<PAGE> 1
                                  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 JUNE 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 August 13, 1998
Common Stock, without par value                                2,164,195 shares

<PAGE>2


                            LAFAYETTE BANCORPORATION

                                      INDEX


PART I.             FINANCIAL INFORMATION

Item 1.

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

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

     Consolidated  Statements  of Income -- Six Months  Ended June 30,  1998 and
     1997

     Consolidated Statements of Cash Flows -- Six Months Ended June 30, 1998 and
     1997

     Notes to Consolidated Financial Statements -- June 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 4.       Submission of Matters to a Vote of Security Holders

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>

-------------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>                 <C>
June 30,                                                                       December 31,
                                                                                   1998                 1997
ASSETS
Cash and due from banks                                                       $       23,230      $      16,901
Federal funds sold                                                                    11,150             14,000
                                                                              --------------      -------------
    Total cash and cash equivalents                                                   34,380             30,901
Securities available-for-sale (at market)                                             71,953             66,577
Securities held-to-maturity, at cost (market value $4,633
  and $5,378)                                                                          4,510              5,268
Loans held for sale                                                                    7,909              7,640
Loans                                                                                322,837            312,227
    Less:  Allowance for loan losses                                                  (3,741)            (3,464)
                                                                              --------------      -------------
       Loans, net                                                                    319,096            308,763
Federal Home Loan Bank stock (at cost)                                                 1,539              1,242
Premises, furniture and equipment, net                                                 6,492              6,183
Accrued interest receivable and other assets                                          11,791             12,455
                                                                              --------------      -------------

          Total assets                                                        $      457,670      $     439,029
                                                                              ==============      =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
    Noninterest-bearing deposits                                              $       44,798      $      42,752
    Interest-bearing demand and savings deposits                                     150,164            144,028
    Interest-bearing time deposits                                                   175,049            168,415
                                                                              --------------      -------------
       Total deposits                                                                370,011            355,195
    Short-term borrowings                                                             19,243             20,372
    Long-term debt                                                                    22,111             19,886
    Accrued interest payable and other liabilities                                     5,612              5,107
                                                                              --------------      -------------
       Total liabilities                                                             416,977            400,560

Shareholders' equity
    Common stock, no par value:  5,000,000 shares authorized;
    2,176,395 and 2,173,570 shares issued; and 2,164,195
    and 2,161,370 shares outstanding                                                   2,176              2,174
    Additional paid-in capital                                                        24,622             24,555
    Retained earnings                                                                 14,030             11,927
    Unrealized gain /(loss) on securities available-for-sale,
      net of tax (($25) and ($59))                                                       (38)               (90)
    Less:  Treasury stock, at cost (12,200 shares)                                       (97)               (97)
                                                                              --------------      -------------
       Total shareholders' equity                                                     40,693             38,469
                                                                              --------------      -------------
          Total liabilities and shareholders' equity                          $      457,670      $     439,029
                                                                              ==============      =============
          See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>4

                            LAFAYETTE BANCORPORATION
           CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                For the three months ended June 30, 1998 and 1997
              (Dollar amounts in thousands, except per share data)
                                   (Unaudited)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                                                                   1998                1997
                                                                                   ----                ----
<S>                                                                          <C>                 <C>
Interest income
    Loans                                                                     $        7,278      $       6,449
Taxable securities                                                                       812              1,040
    Tax exempt securities                                                                220                192
    Other                                                                                180                124
                                                                              --------------      -------------
       Total interest income                                                           8,490              7,805
Interest expense
    Deposits                                                                           3,690              3,474
    Short-term borrowings                                                                169                148
    Long-term debt                                                                       318                144
                                                                              --------------      -------------
       Total interest expense                                                          4,177              3,766
                                                                              --------------      -------------
Net interest income                                                                    4,313              4,039
Provision for loan losses                                                                180                 90
                                                                              --------------      -------------
Net interest income after provision for loan losses                                    4,133              3,949
Noninterest income
    Income from fiduciary activities                                                     226                206
    Service charges on deposit accounts                                                  333                306
    Net realized gain on securities                                                        -                  2
    Net gain on loan sales                                                               269                150
    Other service charges and fees                                                       255                213
    Other operating income                                                               129                135
                                                                              --------------      -------------
       Total noninterest income                                                        1,212              1,012
                                                                              --------------      -------------
Noninterest expense
    Salaries and employee benefits                                                     1,957              1,855
    Occupancy expenses, net                                                              217                212
    Equipment expenses                                                                   252                234
    Other operating expenses                                                             895                810
                                                                              --------------      -------------
       Total noninterest expense                                                       3,321              3,111
                                                                              --------------      -------------
Income before income taxes                                                             2,024              1,850
Income taxes                                                                             683                650
                                                                              --------------      -------------
Net income                                                                             1,341              1,200
                                                                              --------------      -------------
Other comprehensive income, net of tax:
    Change in unrealized gains / (losses) on securities                                   78                392
                                                                              --------------      -------------
Comprehensive income                                                          $        1,419      $       1,592
                                                                              ==============      =============

