UNITED STATES
                     SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549

                                  FORM 10-K

[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
      EXCHANGE ACT OF 1934

      For the fiscal year ended December 31, 1998

                                      OR

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
      EXCHANGE ACT OF 1934

      For the transition period from______________to___________________

                      Commission File Number: 0-026248

                          INDUSTRIAL BANCORP, INC.
           ------------------------------------------------------
           (Exact name of registrant as specified in its charter)

              Ohio                                     34-1800830
-------------------------------                  ----------------------
(State or other jurisdiction of                     I.R.S. Employer
 incorporation or organization)                  Identification Number)

211 North Sandusky Street, Bellevue, Ohio                 44811
-----------------------------------------              ----------
(Address of principal executive offices)               (Zip Code)

                Registrant's telephone number: (419) 483-3375
                                               --------------

         Securities registered pursuant to Section 12(b) of the Act:

      None                                      None
----------------            -------------------------------------------
(Title of Class)            (Name of each exchange on which registered)

         Securities registered pursuant to Section 12(g) of the Act:

                    Common shares, no par value per share
                    -------------------------------------
                              (Title of Class)

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

      Indicate by check mark if there is no disclosure of delinquent filers 
pursuant to Item 405 of Regulation S-K contained in this form, and no 
disclosure will be contained, to the best of issuer's knowledge, in 
definitive proxy or information statements incorporated by reference in Part 
III of this Form 10-K or any amendment to this Form 10-K. [X]

      The aggregate market value of the voting stock held by non-affiliates 
of the registrant, computed by reference to the average of the bid and asked 
prices of such stock on The Nasdaq National Market as of March 16, 1999, was 
$81,922,859. (The exclusion from such amount of the market value of the 
shares owned by any person shall not be deemed an admission by the 
registrant that such person is an affiliate of the registrant.)

      As of March 16, 1999, there were 4,730,886 of the Registrant's Common 
Shares issued and outstanding.

                     DOCUMENTS INCORPORATED BY REFERENCE

    Part II of Form 10-K - Portions of 1998 Annual Report to Shareholders
         Part III of Form 10-K - Portions of Proxy Statement for the
                     1999 Annual Meeting of Shareholders


                                   PART I

Item 1.  Description of Business

General

      Industrial Bancorp, Inc. (the "Holding Company" or the "Corporation") 
was incorporated in the State of Ohio in February 1995 for the purpose of 
owning all of the outstanding capital stock of The Industrial Savings and 
Loan Association ("Industrial" or the "Association") issued upon the 
conversion of the Association from a mutual savings association to a 
permanent capital stock savings association (the "Conversion"). On August 1, 
1995, the effective date of the Conversion, the Holding Company acquired all 
100 shares of the capital stock of the Association.

      The Association was organized as a mutual savings association under 
Ohio law in 1890. As an Ohio savings association, the Association is subject 
to supervision and regulation by the Office of Thrift Supervision (the 
"OTS"), the Ohio Department of Commerce, Division of Financial Institutions 
(the "Division") and the Federal Deposit Insurance Corporation (the "FDIC"). 
The Association is a member of the Federal Home Loan Bank (the "FHLB") of 
Cincinnati and the deposits of the Association are insured up to applicable 
limits by the FDIC in the Savings Association Insurance Fund (the "SAIF").

      The Association conducts business from its main office at 211 N. 
Sandusky Street in Bellevue, Ohio, its nine branch offices and its one loan 
production office in the northern Ohio communities of Ashland, Bellevue, 
Clyde, Findlay, Fremont, Mansfield, Norwalk, Sandusky, Tiffin and Willard. 
The Association is principally engaged in the business of originating 
construction and permanent mortgage loans secured by first mortgages on one- 
to four-family residential real estate located in the Association's primary 
market area, which consists of the seven Ohio counties in which its offices 
are located: Ashland, Erie, Hancock, Huron, Richland, Sandusky and Seneca. 
The Association also originates construction and permanent mortgage loans 
secured by multifamily real estate (over four units) and nonresidential real 
estate in its primary market area. In addition to real estate loans, the 
Association originates a limited number of commercial loans and secured and 
unsecured consumer loans. For liquidity and interest rate risk management 
purposes, the Association invests in interest-bearing deposits in other 
financial institutions, U.S. Government and agency obligations, mortgage-
backed securities and other investments permitted by applicable law. Funds 
for lending and other investment activities are obtained primarily from 
savings deposits and loan principal repayments. Advances from the FHLB of 
Cincinnati are also utilized as an additional source of funds.

      Interest on loans and investments is the Association's primary source 
of income. The Association's principal expense is interest paid on deposit 
accounts. Operating results are dependent to a significant degree on the 
"net interest income" of the Association, which is the difference between 
interest income earned on loans, mortgage-backed securities and other 
interest-earning assets and interest paid on deposits and borrowings. Like 
most thrift institutions, the Association's interest income and interest 
expense are significantly affected by general economic conditions and by the 
policies of various regulatory authorities.

Market Area

      The Association conducts business from its main office in Bellevue, 
Ohio, and its nine branch offices in Bellevue and the northern Ohio cities 
of Ashland, Clyde, Findlay, Fremont, Norwalk, Sandusky, Tiffin and Willard. 
The Association's primary market area for lending and deposit activity 
consists of the six counties in which the Association has its branch 
offices. The Association's lending activity also reaches into Richland 
County through a loan production office in Mansfield, Ohio.

      The economy of the Association's primary market area is stable. 
Population growth and household growth have occurred at slightly slower 
rates than the State of Ohio as a whole. The principal segments of the local 
economy are manufacturing, wholesale/retail trade, tourism and other service 
industries. Erie and Sandusky Counties include popular tourist attractions 
along Lake Erie, such as Cedar Point, which provide a significant number of 
jobs during the summer season and draw large numbers of visitors to the 
area. Other major employers in the Association's primary market area include 
Whirlpool Corporation, Cooper Tire & Rubber Company, Consolidated Biscuit 
Co., General Motors, Ford Motor Company, Marathon Oil and R.R. Donnelly Co. 
There are also several colleges and universities in the Association's 
primary market area.

Lending Activities

      General. The Association's principal lending activity is the 
origination of conventional real estate loans, including construction loans, 
secured by one- to four-family homes located in the Association's primary 
market area. Loans secured by multifamily properties containing more than 
four units and nonresidential properties, including construction loans, are 
also offered by the Association. The Association does not originate first 
mortgage loans insured by the Federal Housing Authority or guaranteed by the 
Veterans Administration. In addition to real estate lending, the Association 
originates a limited number of commercial loans and consumer loans, 
including education loans, loans secured by deposit accounts, automobile 
loans and a limited number of unsecured loans. As an approved Federal Home 
Loan Mortgage Corporation seller/servicer, the Association sells certain 
residential real estate mortgage loans in the secondary market.

      Loan Portfolio Composition. The following table presents certain 
information regarding the composition of the Association's loan portfolio at 
the dates indicated:

<TABLE>
<CAPTION>

                                                                     At December 31,
                         -------------------------------------------------------------------------------------------------------
                                1998                 1997                 1996                 1995                 1994
                         -------------------  -------------------  -------------------  -------------------  -------------------
                                    Percent              Percent              Percent              Percent              Percent
                                    of total             of total             of total             of total             of total
                         Amount      Loans    Amount      Loans    Amount      Loans    Amount      Loans    Amount      Loans
                         -------------------------------------------------------------------------------------------------------
                                                                  (Dollars in thousands)

<S>                      <C>        <C>       <C>        <C>       <C>        <C>       <C>        <C>       <C>        <C>
Real estate loans:
  One- to four-family    $279,237    83.87%   $278,438    85.00%   $248,694    85.35%   $226,868    85.90%   $207,943    86.61%
  Home equity              16,624     4.99      15,407     4.70      11,651     4.00       8,546     3.24       5,509     2.29
  Multifamily               9,165     2.75       8,170     2.49       9,028     3.10       8,213     3.11       8,019     3.35
  Nonresidential           10,979     3.31      10,521     3.21       8,842     3.03       9,100     3.45       6,511     2.71
  Construction (1)         11,607     3.49      10,341     3.16       8,765     3.01       6,746     2.55       7,187     2.99
                         -----------------------------------------------------------------------------------------------------

      Total real estate
       loans              327,612    98.41     322,877    98.56     286,980    98.49     259,473    98.25     235,169    97.95

Commercial loans              451     0.14         297     0.09         398     0.14         585     0.22         666     0.28

Consumer loans:
  Education loans           1,073     0.32       1,155     0.35       1,268     0.44       1,456     0.55       1,650     0.68
  Loans on deposits         1,307     0.39       1,258     0.39       1,087     0.37         987     0.38       1,032     0.43
  Automobile loans          1,545     0.46       1,189     0.36         773     0.27         826     0.31         807     0.34
  Other consumer loans        934     0.28         806     0.25         831     0.29         771     0.29         763     0.32
                         -----------------------------------------------------------------------------------------------------

      Total consumer
       loans                4,859     1.45       4,408     1.35       3,959     1.37       4,040     1.53       4,252     1.77
                         -----------------------------------------------------------------------------------------------------

Total loans               332,922   100.00%    327,582   100.00%    291,337   100.00%    264,098   100.00%    240,087   100.00%
                                    ======               ======               ======               ======               ======
  Less:
    Deferred loan
     origination fees      (4,020)              (4,171)              (3,977)              (3,598)              (3,341)
    Allowance for 
     loan losses           (1,930)              (1,742)              (1,557)              (1,376)              (1,209)
                         --------             --------             --------             --------             --------

      Net loans          $326,972             $321,669             $285,803             $259,124             $235,537
                         ========             ========             ========             ========             ========

--------------------
<F1>  Net of the undisbursed portion of construction loans.

</TABLE>

      Loan Maturity. The following table sets forth certain information as 
of December 31, 1998, regarding the dollar amount of loans maturing in the 
Association's portfolio based on their contractual terms to maturity. Demand 
loans, home equity loans and other loans having no stated schedule of 
repayments or no stated maturity are reported as due in one year or less.

<TABLE>
<CAPTION>

                                                                       Due in years
                                    ----------------------------------------------------------------------------------
                                                                 2002        2004       2009       2019
                                                                  and       through    through      and
                                      1999     2000    2001      2003        2008       2018       After        Total
                                    ----------------------------------------------------------------------------------
                                                                      (In thousands)

<S>                                 <C>        <C>     <C>       <C>        <C>        <C>        <C>         <C>
Real estate loans:
  One- to four-family               $ 1,028    $185    $  575    $ 6,953    $26,561    $72,685    $171,250    $279,237
  Home equity                        16,624       -         -          -          -          -           -      16,624
  Multifamily and nonresidential        545      14       933      4,470      1,420     10,393       2,369      20,144
  Construction                        1,616      73        11        112        122      1,289       8,384      11,607
  Commercial loans                      442       -         -          9          -          -    -    451
  Consumer loans                      1,799     430       656      1,001        804        158          11       4,859
                                    ----------------------------------------------------------------------------------
      Total                         $22,054    $702    $2,175    $12,545    $28,907    $84,525    $182,014    $332,922
                                    ==================================================================================

</TABLE>

      The following table sets forth the dollar amount of all loans which 
will become due more than one year after December 31, 1998, and which have 
predetermined interest rates or adjustable interest rates:

<TABLE>
<CAPTION>

                               Due more than
                              one year after
                             December 31, 1998
                             -----------------
                              (In thousands)

<S>                               <C>
Fixed interest rates              $229,731
Adjustable interest rates           81,137
                                  --------
                                  $310,868
                                  ========

</TABLE>

      Loans Secured by One- to Four-Family Real Estate. The principal 
lending activity of the Association is the origination of permanent 
conventional loans secured by one- to four-family residences, primarily 
single-family residences, located within the Association's primary market 
area. Each of such loans is secured by a first mortgage on the underlying 
real estate and improvements thereon, if any. At December 31, 1998, the 
Association's one- to four-family residential real estate loan portfolio was 
$279.2 million, or 84% of total loans.

