======           ======

</TABLE>

Net interest  income,  on a tax equivalent  basis,  for the first nine months of
1997 was $1,635,  or 15.1%  higher than for that same nine month  period  ending
September 30, 1996. For the third quarter of 1997, the net interest margin, on a
tax  equivalent  basis,  was $585,  or 15.7%  higher than for the same 1996 time
period.  The net interest margin,  on a tax equivalent basis for the nine months
ending  September  30,  1997 and 1996 was 4.44%  and  4.28%,  respectively.  The
increase in the net interest margin in 1997 compared to 1996 was a result of the
changes that occurred in the rate and volume mix of the interest-bearing  assets
and  liabilities.  Because  loans are  generally  higher  yielding  than certain
securities in the investment security  portfolio,  a shift in earning assets has
resulted in a positive effect on net interest income.  During the last year, the
Corporation's average loan portfolio increased  approximately $49,798, or 19.3%,
while the  average  balance  of  investment  securities  declined  approximately
$13,661, or 15.5%. The higher interest expense on long-term debt realized by the
Corporation  during the year was offset by a reduction in interest rates paid on
interest-bearing  deposit accounts,  such as savings and certain certificates of
deposit, which resulted in a lower overall cost of funds to the Corporation.


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 $270 and $180 for the first nine
months of 1997 and 1996,  respectively.  The provision for loan losses increased
$60 for the third  quarter of 1997,  compared to the same 1996 time period.  The
increase in the provision for loan losses is  attributable to the continued loan
growth  the  Corporation  is  experiencing.  The  allowance  for loan  losses at
September 30, 1997 was $3,338,  or 1.10% of total loans  compared to $3,198,  or
1.19% of total loans at December 31, 1996.  Net  charge-offs  were $130 and $137
for the first nine months of 1997 and 1996,  respectively,  a decrease of $7, or
5.1%.  The third quarter of 1997  experienced a net recovery of $24,  while that
same 1996 time period recorded $56 in net charge-offs.

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,
                                                                                   1997                1996

<S>                                                                         <C>                 <C>   
         Loans past due 90 days or more                                      $          1,040    $           735
         Non-accrual loans                                                                238                178
         Restructured loans                                                               443                482
                                                                             ----------------    ---------------

             Total nonperforming loans                                       $          1,721    $         1,395
                                                                             ================    ===============

</TABLE>

Management  believes  overall asset quality has not declined despite an increase
in the nonperforming loan totals.  Loans past due 90 days or more increased $305
since December 31, 1996. This increase was the net result of adding two loans to
this category.  The $60 net change in non-accrual loans is the effect of placing
one additional  commercial loan on non-accrual status.  Restructured loan totals
have declined slightly since December 31, 1996.


Noninterest Income and Expense

Noninterest income totaled $2,918 for the first nine months of 1997, compared to
$2,432 for that same period of 1996, an increase of $486, or 20.0%.  Noninterest
income for the third quarter increased $246, or 29.1%.

Service  charges on deposit  accounts,  which comprise the largest  component of
noninterest  income,  were up for the first  nine  months of 1997 and up for the
third quarter of 1997 when compared to the same 1996 time periods.  The increase
in service  charge  income was a result  primarily in the  increasing  number of
fee-generating   transactions   originated  from  the  two  supermarket  banking
facilities.

Net gain on loan sales originated and sold in the secondary  mortgage market was
$507  and $277 for the  first  nine  months  of 1997 and 1996  respectively,  an
increase  of $230,  or 83.0%.  For the third  quarter of 1997,  net gain on loan
sales  were  $226,  an  increase  of $111,  or 96.5%  from the prior  year.  The
continued strength of the local economy was a factor in the above increases. But
more  importantly,  additional loan  originators and support staff were added to
this  department,  which  led  to  increased  loan  origination  production  and
improvement in overall operational efficiencies within the department.

Other  service  charges and fees were $462 and $316 for the first nine months of
1997 and 1996,  respectively,  an  increase  of $146,  or  46.2%.  For the third
quarter of 1997, other service charges and fees increased $80, or 67.2% compared
to the prior  year.  ATM fee  income  was $117  higher  than the  previous  year
primarily  as a result of  surcharges  that  were  implemented  on all  non-bank
customer ATM transactions  beginning in May 1997. These surcharge fees accounted
for $100, or 85.5% of the $117 increase.

Noninterest  expense totaled $9,180 for the first nine months of 1997,  compared
to $8,127 for that same period of 1996, an increase of $1,053,  or 13.0%.  Total
noninterest expense for the third quarter of 1997 was $350, or 12.6% higher than
the prior year.

Salary and  employee  benefits  expense  was $5,426 for the first nine months of
1997, an increase of $767,  or 16.5%,  from the $4,659 for the first nine months
of 1996. Total salaries and employee  benefits for the third quarter of 1997 was
$1,866, a $221, or 13.4% increase from the 1996 amount. The largest component of
increase in this category was a $390 expense recorded year-to-date in connection
with the  rising  value of the stock  appreciation  rights.  Along  with  normal
increases  in  salary  and  wage  rates,  increases  were  also  experienced  in
commissions  paid, as the performance of both the secondary  mortgage market and
investment center departments improved significantly over the previous year.

Occupancy  expense  was $659 for the first nine  months of 1997,  an increase of
$83, or 14.4%,  compared to the first nine months of 1996. For the third quarter
of 1997,  occupancy  expense increased $31, or 15.7% compared to the prior year.
Contributing  factors  to higher  1997  costs  were  increased  maintenance  and
repairs,  along with the full year effect of the operating costs associated with
the second supermarket  banking facility and the Monticello branch acquired from
National City Bank during the third quarter of 1996.