Basic earnings per share                                                      $         .62       $         .55
                                                                              ==============      =============
Diluted earnings per share                                                    $         .61       $         .55
                                                                              ==============      =============
          See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>5

                            LAFAYETTE BANCORPORATION
           CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                 For the six months ended June 30, 1997 and 1996
              (Dollar amounts in thousands, except per share data)
                                   (Unaudited)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                                                                   1998                1997
                                                                                   ----                ----
<S>                                                                          <C>                 <C>
Interest income
    Loans                                                                     $       14,349      $      12,474
Taxable securities                                                                     1,632              2,100
    Tax exempt securities                                                                411                430
    Other                                                                                350                293
                                                                              --------------      -------------
       Total interest income                                                          16,742             15,297
Interest expense
    Deposits                                                                           7,259              6,898
    Short-term borrowings                                                                332                330
    Long-term debt                                                                       615                284
                                                                              --------------      -------------
       Total interest expense                                                          8,206              7,512
                                                                              --------------      -------------
Net interest income                                                                    8,536              7,785
Provision for loan losses                                                                360                150
                                                                              --------------      -------------
Net interest income after provision for loan losses                                    8,176              7,635
Noninterest income
    Income from fiduciary activities                                                     452                410
    Service charges on deposit accounts                                                  658                594
    Net realized gain on securities                                                        -                 31
    Net gain on loan sales                                                               494                281
    Other service charges and fees                                                       469                382
    Other operating income                                                               360                249
                                                                              --------------      -------------
       Total noninterest income                                                        2,433              1,947
                                                                              --------------      -------------
Noninterest expense
    Salaries and employee benefits                                                     3,914              3,560
    Occupancy expenses, net                                                              432                431
    Equipment expenses                                                                   506                462
    Other operating expenses                                                           1,719              1,590
                                                                              --------------      -------------
       Total noninterest expense                                                       6,571              6,043
                                                                              --------------      -------------
Income before income taxes                                                             4,038              3,539
Income taxes                                                                           1,372              1,219
                                                                              --------------      -------------
Net income                                                                             2,666              2,320
                                                                              --------------      -------------
Other comprehensive income, net of tax:
    Change in unrealized gains / (losses) on securities                                   52                (71)
                                                                              --------------      --------------
Comprehensive income                                                          $        2,718      $       2,249
                                                                              ==============      ==============
Basic earnings per share                                                      $         1.23      $        1.07
                                                                              ==============      ==============
Diluted earnings per share                                                    $         1.21      $        1.07
                                                                              ==============      ==============
          See accompanying notes to consolidated financial statements.
</TABLE>