      OTS regulations and Ohio law limit the amount which the Association 
may lend in relationship to the appraised value of the real estate and 
improvements at the time of loan origination. In accordance with such 
regulations and laws, the Association typically makes loans on one- to four-
family residences for up to 80% of the value of the real estate and 
improvements (the "LTV") and occasionally makes loans with up to a 95% LTV. 
The principal amount of any loan which exceeds an 80% LTV at the time of 
origination is usually covered by private mortgage insurance at the expense 
of the borrower.

      Fixed-rate one- to four-family loans are offered by the Association, 
currently for terms of up to 30 years. Adjustable-rate one- to four-family 
real estate loans ("ARMs") are also offered by the Association for terms of 
up to 30 years. The interest rate adjustment periods on such ARMs are one 
year and the rates are tied to the one-year U.S. Treasury bill rate. The new 
interest rate at each change date is determined by adding a specified 
margin, typically between 2.75% and 3.75%, to the prevailing index. The 
maximum allowable adjustment at each adjustment date is 1% or 2% with a 
maximum adjustment of 6% over the term of the loan. The initial rate on an 
ARM with a 1% cap is typically higher than the initial rate on an ARM with a 
2% cap to compensate for the reduced interest rate sensitivity. The initial 
rate on ARMs originated by the Association is sometimes less than the sum of 
the index at the time of origination plus the specified margin. Such loans 
may be subject to greater risk of default as the interest rate adjusts to 
the fully-indexed level. The Association attempts to reduce the risks by 
underwriting such loans on the basis of the payment amount the borrower will 
be required to pay during the second year of the loan, assuming the maximum 
possible rate increase.

      Adjustable-rate loans decrease the Association's interest rate risk 
but involve other risks, primarily credit risk, because as interest rates 
rise the payment by the borrower rises to the extent permitted by the terms 
of the loan, thereby increasing the potential for default. At the same time, 
the marketability of the underlying property may be adversely affected by 
higher interest rates. The Association believes that these risks have not 
had a material adverse effect on the Association to date.

      Home Equity Loans. In recent years, lines of credit secured by the 
equity in a borrower's principal residence have become increasingly popular. 
The Association offers home equity lines of credit in an amount which, when 
added to any prior indebtedness secured by the real estate, does not exceed 
95% of the appraised value of the real estate. The Association's home equity 
loans have terms of up to 30 years. The borrower can draw on the line of 
credit during the first 15 years and must repay the loan during the second 
15 years. Home equity loans are typically secured by a second mortgage on 
the real estate. The Association frequently holds the first mortgage, 
although the Association will make home equity loans in cases where another 
lender holds the first mortgage. The interest rates charged by the 
Association on home equity loans adjust quarterly and are tied to the 
composite prime rate of 75% of the thirty largest U.S. banks, as published 
in The Wall Street Journal.

      At December 31, 1998, the Association had $16.6 million, or 5% of 
total loans, in home equity loans.

      Loans Secured by Multifamily Real Estate. In addition to loans on one- 
to four-family properties, the Association originates loans secured by 
multifamily properties containing over four units. Multifamily loans are 
offered with adjustable rates for terms of up to 30 years and have a maximum 
LTV of 80%.

      Multifamily lending is generally considered to involve a higher degree 
of risk than one- to four-family residential lending because the borrower 
typically depends upon income generated by the project to cover operating 
expenses and debt service. The profitability of a project can be affected by 
economic conditions, government policies and other factors beyond the 
control of the borrower. The Association attempts to reduce the risk 
associated with multifamily lending by evaluating the creditworthiness of 
the borrower and the projected income from the project and by obtaining 
personal guarantees on loans made to corporations and partnerships. The 
Association requests that borrowers submit rent rolls and that all borrowers 
submit financial statements annually to enable the Association to monitor 
such loans.

      At December 31, 1998, loans secured by multifamily properties totaled 
$9.2 million, or 3% of total loans.

      Loans Secured by Nonresidential Real Estate. At December 31, 1998, 
$11.0 million, or 3%, of the Association's total loans were secured by 
permanent mortgages on nonresidential real estate. Such loans have 
adjustable rates, terms of up to 25 years and LTVs of up to 75%. Among the 
properties securing nonresidential real estate loans are office buildings 
and motel and retail properties located in the Association's primary market 
area.

      Although the loans secured by nonresidential real estate typically 
have higher interest rates than one- to four-family residential real estate 
loans, nonresidential real estate lending is generally considered to involve 
a higher degree of risk than residential lending due to the relatively 
larger loan amounts and the effects of general economic conditions on the 
successful operation of income-producing properties. The Association has 
endeavored to reduce such risk by evaluating the credit history and past 
performance of the borrower, the location of the real estate, the financial 
condition of the borrower, the quality and characteristics of the income 
stream generated by the property and appraisals supporting the property's 
valuation. The Association also makes loans for the construction of 
nonresidential real estate.

      Construction Loans. The Association makes loans for the construction 
of single-family houses, multifamily properties and nonresidential real 
estate projects. At December 31, 1998, the Association's loan portfolio 
included $11.6 million in construction loans, net of undisbursed proceeds, 
or 3% of total loans.

      The Association's construction loan portfolio at December 31, 1998, 
consisted primarily of loans to individuals and builders for the 
construction and permanent financing of single-family residences. Such loans 
are offered with fixed or adjustable rates for terms of up to 30 years. 
During the first year, while the residence is being constructed, the 
borrower is required to pay interest only. At December 31, 1998, loans for 
the construction of nonresidential real estate totaled $595,000.

      Construction loans, particularly loans involving nonresidential real 
estate, generally involve greater underwriting and default risks than do 
loans secured by mortgages on existing properties. Loan funds are advanced 
upon the security of the project under construction, which is more difficult 
to value before the completion of construction. Moreover, because of the 
uncertainties inherent in estimating construction costs, it is relatively 
difficult to evaluate accurately the LTV and the total loan funds required 
to complete a project. In the event a default on a construction loan occurs 
and foreclosure follows, the Association would have to take control of the 
project and attempt either to arrange for completion of construction or 
dispose of the unfinished project. All of the Association's construction 
loans are secured by property in the Association's primary market area.

      Commercial Loans. The Association occasionally makes commercial loans 
to businesses in its primary market area. Such loans are typically secured 
by a security interest in inventory, accounts receivable or other assets of 
the borrower. At December 31, 1998, the Association's commercial loan 
portfolio was $451,000, or less than 1% of total loans.

      Consumer Loans. The Association makes various types of consumer loans, 
including education loans, loans made to depositors on the security of their 
deposit accounts, automobile loans and other secured loans and unsecured 
personal loans. Consumer loans are made at fixed rates of interest and for 
varying terms based on the type of loan. At December 31, 1998, the 
Association had $4.9 million, or 1% of total loans, invested in consumer 
loans.

      Consumer loans, particularly consumer loans which are unsecured or are 
secured by rapidly depreciating assets such as automobiles, may entail 
greater risk than do residential real estate loans. Repossessed collateral 
for a defaulted consumer loan may not provide an adequate source of 
repayment of the outstanding loan balance. The risk of default on consumer 
loans increases during periods of recession, high unemployment and other 
adverse economic conditions.

      Loan Solicitation and Processing. Loan originations are developed from 
a number of sources, including continuing business with depositors, other 
borrowers and real estate developers, solicitations by the Association's 
lending staff and walk-in customers.

      Loan applications for permanent real estate loans are taken by loan 
personnel in the office where the loan is originated. The Association 
typically obtains a credit report, verification of employment and other 
documentation concerning the creditworthiness of the borrower. An appraisal 
of the fair market value of the real estate which will be given as security 
for the loan is prepared by a staff appraiser or a fee appraiser approved by 
the Board of Directors. Upon the completion of the appraisal and the receipt 
of information on the credit history of the borrower, the application for a 
loan is submitted for review in accordance with the Association's 
underwriting guidelines to the Association's Executive Committee or 
Underwriting Committee. All loans are ratified by the full Board of 
Directors.

      Under the Association's current loan guidelines, if a real estate loan 
application is approved, title insurance is usually obtained on the real 
estate which will secure the mortgage loan. In the past, the Association 
used an attorney's opinion for single-family loans, whereas title insurance 
was typically used for nonresidential real estate loans. Borrowers are 
required to carry satisfactory fire and casualty insurance and flood 
insurance, if applicable, and to name the Association as an insured 
mortgagee.

      The procedure for approval of construction loans is the same as for 
permanent real estate loans, except that an appraiser evaluates the building 
plans, construction specifications and estimates of construction costs. The 
Association also evaluates the feasibility of the proposed construction 
project and the experience and record of the builder.

      Consumer loans are underwritten on the basis of the borrower's credit 
history and an analysis of the borrower's income and expenses, ability to 
repay the loan and the value of the collateral, if any.

      Loan Originations, Purchases and Sales. The Association originates 
both fixed-rate and ARM loans for its portfolio. A majority of the loans in 
the Association's portfolio conform to the secondary market standards of the 
Federal Home Loan Mortgage Corporation (the "FHLMC") or the Federal National 
Mortgage Association (the "FNMA"). In an effort to reduce interest rate risk 
and due to the favorable market conditions to do so, the Association, 
beginning in the second quarter of 1998, initiated a program to sell a 
portion of the Association's fixed-rate loan originations in the secondary 
market. The Association intends to continue to charge a higher interest rate 
on loans that do not conform to FHLMC or FNMA standards to mitigate the 
increased interest rate risk associated with loans that cannot be readily 
sold. At December 31, 1998, the Association had $21.1 million of loans 
serviced for others.

      The following table presents the Association's loan origination, 
purchase and sale activity for the periods indicated:

<TABLE>
<CAPTION>

                                                              Year ended December 31,
                                               -----------------------------------------------------
                                                 1998        1997       1996       1995       1994
                                               -----------------------------------------------------
                                                                  (In thousands)

<S>                                            <C>        <C>          <C>        <C>        <C>
Loans originated:
  One- to four-family residential              $ 88,834    $ 74,289    $58,626    $46,007    $50,809
  Multifamily residential                           844         211        702        375        149
  Nonresidential                                  2,335         817        957        848        446
  Construction                                   21,298      22,911     18,751     17,478     15,986
  Commercial                                      2,175       1,674        624        601        836
  Consumer                                        3,327       2,891      2,572      2,568      2,627
                                               -----------------------------------------------------
    Total loans originated                      118,813     102,793     82,232     67,877     70,853

Loan participations purchased                     2,175       1,025          -          -          -

Reductions:
  Principal repayments                          101,360      64,950     54,521     40,609     40,571
  Loans sold                                     17,663           -          -      1,250          -
  Transfers from loans to real estate owned          46          71          -         33        276
                                               -----------------------------------------------------
    Total reductions                            119,069      65,021     54,521     41,892     40,847

Increase (decrease) in other items, net (1)      (3,384)      2,931      1,032      2,398       (530)
                                               -----------------------------------------------------
Net increase                                   $  5,303    $ 35,866    $26,679    $23,587    $30,536
                                               =====================================================

--------------------
<F1>  Other items consist of the undisbursed portion of construction loans, 
      net loan origination fees, unearned interest and the allowance for 
      loan losses.


