EXHIBIT 13

                     1998 ANNUAL REPORT OF SHAREHOLDERS

Contents

 1   President' Message
 2   Selected Consolidated Financial Data
 3   Management's Discussion and Analysis of Financial Condition and Results 
      of Operations
14   Consolidated Financial Statements
18   Notes to Consolidated Financial Statements
32   Report of Independent Auditors
32   Common Stock Information
33   Directors and Executive Officers


Company Profile

Industrial Bancorp, Inc. is a savings  and loan holding company 
headquartered in Bellevue, Ohio. Its sole subsidiary, Industrial Savings and 
Loan Association, maintains ten full-service offices and one loan production 
office serving communities in seven counties throughout north central Ohio.

Founded in 1890, Industrial Savings and Loan is a state-chartered savings 
and loan association with deposits insured by the FDIC. Industrial Savings 
and Loan provides traditional banking services including a wide selection of 
mortgage, loan and deposit products to local consumers and businesses.


Dear Shareholders,

      I am pleased to present our Annual Report to Shareholders for 1998. 
This report will show that 1998 was yet another year of increased earnings, 
continued growth and solid performance by Industrial Bancorp common stock. 
The market value of our common stock rose $2.25 per share during 1998, an 
increase of 13%. In addition, regular cash dividends increased to $0.59 per 
share during 1998 from $0.48 per share during 1997, an increase of 23%.

      Also during 1998, the Company continued its stock repurchase program 
by authorizing the repurchase of an additional 5% of its total outstanding 
common shares. Under the repurchase program, which began late in 1996, the 
Company has been able to purchase 723,464 shares of outstanding stock as of 
year-end 1998, with additional stock yet to be purchased.

      Our subsidiary, Industrial Savings and Loan Association also completed 
another very successful year in 1998. Having completed its 108th year of 
operation, it continued to grow and prosper. One of the highlights of 1998 
was the announcement of a new branch office to be located inside a local 
grocery supercenter in Willard, Ohio. Construction is underway and should be 
completed in the near future. We are excited about this opportunity to 
expand our services to our existing customers and to add to our customer 
base throughout the Willard area. Also during 1998, we upgraded all of our 
teller equipment and computer software. This financial commitment, in excess 
of $650,000, will enhance our ability to better serve our customers as well 
as assist us in preparing for the year 2000 and beyond. This upgrade in 
technology took place with very little disruption to our delivery of quality 
service to our customers thanks to the hard work and dedication of all of 
our employees.  They are truly to be commended for their efforts.

      The strength and vitality of Industrial Bancorp, Inc. continues, as 
evidenced by the year-end financial report. We reached a record high of 
$388.1 million in consolidated assets as of year-end 1998, which represents 
a 7% increase from year-end 1997. During 1998 we sold $17.5 million of fixed 
rate loans in the secondary market. Also, consolidated earnings exceeded 
$5.7 million for the year, compared to $5.1 million for last year, an 
increase of 12%. Earnings per share amounted to $1.22 per share for 1998 
compared to $1.04 per share for 1997, an increase of 17%. Lending remained 
very strong in 1998, as we originated $118.8 million in new loans, which 
represents a 16% increase over the previous year. Savings deposits increased 
to $288.6 million as of year-end, which is also a new record.

      On behalf of the directors, management and employees, I would like to 
express our appreciation to you, our shareholders, for your confidence and 
investment in Industrial Bancorp, Inc. and to our valued customers for their 
continued support of Industrial Savings and Loan Association.


                                       David M. Windau
                                       President and Chief Executive Officer

                                SELECTED CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>

                                              1998        1997        1996        1995        1994
                                            --------------------------------------------------------
Selected financial condition data:                (Dollars in thousands, except per share data)

<S>                                         <C>         <C>         <C>         <C>         <C>
Total assets                                $388,059    $364,023    $326,613    $322,994    $268,041
Investment securities                         21,518      21,467      23,797      27,882      16,014
Loans receivable - net                       326,972     321,669     285,803     259,124     235,537
Deposits                                     288,584     270,957     259,074     238,282     231,966
FHLB advances                                 35,000      29,000       2,000           -       6,000
Shareholders' equity (1)                      60,741      60,862      62,104      81,055      27,616

Summary of earnings:

Interest income                             $ 30,562    $ 27,805    $ 25,468    $ 22,858    $ 19,024
Interest expense                              15,825      14,065      11,863      11,236       9,181
                                            --------------------------------------------------------
Net interest income                           14,737      13,740      13,605      11,622       9,843
Provision for loan losses                        200         186         180         180         200
                                            --------------------------------------------------------
Net interest income after 
 provision for loan losses                    14,537      13,554      13,425      11,442       9,643
Noninterest income                               858         509         447         398         461
Noninterest expense                            6,663       6,167       9,453       5,518       4,734
                                            --------------------------------------------------------
Income before income tax                       8,732       7,896       4,419       6,322       5,370
Income tax expense                             3,028       2,783       2,020       2,149       1,752
                                            --------------------------------------------------------
Net income                                  $  5,704    $  5,113    $  2,399    $  4,173    $  3,618
                                            ========================================================

Basic earnings per share (2)                $   1.22    $   1.04    $   0.47    $   0.42           -
Diluted earnings per share (2)                  1.19        1.03        0.47        0.42           -
Cash dividends per share (2) (3)                0.59        0.48        3.75        0.15           -

Selected financial ratios:
Return on average assets                        1.50%       1.48%       0.75%       1.42%       1.42%
Return on average equity                        9.36        8.38        3.62        8.21       14.33
Average equity to average assets               16.03       17.63       20.59       17.29        9.88
Interest rate spread                            3.11        3.13        3.26        3.26        3.55
Net interest margin                             3.95        4.05        4.32        4.04        3.94
Efficiency ratio (4)                           43.28       43.85       68.14       46.60       46.85
Noninterest expense to average assets           1.75        1.78        2.94        1.88        1.85
Nonperforming assets to total assets            0.38        0.31        0.38        0.49        0.58
Nonperforming loans to total loans              0.45        0.32        0.42        0.60        0.62
Allowance for loan losses to total loans        0.59        0.54        0.53        0.52        0.50
Allowance for loan losses to
 nonperforming loans                          129.72      168.76      125.77       87.53       80.71

--------------------
<F1>  Shareholders' equity prior to the Conversion refers to members' 
      equity.
<F2>  Per share data for 1995 is for the period from the date of the 
      Conversion, August 1, 1995, to December 31, 1995.
<F3>  The amount for 1996 includes a $3.50 per share special return of 
      capital distribution.
<F4>  Noninterest expense as a percentage of the sum of net interest income 
      after provision for loan losses and noninterest income.

</TABLE>

                    MANAGEMENT'S DISCUSSION AND ANALYSIS
              OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

==============================================================================

In August 1995, Industrial Bancorp, Inc. ("Industrial Bancorp) acquired all 
of the common shares issued by The Industrial Savings and Loan Association 
("Industrial Savings") upon its conversion from a mutual savings and loan 
association to a stock savings and loan association (the "Conversion"). 
Since the ownership of such shares constitutes the principal business of 
Industrial Bancorp, the discussion below focuses principally on the 
financial condition and results of operations of Industrial Savings.

The following discussion and analysis of Industrial Bancorp, Inc. and its 
wholly-owned subsidiary, Industrial Savings and Loan Association, (together 
referred to as the "Company") should be read in conjunction with and with 
reference to the consolidated financial statements and accompanying notes 
presented in this Annual Report beginning on page 14.

                       CHANGES IN FINANCIAL CONDITION

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

Total consolidated assets of the Company were $388.1 million at year-end 
1998, an increase of $24.1 million from $364.0 million at year-end 1997.

Loans receivable increased $5.3 million to $327.0 million at year-end 1998 
from $321.7 million at year-end 1997. Loan originations exceeded $100 
million for the second year in a row, with 93% of the originations in the 
one- to four-family residential mortgage and real estate construction loan 
categories. Also during 1998, the Company experienced an unusual amount of 
refinancings and  sold $17.7 million of fixed-rate mortgage loans on the 
secondary market. Investment securities held steady, totaling $21.5 million 
at year-end in both 1998 and 1997. Maturities of U.S. Treasury and agency 
securities totaling $6.0 million were replaced by purchases of the same 
totaling $5.0 million and an increase of $768,000 in unrealized gains on 
those securities during the year. Cash and cash equivalents were $28.5 
million at year-end 1998, more than double the $10.8 million at year-end 
1997. The Company has taken advantage of minor variations between long-term 
and short-term interest rates to improve its liquidity position. Office 
properties and equipment, net of accumulated depreciation, increased to $5.4 
million at year-end 1998 from $5.0 million at year-end 1997. The increase is 
principally due to the Company's substantial upgrade in technology, 
primarily teller equipment and computer hardware and software.

Total deposits increased $17.6 million, or 6%, to $288.6 at year-end 1998 
from $271.0 million at year-end 1997. Certificates of deposit increased 
$12.1 million and transaction accounts, including passbook savings deposits, 
increased $5.6 million. The Company has taken advantage of the favorable 
interest rate environment and used advances from the Federal Home Loan Bank 
("FHLB") to fund loan growth in excess of loan sales and deposit growth. 
FHLB advances were $35.0 million at year-end 1998 compared to $29.0 million 
at year-end 1997.

Shareholders' equity was $60.7 million at year-end 1998, compared to $60.9 
million at year-end 1997. Net income of $5.7 million was offset by purchases 
of 272,000 treasury shares at a cost of $5.5 million during 1998.

The table on the following page presents certain average-balance 
information, as well as average yields on interest-earning assets and 
average costs of interest-bearing liabilities for the years indicated. Such 
yields and costs are derived by dividing income or expense by the average 
monthly balance of interest-earning assets or interest-bearing liabilities, 
respectively, for the years presented. Average balances are derived from 
monthly ending balances, which do not vary significantly from daily average 
balances.