<PAGE>6

                            LAFAYETTE BANCORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 For the six months ended June 30, 1998 and 1997
                          (Dollar amounts in thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                                                          1998            1997
                                                                          ----            ----
<S>                                                                   <C>             <C>  
Cash flows from operating activities
    Net income                                                         $     2,666    $     2,320
    Adjustments to reconcile net income to net cash
      from operating activities
       Depreciation                                                            316            319
       Premium amortization, net of discount accretion                         146            167
       Provision for loan losses                                               360            150
       Net realized gain on securities                                           -            (31)
       Net (gain) loss on :
          Other real estate                                                    (43)            22
       Change in assets and liabilities:
          Loans originated for sale                                        (36,375)       (21,035)
          Loans sold                                                        36,106         21,350
          Accrued interest receivable and other assets                         378            235
          Accrued interest payable and other liabilities                       505            284
                                                                       -----------    -----------
              Net cash from operating activities                             4,059          3,781
Cash flows from investing activities
    Purchase of securities available-for-sale                              (27,845)        (6,217)
    Proceeds from sales of securities available-for-sale                     3,286         10,437
    Proceeds from maturities of securities available-for-sale               19,174          9,320
    Purchase of securities held-to-maturity                                 (1,107)          (524)
    Proceeds from maturities of securities held-to-maturity                  1,858          2,036
    Loans made to customers, net of payments collected                     (10,693)       (23,220)
    Purchase of FHLB stock                                                    (297)          (126)
    Property and equipment expenditures                                       (625)          (130)
    Proceeds from sales of other real estate                                   251            126
                                                                       -----------    -----------
       Net cash from investing activities                                  (15,998)        (8,298)
Cash flows from financing activities
    Net change in deposit accounts                                          14,816          5,822
    Net change in short-term borrowings                                     (1,129)        (9,111)
    Proceeds from long-term debt                                             2,800          5,000
    Payments on long-term debt                                                (575)          (608)
    Common stock issued                                                         69              -
    Dividends paid                                                            (563)          (491)
                                                                       ------------   ------------
              Net cash from financing activities                            15,418            612
Net change in cash and cash equivalents                                      3,479         (3,905)
Cash and cash equivalents at beginning of year                              30,901         29,380
                                                                       -----------    -----------
Cash and cash equivalents at end of period                             $    34,380    $    25,475
                                                                       ===========    ===========
Supplemental disclosures of cash flow information
  Cash paid during the period for:
       Interest                                                        $     7,925    $     7,344
       Income taxes                                                          1,277            988

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

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

<PAGE>7

                            LAFAYETTE BANCORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 1998
                          (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

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

<TABLE>
<CAPTION>
                                                         Six Months Ended         Six Months Ended
                                                           June 30, 1998            June 30, 1997
                                                           -------------            -------------
<S>                                                       <C>                      <C>
Basic earnings per share
 Net income                                                $       2,666            $       2,320
Weighted average shares outstanding                            2,164,023                2,161,386
                                                           -------------            -------------

    Basic earnings per share                               $        1.23            $        1.07
                                                           ==============          ==============

Diluted earnings per share
 Net income                                                $       2,666            $       2,320

Weighted average shares outstanding                            2,164,023                2,161,386
Stock Options                                                    111,112                   97,048
Assumed shares repurchased upon exercise                         (65,218)                 (87,962)
                                                           --------------           --------------
    Diluted average shares outstanding                          2,209,917               2,170,472
                                                           ---------------          -------------

    Diluted earnings per share                             $         1.21           $        1.07
                                                           ===============         ==============

</TABLE>

<PAGE>8
                            LAFAYETTE BANCORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 1998
                          (Dollar amounts in thousands)
                                   (Unaudited)

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                        Three Months Ended       Three Months Ended
                                                           June 30, 1998            June 30, 1997
                                                           -------------            -------------
<S>                                                       <C>                    <C>
Basic earnings per share
 Net income                                                $       1,341            $       1,200
Weighted average shares outstanding                            2,164,195                2,161,386
                                                           -------------            -------------

    Basic earnings per share                               $         .62            $        .55
                                                           =============            =============
Diluted earnings per share
 Net income                                                $       1,341            $       1,200

Weighted average shares outstanding                            2,164,195                2,161,386
Stock Options                                                    111,112                   97,048
Assumed shares repurchased upon exercise                         (62,053)                 (83,589)
                                                           --------------           --------------
    Diluted average shares outstanding                          2,213,254               2,174,845
                                                           --------------           -------------

    Diluted earnings per share                             $         .61            $         .55
                                                           ==============           =============
</TABLE>