</TABLE>

      Federal Lending Limit. OTS regulations impose a lending limit on the 
aggregate amount that a savings association can lend to one borrower to an 
amount equal to 15% of the association's total capital for risk-based 
capital purposes plus any loan loss reserves not already included in total 
capital (the "Lending Limit Capital"). A savings association may loan to one 
borrower an additional amount not to exceed 10% of the association's Lending 
Limit Capital, if the additional amount is fully secured by certain forms of 
"readily marketable collateral."  Real estate is not considered "readily 
marketable collateral."  An exception to this limit permits loans of any 
type to one borrower of up to $500,000. In addition, the OTS, under certain 
circumstances, may permit exceptions to the lending limit on a case-by-case 
basis. In applying these limits, the regulations require that loans to 
certain related or affiliated borrowers be aggregated.

      Based on such limits, the Association was able to lend approximately 
$5.4 million to one borrower at December 31, 1998. The largest amount the 
Association had outstanding to one borrower and related persons or entities 
at December 31, 1998, was $3.9 million, consisting of a number of 
residential rental and condominium development projects in the Association's 
primary market area.

      Loan Origination and Other Fees. The Association realizes loan 
origination fee and other fee income from its lending activities and also 
realizes income from late payment charges, application fees and fees for 
other miscellaneous services.

      Loan origination fees and other fees are a volatile source of income, 
varying with the volume of lending, loan repayments and general economic 
conditions. All nonrefundable loan origination fees and certain direct loan 
origination costs are deferred and recognized in accordance with Statement 
of Financial Accounting Standards No. 91 as an adjustment to yield over the 
life of the related loan.

      Delinquent Loans, Nonperforming Assets and Classified Assets. 
Delinquent loans are loans for which payment has not been received within 30 
days of the payment due date. Loan payments are due on the first day of the 
month with the interest portion of the payment applicable to interest 
accrued during the prior month. When loan payments have not been made by the 
thirtieth of the month, late notices are sent to the borrower. If payment is 
not received by the sixtieth day, second notices are sent and telephone 
calls are made. Each loan bears a late payment penalty which is assessed as 
soon as such loan is more than 15 days delinquent. The late penalty is 5% of 
the payment due.

      When a loan secured by real estate becomes delinquent more than 90 
days, the Board of Directors reviews the loan and foreclosure proceedings 
are instituted if the Board determines that the delinquency is not likely to 
be resolved in a reasonable period of time. An appraisal of the security is 
performed when foreclosure proceedings are initiated. If the appraisal 
indicates that the value of the collateral is less than the book value of 
the loan, a valuation allowance is established for such loan.

      When a consumer loan becomes more than 120 days past due, the loan is 
classified loss and a specific reserve is established for the book balance 
of the loan.

      The following table reflects the amount of loans in a delinquent 
status as of the dates indicated:

<TABLE>
<CAPTION>

                                                                At December 31,
                          --------------------------------------------------------------------------------------------
                                      1998                            1997                            1996
                          ----------------------------    ----------------------------    ----------------------------
                                              Percent                         Percent                         Percent
                                              of Total                        of Total                        of Total
                          Number    Amount     loans      Number    Amount     loans      Number    Amount     loans
                          --------------------------------------------------------------------------------------------
                                                             (Dollars in thousands)

<S>                       <C>       <C>         <C>       <C>       <C>         <C>        <C>      <C>         <C>
Loans delinquent for:
  30 - 59 days             114      $2,336      0.70%       75      $2,019      0.62%       65      $1,267      0.43%
  60 - 89 days              35       1,266      0.38        49       1,327      0.40        34         575      0.20
  90 days and over          71       1,285      0.39        38         763      0.23        75         999      0.34
                           -----------------------------------------------------------------------------------------
Total delinquent loans     220      $4,887      1.47%      162      $4,109      1.25%      174      $2,841      0.97%
                           =========================================================================================

<CAPTION>
                                                 At December 31,
                          ------------------------------------------------------------
                                      1995                            1994
                          ----------------------------    ----------------------------
                                              Percent                         Percent
                                              of Total                        of Total
                          Number    Amount     loans      Number    Amount     loans
                          ------------------------------------------------------------
                                             (Dollars in thousands)

<S>                       <C>       <C>         <C>       <C>       <C>         <C>
Loans delinquent for:
  30 - 59 days             70       $1,238      0.47%      56       $1,394      0.58%
  60 - 89 days             47          749      0.28       36        1,342      0.56
  90 days and over         73        1,502      0.57       47        1,142      0.48
                          ----------------------------------------------------------
Total delinquent loans    190       $3,489      1.32%     139       $3,878      1.62%
                          ==========================================================

</TABLE>

      Nonperforming assets include nonaccruing loans, accruing loans which 
are delinquent 90 days or more, real estate acquired by foreclosure or by 
deed-in-lieu thereof, and repossessed assets. The Association ceases to 
accrue interest on real estate loans if the collateral value is not 
adequate, in the opinion of management, to cover the outstanding principal 
and interest.

      The following table sets forth information with respect to the accrual 
and nonaccrual status of the Association's loans and other nonperforming 
assets at the dates indicated:

<TABLE>
<CAPTION>

                                                               At  December 31,
                                              --------------------------------------------------
                                               1998       1997       1996       1995       1994
                                              --------------------------------------------------
                                                              (Dollars in thousands)

<S>                                           <C>        <C>        <C>        <C>        <C>
Accruing loans delinquent 90 days or more     $  512     $  294     $  721     $  939     $  874
Loans accounted for on a nonaccrual basis:
  Real estate:
    One- to four-family                          963        710        504        621        548
    Multifamily                                    -          -          -          -          -
    Nonresidential                                 -         10          -          7         63
  Consumer                                        13         18         13          5         13
                                              --------------------------------------------------
      Total nonaccrual loans                     976        738        517        633        624
                                              --------------------------------------------------
      Total nonperforming loans                1,488      1,032      1,238      1,572      1,498

Real estate owned                                  5         76          5          5         40
                                              --------------------------------------------------

      Total nonperforming assets              $1,493     $1,108     $1,243     $1,577     $1,538
                                              ==================================================

Allowance for loan losses                     $1,930     $1,742     $1,557     $1,376     $1,209
                                              ==================================================

Nonperforming assets as a 
 percent of total assets                        0.38%      0.31%      0.38%      0.49%      0.58%
Nonperforming loans as a
 percent of total loans                         0.45%      0.32%      0.42%      0.60%      0.62%
Allowance for loan losses as a
 percent of nonperforming loans               129.72%    168.76%    125.77%     87.53%     80.71%

</TABLE>

      For the year ended December 31, 1998, gross interest income which 
would have been recorded had nonaccruing loans been current in accordance 
with their original terms was $22,000. Interest collected on such loans and 
included in net income was $12,000.

      Real estate acquired by the Association as a result of foreclosure 
proceedings is classified as real estate owned ("REO") until it is sold. REO 
is recorded by the Association at the estimated fair value of the real 
estate at the date of acquisition, less estimated selling expenses, and any 
write-down resulting therefrom is charged to the allowance for loan losses. 
Interest accrual, if any, ceases no later than the date of acquisition of 
the real estate, and all costs incurred from such date in maintaining the 
property are expensed. Costs relating to the development and improvement of 
the property are capitalized to the extent of fair value.

      The Association classifies its own assets on a monthly basis in 
accordance with federal regulations. Problem assets are classified as 
"substandard," "doubtful" or "loss."  "Substandard" assets have one or more 
defined weaknesses and are characterized by the distinct possibility that 
the Association will sustain some loss if the deficiencies are not 
corrected. "Doubtful" assets have the same weaknesses as "substandard" 
assets, with the additional characteristics that (i) the weaknesses make 
collection or liquidation in full on the basis of currently existing facts, 
conditions and values questionable and (ii) there is a high possibility of 
loss. An asset classified "loss" is considered uncollectible and of such 
little value that its continuance as an asset of the Association is not 
warranted.

      The aggregate amounts of the Association's classified assets at the 
dates indicated were as follows:

<TABLE>
<CAPTION>

                                             At December 31,
                               ------------------------------------------
                                1998     1997    1996     1995      1994
                               ------------------------------------------
                                             (In thousands)

<S>                            <C>       <C>     <C>     <C>       <C>
Substandard                    $1,482    $786    $874    $1,408    $1,441
Doubtful                            -       -       -         -         -
Loss                               23      45      54        46        74
                               ------------------------------------------
    Total classified assets    $1,505    $831    $928    $1,454    $1,515
                               ==========================================

</TABLE>

      The Association establishes general allowances for loan losses for any 
loan classified as substandard or doubtful. If an asset, or portion thereof, 
is classified as loss, the Association establishes specific allowances for 
losses in the amount of 100% of the portion of the asset classified loss. 
Generally, the Association charges off the portion of any real estate loan 
deemed to be uncollectible.

      The Association analyzes each classified asset on a monthly basis to 
determine whether a change in its classification is appropriate under the 
circumstances. Such analysis focuses on a variety of factors, including the 
amount of any delinquency and the reasons for the delinquency, if any, the 
use of the real estate securing the loan, the status of the borrower and the 
appraised value of the real estate. As such factors change, the 
classification of the asset will change accordingly.

      Allowance for Loan Losses. Senior management, with oversight by the 
Board, reviews on a monthly basis the allowance for loan losses as it 
relates to a number of relevant factors, including but not limited to, 
trends in the level of delinquent and nonperforming assets and classified 
loans, current and anticipated economic conditions in the primary lending 
area, past loss experience and probable losses arising from specific problem 
assets. To a lesser extent, management also considers loan concentrations to 
single borrowers and changes in the composition of the loan portfolio. While 
management believes that it uses the best information available to determine 
the allowance for loan losses, unforeseen market conditions could result in 
adjustments, and net income could be significantly affected if circumstances 
differ substantially from the assumptions used in making the final 
determination.