<TABLE>
<CAPTION>

                                                                       1998                                  1997
                                    Weighted average    ----------------------------------    ----------------------------------
                                     yield/rate at      Average                   Average     Average                   Average
                                        12/31/98        balance     Interest    yield/rate    balance     Interest    yield/rate
                                    --------------------------------------------------------------------------------------------
                                                                       (Dollars in thousands)

<S>                                      <C>            <C>         <C>          <C>          <C>         <C>          <C>
Interest-earning assets:
  Interest-bearing deposits               4.68%         $ 18,656    $   708        3.79%      $ 11,696    $   436        3.73%
  Investment securities (1)               5.99            20,396      1,344        6.59         23,053      1,539        6.68
  Mortgage-backed securities             10.48               345         34        9.98            497         51       10.26
  Loans receivable (2)                    8.04           333,775     28,476        8.53        304,397     25,779        8.47
                                                        -------------------                   -------------------
      Total interest-earning assets       7.69           373,172     30,562        8.19        339,643     27,805        8.19

Noninterest-earning assets:
  Cash and noninterest-bearing
   deposits                                                1,109                                 1,051
  Office properties and equipment                          5,302                                 4,983
  Other nonearning assets                                  2,371                                 1,832
  Allowance for loan losses                               (1,832)                               (1,652)
                                                        --------                              --------
      Total assets                                      $380,122                              $345,857
                                                        ========                              ========

Interest-bearing liabilities:
  Deposits:
    NOW accounts                          2.90          $ 16,139        355        2.20       $ 14,084        327        2.32
    Money market accounts                 3.00             4,391        133        3.03          4,323        130        3.01
    Passbook savings accounts             3.10            53,014      1,626        3.07         53,079      1,644        3.10
    Certificates of deposit               5.54           202,198     11,516        5.70        189,887     10,904        5.74
                                                        -------------------                   -------------------
      Total deposits                      4.80           275,742     13,630        4.94        261,373     13,005        4.98

      FHLB advances                       6.09            35,692      2,195        6.15         16,615      1,060        6.38
                                                        -------------------                   -------------------

      Total interest-bearing 
       liabilities                        4.94           311,434     15,825        5.08        277,988     14,065        5.06

Noninterest-bearing liabilities                            7,763                                 6,882
                                                        --------                              --------
      Total liabilities                                  319,197                               284,870
                                                        ========                              ========

Shareholders' equity                                      60,925                                60,987
                                                        --------                              --------

      Total liabilities and
       shareholders' equity                             $380,122                              $345,857
                                                        ========                              ========

Net interest income                                                 $14,737                               $13,740
                                                                    =======                               =======

Interest rate spread                      2.75%                                    3.11%                                 3.13%

Net interest  margin  (4)                                                          3.95%                                 4.05%

Average interest-earning assets
 to average interest-bearing
 liabilities                                                                     119.82%                               122.18%

<CAPTION>

                                                        1996
                                         ----------------------------------
                                         Average                 Average
                                         balance     Interest    yield/rate
                                         ----------------------------------
                                               (Dollars in thousands)

<S>                                      <C>         <C>           <C>
Interest-earning assets:
  Interest-bearing deposits              $ 13,629    $   649         4.76%
  Investment securities (1)                28,289      1,712         6.05
  Mortgage-backed securities                  660         67        10.15
  Loans receivable (2)                    271,998     23,040         8.47
                                         -------------------
      Total interest-earning assets       314,576     25,468         8.10

Noninterest-earning assets:
  Cash and noninterest-bearing 
   deposits                                   933
  Office properties and equipment           5,019
  Other nonearning assets                   2,596
  Allowance for loan losses                (1,557)
                                         --------
      Total assets                       $321,567
                                         ========
Interest-bearing liabilities:
  Deposits:
    NOW accounts                         $ 12,778        298         2.33
    Money market accounts                   4,653        140         3.01
    Passbook savings accounts              52,872      1,631         3.08
    Certificates of deposit               174,590      9,772         5.60
                                         -------------------
      Total deposits                      244,893     11,841         4.84

      FHLB advances                           462         22         4.76
                                         -------------------

      Total interest-bearing 
       liabilities                        245,355     11,863         4.84

Noninterest-bearing liabilities            10,005
                                         --------
      Total liabilities                   255,360

Shareholders' equity                       66,207
                                         --------

      Total liabilities and 
       shareholders' equity              $321,567
                                         ========

Net interest income                                  $13,605
                                                     =======

Interest rate spread                                                 3.26%

Net interest  margin  (4)                                            4.32%

Average interest-earning assets
 to average interest-bearing
 liabilities                                                       128.21%

--------------------
<F1>  Average yields have been computed based on the amortized cost of the 
      investment security.
<F2>  Net of deferred loan fees, loan discounts and loans in process. Loan 
      fees included in interest income amounted to $1.0 million, $626,000 
      and $625,000 in 1998, 1997 and 1996.
<F3>  Net interest income to average interest-earning assets.

</TABLE>

The table below describes the extent to which changes in interest rates and 
changes in volume of interest-earning assets and interest-bearing 
liabilities have affected the interest income and interest expense of the 
Company during the years indicated. For each category of interest-earning 
assets and interest-bearing liabilities, information is provided for changes 
attributable to (i) increases and decreases in volume (change in volume 
multiplied by prior year rate), (ii) increases and decreases in rate (change 
in rate multiplied by prior year volume) and (iii) total increases and 
decreases in rate and volume. The combined effects of changes in both volume 
and rate, which cannot be separately identified, have been allocated 
proportionately to the change due to volume and the change due to rate.

<TABLE>
<CAPTION>

                                                      1998 vs. 1997                       1997 vs. 1996
                                             --------------------------------    -----------------------------
                                             Increase(decrease)                  Increase(decrease)
                                                   due to            Total             due to            Total
                                             ------------------     increase     ------------------     increase
                                             Volume        Rate    (decrease)    Volume        Rate    (decrease)
                                             --------------------------------------------------------------------
                                                                        (In thousands)

<S>                                          <C>           <C>       <C>         <C>           <C>       <C>
Interest income attributable to:
--------------------------------
Interest-bearing deposits                    $  265        $  7      $  272      $  (84)       $(129)    $ (213)
Investment securities                          (175)        (20)       (195)       (338)         165       (173)
Mortgage-backed securities                      (16)         (1)        (17)        (17)           1        (16)
Loans receivable                              2,505         192       2,697       2,744           (5)     2,739
                                             ------------------------------------------------------------------
      Total interest income                   2,579         178       2,757       2,305           32      2,337

Interest expense attributable to:
---------------------------------
Deposits:
  NOW accounts                                   46         (18)         28          30           (1)        29
  Money market accounts                           2           1           3         (10)           -        (10)
  Passbook savings accounts                      (2)        (16)        (18)          6            7         13
  Certificates of deposit                       702         (90)        612         873          259      1,132
                                             ------------------------------------------------------------------
Total deposits                                  748        (123)        625         899          265      1,164
FHLB advances                                 1,175         (40)      1,135       1,028           10      1,038
                                             ------------------------------------------------------------------
      Total interest expense                  1,923        (163)      1,760       1,927          275      2,202
                                             ------------------------------------------------------------------

Increase(decrease) in net interest income    $  656        $341      $  997      $  378        $(243)     $ 135
                                             ==================================================================

</TABLE>

                       COMPARISON OF OPERATING RESULTS

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

Earnings Summary. The Company had consolidated net income of $5.7 million 
for 1998, compared to $5.1 million for 1997 and $2.4 million for 1996. The 
reduced amount in 1996 was due principally to two separate, but individually 
significant, events that occurred during 1996. The first was the special 
assessment levied by the Federal Deposit Insurance Corporation upon 
institutions with deposits insured by the Savings Association Insurance Fund 
("SAIF"). The second was the impact of the $3.50 per share special return of 
capital distribution on shares held in trust for the Company's Employee 
Stock Ownership Plan ("ESOP") but not allocated to ESOP participants. The 
Company recorded approximately $2.7 million in expense related to these two 
events.

Net Interest Income. Net interest income of the Company is a function of the 
difference, or spread, between the average yield earned on loans and other 
interest-earning assets and the average rate paid on deposits and borrowings 
as well as the relative amounts of such assets and liabilities. The interest 
rate spread is affected by the economic and competitive factors that 
influence interest rates, loan demand and deposit flows.

Net interest income increased to $14.7 million in 1998, compared to $13.7 
million in 1997 and $13.6 million in 1996. Total interest income increased 
to $30.6 million in 1998, compared to $27.8 million in 1997 and $25.5 
million in 1996. The increases were largely due to average loans being $29.4 
million higher in 1998 than in 1997 and $32.4 million higher in 1997 than in 
1996. Interest and fees on loans totaled $28.5 million in 1998, compared to 
$25.8 million in 1997 and $23.0 million in 1996. The average yield earned on 
loans was 8.53% for 1998 and 8.47% for both 1997 and 1996. Interest earned 
on investment securities declined to $1.3 million in 1998 compared to $1.5 
million in 1997 and $1.7 million in 1996 while income from interest-bearing 
deposits has increased to $708,000 in 1998 compared to $436,000 in 1997 and 
$649,000 in 1996. The Company allowed the average balance of its investment 
portfolio to decline in favor of shorter term, more liquid investments due 
to the flat yield curve in 1998. Additional investments were limited during 
1997 due to the excess growth of loans over deposits, without any loan 
sales, and the resultant increased use of FHLB advances to fund the excess.

Total interest expense increased to $15.8 million in 1998, compared to $14.1 
million in 1997 and $11.9 million in 1996. The increases were principally 
due to the increased use of FHLB advances, which averaged $35.7 million in 
1998, compared to $16.6 million in 1997 and $462,000 in 1996. Increased 
reliance upon FHLB advances began in 1997 and continued in 1998 as the 
growth in average deposits, from $244.9 million in 1996 to $261.4 million in 
1997 and $275.7, did not keep pace with loan demand. The Company has 
diminished some of its reliance upon FHLB advances by selling $17.7 million 
of mortgage loans on the secondary market in 1998. The average rate paid for 
deposits decreased to 4.94% in 1998 from 4.98% in 1997 as the maturity of 
the deposit portfolio, particularly certificates of deposit, shifted to 
shorter-term, lower yielding deposits. The average rate paid for deposits 
increased to 4.98% in 1997 from 4.84% in 1996 as the mix in the deposit 
portfolio shifted to a greater percentage of higher yielding certificates of 
deposit from lower yielding transaction accounts.

Yields Earned and Rates Paid. The spread between the average yield on 
interest-earning assets and the average cost of interest-bearing liabilities 
remained relatively stable, reflecting the interest rate environment, 
declining only slightly to 3.11% in 1998 from 3.13% in 1997. The decline in 
the interest rate spread from 3.26% in 1996 to 3.13% in 1997 was a result of 
the initiation of treasury stock purchases, which replaced a noninterest-
bearing funding source with interest-bearing FHLB advances.

The excess of average interest-earning assets over average interest-bearing 
liabilities remained steady at $61.7 million for both 1998 and 1997, 
compared to $69.2 million for 1996. The ratio of average interest-earning 
assets to average interest-bearing liabilities was 119.82% for 1998, 
compared to 122.18% for 1997 and 128.21% for 1996.