NOTE 3 - SECURITIES

The amortized  cost and estimated  market values of securities are as follows at
June 30, 1998:
<TABLE>
<CAPTION>
                                                         Amortized                      Estimated
                                                           Cost                       Market Value
<S>                                                    <C>                          <C>   
Securities Available-for-Sale
U.S. Government and its agencies                       $    19,944                    $    19,936
Obligations of states and political subdivisions            15,495                         15,570
Corporate obligations                                        1,010                          1,010
Mortgage-backed and other asset-backed securities           35,567                         35,437
                                                       -----------                    -----------
                                                       $    72,016                    $    71,953
                                                       ===========                    ===========
Securities Held-to-Maturity

Obligations of states and political subdivisions       $     4,510                    $     4,633
                                                       ===========                    ===========
</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
                                  June 30, 1998
                          (Dollar amounts in thousands)
                                   (Unaudited)

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

NOTE 4 - LOANS

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

                                                                                 June 30,          December 31,
                                                                                   1998                1997

<S>                                                                          <C>                 <C>            
         Commercial and agricultural loans                                   $        110,009    $       112,586
         Real estate construction loans                                                24,295             17,117
         Residential real estate loans                                                137,893            127,574
         Installment loans to ind                                                      50,640             54,950
                                                                             ----------------    ---------------

             Total loans                                                     $        322,837    $       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                                  360                 150
    Loans charged off                                               (190)               (235)
    Recoveries on loans previously charged off                       107                  81
                                                           -------------      --------------

    Balance, June 30                                       $       3,741      $        3,194
                                                           =============      ==============
</TABLE>

<PAGE>10

NOTE 6 - SHORT-TERM BORROWINGS

Short-term borrowings are comprised of the following:

<TABLE>
<CAPTION>

                                                                                 June 30,          December 31,
                                                                                   1998                1997

<S>                                                                          <C>                 <C>            
         Repurchase agreements                                               $         16,869    $        17,340
         Treasury tax and loan open-end note                                            2,374              3,032
                                                                             ----------------    ---------------

             Total short-term borrowings                                     $         19,243    $        20,372
                                                                             ================    ===============

</TABLE>


<PAGE>11

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 $1,341, or $.62 per share for the second quarter of 1998
compared to $1,200, or $.55 per share for the second quarter of 1997. Net income
increased $346, or 14.9% to $2,666 for the six month period ending June 30, 1998
compared to that same 1997 time period.  Basic earnings per share were $1.23 and
$1.07 for the six month period ending June 30, 1998 and 1997, respectively.  Net
interest income continues to be the most significant factor in the increased net
income, although increased contributions from certain noninterest income sources
such as realized  gains on the sale of mortgage  loans in the secondary  market,
the Corporation's  investment brokerage department,  and ATM fee income enhanced
overall profits. A gain on the sale of an other real estate property recorded in
the first quarter of 1998 also augmented  noninterest income. A higher loan loss
provision,  along with increased  salary and benefits  expense and certain other
noninterest  expenses  partially  offset the increases  recognized in other 1998
income categories.

Return on  average  assets  (ROA) was 1.21% and 1.14% for the six month  periods
ending  June 30, 1998 and 1997,  respectively,  while  return on average  equity
(ROE) was 13.45% and 13.11% for those  same  periods  ending  June 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 six months ended June 30, 1998 and 1997, net interest  income was $8,536 and
$7,785,  respectively.  This  represents a $751, or 9.6% increase over the prior
year.  Net  interest  income  for the second  quarter of 1998 was $274,  or 6.8%
higher than for that same three month period ending June 30, 1997.  The increase
in net interest income during 1998 is primarily  attributable to the higher loan
volume generated by the Corporation.

<PAGE>12

Total interest income for the six month period ending June 30, 1998 and 1997 was
$16,742 and $15,297, respectively.  Total interest income for the second quarter
of 1998 was $685,  or 8.8% greater than for that same quarter in 1997.  Interest
and fees on loans  increased  $1,875,  or 15.0%,  to  $14,349  for the first six
months of 1998,  compared to $12,474  for the first six months of 1997.  For the
second  quarter of 1998,  interest and fees on loans  increased  $829,  or 12.9%
compared  to the  second  quarter  of 1997.  Growth  in the  Corporation's  loan
portfolio  continued  to  account  for the  majority  of the  increase  in total
interest income, as average loan balances were approximately  $36,613,  or 12.5%
higher in June 1998  compared  to June 1997.  Although  outstanding  loan totals
continue to increase,  the  Corporation  has not  experienced  the growth it did
during the 1996 and 1997 years. Overall,  second quarter average loan growth was
slightly less than that of the first quarter of 1998.