      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 loan loss allowance 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 less than the 
outstanding balances of the consumer loans; and (4) determinations by 
various regulatory agencies that the Association 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 following table sets forth an analysis of the Association's 
allowance for loan losses for the periods indicated:

<TABLE>
<CAPTION>

                                              Year ended December 31,
                                   ----------------------------------------------
                                    1998      1997      1996      1995      1994
                                   ----------------------------------------------
                                               (Dollars in thousands)

<S>                                <C>       <C>       <C>       <C>       <C>
Balance at beginning of period     $1,742    $1,557    $1,376    $1,209    $1,001

Charge-offs                           (14)       (2)        -       (17)       (4)
Recoveries                              2         1         1         4        12
                                   ----------------------------------------------
Net (charge-offs) recoveries          (12)       (1)        1       (13)        8
Provision for loan losses             200       186       180       180       200
                                   ----------------------------------------------
Balance at end of year             $1,930    $1,742    $1,557    $1,376    $1,209
                                   ==============================================
Net (charge-offs) recoveries to
 average loans                       0.00%     0.00%     0.00%    (0.01)%    0.00%
Allowance for loan losses to 
 total loans                         0.59%     0.54%     0.53%     0.52%     0.50%

</TABLE>

      The following table sets forth the allocation of the Association's 
allowance for loan losses by type of loan at the dates indicated:

<TABLE>
<CAPTION>

                               1998                     1997                     1996
                       ---------------------    ---------------------    ---------------------
                                 Percent of               Percent of               Percent of
                                    loans                    loans                    loans
                                   in each                  in each                  in each
                                 category to              category to              category to
                       Amount    total loans    Amount    total loans    Amount    total loans
                       -----------------------------------------------------------------------
                                                (Dollars in thousands)

<S>                    <C>           <C>        <C>           <C>        <C>           <C>
Balance at year end
 applicable to:
  Real estate loans    $1,442         98%       $1,303         99%       $1,166         99%
Commercial loans           38          -            34          -            30          -
Consumer loans            164          2           151          1           134          1
Unallocated               286          -           254          -           227          -
                       -------------------------------------------------------------------
Total                  $1,930        100%       $1,742        100%       $1,557        100%
                       ===================================================================

<CAPTION>

                               1995                     1994
                       ---------------------    ---------------------
                                 Percent of               Percent of
                                    loans                    loans
                                   in each                  in each
                                 category to              category to
                       Amount    total loans    Amount    total loans
                       ----------------------------------------------
                                   (Dollars in thousands)

<S>                    <C>           <C>        <C>           <C>
Balance at year end
 applicable to:
  Real estate loans    $1,036         98%       $  913         98%
  Commercial loans         27          -            23          -
  Consumer loans          112          2           103          2
  Unallocated             201          -           170          -
                       ------------------------------------------
      Total            $1,376        100%       $1,209        100%
                       ==========================================

</TABLE>

      Because the loan loss allowance is based on estimates, it is monitored 
monthly and adjusted as necessary to provide an adequate allowance.

Investment Activities

      Federal regulation and Ohio law permit the Association to invest in 
various types of investments, including interest- bearing deposits in other 
financial institutions, U.S. Treasury and agency obligations, mortgage-
backed securities and certain other specified investments. The Board of 
Directors of the Association has adopted an investment policy which 
authorizes management to make investments in U.S. Government and agency 
securities, deposits in the FHLB, certificates of deposit in federally-
insured financial institutions, banker's acceptances issued by major U.S. 
banks, corporate debt securities rated at least "AA," or equivalent, by a 
major statistical rating firm and municipal or other tax free obligations. 
The Association's investment policy is designed primarily to provide and 
maintain liquidity within regulatory guidelines, to maintain a balance of 
high quality investments to minimize risk and to maximize return without 
sacrificing liquidity and safety.

      The following table sets forth the composition of the Association's 
interest-bearing deposits, investment securities and mortgage-backed 
securities at the dates indicated:

<TABLE>
<CAPTION>

                                                                            At December 31,
                                         -------------------------------------------------------------------------------------
                                                           1998                                         1997
                                         ----------------------------------------     ----------------------------------------
                                         Carrying     % of       Fair       % of      Carrying     % of       Fair       % of
                                           value      total      value      total       value      total      value      total
                                         -------------------------------------------------------------------------------------
                                                                        (Dollars in thousands)


<S>                                      <C>         <C>        <C>        <C>        <C>         <C>        <C>        <C>
Interest-bearing deposits:
  Demand deposits                        $ 5,469      11.16%    $ 5,469     11.16%    $ 3,499      11.30%    $ 3,499     11.29%
  Overnight deposits                      22,000      44.91      22,000     44.89       6,000      19.38       6,000     19.35
                                         -------------------------------------------------------------------------------------

      Total interest-bearing deposits     27,469      56.07      27,469     56.05       9,499      30.68       9,499     30.64

Investment securities:
  U.S. Treasury securities:
    Available for sale                    12,156      24.81      12,156     24.81      16,048      51.82      16,048     51.76
  U.S. agency securities:
    Available for sale                     6,042      12.33       6,042     12.33       3,011       9.72       3,011      9.71
  Equity securities (1)                    3,037       6.20       3,037      6.20       1,971       6.37       1,971      6.36
                                         -------------------------------------------------------------------------------------
      Total investment securities         21,235      43.34      21,235     43.34      21,030      67.91      21,030     67.83
                                         -------------------------------------------------------------------------------------
  Mortgage-backed securities                 283       0.59         302      0.61         437       1.41         474      1.53
                                         -------------------------------------------------------------------------------------
Total investments                        $48,987     100.00%    $49,006    100.00%    $30,966     100.00%    $31,003    100.00%
                                         =====================================================================================

<CAPTION>

                                                      At December 31,
                                         ----------------------------------------
                                                           1996
                                         ----------------------------------------
                                         Carrying     % of       Fair       % of
                                           value      total      value      total
                                         ----------------------------------------
                                                  (Dollars in thousands)

<S>                                      <C>         <C>        <C>        <C>

Interest-bearing deposits:
  Demand deposits                        $ 2,101       7.03%    $ 2,101      7.02%
  Overnight deposits                       4,000      13.38       4,000     13.36
                                         ----------------------------------------

      Total interest-bearing deposits      6,101      20.41       6,101     20.38

Investment securities:
  U.S. Treasury securities:
    Available for sale                    21,938      73.38      21,938     73.27
  U.S. agency securities:
    Available for sale                         -          -           -         -
  Equity securities (1)                    1,298       4.34       1,298      4.33
                                         ----------------------------------------
      Total investment securities         23,236      77.72      23,236     77.60
                                         ----------------------------------------
  Mortgage-backed securities                 561       1.87         608      2.02
                                         ----------------------------------------
Total investments                        $29,898     100.00%    $29,945    100.00%
                                         ========================================

--------------------
<F1>  Comprised of Federal Home Loan Mortgage Corporation preferred stock.

</TABLE>

      The maturities of the Association's interest-bearing deposits, 
investment securities and mortgage-backed securities at December 31, 1998, 
are as follows:

<TABLE>
<CAPTION>

                                                                 At December 31, 1998
                               ----------------------------------------------------------------------------------------
                                                       After one through          After five             After  ten
                                 One year or less          five years         through ten years            years
                               -------------------    -------------------    -------------------    -------------------
                               Carrying    Average    Carrying    Average    Carrying    Average    Carrying    Average
                                 value      yield       value      yield       value      yield       value      yield
                               ----------------------------------------------------------------------------------------
                                                                (Dollars in thousands)

<S>                            <C>          <C>        <C>         <C>         <C>        <C>         <C>        <C>
Interest-bearing deposits      $27,469      4.68%      $    -         -%       $  -          -%       $  -           -%
U.S. Treasury securities         6,018      5.52        6,138      6.33           -          -           -           -
U.S. agency securities           4,014      5.87        2,028      6.09           -          -           -           -
Mortgage-backed securities           -         -           58      9.82          12       8.50         213       10.76
                               ---------------------------------------------------------------------------------------
      Total                    $37,501      4.94%      $8,224      6.30%       $ 12       8.50%       $213       10.76%
                               =======================================================================================

<CAPTION>

                                       At December 31, 1998
                               ------------------------------------

                                               Total
                               ------------------------------------
                               Carrying    Market    Weighted
                                 value     value     average yield
                               ------------------------------------
                                      (Dollars in thousands)

<S>                            <C>         <C>           <C>
Interest-bearing deposits      $27,469     $27,469        4.68%
U.S. Treasury securities        12,156      12,156        5.92
U.S. agency securities           6,042       6,042        5.94
Mortgage-backed securities         283         302       10.47
                               -------------------------------
      Total                    $45,950     $45,969        5.21%
                               ===============================

</TABLE>

Not included in the preceding table is $3.0 million of Federal Home Loan 
Mortgage Corporation preferred stock which has no stated maturity.

Deposits and Borrowings

      General. Deposits have traditionally been the primary source of the 
Association's funds for use in lending and other investment activities. In 
addition to deposits, the Association derives funds from interest payments 
and principal repayments on loans and income on interest-earning assets. 
Loan payments are a relatively stable source of funds, while deposit inflows 
and outflows fluctuate more in response to general interest rates and money 
market conditions. The Association also utilizes FHLB advances as an 
alternative source of funds.

      Deposits. Deposits are attracted principally from within the 
Association's primary market area through the offering of a broad selection 
of deposit instruments, including NOW accounts, demand deposit accounts, 
money market accounts, regular passbook savings accounts, term certificate 
accounts, IRAs and Keogh accounts. Interest rates paid, maturity terms, 
service fees and withdrawal penalties for the various types of accounts are 
established periodically by management based on the Association's liquidity 
requirements, growth goals and interest rates paid by competitors. The 
Association does not use brokers to attract deposits. The amount of deposits 
from outside the Association's primary market area is not significant.

      At December 31, 1998, the Association's certificates of deposit 
totaled $207.9 million, or 72% of total deposits. Of such amount, 
approximately $142.4 million in certificates of deposit mature within one 
year. Based on past experience and the Association's prevailing pricing 
strategies, management believes that a substantial percentage of such 
certificates will be renewed with the Association at maturity. If deviation 
from historical experience occurs, the Association can utilize borrowings 
from the FHLB of Cincinnati as an alternative source of funds, up to the 
Association's limit on such borrowings, which was $69.1 million at December 
31, 1998.

      The following table sets forth the dollar amount of deposits in the 
various types of accounts offered by the Association at the dates indicated:

<TABLE>
<CAPTION>

                                                                                 December 31,
                              ------------------------------------------------------------------------------------------------
                                  Weighted               1998                        1997                        1996
                              average rate at  ------------------------    ------------------------    -----------------------
                                December 31,              Percent of                  Percent of                  Percent of
                                   1998        Amount    total deposits    Amount    total deposits    Amount    total deposits
                              -------------------------------------------------------------------------------------------------
                                                                            (Dollars in thousands)

<S>                                <C>         <C>          <C>            <C>          <C>            <C>          <C>
Transaction accounts:
  Noninterest-bearing demand
   deposits                           -%       $  4,009       1.39%        $  3,287       1.21%        $  3,173       1.22%
  Passbook savings accounts        3.10          54,258      18.80           52,622      19.43           53,410      20.62
  NOW accounts                     2.90          17,750       6.15           15,277       5.64           14,321       5.53
  Money market accounts            3.00           4,713       1.63            4,049       1.49            4,531       1.75
                                               ---------------------------------------------------------------------------
    Total transaction accounts                   80,730      27.97           75,235      27.77           75,435      29.12

Certificates of deposit:
  4.01% -  6.00%                   5.42         149,696      51.87          120,113      44.33          130,367      50.32
  6.01% -  8.00%                   6.17          33,578      11.64           51,020      18.83           28,962      11.18
  8.01% - 10.00%                      -               -          -                -          -                6       0.00
  Adjustable-rate (1)              5.45          24,580       8.52           24,589       9.07           24,304       9.38
                                               ---------------------------------------------------------------------------
      Total certificates
       of deposit                  5.54         207,854      72.03          195,722      72.23          183,639      70.88
                                               ---------------------------------------------------------------------------
      Total deposits               4.80%       $288,584     100.0%         $270,957     100.0%         $259,074     100.0%
                                               ==========================================================================

--------------------
<F1>  Consists of IRA and Keogh accounts, the rates on which adjust monthly 
      at the discretion of the Association.