Provision for Loan Losses. The Company maintains an allowance for loan 
losses in an amount which, in management's judgment, is adequate to absorb 
probable losses inherent in its loan portfolio. The amount of the provision 
which is charged against earnings each year and added to the allowance is 
based upon management's ongoing review of such factors as historical loss 
performance, general prevailing economic conditions, changes in the size and 
composition of the loan portfolio and considerations relating to specific 
loans, including the ability of the borrower to repay the loan and the 
estimated value of the underlying collateral.

The foregoing statement regarding the adequacy of the allowance for loan 
losses is a "forward-looking " statement within the meaning of Section 27A 
of the Securities Act of 1933, as amended, and Section 21E of the Securities 
Exchange Act of 1934, as amended. Factors that could affect the adequacy of 
the allowance for loan losses include, but are not limited to, the 
following: (1) changes in the national and local economy which may 
negatively impact the ability of borrowers to repay their loans and which 
may cause the value of real estate and other properties that secure 
outstanding loans to decline; (2) unforeseen adverse changes in 
circumstances with respect to certain large loans; (3) decreases in the 
value of collateral securing consumer loans to amounts equal to less than 
the outstanding balances of the consumer loans; and (4) determinations by 
various regulatory agencies that Industrial Savings must recognize additions 
to its loan loss allowance based on such regulators' judgment of information 
available to them at the time of their examinations.

The provision for loan losses was $200,000 in 1998, compared to $186,000 in 
1997 and $180,000 1996. The Company had $14,000 in charge-offs during 1998, 
compared to $2,000 in 1997 and none in 1996. Recoveries totaled $2,000 in 
1998 and $1,000 in both 1997 and 1996. Nonperforming loans were $1.5 million 
at year-end 1998, compared to $1.0 million at year-end 1997 and $1.2 million 
at year-end 1996. At year-end 1998, the allowance for loan losses was 
129.72% of nonperforming loans and .59% of total loans compared to 168.76% 
and .54% at year-end 1997. Management determined that a provision for loan 
losses was warranted in 1998 based on the increased level of nonperforming 
loans and the growth in loans receivable during 1998.

Noninterest Income. Noninterest income increased to $858,000 in 1998, 
compared to $509,000 in 1997 and  $447,000 in 1996. Service fees related to 
the growing deposit base and expanding ATM usage contributed largely to 
these increases during each of the three years. In 1998, income of $174,000 
was recognized as a result of the sale of mortgage loans on the secondary 
market.

Noninterest Expense. Noninterest expense amounted to $6.7 million in 1998, 
compared to $6.2 million in 1997 and $9.5 million in 1996. The amount for 
1996 was significantly higher because of the industry-wide special SAIF 
assessment and the employee benefits expense associated with accounting for 
the special return of capital distribution on unallocated ESOP shares.

Salaries and employee benefits were $3.4 million in 1998, compared to $3.1 
million in 1997 and $4.3 million in 1996.  The expense was higher in 1996 
due principally to the recording of $1.2 million associated with the $3.50 
per share special return of capital distribution related to unallocated ESOP 
shares. Salaries and employee benefits were also affected by the 
implementation of the MRP in 1996, by increases in ESOP expense as the value 
of the Company's stock continues to rise, and by normal pay increases.

State franchise tax has decreased from $843,000 in 1996 to $524,000 in 1997 
and $442,000 in 1998, due to intercompany transfers of capital from 
Industrial Savings to Industrial Bancorp in 1998 and 1997. In addition to 
reducing the amount of state franchise tax paid, the transfer will provide 
the Company with greater flexibility in the future. Federal deposit 
insurance premiums increased to $168,000 in 1998 compared to $135,000 in 
1997, as a result of the growth in deposits. The $2.1 million of insurance 
premiums in 1996 included the $1.5 million special assessment upon SAIF-
insured deposits.

Data processing and related fees, which are based on the outstanding number 
of loan and deposit accounts, increased to $437,000 in 1998 from $370,000 in 
1997 and $355,000 in 1996. Total occupancy and equipment and depreciation 
expense increased to $757,000 for 1998, compared to $638,000 for 1997 and 
$601,000 in 1996, due principally to the significant upgrade in technology 
the Company made during 1998. Advertising expense has remained relatively 
stable totaling $188,000 for 1998, down from $194,000 in 1997, which was up 
from $186,000 in 1996. Other expenses increased $52,000 in 1998 compared to 
1997, and $72,000 in 1997 compared to 1996, due principally to increases in 
lending activity.

Income Tax Expense. Fluctuations in income tax expense are primarily 
attributable to the change in income before taxes. Income before taxes 
amounted to $8.7 million in 1998, compared to $7.9 million in 1997 and $4.4 
million in 1996. The Company's effective tax rates were 34.7% in 1998, 
compared to 35.2% in 1997 and 45.7% in 1996. The higher effective tax rate 
in 1996 was because the special return of capital distribution as applied to 
unallocated ESOP shares was not deductible for tax purposes.

                                ASSET QUALITY

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

The Company has consistently maintained a high quality loan portfolio, as 
evidenced by its level of nonperforming assets which consists of loans 
accounted for on a nonaccrual basis, accruing loans past due 90 days or 
more, and real estate acquired through or instead of foreclosure. 
Nonperforming assets were $1.4 million at year-end 1998, compared to $1.1 
million at year-end 1997 and $1.2 million at year-end 1996. As a percentage 
of year-end total assets, nonperforming assets were 0.38% in 1998, 0.31% in 
1997 and 0.38% in 1996.

The Company's allowance for loan losses has increased, consistent with 
growth in the loan portfolio, over the past five years and stood at $1.9 
million at year-end 1998 compared to $1.2 million at year-end 1994. As a 
percentage of nonperforming loans, the allowance for loan losses has 
increased from 80.71% at year-end 1994 to 129.72% at year-end 1998. Over the 
last five years, the Company has experienced total charge-offs of $38,000 
and total recoveries of $21,000.

                       ASSET AND LIABILITY MANAGEMENT

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

The Company is subject to interest rate risk to the extent that its 
interest-earning assets reprice differently than its interest-bearing 
liabilities. Exposure to interest rate risk is measured with the use of 
interest rate sensitivity analysis to estimate the change in the Company's 
"net portfolio value" ("NPV") in the event of hypothetical changes in 
interest rates.

As part of its efforts to monitor and manage interest rate risk, the 
Company's asset and liability committee reviews with the Board of Directors, 
on a quarterly basis, reports provided by the Office of Thrift Supervision 
("OTS") and considers methods of maintaining acceptable levels of changes in 
NPV. The Company's asset and liability management is designed to minimize 
the impact of sudden and sustained changes in interest rates on NPV. If 
estimated changes to NPV are not within the limits established by the Board, 
the Board may direct management to adjust the asset and liability mix to 
bring interest rate risk within board-approved limits.

Generally, NPV is the discounted present value of the difference between 
incoming cash flows on interest-earning assets and other assets and outgoing 
cash flows on interest-bearing liabilities and other liabilities. The 
application of the NPV methodology attempts to quantify interest rate risk 
in the event of a sudden and sustained 1 to 4 percent increase or decrease 
in market rates.

The following table presents, at year-end 1998, an analysis of the interest 
rate risk of the Company, as measured by changes in NPV for instantaneous 
and sustained parallel shifts of 1% to 4% increments in market interest 
rates. The table also contains the policy limits set by the Board as the 
maximum change in NPV that the Board deems advisable in the event of various 
changes in interest rates. Such limits have been established with 
consideration of the dollar impact of various rate changes and the strong 
capital position of the Company.

<TABLE>
<CAPTION>

                                                Change in Net Portfolio Value
                                 Board limit    -----------------------------
      Change in interest rate     % change            $             %
      -----------------------------------------------------------------------
                                                       (In thousands)

               <S>                   <C>           <C>            <C>
               + 4.0%                80%           (26,680)       (51)
               + 3.0%                60            (18,960)       (36)
               + 2.0%                40            (11,274)       (22)
               + 1.0%                20             (4,434)        (9)
                   0                  -                  -          -
               - 1.0%                20              1,857          4
               - 2.0%                40              3,335          6
               - 3.0%                60              5,676         11
               - 4.0%                80              7,046         14

</TABLE>

Based on the above information, in the event that interest rates rise from 
the recent low levels, the net interest income of the Company could be 
negatively affected. Moreover, rising interest rates could negatively affect 
the earnings of the Company due to diminished loan demand. The Company 
attempts to mitigate interest rate risk by originating adjustable-rate loans 
and by selling a portion of its of fixed-rate mortgage loans on the 
secondary market to Freddie Mac.

NPV is calculated by the OTS using information provided by the Company. 
Computation of prospective effects of hypothetical interest rate changes are 
based on numerous assumptions, including relative levels of market interest 
rates, loan prepayments and deposit run-off, and should not be relied upon 
as indicative of actual results. Further the computations do not contemplate 
any actions the Company may undertake in response to changes in interest 
rates.

                       LIQUIDITY AND CAPITAL RESOURCES

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

The Company's liquidity, primarily represented by cash and cash equivalents, 
is a result of its operating, investing and financing activities, which are 
summarized as follows:

<TABLE>
<CAPTION>

                                                       1998       1997       1996
                                                      -----------------------------
                                                             (In thousands)

    <S>                                               <C>        <C>        <C>
    Net income                                        $ 5,704    $ 5,113    $ 2,399
    Adjustments                                           744        (34)     2,062
                                                      -----------------------------
    Net cash from operating activities                  6,448      5,079      4,461
    Net cash from investment activities                (4,186)   (32,584)   (22,555)
    Net cash from financing activities                 15,502     30,864     (1,204)
                                                      -----------------------------
    Net change in cash and cash equivalents            17,764      3,359    (19,298)
    Cash and cash equivalents at beginning of year     10,772      7,413     26,711
                                                      -----------------------------
    Cash and cash equivalents at end of year          $28,536    $10,772    $ 7,413
                                                      =============================

</TABLE>

The principal sources of funds for the Company are deposits, FHLB 
borrowings, loan repayments, the sale of mortgage loans on the secondary 
market, maturity of investment securities and funds generated through 
operations. While scheduled loan repayments and maturing investments are 
relatively predictable, deposit flows and loan prepayments are more 
influenced by interest rates, general economic conditions and competition. 
The Company maintains a level of investment in liquid assets which is based 
upon management's assessment of (i) the need for funds, (ii) expected 
deposit flows, (iii) the yields available on short-term liquid assets and 
(iv) the objectives of the asset and liability management program of the 
Company.