Total  interest  expense for the six month period  ending June 30, 1998 and 1997
was $8,206 and  $7,512,  respectively.  For the  second  quarter of 1998,  total
interest  expense  increased  $411,  or  10.9%,  compared  to the same 1997 time
period. Average total interest-bearing  liabilities and long-term debt increased
approximately  $25,572,  or 7.5% and $11,888,  or 116.3%,  receptively from June
1997 to June 1998.  While growth in the  interest-bearing  deposit accounts have
contributed to increased  overall  interest  expense,  the average cost of these
funds between the two periods has remained  relatively  unchanged.  Although the
average cost of long-term debt has declined  between  periods,  overall interest
expense increased as a result of the increase in principal debt.

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>
                                       Six Months                          Change from
                                     Ended June 30,                       Prior Period
                                   1998             1997             Amount        Percent
                                   ----             ----             ------        -------

<S>                              <C>               <C>               <C>              <C> 
Interest income                  $16,996           $15,571           $1,425           9.2%

Interest expense                   8,206             7,512              694           9.2%
                                  ------            ------           ------
     Net interest income         $ 8,790           $ 8,059            $ 731           9.1%
                                 =======           =======            =====
</TABLE>



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

<S>                              <C>              <C>               <C>            <C>  
Interest income                   $8,625            $7,931             $694           8.8%

Interest expense                   4,177             3,766              411          10.9%
                                   -----             -----            -----
     Net interest income          $4,448            $4,165           $  283           6.8%
                                  ======            ======           ======
</TABLE>

Net interest income, on a tax equivalent basis, for the first six months of 1998
was $731,  or 9.1%  higher than for that same six month  period  ending June 30,
1997. For the second quarter of 1998, net interest  income,  on a tax equivalent
basis,  was $283,  or 6.8%  higher than for the same 1997 time  period.  The net
interest  margin,  on a tax equivalent  basis for the six months ending June 30,
1998 and 1997 was 4.31% and 4.28%, respectively.  The ongoing growth in the loan
portfolio is primarily  responsible for the increase  recognized in net interest
income.  The  increase in interest  expense,  on the other  hand,  is  primarily
attributed  to the 7.5% growth in  interest-bearing  liabilities.  Net  interest
income for the second quarter  increased at a slower pace than that of the first
quarter   mainly  due  to  lower   earning   asset   yields  and  higher   total
interest-bearing liability costs, predominately borrowed funds.

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.

<PAGE>13

The  consolidated  provision for loan losses was $360 and $150 for the first six
months of 1998 and 1997,  respectively.  The provision for loan losses increased
$90 for the  second  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 June 30,
1998 was $3,741,  or 1.16% of total loans compared to $3,464,  or 1.11% of total
loans at December 31, 1997. Net charge-offs  were $83 and $154 for the first six
months of 1998 and 1997, respectively.  This $71, or 46.1% decrease is primarily
attributable  to the decline in  indirect  lending  charge-offs  recorded by the
Corporation.

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>

                                                                                 June 30,          December 31,
                                                                                   1998                1997

<S>                                                                         <C>                 <C>            
         Loans past due 90 days or more                                      $            812    $           505
         Nonaccrual loans                                                                 125                127
         Restructured loans                                                               240                350
                                                                             ----------------    ---------------

             Total nonperforming loans                                       $          1,177    $           982
                                                                             ================    ===============
</TABLE>

Nonperforming loan totals at December 31, 1997 were at their lowest level in the
last five years.  Although total nonperforming loans increased $195,  management
believes  overall asset quality to be good.  The $307 increase in loans past due
90 days or more is  attributable  to a $231 net increase in mortgage loans and a
$103 net increase in the installment loan portfolio, of which $71 related to the
indirect lending function.  Nonaccrual loans were at their five year low at June
30, 1998, while restructured loan totals declined $110 from the $350 reported at
December 31, 1997.

Noninterest Income and Expense

Noninterest income totaled $2,433 for the first six months of 1998,  compared to
$1,947 for that same period of 1997, an increase of $486, or 25.0%.  Noninterest
income for the second quarter increased $200, or 19.8% to $1,212 compared to the
prior year.