</TABLE>

      The Association bids on deposits of public funds from entities in its 
primary market area. The amount of such deposits was approximately $20.8 
million at December 31, 1998.

      The following table shows rate and maturity information for the 
Association's certificates of deposit at December 31, 1998:

<TABLE>
<CAPTION>

                                                         Amount Due
                                 ----------------------------------------------------------
                                               Over         Over
                                   Up to     1 year to    2 years to      Over
Rate                             one year     2 years      3 years      3 years      Total
-------------------------------------------------------------------------------------------
                                                       (In thousands)

<S>                              <C>          <C>          <C>          <C>        <C>
4.01% to 6.00%                   $110,709     $18,155      $15,170      $5,662     $149,696
6.01% to 8.00%                     15,622      11,332        4,958       1,666       33,578
Adjustable rate                    16,065       8,515            -           -       24,580
                                 ----------------------------------------------------------
Total certificates of deposit    $142,396     $38,002      $20,128      $7,328     $207,854
                                 ==========================================================

</TABLE>

      The following table presents the amount of the Association's 
certificates of deposit of $100,000 or more, by the time remaining until 
maturity, at December 31, 1998:

<TABLE>
<CAPTION>

Maturity                         Amount
----------------------------------------
                             (In thousands)

<S>                              <C>
Three months or less             $   479
Over 3 months to 6 months          7,376
Over 6 months to 12 months        25,839
Over 12 months                    12,201
                                 -------
      Total                      $45,895
                                 =======

</TABLE>

      The following table sets forth the Association's deposit account 
balance activity for the periods indicated:

<TABLE>
<CAPTION>

                                              Year ended December 31,
                                         --------------------------------
                                           1998        1997        1996
                                         --------------------------------
                                              (Dollars in thousands)

<S>                                      <C>         <C>         <C>
Beginning balance                        $270,957    $259,074    $238,282
  Deposits                                445,214     166,892     399,604
  Withdrawals                            (438,622)   (165,456)   (388,210)
                                         --------------------------------
Net deposits before interest credited     277,549     260,510     249,676
  Interest credited                        11,035      10,447       9,398
                                         --------------------------------
Ending balance                           $288,584    $270,957    $259,074
                                         ================================

  Net increase                           $ 17,627    $ 11,883    $ 20,792
  Percent increase                            6.5%        4.6%        8.7%

</TABLE>

      Borrowings. The FHLB system functions as a central reserve bank, 
providing credit for its member institutions and certain other financial 
institutions. As a member in good standing of the FHLB of Cincinnati, the 
Association is authorized to apply for advances from the FHLB of Cincinnati, 
provided certain standards of creditworthiness have been met. Under current 
regulations, an association must meet certain qualifications to be eligible 
for FHLB advances. The extent to which an association is eligible for such 
advances will depend upon whether it meets the Qualified Thrift Lender Test 
(the "QTL test"). If an association meets the QTL test, it will be eligible 
for 100% of the advances it would otherwise be eligible to receive. If an 
association does not meet the QTL test, it will be eligible for such 
advances only to the extent it holds specified QTL test assets. At December 
31, 1998, the Association was in compliance with the QTL test.

      The following table sets forth the maximum month-end balance and 
average balance of the Association's FHLB advances during the periods 
indicated:

<TABLE>
<CAPTION>

                                 Year ended December 31,
                              ----------------------------
                               1998       1997       1996
                              ----------------------------
                                 (Dollars in thousands)

<S>                           <C>        <C>        <C>
Maximum balance               $37,000    $29,000    $2,000
Average balance                35,692     16,615       462
Average interest rate paid       6.15%      6.38%     4.76%

</TABLE>

      At December 31, 1998, the Association had outstanding FHLB advances 
totaling $35.0 million, with a weighted average interest rate of 6.11%.

Competition

      The Association competes for deposits with other savings associations, 
savings banks, commercial banks and credit unions and with the issuers of 
commercial paper and other securities, such as shares in money market mutual 
funds. The primary factors in competing for deposits are interest rates and 
convenience of office location. In making loans, the Association competes 
with other savings banks, savings associations, commercial banks, mortgage 
brokers, consumer finance companies, credit unions, leasing companies and 
other lenders. The Association competes for loan originations primarily 
through the interest rates and loan fees it charges and through the 
efficiency and quality of services it provides to borrowers. Competition is 
intense and is affected by, among other things, the general availability of 
lendable funds, general and local economic conditions, current interest rate 
levels and other factors which are not readily predictable. The Association 
does not offer all of the products and services offered by some of its 
competitors, particularly commercial banks. The Association monitors the 
product offerings of its competitors and adds new products when it can do so 
competitively and cost effectively.

      The size of financial institutions competing with the Association is 
likely to increase as a result of changes in statutes and regulations 
eliminating various restrictions on interstate and inter-industry branching 
and acquisitions. Such increased competition may have an adverse effect upon 
the Association.

Employees

      As of December 31, 1998, the Association had 84 full-time employees 
and 8 part-time employees. The Association believes that relations with its 
employees are excellent. The Association offers health and disability 
benefits, life insurance and an employee stock ownership plan. None of the 
employees of the Association are represented by a collective bargaining 
unit.

                                 REGULATION

General

      As a savings and loan association incorporated under the laws of Ohio, 
Industrial is subject to regulation, examination and oversight by the OTS 
and the Superintendent of the Division of Financial Institutions of the 
Department of Commerce of the State of Ohio (the "Ohio Superintendent"). 
Because Industrial's deposits are insured by the FDIC, Industrial also is 
subject to general oversight by the FDIC. Industrial must file periodic 
reports with the OTS, the Ohio Superintendent and the FDIC concerning its 
activities and financial condition. Examinations are conducted periodically 
by federal and state regulators to determine whether Industrial is in 
compliance with various regulatory requirements and is operating in a safe 
and sound manner. Industrial is a member of the FHLB of Cincinnati.

      The Holding Company is a savings and loan holding company within the 
meaning of the Home Owners Loan Act, as amended (the "HOLA") and is, 
therefore, subject to regulation, examination, and oversight by the OTS and 
is required to submit periodic reports to the OTS. Because the Holding 
Company and Industrial are corporations organized under Ohio law, they are 
also subject to the provisions of the Ohio Revised Code applicable to 
corporations generally.

      Congress is considering legislation to eliminate the federal savings 
and loan charter and the separate federal regulation of savings and loan 
associations. Pursuant to such legislation, Congress may eliminate the OTS 
and Industrial may be regulated under federal law as a bank or may be 
required to change its charter. Such change in regulation or charter would 
likely change the range of activities in which Industrial may engage and 
would probably subject Industrial to more regulation by the FDIC. In 
addition, the Holding Company might become subject to different holding 
company regulations, including separate capital requirements. At this time, 
the Holding Company cannot predict when or whether Congress may actually 
pass legislation regarding the Holding Company's and Industrial's regulatory 
requirements or charter. Although such legislation may change the activities 
in which either the Holding Company and Industrial may engage, it is not 
anticipated that the current activities of the Holding Company or Industrial 
will be materially affected by those activity limits.

Ohio Savings and Loan Law

      The Ohio Superintendent is responsible for the regulation and 
supervision of Ohio savings and loan associations in accordance with the 
laws of the State of Ohio. Ohio law prescribes the permissible investments 
and activities of Ohio savings and loan associations, including the types of 
lending that such associations may engage in and the investments in real 
estate, subsidiaries, and corporate or government securities that such 
associations may make. The ability of Ohio associations to engage in these 
state-authorized investments and activities is subject to oversight and 
approval by the FDIC, if such investments or activities are not permissible 
for a federally-chartered savings and loan association.

      The Ohio Superintendent also has approval authority over any mergers 
involving, or acquisitions of control of, Ohio savings and loan 
associations. The Ohio Superintendent may initiate certain supervisory 
measures or formal enforcement actions against Ohio associations. 
Ultimately, if the grounds provided by law exist, the Ohio Superintendent 
may place an Ohio association in conservatorship or receivership.

      The Ohio Superintendent conducts regular examinations of Industrial 
approximately once every eighteen months. Such examinations are usually 
conducted jointly with one or both federal regulators. The Ohio 
Superintendent imposes assessments on Ohio associations based on their asset 
size to cover the cost of supervision and examination.

Office of Thrift Supervision

      General. The OTS is an office in the Department of the Treasury and is 
responsible for the regulation and supervision of all federally-chartered 
savings and loan associations and all other savings and loan associations, 
the deposits of which are insured by the FDIC. The OTS issues regulations 
governing the operation of savings and loan associations, regularly examines 
such associations and imposes assessments on savings associations based on 
their asset size to cover the costs of this supervision and examination. The 
OTS also may initiate enforcement actions against savings and loan 
associations and certain persons affiliated with them for violations of laws 
or regulations or for engaging in unsafe or unsound practices. If the 
grounds provided by law exist, the OTS may appoint a conservator or receiver 
for a savings and loan association.

      Savings associations are subject to regulatory oversight under various 
consumer protection and fair lending laws. These laws govern, among other 
things, truth-in-lending disclosures, equal credit opportunity, fair credit 
reporting and community reinvestment. Failure to abide by federal laws and 
regulations governing community reinvestment could limit the ability of an 
association to open a new branch or engage in a merger. Community 
reinvestment regulations evaluate how well and to what extent an institution 
lends and invests in its designated service area, with particular emphasis 
on low- to moderate-income communities and borrowers in that area. 
Industrial has received a "satisfactory" examination rating under those 
regulations.

      Regulatory Capital Requirements. Industrial is required by OTS 
regulations to meet certain minimum capital requirements. Current capital 
requirements call for tangible capital of 1.5% of adjusted total assets, 
core capital (which for Industrial consists solely of tangible capital) of 
3.0% of adjusted total assets and risk-based capital (which for Industrial 
consists of core capital and general valuation allowances) of 8.0% of risk-
weighted assets (assets, including certain off-balance sheet items, are 
weighted at percentage levels ranging from 0% to 100% depending on the 
relative risk).

      The OTS has proposed to amend the core capital requirement so that 
those associations that do not have the highest examination rating and an 
acceptable level of risk will be required to maintain core capital of from 
4% to 5%, depending on the association's examination rating and overall 
risk. Industrial does not anticipate that it will be adversely affected if 
the core capital requirement regulation is amended as proposed.

      The OTS has adopted an interest rate risk component to the risk-based 
capital requirement, though the implementation of that component has been 
delayed. Pursuant to that requirement a savings association would have to 
measure the effect of an immediate 200 basis point change in interest rates 
on the value of its portfolio as determined under the methodology of the 
OTS. If the measured interest rate risk is above the level deemed normal 
under the regulation, Industrial will be required to deduct one-half of such 
excess exposure from its total capital when determining its risk-based 
capital. In general, an association with less than $300 million in assets 
and a risk-based capital ratio in excess of 12% will not be subject to the 
interest rate risk component. Pending implementation of the interest rate 
risk component, the OTS has the authority to impose a higher individualized 
capital requirement on any savings association it deems to have excess 
interest rate risk. The OTS also may adjust the risk-based capital 
requirement on an individualized basis to take into account risks due to 
concentrations of credit and non-traditional activities.