OTS regulations presently require the Company to maintain an average daily 
balance of liquid assets, which may include, but are not limited to, 
investments in U. S. Treasury and federal agency obligations and other 
investments generally having maturities of five years or less, in an amount 
equal to 4% of the sum of the Company's average daily balance of net 
withdrawable deposit accounts and borrowings payable in one year or less. 
The liquidity requirement, which may be changed from time to time by the OTS 
to reflect changing economic conditions, is intended to provide a source of 
relatively liquid funds upon which the Company may rely if necessary to fund 
deposit withdrawals or other short-term funding needs. At year-end 1998, the 
regulatory liquidity ratio of the Company was 7.90%. At such date, the 
Company had commitments to originate loans and loans in process totaling 
$12.8 million and commitments to sell loans totaling $341,000. The Company 
considers its liquidity and capital reserves sufficient to meet its 
foreseeable short-term and long-term needs.

The Company's savings and loan association is required by OTS regulations to 
maintain specified minimum amounts of capital. At year-end 1998, the 
association exceeded all applicable minimum capital requirements. The 
association's actual capital and regulatory capital requirements at year-end 
1998 were as follows:

<TABLE>
<CAPTION>

                                     Amount    Percent of assets
                                    ----------------------------
                                           (In thousands)

      <S>                           <C>              <C>
      Tangible capital: (1)
        Capital level               $34,110           8.85%
        Requirement                   5,784           1.50
                                    ----------------------
        Excess                      $28,326           7.35%
                                    ======================
      Tier 1 (Core) capital: (1)
        Capital level               $34,110           8.85%
        Requirement                  11,569           3.00
                                    ----------------------
        Excess                      $22,541           4.85%
                                    ======================
      Risk-based capital: (2)
        Capital level               $36,018          17.21%
        Requirement                  16,740           8.00
                                    ----------------------
        Excess                      $19,278           9.21%
                                    ======================

--------------------
<F1>  Tangible and Tier 1 (Core) capital percentages are based on adjusted 
      total assets of  $385.6 million.
<F2>  Risk-based capital percentages are based on risk-weighted assets of 
      $209.2 million.

</TABLE>

                         YEAR 2000 COMPLIANCE ISSUES

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

The Company began addressing the Year 2000 compliance issue in 1996, with 
the review and analysis of its customer delivery system, specifically its 
teller terminals and related equipment. Early in 1997, the Company formed a 
Year 2000 Committee, which includes senior management representatives, to 
assess the potential risk, establish a budget, and develop and implement a 
plan to mitigate the risk that might arise from the failures of computer 
programming to recognize the Year 2000. The Year 2000 compliance program 
established by the committee includes quarterly progress reports submitted 
to the Board of Directors, contingency planning, and the completion of all 
internal testing by the end of the first quarter of 1999.

Included in the assessment was the identification of technology applications 
and systems that could be impacted by the Year 2000 date change and the 
identification of any third-party vendors that impact the daily operations 
of the Company. The Committee acknowledged that the greatest potential 
impact upon the Company is the risk related to the Company's data processing 
service bureau. The Committee also determined that the teller terminals and 
related equipment then in use were not Year 2000 compliant and that the 
manufacturer had no plans to correct the problem. Various other in-house 
applications and third-party dependent equipment were identified which would 
require testing for Year 2000 compliance.

The budget established as part of the compliance program consisted mainly of 
the hardware and software purchases necessary to replace the then existing 
customer delivery system with new Year 2000 compliant technology, primarily 
computers and the related equipment. The renovation of this technology was 
estimated at approximately $600,000. Other factors, such as software update 
purchases, training and additional employee hours were also considered.

Beyond the technology conversion to the new customer delivery system, which 
was completed by mid-year 1998, the primary task of the Committee's Year 
2000 compliance program was the validation, or testing, of any application, 
system or equipment recognized during assessment. Subsequent to the 
installation of the new teller terminals and platform system, which was 
completed by mid-year 1998, testing was completed which verified that the 
new system was Year 2000 compliant. The highest priority and effort has been 
devoted to monitoring the progress of testing associated with Fiserv, the 
nationally recognized data processing service bureau under contract with the 
Company to perform transaction processing. The Company has continually 
assessed the validation of the Year 2000 compliance of this application, 
which has been identified as mission critical to the Company's operations. 
Fiserv's validation efforts have included a date handling strategy of the 
host software, client task force proxy testing, third party vendor interface 
testing, and application review, testing, and programming changes to both 
the base system and individualized client packages of the OnLine Financial 
teller/platform system supported and maintained by Fiserv. By year-end 1998, 
all in-house equipment identified during assessment had been tested, with 
the exception of automated teller machines, which are scheduled to have 
validation completed by the end of the first quarter of 1999.

Vendors used by the Company have been identified and assessed for the impact 
upon operations of the Company if they would be unable to provide services 
due to Year 2000 noncompliance. The Company has also reviewed the potential 
impact of Year 2000 noncompliance of large borrowers or significant 
employers in our primary market area. The loan portfolio of the Company is 
highly diversified with regard to individual borrowers and types of 
businesses, with the largest segment being to one- to four-family 
residential mortgage loans. The primary market area is not significantly 
dependent upon one employer or industry. The Company does not anticipate any 
significant or prolonged Year 2000 related difficulties generated by the 
identified vendors, large borrowers, or local employer base that would 
materially affect the Company's net income or cash flow.

The Company has also considered the risk arising from relationships with 
customers of Industrial Savings, both borrowers and depositors. As these 
customers both provide (through deposits) and use (through loans) the 
majority of the funds available to the Company, there is a potential risk 
that the Year 2000 issue could lead to increased demand for credit, 
increased levels of nonperforming loans, or increased demand upon the 
Company's liquidity. The Company has developed and made available to 
customers and other interested parties an informational brochure explaining 
the possible impact of the Year 2000 problems and what the Company has done 
to mitigate such potential problems.

A contingency plan has been developed to insure the necessary policies and 
procedures are in effect to mitigate potential interruptions in service that 
the Company may experience as the Year 2000 begins. The Company has had a 
disaster recovery plan in effect for many years, which has worked well when 
events required its use. The Year 2000 Contingency Plan approved by the 
Board of Directors has expanded the basic disaster recovery plan and 
addressed issues specific to the potential risk associated with the Year 
2000 problems. The greatest concern the Company has related to contingency 
planning is the possible interruption of electrical power, which is a 
contingency faced by all businesses.

The Company's efforts to devise and implement the Year 2000 compliance 
program has cost approximately $650,000 to date. These costs principally 
represent the hardware and software purchases associated with the update and 
conversion of teller terminals in bringing the customer delivery system Year 
2000 compliant. While incidental expense is expected in 1999, and although 
the Company anticipates and has planned for an increased demand for 
liquidity, the Year 2000 Committee estimates that the impact upon the 
Company's results of operations and capital resources will be minimal. 

                   EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS

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

The Financial Accounting Standards Board has issued new accounting standards 
that are effective for the Company's consolidated financial statements for 
the years ending after December 31, 1998.

Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting 
for Derivative Instruments and Hedging Activities," issued in June 1998 and 
effective for fiscal years beginning after June 15, 1999, addresses the 
accounting for derivative instruments and certain derivative instruments 
embedded in other contracts, and hedging activities. The statement 
standardizes the accounting for derivative instruments by requiring that an 
entity recognize those items as assets or liabilities in the statement of 
financial position and measure them at fair value.

SFAS No. 134, "Accounting for Mortgage-Backed Securities Retained after the 
Securitization of Mortgage Loans Held for Sale by a Mortgage Banking 
Enterprise," issued in October 1998, will allow, beginning in 1999, mortgage 
loans that are securitized to be classified as trading, available for sale, 
or in certain circumstances held to maturity. Currently these must be 
classified as trading.

These statements are not expected to have a material effect on the Company's 
consolidated financial position or results of operations since the Company 
has not historically engaged in these activities.

                         CONSOLIDATED BALANCE SHEETS
                           (Dollars in thousands)

<TABLE>
<CAPTION>

December 31,                                          1998        1997
------------------------------------------------------------------------

<S>                                                 <C>         <C>
ASSETS
Cash and noninterest-bearing deposits               $  1,067    $  1,273
Interest-bearing demand deposits                       5,469       3,499
Overnight deposits                                    22,000       6,000
                                                    --------------------
  Cash and cash equivalents                           28,536      10,772
Investment securities available for sale,
 at fair value                                        21,235      21,030
Investment securities held to maturity 
 (fair value: 1998 - $302;  1997 - $474)                 283         437
Loans receivable - net                               326,972     321,669
Federal Home Loan Bank stock                           3,256       2,938
Office properties and equipment - net                  5,387       4,972
Accrued interest receivable                            2,051       1,985
Other assets                                             339         220
                                                    --------------------
      Total assets                                  $388,059    $364,023
                                                    ====================

LIABILITIES
Deposits                                            $288,584    $270,957
Federal Home Loan Bank advances                       35,000      29,000
Accrued interest payable and other liabilities         3,734       3,204
                                                    --------------------
      Total liabilities                              327,318     303,161
                                                    --------------------

SHAREHOLDERS' EQUITY
Common stock, no par value, 10,000,000 shares
 authorized, 5,554,500 shares issued                  34,669      34,669
Additional paid-in capital                             2,472       1,879
Retained earnings                                     37,522      34,569
Accumulated other comprehensive income                 2,101       1,333
Unearned employee stock ownership plan shares         (3,100)     (3,529)
Unearned compensation                                 (1,227)     (1,753)
Treasury stock, at cost (1998 - 723,464
 shares; 1997 - 451,700 shares)                      (11,696)     (6,306)
                                                    --------------------
      Total shareholders' equity                      60,741      60,862
                                                    --------------------

      Total liabilities and shareholders' equity    $388,059    $364,023
                                                    ====================

</TABLE>

        See accompanying notes to consolidated financial statements.