Service  charges on deposit  accounts,  which comprise the largest  component of
noninterest income,  increased for the first six months of 1998 and also for the
second  quarter of 1998 when compared to the same 1997 time periods.  The number
of accounts  being  assessed  fees,  along with an increase in the fee structure
which became effective November 1, 1997 account for the majority of this change.

Net gain on loans originated and sold in the secondary mortgage market were $494
and $281 for the first six months of 1998 and 1997 respectively,  an increase of
$213,  or 75.8%.  For the second  quarter  of 1998,  net gain on loan sales were
$269, an increase of $119, or 79.3% from the prior year. The continued  strength
of the local  economy,  along with the low mortgage  interest rate  environment,
spurred  not only an  increase  in new home  sales,  but also the volume of home
refinancings.  These  factors,  in addition  to an increase in the  departmental
staffing level has led to an increase of $14,756,  or 69.1% in loan fundings for
the six months ended June 30, 1998 compared to June 30, 1997.  Loan fundings for
the  second  quarter of 1998  increased  20.9% to  $19,758  compared  to $16,348
recorded for the first quarter of the same year.

Other  service  charges  and fees were $469 and $382 for the first six months of
1998 and 1997,  respectively,  and  increase  of $87,  or 22.8%.  For the second
quarter of 1998, other service charges and fees increased $42, or 19.7% compared
to the prior year. The majority of the increase is attributable to ATM surcharge
fees. The Corporation  began  surcharging  non-bank customer ATM transactions in
May 1997.

<PAGE>14

Noninterest expense totaled $6,571 for the first six months of 1998, compared to
$6,043  for that same  period  of 1997,  an  increase  of $528,  or 8.7%.  Total
noninterest expense for the second quarter of 1998 was $210, or 6.8% higher than
the prior year.

Salary  and  employee  benefits  expense  was $3,914 for the first six months of
1998, an increase of $354, or 9.9%,  from the $3,560 for the first six months of
1997.  Total  salaries and employee  benefits for the second quarter of 1998 was
$1,957,  a $102, or 5.5% increase from the 1997 amount.  The number of full-time
equivalent  employees  increased  to 215  from 202 at June  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.  The  Corporation  also  realized  an  increase in health
insurance costs, primarily as a result of the increased staffing level.

Other  operating  expenses  were  $1,719  for the first six  months of 1998,  an
increase of $129, or 8.1%,  compared to $1,590 for the first six months of 1997.
For the second quarter of 1998, other operating expenses increased $85, or 10.5%
from the prior year. In addition to higher office supply costs attributed to the
opening of the new branch facility,  the Corporation  expanded its marketing and
advertising  efforts which  account for the majority of the overall  increase in
this category.

Income Taxes

Income taxes were $1,372 for the first six months of 1998 compared to $1,219 for
the first six months of 1997,  an  increase of $153,  or 12.6%.  Compared to the
prior year,  income taxes increased $33, or 5.1% for the second quarter of 1998.
Increased  corporate  earnings  contributed  to a higher income tax expense,  in
addition to tax-exempt  income for the six months ended June 30, 1998 being less
than that same 1997 time period.  For the second  quarter,  however,  tax-exempt
income  increased  $28,  or 14.6% in 1998  compared to 1997,  which  assisted in
minimizing the overall income tax liability.

FINANCIAL CONDITION

Total assets were $457,670 at June 30, 1998 compared to $439,029 at December 31,
1997, an increase of $18,641, or 4.2%. Increases of $3,479,  $4,618, and $10,333
were  realized  in cash and cash  equivalents,  investment  securities,  and net
loans, respectively, for the first six months of 1998.

Total  deposits and  long-term  debt for the first six months of 1998  increased
$14,816 and $2,225, respectively,  while short-term debt decreased $1,129 during
that same time period.  Increases in  interest-bearing  deposits  accounted  for
86.2% of the total  deposit  increase,  while the increase in long-term  debt is
primarily  attributable to an additional $2,800 in borrowings,  net of principal
repayments, from the Federal Home Loan Bank in Indianapolis.