      The OTS has adopted regulations governing prompt corrective action to 
resolve the problems of capital deficient and otherwise troubled savings and 
loan associations. At each successively lower defined capital category, an 
association is subject to more restrictive and numerous mandatory or 
discretionary regulatory actions or limits, and the OTS has less flexibility 
in determining how to resolve the problems of the institution. The OTS has 
defined these capital levels as follows:  (i) well-capitalized associations 
must have total risk-based capital of at least 10%, core risk-based capital 
(consisting only of items that qualify for inclusion in core capital) of at 
least 6% and core capital of at least 5%; (ii) adequately capitalized 
associations are those that meet the regulatory minimum of total risk-based 
capital of 8%, core risk-based capital of 4%, and core capital of 4% (except 
for associations receiving the highest examination rating, in which case the 
level is 3%) but are not well-capitalized; (iii) undercapitalized 
associations are those that do not meet regulatory limits, but that are not 
significantly undercapitalized; (iv) significantly undercapitalized 
associations have total risk-based capital of less than 6%, core risk-based 
capital of less than 3% or core capital of less than 3%; and (v) critically 
undercapitalized associations are those with core capital of less than 2% of 
total assets. In addition, the OTS generally can downgrade an association's 
capital category, notwithstanding its capital level, if, after notice and 
opportunity for hearing, the association is deemed to be engaging in an 
unsafe or unsound practice because it has not corrected deficiencies that 
resulted in it receiving a less than satisfactory examination rating on 
matters other than capital or it is deemed to be in an unsafe or unsound 
condition. An undercapitalized association must submit a capital restoration 
plan to the OTS within 45 days after it becomes undercapitalized. 
Undercapitalized associations will be subject to increased monitoring and 
asset growth restrictions and will be required to obtain prior approval for 
acquisitions, branching and engaging in new lines of business. Critically 
undercapitalized institutions must be placed in conservatorship or 
receivership within 90 days of reaching that capitalization level, except 
under limited circumstances. Industrial's capital at December 31, 1998, met 
the standards for a well-capitalized institution.

      Federal law prohibits a savings and loan association from making a 
capital distribution to anyone or paying management fees to any person 
having control of the association if, after such distribution or payment, 
the association would be undercapitalized. In addition, each company 
controlling an undercapitalized association must guarantee that the 
association will comply with its capital plan until the association has been 
adequately capitalized on an average during each of four preceding calendar 
quarters and must provide adequate assurances of performance. The aggregate 
liability pursuant to such guarantee is limited to the lesser of (i) an 
amount equal to 5% of the association's total assets at the time the 
association became undercapitalized or (ii) the amount that is necessary to 
bring the association into compliance with all capital standards applicable 
to such association at the time the association fails to comply with its 
capital restoration plan.

      Liquidity. OTS regulations require that savings associations maintain 
an average daily balance of liquid assets (cash, certain time deposits, 
association's acceptances, and specified United States Government, state or 
federal agency obligations) equal to a monthly average of not less than 4% 
of its net withdrawable savings deposits plus borrowings payable in one year 
or less. Monetary penalties may be imposed upon member institutions failing 
to meet liquidity requirements. The eligible liquidity of Industrial at 
December 31, 1998, was approximately $31.1 million, or 7.90%, which exceeded 
the 4% liquidity requirement by approximately $18.8 million.

      Qualified Thrift Lender Test. Prior to September 30, 1996, the QTL 
test required savings associations to maintain a specified level of 
investments in assets that are designated as qualifying thrift investments 
("QTI"), which are generally related to domestic residential real estate and 
manufactured housing and include stock issued by any FHLB, the FHLMC or the 
FNMA. Under this test 65% of an institution's "portfolio assets" (total 
assets less goodwill and other intangibles, property used to conduct 
business, and 20% of liquid assets) must consist of QTI on a monthly average 
basis in 9 out of every 12 months. Congress created a second QTL test, 
effective September 30, 1996, pursuant to which a savings association may 
also qualify as a QTL thrift if at least 60% of the institution's assets (on 
a tax basis) consist of specified assets (generally loans secured by 
residential real estate or deposits, educational loans, cash, and certain 
governmental obligations). The OTS may grant exceptions to the QTL test 
under certain circumstances. If a savings association fails to meet the QTL 
test, the association and its holding company become subject to certain 
operating and regulatory restrictions. A savings association that fails to 
meet the QTL test will not be eligible for new FHLB advances. At 
December 31, 1998, Industrial met the QTL test.

      Lending Limit. OTS regulations generally limit the aggregate amount 
that a savings association can lend to one borrower or group of related 
borrowers to an amount equal to 15% of the association's Lending Limit 
Capital. A savings association may lend to one borrower an additional amount 
not to exceed 10% of the association's Lending Limit Capital, if the 
additional amount is fully secured by certain forms of "readily marketable 
collateral."  Real estate is not considered "readily marketable collateral."  
Certain types of loans are not subject to this limit. In applying this 
limit, the regulations require that loans to certain related borrowers be 
aggregated. An exception to this limit permits loans of any type to one 
borrower up to $500,000.

      Based on such limits, Industrial was able to lend approximately $5.4 
million to one borrower at December 31, 1998. The largest amount Industrial 
had outstanding to any group of affiliated borrowers at December 31, 1998, 
was $3.9 million, which consisted of forty-four loans, secured by a number 
of residential rental and condominium development projects. At December 31, 
1998, such loans were performing in accordance with their terms.

      Transactions with Insiders and Affiliates. Loans to executive 
officers, directors, and principal shareholders and their related interests 
must conform to the lending limit on loans to one borrower, and the total of 
such loans to executive officers, directors, principal shareholders, and 
their related interests cannot exceed Industrial's Lending Limit Capital (or 
200% of Lending Limit Capital for qualifying institutions with less than 
$100 million in assets). Most loans to directors, executive officers, and 
principal shareholders must be approved in advance by a majority of the 
"disinterested" members of the board of directors of Industrial with any 
"interested" director not participating. All loans to directors, executive 
officers, and principal shareholders must be made on terms substantially the 
same as offered in comparable transactions with the general public or as 
offered to all employees in a company-wide benefit program, and loans to 
executive officers are subject to additional limitations. Industrial was in 
compliance with such restrictions at December 31, 1998.

      All transactions between a savings association and its affiliates must 
comply with Sections 23A and 23B of the Federal Reserve Act (the "FRA"). An 
affiliate of a savings association is any company or entity that controls, 
is controlled by or is under common control with, the savings association. 
The Holding Company will be an affiliate of Industrial. Generally, Sections 
23A and 23B of the FRA (i) limit the extent to which a savings association 
or its subsidiaries may engage in "covered transactions" with any one 
affiliate to an amount equal to 10% of such institution's capital stock and 
surplus, (ii) limit the aggregate of all such transactions with all 
affiliates to an amount equal to 20% of such capital stock and surplus, and 
(iii) require that all such transactions be on terms substantially the same, 
or at least as favorable to the association, as those provided in 
transactions with a non-affiliate. The term "covered transaction" includes 
the making of loans, purchase of assets, issuance of a guarantee, and other 
similar types of transactions. In addition to the limits in Sections 23A and 
23B, a savings association may not make any loan or other extension of 
credit to an affiliate unless the affiliate is engaged only in activities 
permissible for a bank holding company and may not purchase or invest in 
securities of any affiliate except shares of a subsidiary. Industrial was in 
compliance with these requirements and restrictions at December 31, 1998.

      Limitations on Capital Distributions. The OTS imposes various 
restrictions or requirements on the ability of associations to make capital 
distributions, according to ratings of associations based on their capital 
level and supervisory condition. Capital distributions, for purposes of such 
regulation, include, without limitation, payments of cash dividends, 
repurchases, and certain other acquisitions by an association of its shares 
and payments to stockholders of another association in an acquisition of 
such other association.

      For purposes of the capital distribution regulations, each institution 
is categorized into one of three tiers. The first rating category is Tier 1, 
consisting of associations that, before and after the proposed capital 
distribution, meet their fully phased-in capital requirement. Associations 
in this category may make capital distributions during any calendar year 
equal to the greater of (i) 100% of its net income, current year-to-date, 
plus 50% of the amount by which the lesser of the association's tangible, 
core or risk-based capital exceeds its fully phased-in capital requirement 
for such capital component, as measured at the beginning of  the calendar 
year, or (ii) the amount authorized for a Tier 2 association. The second 
category, Tier 2, consists of associations that, before and after the 
proposed capital distribution, meet their current minimum, but not fully 
phased-in, capital requirement. Associations in this category may make 
capital distributions up to 75% of their net income over the most recent 
four quarters. Tier 3 associations do not meet their current minimum capital 
requirement and must obtain OTS approval of any capital distribution. A Tier 
1 association deemed to be in need of more than normal supervision by the 
OTS may be treated as a Tier 2 or a Tier 3 association.

      Industrial is also prohibited from declaring or paying any dividends 
or from repurchasing any of its stock if, as a result, the net worth of 
Industrial would be reduced below the amount required to be maintained for 
the liquidation account established in connection with the Conversion. In 
addition, as a subsidiary of the Holding Company, Industrial is also 
required to give the OTS 30 days' notice prior to declaring any dividend on 
its stock. The OTS may object to the dividend during that 30-day period 
based on safety and soundness concerns.  Moreover, the OTS may prohibit any 
capital distribution otherwise permitted by regulation if the OTS determines 
that such distribution would constitute an unsafe or unsound practice.

      Holding Company Regulation.  The Holding Company is a savings and loan 
holding company within the meaning of the HOLA. As such, the Holding Company 
has registered with the OTS and is subject to OTS regulations, examination, 
supervision, and reporting requirements.

      The HOLA generally prohibits a savings and loan holding company from 
controlling any other savings and loan association or savings and loan 
holding company, without prior approval of the OTS, or from acquiring or 
retaining more than 5% of the voting shares of a savings and loan 
association or holding company thereof which is not a subsidiary. Under 
certain circumstances, a savings and loan holding company is permitted to 
acquire, with the approval of the OTS, up to 15% of the previously unissued 
voting shares of an undercapitalized savings and loan association for cash 
without being deemed to control  the  association. Except  with  the  prior 
approval  of  the  OTS, no  director or officer of  a savings and loan 
holding company or person owning or controlling by proxy or otherwise more 
than 25% of such company's stock may also acquire control of any savings 
institution, other than a subsidiary institution, or any other savings and 
loan holding company.

      The Holding Company is a unitary savings and loan holding company. 
Under current law, there are generally no restrictions on the activities of 
unitary savings and loan holding companies and such companies are the only 
financial institution holding companies which may engage in commercial, 
securities, and insurance activities without limitation. The broad latitude 
under current law can be restricted if the OTS determines that there is 
reasonable cause to believe that the continuation by a savings and loan 
holding company of an activity constitutes a serious risk to the financial 
safety, soundness, or stability of its subsidiary savings and loan 
association. The OTS may impose such restrictions as deemed necessary to 
address such risk, including limiting (i) payment of dividends by the 
savings and loan association; (ii) transactions between the savings and loan 
association and its affiliates; and (iii) any activities of the savings and 
loan association that might create a serious risk that the liabilities of 
the holding company and its affiliates may be imposed on the savings and 
loan association. Notwithstanding the foregoing rules as to permissible 
business activities of a unitary savings and loan holding company, if the 
savings and loan association subsidiary of a holding company fails to meet 
the QTL, then such unitary holding company would become subject to the 
activities restrictions applicable to multiple holding companies. At 
December 31, 1998, Industrial met the QTL.