                      CONSOLIDATED STATEMENTS OF INCOME
              (Dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>

For the year ended December 31,                           1998       1997       1996
--------------------------------------------------------------------------------------

<S>                                                      <C>        <C>        <C>
Interest income
  Interest and fees on loans                             $28,476    $25,779    $23,040
  Interest and dividends on investment securities          1,378      1,590      1,779
  Interest on deposits                                       708        436        649
                                                         -----------------------------
                                                          30,562     27,805     25,468
                                                         -----------------------------

Interest expense
  Interest on deposits                                    13,630     13,005     11,841
  Interest on Federal Home Loan Bank advances              2,195      1,060         22
                                                         -----------------------------
                                                          15,825     14,065     11,863
                                                         -----------------------------
Net interest income                                       14,737     13,740     13,605
Provision for loan losses                                    200        186        180
                                                         -----------------------------
  Net interest income after provision for loan losses     14,537     13,554     13,425
                                                         -----------------------------

Noninterest income
  Service fees and other charges                             635        466        401
  Other                                                      223         43         46
                                                         -----------------------------
                                                             858        509        447
                                                         -----------------------------

Noninterest expense
  Salaries and employee benefits                           3,430      3,117      4,291
  State franchise tax                                        442        524        843
  Federal deposit insurance premiums                         168        135      2,060
  Occupancy and equipment                                    368        352        330
  Data processing                                            437        370        355
  Depreciation                                               389        286        271
  Advertising                                                188        194        186
  Other                                                    1,241      1,189      1,117
                                                         -----------------------------
                                                           6,663      6,167      9,453
                                                         -----------------------------
Income before income tax                                   8,732      7,896      4,419
Provision for income tax                                   3,028      2,783      2,020
                                                         -----------------------------

Net income                                               $ 5,704    $ 5,113    $ 2,399
                                                         =============================

Basic earnings per share                                 $  1.22    $  1.04    $  0.47
Diluted earnings per share                               $  1.19    $  1.03    $  0.47

</TABLE>

               CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                           (Dollars in thousands)

<TABLE>
<CAPTION>

For the year ended December 31,                          1998      1997      1996
-----------------------------------------------------------------------------------

<S>                                                      <C>       <C>       <C>
Net income                                               $5,704    $5,113    $2,399

Other comprehensive income:
  Unrealized gains/losses on securities, net of taxes       768       483       102
                                                         --------------------------

Comprehensive income                                     $6,472    $5,596    $2,501
                                                         ==========================

</TABLE>

        See accompanying notes to consolidated financial statements.

               CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
              (Dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>

                                                                       Unrealized
                                                                       Gain on
                                             Additional                Securities    Unearned    Unearned
                                   Common    Paid in       Retained    Available     ESOP        Compen-    Treasury
                                   Stock     Capital       Earnings    for Sale      Shares      sation     Stock         Total
                                   ---------------------------------------------------------------------------------------------

<S>                                <C>         <C>         <C>           <C>         <C>         <C>         <C>         <C>
Balance at January 1, 1996         $54,110                 $30,633       $  748      $(4,436)                            $81,055

Net income                                                   2,399                                                         2,399
Capital distribution declared
 ($3.50 per share)                 (19,441)                                                                              (19,441)
Purchase of treasury stock
 (50,000 shares)                                                                                             $  (634)       (634)
Cash dividends declared
 ($.25 per share)                                           (1,278)                                                       (1,278)
Employee Stock Ownership Plan:
  Capital distribution on
   unallocated shares                          $1,553                                                                      1,553
  Shares released                                 116                                    462                                 578
Management Recognition Plan:
  Shares purchased                                                                               $(2,630)                 (2,630)
  Compensation earned                                                                                351                     351
Change in unrealized gain on
 securities available for sale                                              102                                              102
Other changes/adjustments                                       49                                                            49
                                   ---------------------------------------------------------------------------------------------
Balance at December 31, 1996        34,669      1,669       31,803          850       (3,974)     (2,279)       (634)     62,104

Net income                                                   5,113                                                         5,113
Purchase of treasury stock
 (401,700 shares)                                                                                             (5,672)     (5,672)
Cash dividends declared
 ($.48 per share)                                           (2,347)                                                       (2,347)
Employee Stock Ownership Plan:
  Shares released                                 210                                    445                                 655
Management Recognition Plan:
  Compensation earned                                                                                526                     526
Change in unrealized gain on
 securities available for sale                                              483                                              483
                                   ---------------------------------------------------------------------------------------------
Balance at December 31, 1997        34,669      1,879       34,569        1,333       (3,529)     (1,753)     (6,306)     60,862

Net income                                                   5,704                                                         5,704
Purchase of treasury stock
 (271,764 shares)                                                                                             (5,466)     (5,466)
Cash dividends declared
 ($.59 per share)                                           (2,751)                                                       (2,751)
Exercise of stock options                          16                                                             76          92
Employee Stock Ownership Plan:
  Shares released                                 415                                    429                                 844
Management Recognition Plan:
  Compensation earned                             162                                                526                     688
Change in unrealized gain on
 securities available for sale                                              768                                              768
                                   ---------------------------------------------------------------------------------------------
Balance at December 31, 1998       $34,669     $2,472      $37,522       $2,101      $(3,100)    $(1,227)   $(11,696)    $60,741
                                   =============================================================================================

</TABLE>

        See accompanying notes to consolidated financial statements.

                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                           (Dollars in thousands)

<TABLE>
<CAPTION>

For the year ended December 31,                             1998        1997        1996
------------------------------------------------------------------------------------------

<S>                                                        <C>         <C>         <C>
Cash flows from operating activities
  Net income                                               $ 5,704     $ 5,113     $ 2,399
  Adjustments to reconcile net income to net cash
   from operating activities
    Depreciation                                               389         286         271
    Provision for loan losses                                  200         186         180
    Accretion of deferred loan fees                         (1,107)       (674)       (639)
    FHLB stock dividends                                      (224)       (200)       (176)
    Net accretion on investment securities                     (41)        (50)        (55)
    ESOP expense                                               844         655       1,794
    MRP compensation expense                                   688         526         351
    Net change in:
      Deferred taxes                                           124         105          29
      Accrued interest receivable and other assets            (139)       (637)         96
      Accrued interest payable and other liabilities            10        (231)        211
                                                           -------------------------------
    Net cash from operating activities                       6,448       5,079       4,461
                                                           -------------------------------
Cash flows from investing activities
  Proceeds from maturities of investment securities
   available for sale                                        6,000      12,000      10,000
  Purchases of investment securities available for sale     (5,000)     (9,008)     (5,910)
  Principal repayments and maturities of investment
   securities held to maturity                                 154         124         205
  Net increase in loans                                     (4,442)    (35,378)    (26,220)
  FHLB stock purchases                                         (94)        (93)        (69)
  Properties and equipment expenditures, net                  (804)       (229)       (561)
                                                           -------------------------------
    Net cash from investing activities                      (4,186)    (32,584)    (22,555)
                                                           -------------------------------
Cash flows from financing activities
  Net increase in deposits                                  17,627      11,883      20,792
  Proceeds from FHLB advances                               10,000      33,000       2,000
  Repayment of FHLB advances                                (4,000)     (6,000)
  Capital distribution to shareholders                                             (19,071)
  Purchase of MRP shares                                                            (2,630)
  Proceeds from exercise of stock options                       92
  Cash dividends paid                                       (2,751)     (2,347)     (1,661)
  Purchase of treasury stock                                (5,466)     (5,672)       (634)
                                                           -------------------------------
    Net cash from financing activities                      15,502      30,864      (1,204)
                                                           -------------------------------
Net change in cash and cash equivalents                     17,764       3,359     (19,298)
Cash and cash equivalents at beginning of year              10,772       7,413      26,711
                                                           -------------------------------
Cash and cash equivalents at end of year                   $28,536     $10,772     $ 7,413
                                                           ===============================

Cash paid during the year for:
  Interest                                                 $15,765     $13,938     $11,655
  Income taxes                                               2,707       2,947       1,780
Noncash transactions:
  Transfer of loans to real estate owned                        46          71

</TABLE>

        See accompanying notes to consolidated financial statements.

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation:  The consolidated financial statements include 
Industrial Bancorp, Inc. and its wholly-owned subsidiary, Industrial Savings 
and Loan Association, together referred to as "the Company". Intercompany 
transactions and balances are eliminated.

Use of Estimates:  To prepare financial statements in conformity with 
generally accepted accounting principles,  management makes estimates and 
assumptions based on available information. These estimates and assumptions 
affect the amounts reported in the financial statements and disclosures 
provided, and future results could differ. The allowance for loan losses and 
fair values of financial instruments are particularly subject to change.

Cash Flows:  Cash and cash equivalents include cash, demand deposits with 
other financial institutions and overnight deposits. Net cash flows are 
reported for loan and deposit transactions.

Investment Securities:  Investment securities are classified as held to 
maturity and carried at amortized cost when management has the positive 
intent and ability to hold to maturity. Investment securities are classified 
as available for sale when they might be sold before maturity. Investment 
securities available for sale are carried at fair value, with unrealized 
gains and losses reported in other comprehensive income. Other securities 
such as Federal Home Loan Bank stock are carried at cost.

Interest income includes amortization of purchase premium or discount.

Loans Receivable:  Loans are reported at the principal balance outstanding, 
net of unearned interest, deferred loan fees and costs, and an allowance for 
loan losses. Loans held for sale are reported at the lower of cost or 
market, on an aggregate basis.

Interest income is reported on the interest method and includes amortization 
of net deferred loan fees and costs over the loan term. Interest income is 
not reported when full loan repayment is in doubt, typically when the loan 
is impaired or payments are past due over 90 days.

Allowance for Loan Losses:  The allowance for loan losses is a valuation 
allowance for probable credit losses, increased by the provision for loan 
losses and decreased by charge-offs less recoveries. Management estimates 
the allowance balance required using past loan loss experience, known and 
inherent risks in the nature and volume of the portfolio, information about 
specific borrower situations and estimated collateral values, economic 
conditions, and other factors. Allocations of the allowance may be made for 
specific loans, but the entire allowance is available for any loan that, in 
management's judgment, should be charged-off.

A loan is impaired if full payment under the loan terms is not expected. 
Impairment is evaluated in total for smaller-balance loans of similar nature 
such as residential mortgage or consumer loans, and on an individual loan 
basis for other loans. If a loan is impaired, a portion of the allowance is 
allocated so that the loan is reported net, at the present value of 
estimated future cash flows using the loan's existing rate or at the fair 
value of collateral if repayment is expected solely from the collateral.

Servicing Rights:  Servicing rights are recognized as assets for purchased 
rights and for the allocated value of retained servicing rights on loans 
sold. Servicing rights are expensed in proportion to, and over the period 
of, estimated net servicing revenues. Impairment is evaluated based on the 
fair value of the rights, using groupings of the underlying loans as to 
interest rates and then, secondarily, as to geographic and prepayment 
characteristics. Any impairment of a grouping is reported as a valuation 
allowance.

Real Estate Owned:  Real estate acquired through or instead of foreclosure 
is initially recorded at the fair value when acquired, establishing a new 
cost basis. If fair value declines, a valuation allowance is recorded 
through expense. Costs after acquisition are expensed.

Office Properties and Equipment:  Office properties and equipment are stated 
at cost less accumulated depreciation. Depreciation is computed over the 
estimated useful lives on an accelerated basis, except for buildings for 
which the straight line basis is principally used.

Stock Compensation:  Employee compensation expense under stock option plans 
is reported if options are granted below market price at grant date. Pro 
forma disclosures of net income and earnings per share are shown using the 
fair value method of Statement of Financial Accounting Standards (SFAS) 
No.123 to measure expense for options granted after 1994, using an option 
pricing model to estimate fair value.