Equipment  expenses  were $727 for the first nine months of 1997,  a decrease of
$27, or 3.6%,  compared  to the $754 for the first nine months of 1996.  For the
third quarter of 1997,  equipment expense increased $36, or 15.7% from the prior
year. A large number of fixed assets became fully depreciated  during the latter
part of 1996, which led to a significant decline in depreciation  expense during
1997. This decrease in depreciation  expense was partially offset by the current
rising costs of maintenance and repairs to equipment.

Other  operating  expenses  were  $2,368 for the first nine  months of 1997,  an
increase  of $230,  or 10.8%,  compared  to $2,138 for the first nine  months of
1996. For the third quarter of 1997, other operating  expenses increased $62, or
8.7% from the prior year.  Advertising,  telephone,  postage,  legal  fees,  and
goodwill amortization accounted for 72.2% of the cost increases incurred in this
particular category.


Income Taxes

Income  taxes were $1,942 for the first nine  months of 1997  compared to $1,563
for the first nine months of 1996,  an increase of $379,  or 24.2%.  Compared to
the prior year,  income taxes  increased $193, or 36.4% for the third quarter of
1997.  This increase can be attributed  primarily to the increased  earnings the
Corporation experienced.



FINANCIAL CONDITION

Total  assets  increased  $15,360,  or 3.7% to  $429,751 at  September  30, 1997
compared  to $414,391 at December  31,  1996.  The  majority of the change was a
result of cash and cash  equivalents  increasing  $2,217,  along  with a $33,652
increase  in net  loans and a $1,152  increase  in loans  held for  sale,  while
investment securities declined $21,865 during that same time period.

Total  deposits  increased  $6,747,  or 2.0%, to $348,297 at September 30, 1997,
compared to the total deposits reported nine months earlier. As of September 30,
1997,   short-term  borrowings  decreased  $5,414,  or  22.1%,  while  long-term
borrowings  increased  $10,716,  or 115.7% when  compared  to December  31, 1996
totals.  The  increase in long-term  borrowings  is  attributable  to $11,500 of
Federal Home Loan Bank  borrowings for the purpose of funding the continued loan
growth of the Corporation.


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,  core deposit
intangibles,  and the unrealized gain or loss on securities  available-for-sale,
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 generally at least 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 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, 1997 and  December  31,  1996,  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, 1997 and December  31, 1996,  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,
                                                                                   1997                1996
                                                                               -------------       ------------

      
<S>                                                                          <C>                 <C>
       Tier 1 capital
         Shareholders' equity                                                $         37,593    $        34,646
         Less:  Intangibles                                                              (895)              (948)
         Add/less:  Unrealized loss/(gain) on securities                                  237                311
                                                                             ----------------    ---------------

             TOTAL TIER 1 CAPITAL                                            $         36,935    $        34,009
                                                                             ================    ===============

       Total capital
         Tier 1 capital                                                      $         36,935    $        34,009
         Allowable allowance for loan losses                                            3,338              3,198
                                                                             ----------------    ---------------

             TOTAL  CAPITAL                                                  $         40,273    $        37,207
                                                                             ================    ===============

       RISK WEIGHTED ASSETS                                                  $        303,085    $       280,860
                                                                             ================    ===============

       AVERAGE ASSETS                                                        $        419,239    $       396,534
                                                                             ================    ===============

</TABLE>

<TABLE>
<CAPTION>

                                   Actual ratios as of
                              September 30,    December 31,             Capital Adequacy          Well-Capitalized
                                  1997             1996                    Requirement               Requirement
                                  ----             ----                    -----------               -----------

<S>                               <C>                <C>                      <C>                      <C>    
Tier I Capital
  (to average assets)             8.81%              8.69%                    4.00%                     5.00%

Tier I Capital
  (to risk
  weighted assets)               12.19%            12.13%                     4.00%                     6.00%

Total Capital
  (to risk
   weighted assets)              13.29%              13.27%                   8.00%                    10.00%

Liquidity
</TABLE>

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, 1997 and 1996.  Including net income of $3,625,  the
net cash from  operating  activities for the first nine months of 1997 generated
$3,217 of available cash. Net cash from investing activities utilized $12,297 of
available  cash,  primarily  as a result of funding  $33,922  in net  loans.  An
increase in deposits  and the  proceeds  from the net change in  long-term  debt
offset the net decrease in short-term borrowings to generate $11,297 in cash for
the Corporation from financing activities. Total cash inflows for the nine month
period in 1997  exceeded  cash  outflows by $2,217  resulting in a cash and cash
equivalent balance of $31,597 at September 30, 1997.



























PART II.   OTHER INFORMATION


Item 6.  Exhibits and Reports on Form 8-K

        (a)   Exhibits

                 11   Statement of computation of per share earnings.

                 27   Financial Data Schedule for September 30, 1997

        (b)   Reports on Form 8-K

              No Form 8-K was filed with the SEC during the quarter  ended
              September 30, 1997.

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:  November 11, 1997                 By /s/ Robert J. Weeder
                                        ---------------------------------------
                                          Robert J. Weeder
                                          President


Date:  November 11, 1997                 By /s/ Marvin S. Veatch
                                        ---------------------------------------
                                          Marvin S. Veatch
                                          Controller