      Congress is considering legislation which may limit the Holding 
Company's ability to engage in these activities and the Holding Company 
cannot predict if and in what form these proposals might become law. 
However, such limits would not impact the Holding Company's initial activity 
of holding the stock of Industrial.

      If the Holding Company were to acquire control of another savings 
institution, other than through a merger or other business combination with 
Industrial, the Holding Company would become a multiple savings and loan 
holding company. Unless the acquisition is an emergency thrift acquisition 
and each subsidiary savings and loan association meets the QTL, the 
activities of the Holding Company and any of its subsidiaries (other than 
Industrial or other subsidiary savings and loan associations) would 
thereafter be subject to activity restrictions. The HOLA provides that, 
among other things, no multiple savings and loan holding company or 
subsidiary thereof that is not a savings institution shall commence or 
continue for a limited period of time after becoming a multiple savings and 
loan holding company or subsidiary thereof, any business activity other than 
(i) furnishing or performing management services for a subsidiary savings 
institution; (ii) conducting an insurance agency or escrow business; (iii) 
holding, managing or liquidating assets owned by or acquired from a 
subsidiary savings institution; (iv) holding or managing properties used or 
occupied by a subsidiary savings institution; (v) acting as trustee under 
deeds of trust; (vi) those activities previously directly authorized by 
federal regulation as of March 5, 1987, to be engaged in by multiple holding 
companies; or (vii) those activities authorized by the FRB as permissible 
for bank holding companies, unless the OTS by regulation prohibits or limits 
such activities for savings and loan holding companies, and which have been 
approved by the OTS prior to being engaged in by a multiple holding company.

      The OTS may approve an acquisition resulting in the formation of a 
multiple savings and loan holding company that controls savings and loan 
associations in more than one state only if the multiple savings and loan 
holding company involved controls a savings and loan association that 
operated a home or branch office in the state of Industrial to be acquired 
as of March 5, 1987, or if the laws of the state in which the institution to 
be acquired is located specifically permit institutions to be acquired by 
state-chartered institutions or savings and loan holding companies located 
in the state where the acquiring entity is located (or by a holding company 
that controls such state-chartered savings institutions). As under prior 
law, the OTS may approve an acquisition resulting in a multiple savings and 
loan holding company controlling savings and loan associations in more than 
one state in the case of certain emergency thrift acquisitions. Bank holding 
companies have had more expansive authority to make interstate acquisitions 
than savings and loan holding companies since August 1995.

FDIC Regulations

      Deposit Insurance. The FDIC is an independent federal agency that 
insures the deposits, up to prescribed statutory limits, of federally-
insured banks and thrifts and safeguards the safety and soundness of the 
banking and thrift industries. The FDIC administers two separate insurance 
funds, Bank Insurance Fund (the "BIF") for commercial banks and state 
savings banks and the SAIF for savings associations. The FDIC is required to 
maintain designated levels of reserves in each fund. Industrial's deposit 
accounts are insured by the FDIC in the SAIF up to the prescribed limits. 
The FDIC has examination authority over all insured depository institutions, 
including Industrial, and has authority to initiate enforcement actions 
against federally-insured savings associations if the FDIC does not believe 
the OTS has taken appropriate action to safeguard safety and soundness and 
the deposit insurance fund.

      The FDIC is required to maintain designated levels of reserves in each 
fund. The FDIC may increase assessment rates for either fund if necessary to 
restore the fund's ratio of reserves to insured deposits to its target level 
within a reasonable time and may decrease such rates if such target level 
has been met. The FDIC has established a risk-based assessment system for 
both SAIF and BIF members. Under this system, assessments vary based on the 
risk the institution poses to its deposit insurance fund. The risk level is 
determined based on the institution's capital level and the FDIC's level of 
supervisory concern about the institution. BIF assessments for healthy banks 
in 1997 were $.012 per $100 in deposits, and SAIF assessments for healthy 
institutions in 1997 were $.061 per $100 in deposits.

FRB Regulations

      FRB regulations currently require savings associations to maintain 
reserves of 3% of net transaction accounts (primarily NOW accounts) up to 
$46.5 million (subject to an exemption of up to $4.9 million), and of 10% of 
net transaction accounts over $46.5 million. At December 31, 1998, 
Industrial was in compliance with this reserve requirement.

Federal Home Loan Banks

      The FHLBs provide credit to their members in the form of advances. 
Industrial is a member of the FHLB of Cincinnati and must maintain an 
investment in the capital stock of the FHLB of Cincinnati in an amount equal 
to the greater of 1% of the aggregate outstanding principal amount of 
Industrial's residential mortgage loans, home purchase contracts, and 
similar obligations at the beginning of each year, and 5% of its advances 
from the FHLB. Industrial was in compliance with this requirement with an 
investment in stock of the FHLB of Cincinnati of $3.3 million at 
December 31, 1998.

      Upon the origination or renewal of a loan or advance, the FHLB of 
Cincinnati is required by law to obtain and maintain a security interest in 
collateral in one or more of the following categories: fully disbursed, 
whole first mortgage loans on improved residential property or securities 
representing a whole interest in such loans; securities issued, insured or 
guaranteed by the U.S. Government or an agency thereof; deposits in any 
FHLB; or other real estate related collateral (up to 30% of the member 
association's capital) acceptable to the applicable FHLB, if such collateral 
has a readily ascertainable value and the FHLB can perfect its security 
interest in the collateral.

      Each FHLB is required to establish standards of community investment 
or service that its members must maintain for continued access to long-term 
advances from the FHLBs. The standards take into account a member's 
performance under the Community Reinvestment Act and its record of lending 
to first-time home buyers. All long-term advances by each FHLB must be made 
only to provide funds for residential housing finance.

                                  TAXATION

Federal Taxation

      The Holding Company and Industrial are each subject to the federal tax 
laws and regulations which apply to corporations generally. In addition to 
the regular income tax, the Holding Company and Industrial may be subject to 
an alternative minimum tax. An alternative minimum tax is imposed at a 
minimum tax rate of 20% on "alternative minimum taxable income" (which is 
the sum of a corporation's regular taxable income, with certain adjustments, 
and tax preference items), less any available exemption. Such tax preference 
items include interest on certain tax-exempt bonds issued after August 7, 
1986. In addition, 75% of the amount by which a corporation's "adjusted 
current earnings" exceeds its alternative minimum taxable income computed 
without regard to this preference item and prior to reduction by net 
operating losses, is included in alternative minimum taxable income. Net 
operating losses can offset no more than 90% of alternative minimum taxable 
income. The alternative minimum tax is imposed to the extent it exceeds the 
corporation's regular income tax. Payments of alternative minimum tax may be 
used as credits against regular tax liabilities in future years. The 
Taxpayer Relief Act of 1997 repealed the alternative minimum tax for certain 
"small corporations" for tax years beginning after December 31, 1997. A 
corporation initially qualifies as a small corporation if it had average 
gross receipts of $5,000,000 or less for the three tax years ending with its 
first tax year beginning after December 31, 1997. Once a corporation is 
recognized as a small corporation, it will continue to be exempt from the 
alternative minimum tax for as long as its average gross receipts for the 
prior three-year period do not exceed $7,500,000. In determining if a 
corporation meets this requirement, the first year that it achieved small 
corporation status is not taken into consideration.

      Based on Industrial's average gross receipts of $28.5 million for the 
three tax years ending on December 31, 1998, Industrial would not qualify as 
a small corporation exempt from the alternative minimum tax.

      Prior to the enactment of the Small Business Jobs Protection Act (the 
"Small Business Act"), which was signed into law on August 21, 1996, certain 
thrift institutions, were allowed deductions for bad debts under methods 
more favorable than those granted to other taxpayers. Qualified thrift 
institutions could compute deductions for bad debts using either the 
specific charge off method of Section 166 of the Code, or one of the two 
reserve methods of Section 593 of the Code. The reserve methods under 
Section 593 of the Code permitted a thrift institution annually to elect to 
deduct bad debts under either (i) the "percentage of taxable income" method 
applicable only to thrift institutions, or (ii) the "experience" method that 
also was available to small banks. Under the "percentage of taxable income" 
method, a thrift institution generally was allowed a deduction for an 
addition to its bad debt reserve equal to 8% of its taxable income 
(determined without regard to this deduction and with additional 
adjustments). Under the experience method, a thrift institution was 
generally allowed a deduction for an addition to its bad debt reserve equal 
to the greater of (i) an amount based on its actual average experience for 
losses in the current and five preceding taxable years, or (ii) an amount 
necessary to restore the reserve to its balance as of the close of the base 
year. A thrift institution could elect annually to compute its allowable 
addition to bad debt reserves for qualifying loans either under the 
experience method or the percentage of taxable income method.

      The Small Business Act eliminated the percentage of taxable income 
reserve method of accounting for bad debts by thrift institutions, effective 
for taxable years beginning after 1995. Thrift institutions that would be 
treated as small banks are allowed to utilize the experience method 
applicable to such institutions, while thrift institutions that are treated 
as large banks are required to use only the specific charge off method.

      A thrift institution required to change its method of computing 
reserves for bad debts will treat such change as a change in the method of 
accounting, initiated by the taxpayer, and having been made with the consent 
of the Secretary of the Treasury. Section 481(a) of the Code requires 
certain amounts to be recaptured with respect to such change. Generally, the 
amounts to be recaptured will be determined solely with respect to the 
"applicable excess reserves" of the taxpayer. The amount of the applicable 
excess reserves will be taken into account ratably over a six-taxable year 
period, beginning with the first taxable year beginning after 1995, subject 
to the residential loan requirement described below. In the case of a thrift 
institution that becomes a large bank, the amount of the institution's 
applicable excess reserves generally is the excess of (i) the balances of 
its reserve for losses on qualifying real property loans (generally loans 
secured by improved real estate) and its reserve for losses on nonqualifying 
loans (all other types of loans) as of the close of its last taxable year 
beginning before January 1, 1996, over (ii) the balances of such reserves as 
of the close of its last taxable year beginning before January 1, 1988 
(i.e., the "pre-1988 reserves"). In the case of a thrift institution that 
becomes a small bank, the amount of the institution's applicable excess 
reserves generally is the excess of (i) the balances of its reserve for 
losses on qualifying real  property loans and its reserve for losses on 
nonqualifying loans as of the close of its last taxable year beginning 
before January 1, 1996, over (ii) the greater of the balance of (a) its pre-
1988 reserves or (b) what the thrift's reserves would have been at the close 
of its last year beginning before January 1, 1996, had the thrift always 
used the experience method.

      For taxable years that begin on or after January 1, 1996, and before 
January 1, 1998, if a thrift meets the residential loan requirement for a 
tax year, the recapture of the applicable excess reserves otherwise required 
to be taken into account as a Code Section 481(a) adjustment for the year 
will be suspended. A thrift meets the residential loan requirement if, for 
the tax year, the principal amount of residential loans made by the thrift 
during the year is not less then its base amount. The "base amount" 
generally is the average of the principal amounts of the residential loans 
made by the thrift during the six most recent tax years beginning before 
January 1, 1996. A residential loan is a loan as described in Section 
7701(a)(19)(C)(v) (generally a loan secured by residential real and church 
property and certain mobile homes), but only to the extent that the loan is 
made to the owner of the property.