Income Taxes: Income tax expense is the total of the current year income tax 
due or refundable and the change in deferred tax assets and liabilities. 
Deferred tax assets and liabilities are the expected future tax amounts for 
the temporary differences between carrying amounts and tax bases of assets 
and liabilities, computed using enacted tax rates.

Employee Stock Ownership Plan:  The cost of shares issued to the ESOP, but 
not yet allocated to participants, is shown as a reduction of shareholders' 
equity. Compensation expense is based on the market price of shares as they 
are committed to be released to participant accounts. Dividends on allocated 
ESOP shares reduce retained earnings; dividends on unearned ESOP shares 
reduce debt and accrued interest.

Financial Instruments:  Financial instruments include credit instruments, 
such as commitments to make loans, issued to meet customer financing needs. 
The face amount for these items represents the exposure to loss, before 
considering customer collateral or ability to repay.

Fair values of financial instruments are estimated using relevant market 
information and other assumptions, as more fully disclosed separately. Fair 
value estimates involve uncertainties and matters of significant judgment 
regarding interest rates, credit risk, prepayments, and other factors, 
especially in the absence of broad markets for particular items. Changes in 
assumptions or in market conditions could significantly affect the 
estimates.

Comprehensive Income:  Comprehensive income consists of net income and other 
comprehensive income. Other comprehensive income consists of unrealized 
gains and losses on investment securities which are also recognized as 
separate components of equity. The accounting standard that requires 
reporting comprehensive income first applies for 1998, with prior 
information restated to be comparable.

Earnings Per Share: Basic earnings per share is net income divided by the 
weighted average number of common shares outstanding during the period. ESOP 
shares are considered outstanding for this calculation unless unearned. 
Diluted earnings per share includes the dilutive effect of additional 
potential common shares issuable under stock options.

Loss Contingencies:  Loss contingencies, including claims and legal actions 
arising in the ordinary course of business, are recorded as liabilities when 
the likelihood of loss is probable and an amount or range of loss can be 
reasonably estimated. Management does not believe that there are now any 
such matters that would have a material effect on the financial statements.

Reclassifications:  Certain items in the 1997 and 1996 financial statements 
have been reclassified to correspond with the 1998 presentation.

NOTE 2 - INVESTMENT SECURITIES

Investment securities as of the end of the year were as follows:

<TABLE>
<CAPTION>

                                                  Gross         Gross       Estimated
                                   Amortized    Unrealized    Unrealized       Fair
                                      Cost        Gains         Losses        Value
                                   --------------------------------------------------

<S>                                 <C>           <C>           <C>          <C>
Available for sale

1998
----
  U.S. Treasury securities          $12,003       $  153                     $12,156
  U.S. agency securities              6,002           40                       6,042
  Federal Home Loan Mortgage
   Corporation preferred stock           46        2,991                       3,037
                                    --------------------                     -------
                                    $18,051       $3,184                     $21,235
                                    ====================                     =======

1997
----
  U.S. Treasury securities          $15,971       $   78        $  (1)       $16,048
  U.S. agency securities              2,993           18                       3,011
  Federal Home Loan Mortgage
   Corporation preferred stock           46        1,925                       1,971
                                    ------------------------------------------------
                                    $19,010       $2,021        $  (1)       $21,030
                                    ================================================

Held to maturity

1998
----
  Mortgage-backed securities        $   283       $   19                     $   302
                                    =======       ======                     =======

1997
----
  Mortgage-backed securities        $   437       $   37                     $   474
                                    =======       ======                     =======


</TABLE>

Contractual maturities of debt securities at year-end 1998 were as follows:

<TABLE>
<CAPTION>

                                                           Amortized     Estimated
                                                              Cost      Fair Value
                                                           -----------------------

<S>                                                         <C>          <C>
Available for sale
  Due in one year or less                                   $10,007      $10,033
  Due after one year through five years                       7,998        8,165
                                                            --------------------
                                                             18,005       18,198
  Federal Home Loan Mortgage Corporation preferred stock         46        3,037
                                                            --------------------
                                                            $18,051      $21,235
                                                            ====================
Held to maturity
  Mortgage-backed securities                                $   283      $   302
                                                            ====================

</TABLE>

No investment securities were sold during 1998, 1997 or 1996. Investment 
securities pledged at year-end 1998 and 1997 had costs of $15.4 million and 
$15.5 million and were pledged to secure public deposits.

NOTE 3 - LOANS RECEIVABLE

Loans receivable as of the end of the year were as follows:

<TABLE>
<CAPTION>

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

      <S>                                      <C>          <C>
      Real estate loans:
        One- to four-family                    $279,237     $278,438
        Home equity                              16,624       15,407
        Construction                             17,858       20,013
        Multi-family                              9,165        8,170
        Nonresidential                           10,979       10,521
                                               ---------------------
            Total real estate loans             333,863      332,549
      Commercial loans                              451          297
      Consumer loans                              4,859        4,408
                                               ---------------------
            Total loans                         339,173      337,254
      Less:
        Undisbursed construction loan funds      (6,251)      (9,672)
        Net deferred loan fees                   (4,020)      (4,171)
        Allowance for loan losses                (1,930)      (1,742)
                                               ---------------------
                                               $326,972     $321,669
                                               =====================


</TABLE>

Activity in the allowance for loan losses for the year was as follows:

<TABLE>
<CAPTION>

                                       1998       1997       1996
                                      ----------------------------

      <S>                             <C>        <C>        <C>
      Balance at beginning of year    $1,742     $1,557     $1,376
        Provision for losses             200        186        180
        Charge-offs                      (14)        (2)         -
        Recoveries                         2          1          1
                                      ----------------------------
      Balance at end of year          $1,930     $1,742     $1,557
                                      ============================

</TABLE>

No loans were classified as impaired at year-end 1998, 1997 and 1996 or 
during the years then ended. Non-performing loans as of the end of the year 
were as follows:

<TABLE>
<CAPTION>

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

      <S>                                           <C>       <C>
      Loans accounted for on a nonaccrual basis     $  976    $  738
      Accruing loans past due 90 days or more          512       294
                                                    ----------------
            Total non-performing loans              $1,488    $1,032
                                                    ================

</TABLE>

Loans serviced by others, which are not reported as assets, total $21.1 
million and $4.8 million at year-end 1998 and 1997. Activity for capitalized 
mortgage servicing rights was as follows:

<TABLE>
<CAPTION>

                                        1998
                                        ----

      <S>                               <C>
      Balance at beginning of year      $  -
        Additions                        177
        Amortized to expense              (8)
                                        ----
      Balance at end of year            $169
                                        ====

</TABLE>

Loans to principal officers, directors and their related businesses, 
aggregating $60,000 or more to any one related party, were as follows:

<TABLE>
<CAPTION>

                                        1998
                                        ----

      <S>                               <C>
      Balance at beginning of year      $ 95
        Loans originated                 211
        Repayments                      (107)
                                        ----
      Balance at end of year            $199
                                        ====

</TABLE>

NOTE 4 - OFFICE PROPERTIES AND EQUIPMENT

Office properties and equipment as of the end of the year were as follows:

<TABLE>
<CAPTION>

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

      <S>                            <C>       <C>
      Land                           $1,932    $1,829
      Buildings and improvements      5,065     5,058
      Furniture and equipment         1,489     1,083
      Construction in progress           20         -
                                     ----------------
            Total cost                8,506     7,970
      Accumulated depreciation        3,119     2,998
                                     ----------------
                                     $5,387    $4,972
                                     ================

</TABLE>

NOTE 5 - DEPOSITS

Deposits as of the end of the year were as follows:

<TABLE>
<CAPTION>

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

      <S>                                    <C>         <C>
      Noninterest-bearing demand deposits    $  4,009    $  3,287
      Money market accounts                     4,713       4,049
      NOW accounts                             17,750      15,277
      Passbook savings accounts                54,258      52,622
      Certificates of deposit                 207,854     195,722
                                             --------------------
                                             $288,584    $270,957
                                             ====================

</TABLE>

Certificates of deposit with balances of $100,000 or more were $51.7 million 
and $44.3 million at year-end 1998 and 1997.

Scheduled maturities of certificates of deposit at year-end 1998 were as 
follows:

<TABLE>
<CAPTION>

                     Amount
                    --------

      <S>           <C>
      1999          $142,396
      2000            38,002
      2001            20,128
      2002             3,995
      2003             2,103
      Thereafter       1,230
                    --------
                    $207,854
                    ========

</TABLE>

NOTE 6 - FEDERAL HOME LOAN BANK ADVANCES

Advances from the Federal Home Loan Bank at year-end were as follows:

<TABLE>
<CAPTION>

                                                 1998                        1997
                                       ------------------------    ------------------------
      Year of Maturity                 Interest Rate    Amount     Interest Rate    Amount
      ------------------------------------------------------------------------------------

      <S>                               <C>             <C>         <C>             <C>
            1998                                                    5.80 - 6.15%    $ 4,000
            1999                        5.75 - 6.30%    $ 7,000     6.00 - 6.30       7,000
            2000                        6.30 - 6.45       7,000     6.30 - 6.60       7,000
            2001                        5.73 - 6.21       9,000         6.21          2,000
            2002                        5.95 - 6.25       9,000     5.95 - 6.25       9,000
            2003                            5.83          3,000
                                                        -------                     -------
                                                        $35,000                     $29,000
                                                        =======                     =======
      Weighted average interest rate        6.11%                       6.20%

</TABLE>

These advances were collateralized by $52.5 million and $43.5 million of 
residential mortgage loans under a blanket lien agreement and by Federal 
Home Loan Bank stock at year-end 1998 and 1997.

NOTE 7 - EMPLOYEE STOCK OWNERSHIP PLAN

Employees of the Company participate in an employee stock ownership plan 
(ESOP). The ESOP borrowed from the Company to acquire 443,610 shares of 
stock at $10 per share. The Company makes discretionary contributions to the 
ESOP, as well as paying dividends on unallocated shares to the ESOP, and the 
ESOP uses funds it receives to repay the loan. As loan payments are made, 
ESOP shares are allocated to participants based on relative compensation and 
expense is recorded. Dividends on allocated shares increase participant 
accounts. Participants receive the shares at the end of employment.

Contributions to the ESOP during 1998, 1997 and 1996 were $398,000, $542,000 
and $588,000. ESOP expense for 1998, 1997 and 1996 was $844,000, $655,000 
and $1.8 million.

Shares held by the ESOP as of the end of the year were as follows:

<TABLE>
<CAPTION>

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

      <S>                                             <C>         <C>
      Shares allocated to participants                 133,585      90,728
      Unearned shares                                  308,350     352,882
                                                      --------------------
            Total ESOP shares                          441,935     443,610
                                                      ====================

      Fair value of unearned shares (in thousands)    $  6,167    $  6,264

</TABLE>

NOTE 8 - STOCK OPTION AND INCENTIVE PLAN

Options to buy stock of the Company are granted to directors and certain key 
employees under the Stock Option and Incentive Plan, which provides for 
issue of up to 555,450 options. Exercise price is the market price at date 
of grant. The maximum option term is ten years, and options vest over five 
years.