Capital

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

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

The minimum  requirements  under the capital guidelines are 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).

<PAGE>15

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  June  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 June 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>

                                                                                 June 30,          December 31,
                                                                                   1998                1997
<S>                                                                         <C>                  <C>
       Tier 1 capital
         Shareholders' equity                                                $         40,693    $        38,469
         Less:  Intangibles                                                              (841)              (908)
         Add/less:  Unrealized loss/(gain) on securities                                   38                 90
                                                                             ----------------    ---------------

             TOTAL TIER 1 CAPITAL                                            $         39,890    $        37,651
                                                                             ================    ===============
       Total capital
         Tier 1 capital                                                      $         39,890    $        37,651
         Allowable allowance for loan losses                                            3,741              3,464
                                                                             ----------------    ---------------

             TOTAL  CAPITAL                                                  $         43,631    $        41,115
                                                                             ================    ===============

       RISK WEIGHTED ASSETS                                                  $        321,581    $       310,170
                                                                             ================    ===============

       AVERAGE ASSETS                                                        $        444,346    $       430,555
                                                                             ================    ===============
</TABLE>


<PAGE>16

<TABLE>
<CAPTION>
                                   Actual ratios as of
                                June 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)               12.4%             12.1%                     4.0%                       6.0%

Total Capital
  (to risk
   weighted assets)              13.6%             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 six
months  ended June 30, 1998 and 1997.  Including  net income of $2,666,  the net
cash from operating activities for the first six months of 1998 generated $4,059
of  available  cash.  Net cash from  investing  activities  utilized  $15,998 of
available  cash,  primarily  as a result  of  purchasing  $4,634  in  investment
securities and funding $10,693 in net loans.  The $14,816  increase in deposits,
along with $2,800 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 $15,418 in cash generated from financing activities.  Total cash
inflows  for the six  month  period in 1998  exceeded  cash  outflows  by $3,479
resulting in a cash and cash equivalent balance of $34,380 at June 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.  Testing of specific system applications is scheduled to begin during the
early part of the third  quarter and lasting  until the end of the first quarter
of 1999. The Corporation has developed  contingency  plans,  conducted  internal
training seminars for employees,  and has scheduled  customer awareness seminars
not  only  to  communicate  the  Year  2000  issue,  but  also to  inform  these
individuals  of  the  Corporation's  approach  to  address  this  issue.  A risk
assessment  process  has  also  been  implemented  to  evaluate  the  Year  2000
preparedness of commercial borrowers of the Corporation.

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.


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 June 30, 1998
from the analysis and disclosures  provided in the  Corporation's  Form 10-K for
the year ended December 31, 1997.

<PAGE>17

PART II.   OTHER INFORMATION

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

     (a)  The  Corporation's  Annual  Meeting of  Shareholders  was held Monday,
          April 13, 1998.

     (b)  The  following  members  were  elected to the  Corporation's  Board of
          Directors to hold office as indicated by the term expiration, or until
          their successors are duly chosen and qualified.
<TABLE>
<CAPTION>

       Term                                                Against or                             Broker
     Expiration           Nominee               For         Withheld           Abstain           Non-Votes

     <S>          <C>                        <C>             <C>                <C>              <C>
       2001       Richard A. Boehning        1,807,260       30,182             5,173                0
       2001       Joseph A. Bonner           1,837,041           392            5,173                0
</TABLE>


     (c)  The  following  matters were also voted upon at the Annual  Meeting of
          Shareholders

<TABLE>
<CAPTION>
                                                           Against or                             Broker
               Matter                           For         Withheld           Abstain           Non-Votes
   <S>                                      <C>            <C>               <C>                 <C>  
        Approval of the 1998
     Nonqualified Stock Option Plan          1,761,571       47,399            44,784                0
</TABLE>

Item 6.  Exhibits and Reports on Form 8-K

     (a)  Exhibits

            27   Financial Data Schedule for June 30, 1998

     (b)  Reports on Form 8-K

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

SIGNATURES

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


Date:  August 13, 1998                       By /s/ Robert J. Weeder
                                                Robert J. Weeder
                                                President


Date:  August 13, 1998                      By /s/ Marvin S. Veatch
                                               Marvin S. Veatch
                                               Controller