      The balance of the pre-1988 reserves is subject to the provisions of 
Section 593(e) as modified by the Small Business Act which require recapture 
in the case of certain excessive distributions to shareholders. The pre-1988 
reserves may not be utilized for payment of cash dividends or other 
distributions to a shareholder (including distributions in dissolution or 
liquidation) or for any other purpose (except to absorb bad debt losses). 
Distribution of a cash dividend by a thrift institution to a shareholder is 
treated as made:  first, out of the institution's post-1951 accumulated 
earnings and profits; second, out of the pre-1988 reserves; and third, out 
of such other accounts as may be proper. To the extent a distribution by 
Industrial to the Holding Company is deemed paid out of its pre-1988 
reserves under these rules, the pre-1988 reserves would be reduced and 
Industrial's gross income for tax purposes would be increased by the amount 
which, when reduced by the income tax, if any,  attributable to the 
inclusion of such amount in its gross income,  equals the amount deemed paid 
out of the pre-1988 reserves. As of December 31, 1998, Industrial's pre-1988 
reserves for tax purposes totaled approximately $4.2 million. Industrial 
believes it had approximately $2.4 million of accumulated earnings and 
profits for tax purposes as of December 31, 1998, which would be available 
for dividend distributions, provided regulatory restrictions applicable to 
the payment of dividends are met. No representation can be made as to 
whether Industrial will have current or accumulated earnings and profits in 
subsequent years.

      The tax returns of Industrial have been audited or closed without 
audit through fiscal year 1994. In the opinion of management, any 
examination of open returns would not result in a deficiency which could 
have a material adverse effect on the financial condition of Industrial.

Ohio Taxation

      The Holding Company is subject to the Ohio corporation franchise tax, 
which, as applied to the Holding Company, is a tax measured by both net 
earnings and net worth. The rate of tax is the greater of (i) 5.1% on the 
first $50,000 of computed Ohio taxable income and 8.9% of computed Ohio 
taxable income in excess of $50,000 and (ii) 0.582% times taxable net worth. 
Under these alternative measures of computing tax liability, the states to 
which a taxpayer's adjusted total net income and adjusted total net worth 
are apportioned or allocated are determined by complex formulas. The minimum 
tax is $50 per year.

      A special litter tax is also applicable to all corporations, including 
the Holding Company, subject to the Ohio corporation franchise tax other 
than "financial institutions."  If the franchise tax is paid on the net 
income basis, the litter tax is equal to .11% of the first $50,000 of 
computed Ohio taxable income and .22% of computed Ohio taxable income in 
excess of $50,000. If the franchise tax is paid on the net worth basis, the 
litter tax is equal to .014% times taxable net worth.

      Ohio corporation franchise tax law is scheduled to change markedly as 
a consequences of legislative reforms enacted July 1, 1997. Tax liability, 
however, continues to be measured by both net income and net worth. In 
general, tax liability will be the greater of (i) 5.1% on the first $50,000 
of computed Ohio taxable income and 8.5% of computed Ohio taxable income in 
excess of $50,000 or (ii) 0.40% of taxable net worth. Under these 
alternative measures of computing tax liability, the states to which total 
net income and total net worth will be apportioned or allocated will 
continue to be determined by complex formulas, but the formulas change. The 
minimum tax will still be $50 per year and maximum tax liability as measured 
by net worth will be limited to $150,000 per year. The special litter taxes 
remain in effect. Various other changes in the tax law may affect the 
Holding Company.

      Industrial is a "financial institution" for State of Ohio tax 
purposes. As such, it is subject to the Ohio corporate franchise tax on 
"financial institutions," which is imposed annually at a rate of 1.5% of 
Industrial's apportioned book net worth, determined in accordance with GAAP, 
less any statutory deduction. This rate of tax is scheduled to decrease in 
each of the years 1999 and 2000. As a "financial institution," Industrial is 
not subject to any tax based upon net income or net profits imposed by the 
State of Ohio.

Item 2.  Description of Property

      The following table sets forth certain information at December 31, 
1998, regarding the office facilities of the Association:

<TABLE>
<CAPTION>

                                Owned or     Date                  Net book
          Location               leased    acquired    Deposits    value
          -----------------------------------------------------------------
                                           (In thousands)

<S>                              <C>       <C>         <C>          <C>
30 East Main Street              Owned     11/04/94    $29,325      $1,137
Ashland, Ohio 44805

203 North Sandusky Street (1)    Owned     02/25/93          -          64
Bellevue, Ohio  44811

211 North Sandusky Street        Owned     05/06/72     56,034         349
Bellevue, Ohio  44811

225 North Main Street            Owned     06/05/75     15,116         103
Clyde, Ohio  43410

1500 Bright Road                 Owned     01/29/93     20,783       1,027
Findlay, Ohio  45840

321 West State Street            Owned     06/30/87     19,225         218
Fremont, Ohio  43420

2080 Ferguson Road               Leased           -          -           -
Mansfield, Ohio  44906

50 West Main Street              Owned     08/06/76     43,056         261
Norwalk, Ohio  44857

51 West Main Street (2)          Owned     09/11/92          -         193
Norwalk, Ohio  44587

4112 Milan Road                  Owned     02/29/88     14,242         429
Sandusky, Ohio  44870

48 East Market Street (3)        Owned     06/15/83     55,006         335
Tiffin, Ohio  44883

796 West Market Street (3)       Owned     12/18/90          -         227
Tiffin, Ohio  44883

301 Myrtle Avenue                Owned     05/07/77     35,887         142
Willard, Ohio  44890

--------------------
<F1>  Office facility for the Association's appraisal staff.
<F2>  Drive-up facility only.
<F3>  Deposit totals are combined for the two Tiffin offices.

</TABLE>

Item 3.  Legal Proceedings

      The Association is not presently involved in any material legal 
proceedings. From time to time, the Association is a party to legal 
proceedings incidental to its business to enforce its security interest in 
collateral pledged to secure loans made by the Association.

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

      Not applicable.

                                   PART II

Item 5.  Market for Registrant's Common Equity and Related Shareholder 
         Matters

      The information contained in the 1998 Annual Report to Shareholders of 
the Corporation (the "Annual Report"), a copy of which is attached hereto as 
Exhibit 13, under the caption "Common Stock Information," is incorporated 
herein by reference.

Item 6.  Selected Financial Data

      The information contained in the Annual Report under the caption 
"Selected Consolidated Financial Data" is incorporated herein by reference. 
The dividend pay-out ratio (dividends declared per share as a percentage of 
basic earnings per share) of the Company was 48.4% for 1998, 46.2% for 1997 
and 53.2% for 1996. The dividend pay-out ratio for 1996 excludes the $3.50 
per share special return of capital distribution.

Item 7.  Management's Discussion and Analysis of Financial Condition and 
         Results of Operations

      The information contained in the Annual Report under the caption 
"Management's Discussion and Analysis of Financial Condition and Results of 
Operations" is incorporated herein by reference.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

      The information contained in the Annual Report under the caption 
"Asset and Liability Management" is incorporated herein by reference.

Item 8.  Financial Statements and Supplemental Data

      The Consolidated Financial Statements appearing in the Annual Report 
and the report of Crowe, Chizek and Company LLP dated January 15, 1999, are 
incorporated herein by reference.

Item 9.  Changes in and Disagreements with Accountants on Accounting and 
         Financial Disclosure

      Not applicable.

                                  PART III

Item 10. Directors and Executive Officers of the Registrant

      The information contained in the Proxy Statement for the 1999 Annual 
Meeting of Shareholders of the Company (the "Proxy Statement"), filed with 
the Securities and Exchange Commission (the "Commission") on March 16, 1999, 
under the captions "Election of Directors" and "Executive Officers," is 
incorporated herein by reference.

Item 11. Executive Compensation

      The information contained in the Proxy Statement under the caption 
"Compensation of Executive Officers and Directors" is incorporated herein by 
reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management

      The information contained in the Proxy Statement under the caption 
"Voting Securities and Ownership of Certain Beneficial Owners and 
Management" is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions

      The information contained in the Proxy Statement under the caption 
"Compensation of Executive Officers and Directors - Certain Transactions" is 
incorporated herein by reference.

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)   Exhibits

      3(a)    Articles of Incorporation

      3(b)    Certificate of Amendment to Articles of Incorporation

      3(c)    Code of Regulations

      11      Statement Regarding Computation of Per Share Earnings

      13      Annual Report to Shareholders

      21      Subsidiaries of Registrant

      27      Financial Data Schedule

      99      Proxy Statement for 1999 Annual Meeting of Shareholders


(b)   Financial Statement Schedules. All schedules are omitted because they 
are not applicable or the required information is shown in the financial 
statements or notes thereto.

(c)   Reports on Form 8-K. There were no reports filed during 1998.


                                 SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities 
Exchange Act of 1934, the Registrant has duly caused this report to be 
signed on its behalf by the undersigned, thereunto duly authorized.

                                       INDUSTRIAL BANCORP, INC.

                                       By:  /s/ David M. Windau
                                            ------------------------------
                                            David M. Windau, Chief Executive
                                            Officer (Duly Authorized 
                                            Representative)

      Pursuant to the requirements of the Securities Exchange Act of 1934, 
this report has been signed below by the following persons in the capacities 
and on the dates indicated.

/s/  David M. Windau                   /s/ Lawrence R. Rhoades
-----------------------------          -----------------------------------
David M. Windau, President,            Lawrence R. Rhoades, Chairman of the 
Chief Executive Officer and Director   Board, Chief Financial Officer and 
                                       Director

Date:  March 16, 1999                  Date:  March 16, 1999

/s/ Graydon H. Hayward                 /s/ Leon W. Maginnis
-----------------------------          -----------------------------------
Graydon H. Hayward, Director           Leon W. Maginnis, Director

Date:  March 16, 1999                  Date:  March 16, 1999

-----------------------------          -----------------------------------
Bob Moore, Director                    Fredric C. Spurck, Director

Date:  March 16, 1999                  Date:  March 16, 1999

/s/  Roger O. Wilkinson
-----------------------------
Roger O. Wilkinson, Director

Date:  March 16, 1999

                              INDEX TO EXHIBITS

Exhibit Number

     3(a)         Articles of Incorporation
                  Incorporated by reference to the Registration Statement on 
                  Form S-1 filed by the Holding Company on March 23, 1995 
                  (the "S-1") with the Securities and Exchange Commission, 
                  Exhibit 3.1

     3(b)         Certificate of Amendment to Articles of Incorporation

     3(c)         Code of Regulations
                  Incorporated by reference to the S-1, Exhibit 3.2
                  Incorporated by reference to the S-1, Exhibit 3.3

    11            Statement Regarding Computation of Per Share Earnings 
                  Incorporated by reference to Note 1 to the Financial 
                  Statements included in the Annual Report

    13            Annual Report to Shareholders

    21            Subsidiaries of the Registrant

    27            Financial Data Schedule

    99            Proxy Statement for 1999 Annual Meeting of Shareholders
                  Incorporated by reference to the Proxy Statement, filed
                  with the Securities and Exchange Commission on March 16, 1999