A summary of activity in the plan is as follows:

<TABLE>
<CAPTION>

                                                  1998                    1997
                                          --------------------    -------------------
                                                      Weighted               Weighted
                                          Number      Average     Number     Average
                                            of        Exercise      of       Exercise
                                          Shares        Price     Shares       Price
                                          -------------------------------------------

      <S>                                 <C>         <C>         <C>
      Outstanding at beginning of year    388,815                 388,815
      Exercised                            (6,000)    $11.00            -
                                          -------                 -------
      Outstanding at end of year          382,815                 388,815
                                          =======                 =======
      Options exercisable at year-end     149,526                  77,763

</TABLE>

No options were granted in 1998 or 1997. All options issued to date, and 
therefore all outstanding or exercisable at year-end, have an exercise price 
of $11.00 per share.

Had compensation cost for stock options been measured using FASB Statement 
No. 123, net income and earnings per share would have been the pro forma 
amounts indicated below. The pro forma effect may increase in the future if 
more options are granted.

<TABLE>
<CAPTION>

                                              1998                        1997
                                    ------------------------    ------------------------
                                    As reported    Pro forma    As reported    Pro forma
                                    ----------------------------------------------------

      <S>                              <C>           <C>           <C>           <C>
      Net income                       $5,704        $5,521        $5,113        $4,930
      Basic earnings per share           1.22          1.18          1.04          1.01
      Diluted earnings per share         1.19          1.15          1.03          0.99

</TABLE>

The pro forma effects are computed using option pricing models which used 
the following weighted-average assumptions as of grant date: a risk-free 
interest rate of 6.34%, a dividend yield of 3.86%, volatility factors of the 
expected market price of the Company's common stock of 40.8%, and an 
expected life of the option of 7.5 years. Based on these assumptions the 
estimated fair value of the options granted during 1996 was $3.57 per share.

NOTE 9 - MANAGEMENT RECOGNITION PLAN

The management recognition plan (MRP) provides to directors and certain key 
employees an ownership interest in the Company designed to compensate such 
directors and key employees for services to the Company. The Company 
contributed sufficient funds to enable the MRP to purchase and issue as 
awards 222,180 common shares of the Company. The shares awarded vest over a 
five-year period beginning in 1996. Compensation expense, which is based 
upon the cost of the shares, was $526,000 in both 1998 and 1997 and $351,000 
in 1996.

NOTE 10 - INCOME TAXES

The provision for income tax was as follows:

<TABLE>
<CAPTION>

                            1998      1997      1996
                           --------------------------

      <S>                  <C>       <C>       <C>
      Current expense      $2,904    $2,678    $1,991
      Deferred expense        124       105        29
                           --------------------------
                           $3,028    $2,783    $2,020
                           ==========================

</TABLE>

Effective tax rates differ federal statutory rates applied to financial 
statement income due to the following:

<TABLE>
<CAPTION>

                                       1998      1997      1996
                                      --------------------------

      <S>                             <C>       <C>       <C>
      Income tax computed at the 
       statutory federal rate         $2,969    $2,685    $1,502
      Effect of ESOP deduction           196        72       579
      Effect of MRP awards expense       (16)      (16)        -
      Other                             (121)       42       (61)
                                      --------------------------
                                      $3,028    $2,783    $2,020
                                      ==========================
      Effective tax rate                34.7%     35.2%     45.7%

</TABLE>

Deferred tax assets and liabilities as of the end of the year were as 
follows:

<TABLE>
<CAPTION>

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

<S>                                                              <C>       <C>
Deferred tax assets
  Deferred loan fees                                             $1,020    $1,211
  Accrued MRP awards                                                119       119
  Construction period interest                                       16        17
  Accrued vacation                                                   38        36
  ESOP shares allocated                                              77        57
  Other                                                               8        10
                                                                 ----------------
                                                                  1,278     1,450
                                                                 ----------------
Deferred tax liabilities
  Bad debt deduction                                               (186)     (350)
  FHLB stock dividends                                             (590)     (515)
  Unrealized gain on investment securities available for sale    (1,082)     (687)
  Depreciation expense                                             (111)     (120)
  Loan servicing rights                                             (57)        -
  Accumulated accretion                                             (31)      (38)
                                                                 ----------------
                                                                 (2,057)   (1,710)
                                                                 ----------------

      Net deferred tax asset /(liability)                        $  779    $ (260)
                                                                 ================

</TABLE>

The Company has not established a valuation allowance, as it is management's 
belief that it has adequate taxable income and carrybacks to realize 
recorded deferred tax assets.

Federal income tax laws provided additional bad debt deductions through 
1987, totaling $4.2 million. Accounting standards do not require a deferred 
tax liability to be recorded on this amount, which liability otherwise would 
total $1.4 million at December 31, 1998. If the Association were liquidated 
or otherwise ceases to be a thrift or if tax laws were to change, this 
amount would be expensed. Under 1996 tax law changes, bad debts are based on 
actual loss experience and tax bad debt reserves accumulated since 1987 are 
to be reduced. This requires payment of approximately $495,000 annually over 
six years beginning in 1998.

NOTE 11 - RESTRICTIONS ON RETAINED EARNINGS AND CAPITAL REQUIREMENTS

The Company's savings and loan association is subject to regulatory capital 
requirements administered by federal banking agencies. Capital adequacy 
guidelines and prompt correction action regulations involve quantitative 
measures of assets, liabilities, and certain off-balance-sheet items 
calculated under regulatory accounting practices. Capital amounts and 
classifications are also subject to qualitative judgments by regulators. 
Failure to meet capital requirements can initiate regulatory action. As of 
December 31, 1998, the Company's savings and loan association is considered 
well capitalized based on computed regulatory capital ratios.

Federal regulations limit all capital distributions, including cash 
dividends, by savings associations. The regulation establishes a three-
tiered system of restrictions, with the greatest flexibility afforded to 
thrifts which are both well-capitalized and given favorable qualitative 
examination ratings.

Actual and required capital amounts (in thousands) and ratios as of the end 
of the year were as follows:

<TABLE>
<CAPTION>

                                                                             Minimum Required
                                                    Minimum Required     To Be Well Capitalized
                                                       For Capital       Under Prompt Corrective
                                     Actual         Adequacy Purposes       Action Regulations
                               -----------------    -----------------    -----------------------
                               Amount     Ratio     Amount     Ratio       Amount       Ratio
                               -----------------------------------------------------------------

<S>                            <C>        <C>       <C>         <C>        <C>          <C>
1998
----
Total capital
 (to risk weighted assets)     $36,018    17.21%    $16,740     8.0%       $20,925      10.0%
Tier 1 (core) capital 
 (to risk weighted assets)     $34,110    16.30%    $ 8,370     4.0%       $12,555       6.0%
Tier 1 (core) capital
 (to adjusted total assets)    $34,110     8.85%    $11,569     3.0%       $19,282       5.0%
Tangible capital
 (to adjusted total assets)    $34,110     8.85%    $ 5,784     1.5%               N/A

1997
----
Total capital
 (to risk weighted assets)     $37,392    19.03%    $15,718     8.0%       $19,648      10.0%
Tier 1 (core) capital 
 (to risk weighted assets)     $35,696    18.17%    $ 7,859     4.0%       $11,789       6.0%
Tier 1 (core) capital
 (to adjusted total assets)    $35,696     9.86%    $10,866     3.0%       $18,110       5.0%
Tangible capital
 (to adjusted total assets)    $35,696     9.86%    $ 5,433     1.5%               N/A

</TABLE>

NOTE 12 - OFF-BALANCE-SHEET ACTIVITIES

Some financial instruments, such as loan commitments, credit lines, letters 
of credit and overdraft protection, are issued to meet customer financing 
demands. These are agreements to provide credit or to support the credit of 
others, as long as conditions established in the contract are met, and 
usually have expiration dates. Commitments may expire without being used. 
Off-balance-sheet risk to credit loss exists up to the face amount of these 
instruments, although material losses are not anticipated. The same credit 
policies are used to make such commitments as are used for loans, including 
obtaining collateral at exercise of the commitment.

Financial instruments with off-balance-sheet risk as of the end of the year 
were as follows:

<TABLE>
<CAPTION>

                                                    1998                  1997
                                             ------------------    ------------------
                                             Fixed     Variable    Fixed     Variable
                                             Rate        Rate      Rate        Rate
                                             ----------------------------------------

      <S>                                    <C>       <C>         <C>        <C>
      Commitments to make loans              $4,882    $ 1,638     $4,360     $1,000
      Undisbursed construction loan funds     5,357        894      7,022      2,650
      Unused lines of credit                      -     12,228         26      9,124

</TABLE>

Commitments to make loans are generally made for 30 days or less. The fixed 
rate loan commitments on mortgage loans have interest rates ranging from 
6.25% to 9.75% and maturities ranging from 15 years to 30 years.

The Company was required by the Federal Reserve Bank to maintain cash 
reserves of $500,000 and $436,000 as of year-end 1998 and 1997. These 
reserves do not earn interest.

NOTE 13 - FAIR VALUE OF FINANCIAL INSTRUMENTS

Carrying amount and estimated fair values of financial instruments as of the 
end of the year were as follows:

<TABLE>
<CAPTION>

                                                 1998                        1997
                                        -----------------------     -----------------------
                                        Carrying                    Carrying
                                         Amount      Fair Value      Amount      Fair Value
                                        ---------------------------------------------------

      <S>                               <C>           <C>           <C>           <C>
      Financial assets
        Cash and cash equivalents       $  28,536     $  28,536     $  10,772     $  10,772
        Investment securities              21,518        21,537        21,467        21,504
        Loans receivable, net             326,972       332,757       321,669       324,187
        Federal Home Loan Bank stock        3,256         3,256         2,938         2,938
        Accrued interest receivable         2,051         2,051         1,985         1,985

      Financial liabilities
        Deposits                        $(288,584)    $(290,040)    $(270,957)    $(271,716)
        FHLB advances                     (35,000)      (35,581)      (29,000)      (29,015)
        Accrued interest payable             (769)         (769)         (709)         (709)

</TABLE>

The methods and assumptions used to estimate fair value are described as 
follows. Carrying amount is the estimated fair value for cash and cash 
equivalents, Federal Home Loan Bank stock, accrued interest receivable and 
payable, demand deposits and variable rate loans or deposits that reprice 
frequently and fully. Investment securities fair values are based on market 
prices. For fixed rate loans or deposits and for variable rate loans or 
deposits with infrequent repricing or repricing limits, fair value is based 
on discounted cash flows using current market rates applied to the estimated 
life and credit risk. Fair value of loans held for sale is based on market 
quotes. Fair value of FHLB advances is based on current rates for similar 
financing.

NOTE 14 - EARNINGS PER SHARE

The factors used in the earnings per share computation were as follows:

<TABLE>
<CAPTION>

                                                                  1998          1997          1996
                                                               --------------------------------------

<S>                                                            <C>           <C>           <C>
Net income (in thousands)                                      $    5,704    $    5,113    $    2,399

Basic:
-----
Weighted average common shares outstanding                      5,006,690     5,276,908     5,547,881
Less: Average unallocated ESOP shares                             331,454       375,137       420,501
                                                               --------------------------------------
       Average shares                                           4,675,236     4,901,771     5,127,380
                                                               ======================================
Basic earnings per share                                       $     1.22    $     1.04    $     0.47

Diluted:
-------
Weighted average common shares outstanding
 for basic earnings per share                                   4,675,236     4,901,771     5,127,380
Add: Dilutive effects of assumed exercises of stock options       110,299        62,644         7,833
                                                               --------------------------------------
  Average shares and dilutive potential common shares           4,785,535     4,964,415     5,135,213
                                                               ======================================
  Diluted earnings per share                                   $     1.19    $     1.03    $     0.47

</TABLE>

NOTE 15 - PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION

<TABLE>
<CAPTION>

CONDENSED BALANCE SHEETS
(Dollars in thousands)
December 31,                                   1998       1997
----------------------------------------------------------------

      <S>                                     <C>        <C>
      ASSETS
      Cash and cash equivalents               $    87    $   538
      Investment in subsidiary                 36,211     37,029
      Loan receivable from ESOP                 3,327      3,697
      Loan receivable from subsidiary          21,000     19,500
      Other assets                                 90         99
                                              ------------------
                                              $60,715    $60,863
                                              ==================

      LIABILITIES AND SHAREHOLDERS' EQUITY
      Liabilities                             $   (26)   $     1
      Shareholders' equity                     60,741     60,862
                                              ------------------
                                              $60,715    $60,863
                                              ==================

</TABLE>

<TABLE>
<CAPTION>

CONDENSED STATEMENTS OF INCOME
(Dollars in thousands)
For the year ended December 31,                                      1998      1997       1996
-----------------------------------------------------------------------------------------------

<S>                                                                 <C>       <C>        <C>
Interest income on loan from subsidiary                             $1,030    $   287    $  791
Dividends from subsidiary                                            9,000     26,500         -
Management fees expense                                               (900)       (60)      (60)
Other operating expenses                                               (78)      (123)     (167)
                                                                    ---------------------------
    Income before income tax and undistributed subsidiary income     9,052     26,604       564
Provision for income taxes                                              17         35       192
Equity in undistributed subsidiary income                           (3,331)   (21,456)    2,027
                                                                    ---------------------------
    Net income                                                      $5,704    $ 5,113    $2,399
                                                                    ===========================

</TABLE>

<TABLE>
<CAPTION>

CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
For the year ended December 31,                       1998      1997       1996
----------------------------------------------------------------------------------

<S>                                                  <C>       <C>        <C>
Cash flows from operating activities
Net income                                           $5,704    $ 5,113    $ 2,399
Adjustments:
  Equity in undistributed subsidiary income           3,331     21,456     (2,027)
  Dividends on unallocated ESOP shares                 (214)      (194)      (144)
  Changes in other assets                                 9        (50)       (38)
                                                     ----------------------------
    Net cash from operating activities                8,830     26,325        190
                                                     ----------------------------

Cash flows from investing activities
  Loans to subsidiary                                (9,000)   (23,900)         -
  Principal repayment on loans to subsidiary          7,500      5,100     21,550
  Principal repayment on loan to ESOP                   370        370        370
                                                     ----------------------------
    Net cash from investing activities               (1,130)   (18,430)    21,920
                                                     ----------------------------

Cash flows from financing activities
  Capital distribution to shareholders                    -          -    (19,441)
  Cash dividends paid                                (2,751)    (2,347)    (1,661)
  Purchase of treasury stock                         (5,466)    (5,672)      (634)
  Proceeds from exercise of stock options                66          -          -
                                                     ----------------------------
    Net cash from financing activities               (8,151)    (8,019)   (21,736)
                                                     ----------------------------

Net change in cash and cash equivalents                (451)      (124)       374

Cash and cash equivalents at beginning of period        538        662        288
                                                     ----------------------------

Cash and cash equivalents at end of period           $   87     $  538    $   662
                                                     ============================
</TABLE>

NOTE 16 - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>

                             March 31    June 30    September 30    December 31
                             --------------------------------------------------

<S>                           <C>         <C>          <C>            <C>
1998
Interest income               $7,407      $7,621       $7,750         $7,784
Interest expense               3,806       3,938        4,069          4,012
                              ----------------------------------------------
    Net interest income        3,601       3,683        3,681          3,772

Provision for loan losses         45          55           55             45
Other income                     141         173          234            310
Other expense                  1,637       1,685        1,637          1,704
                              ----------------------------------------------
    Income before taxes        2,060       2,116        2,223          2,333

Provision for incomes taxes      702         722          757            847
                              ----------------------------------------------

    Net income                $1,358      $1,394       $1,466         $1,486
                              ==============================================

Basic earnings per share      $ 0.29      $ 0.30       $ 0.31         $ 0.32
Diluted earnings per share      0.28        0.29         0.31           0.32

1997
Interest income               $6,581      $6,846       $7,084         $7,294
Interest expense               3,187       3,423        3,657          3,798
                              ----------------------------------------------
    Net interest income        3,394       3,423        3,427          3,496

Provision for loan losses         49          47           45             45
Other income                     111         111          120            167
Other expense                  1,565       1,530        1,630          1,442
                              ----------------------------------------------
    Income before taxes        1,891       1,957        1,872          2,176

Provision for incomes taxes      671         674          642            796
                              ----------------------------------------------

    Net income                $1,220      $1,283       $1,230         $1,380
                              ==============================================

Basic earnings per share      $ 0.24      $ 0.26       $ 0.25         $ 0.29
Diluted earnings per share      0.24        0.26         0.25           0.28

</TABLE>

                       REPORT OF INDEPENDENT AUDITORS


Board of Directors and Shareholders
Industrial Bancorp, Inc.
Bellevue, Ohio


We have audited the accompanying consolidated balance sheets of Industrial 
Bancorp, Inc. as of December 31, 1998 and 1997, and the related consolidated 
statements of income, comprehensive income, changes in shareholders' equity 
and cash flows for each of the three years in the period ended December 31, 
1998. These financial statements are the responsibility of the Company's 
management. Our responsibility is to express an opinion on these financial 
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing 
standards. Those standards require that we plan and perform the audit to 
obtain reasonable assurance about whether the financial statements are free 
of material misstatement. An audit includes examining, on a test basis, 
evidence supporting the amounts and disclosures in the financial statements. 
An audit also includes assessing the accounting principles used and 
significant estimates made by management, as well as evaluating the overall 
financial statement presentation. We believe that our audits provide a 
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above 
present fairly, in all material respects, the financial position of 
Industrial Bancorp, Inc. as of December 31, 1998 and 1997, and the results 
of its operations and its cash flows for each of the three years in the 
period ended December 31, 1998, in conformity with generally accepted 
accounting principles.


                                       Crowe, Chizek and Company LLP

Cleveland, Ohio
January 15, 1999

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

                          COMMON STOCK INFORMATION

The common shares of Industrial Bancorp are listed on the Nasdaq Stock 
Market under the symbol "INBI". There were 4,831,036 common shares 
outstanding at year-end 1998, held of record by approximately 1,450 
shareholders. The following dividend and market price information includes 
daily high, low and closing sales prices of the common shares of Industrial 
Bancorp for each period indicated.

<TABLE>
<CAPTION>

          Quarter ended     High      Low       Last     Dividend
          -------------------------------------------------------

             <S>           <C>       <C>       <C>         <C>
              3/31/97      $13.00    $12.50    $12.63      $.10
              6/30/97       14.00     12.00     13.69       .12
              9/30/97       18.00     13.63     18.00       .12
             12/31/97       18.38     17.25     17.75       .14
              3/31/98       23.50     17.63     22.50       .14
              6/30/98       25.25     18.31     19.00       .15
              9/30/98       20.00     15.88     18.00       .15
             12/31/98       20.25     17.00     20.00       .15

</TABLE>

                          INDUSTRIAL BANCORP, INC.

              Directors                            Annual Meeting
-------------------------------------    -----------------------------------

Lawrence  R. Rhoades                     The 1999 Annual Meeting of Share-
Chairman of the Board and Chief          holders of Industrial Bancorp, Inc.
 Financial Officer                       will be held on April 20, 1999, at
                                         2:30 p.m., local time, at the 
David M. Windau                          Bellevue Elks Lodge #1013, located 
President and Chief Executive Officer    at 214 West Main Street, Bellevue, 
                                         Ohio 44811. Shareholders are 
Fredric C. Spurck                        cordially invited to attend.
President and Chief Executive Officer
Webster Industries, Inc.                              Form 10-K
                                         -----------------------------------
Roger O. Wilkinson                       A copy of Industrial Bancorp's 
Deputy Director                          Annual Report on Form 10-K, as
Huron County Alcohol, Drug Addiction     filed with the Securities and
 and Mental Health Services Board        Exchange Commission, will be
                                         available to shareholders at no 
Graydon H. Hayward                       change upon request to:
President
Hayward Rigging & Construction, Inc.          Industrial Bancorp, Inc.
                                               211 N. Sandusky Street
Leon W. Maginnis                                Bellevue, Ohio 44811
Vice President - Finance                      Attn: Patrick S. Smith,
Hirt Publishing Company, Inc.                    Investor Relations
                                                   (419) 483-3375
Bob Moore
President, Retired                               Shareholder Services
Willard Foods                            -----------------------------------
                                         Registrar and Transfer Company 
         Executive Officers              serves as transfer agent and
-------------------------------------    dividend distributing agent for
                                         Industrial Bancorp's shares.
Lawrence  R. Rhoades                     Communications regarding change of
Chairman of the Board                    address, transfer of shares, lost
 and Chief Financial Officer             certificates and dividends should
                                         be sent to:
David M. Windau
President and Chief Executive Officer       Registrar and Transfer Company
                                                  10 Commerce Drive
David W. Ball                             Cranford, New Jersey 07016-3572
Senior Vice President - Loans                     (908) 272-8511

Stephan S. Beal
Senior Vice President - Operations