EXHIBIT 13

PRESIDENT'S MESSAGE TO OUR SHAREHOLDERS
-------------------------------------------------------------------------------

On behalf  of the  directors,  officers,  and  employees  of  Northeast  Indiana
Bancorp,  Inc. and its  subsidiary  First Federal  Savings Bank, I am pleased to
report to you, our shareholders, that 1996 was another successful and profitable
year.

Your company continued to play a vital role in the growth,  prosperity,  and the
quality of life of the  Huntington  community.  As a  community  citizen,  First
Federal  and its  employees  participated  actively  and  financially  in  local
organizations and community groups. First Federal Savings Bank is the number one
provider of mortgage  loans and consumer  financing  in our market area,  and in
1996 made  major  advances  in  developing  loan  programs  attractive  to small
business and commercial customers. The success of these programs is reflected by
the fact that  assets have grown from  $137.6  million on  December  31, 1995 to
$169.5  million on December 31, 1996, an increase of 23.2%.  Total deposits grew
by $17.1 million to $85.3 million, a 25.1% increase,  while net loans receivable
increased 19.7% to $146.9 million on December 31, 1996.

Success,  while  measured in terms of community  involvement  and  institutional
growth,  must also be reflected in company profits and 1996 was a very good year
for First  Federal.  For the year ended  December  31, 1996,  Northeast  Indiana
Bancorp,  Inc.'s net income was $1.57 million or $0.84 per share, an increase of
18.8% from the year ended  December 31, 1995 net income of $1.32  million.  This
increase in profits took place despite the cost  associated  with the resolution
of the Savings Association Insurance Fund (SAIF)  recapitalization.  Without the
SAIF assessment,  net income for December 31, 1996 would have been approximately
$1.84 million or $0.98 per share,  an increase of 39.4% from the previous fiscal
year.

To enhance shareholder value and earnings per share,  Northeast Indiana Bancorp,
Inc.  continued an aggressive stock repurchase program during 1996. In that time
frame,  371,539  shares were  repurchased  as treasury  stock  leaving the total
number of shares issued and outstanding at year end at 1,810,586.

The  financial  services  market that we serve is  affected  by many  variables,
including but not limited to,  federal  regulations,  economy,  competition  and
interest rate risk. We begin 1997  recognizing we must deal with these and other
challenges that lie ahead.

Your  directors,  officers and  employees  will continue to make every effort to
have First Federal  Savings Bank  recognized as "Now more than  ever...First  in
Hometown  Banking." We look forward with  excitement and commitment to improving
our services,  products, profits and your shareholder value in Northeast Indiana
Bancorp, Inc.

Sincerely,



Stephen E. Zahn
Chairman of the Board,
President and Chief Executive Officer
<PAGE>
<TABLE>
<CAPTION>
                                    SELECTED CONSOLIDATED FINANCIAL INFORMATION
-----------------------------------------------------------------------------------------------------------
                                                                      December 31
                                               1996         1995         1994         1993         1992
                                               ----         ----         ----         ----         ----
Selected Financial Condition Data:                                  (dollars in thousands)
<S>                                         <C>          <C>           <C>          <C>           <C>

Total assets................................$ 169,544    $ 137,569     $ 115,095    $  96,106     $ 81,412

Loans receivable, net.......................  146,855      122,641       104,402       87,725       73,318
Securities..................................   12,388        6,882         5,395        4,275        3,162

Deposits ...................................   85,346       68,203        68,533       69,169       70,985
Total borrowings............................   56,000       37,500        35,500       17,500        2,494
Shareholders' equity........................   26,529       31,033        10,238        8,901        7,420

Selected Operations Data:

Total interest income.......................$  11,767     $  9,644     $   8,102    $   7,425    $   7,316
Total interest expense......................    6,197        5,307         4,072        3,192        3,651
                                            ---------     --------     ---------    ---------    ---------
   Net interest income......................    5,570        4,337         4,030        4,233        3,665
Provision for loan losses...................      235          251           263          196          131
                                            ---------     --------     ---------    ---------    ---------
Net interest income after provision for loan
  losses....................................    5,335        4,086         3,767        4,037        3,534
Total noninterest income....................      402          347           384          284          298
Total noninterest expense...................    3,208        2,364         1,938        1,846        1,686
                                            ---------     --------     ---------    ---------    ---------
Income before income taxes..................    2,529        2,069         2,213        2,475        2,146
Income tax expense..........................      962          750           876          993          858
                                            ---------     --------     ---------    ---------    ---------
Net income..................................$   1,567     $  1,319     $   1,337    $   1,482    $   1,288
                                            =========     ========     =========    =========    =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                                             <C>         <C>          <C>          <C>           <C>
Selected Financial Ratios and Other Data:

Performance Ratios:
   Return on assets (ratio of net
     income to average  total assets).......      1.02%        1.04%        1.22%        1.65%         1.61%
   Return on equity (ratio of net income to
     average total equity)..................      5.49         6.28        13.77        18.07         18.88
   Interest rate spread information:
   Average during period....................      2.90         2.80         3.51         4.53          4.38
   End of period............................      2.70         2.77         2.83         3.92          4.13
   Net interest margin (1)..................      3.81         3.57         3.82         4.88          4.71
   Ratio of operating expense to average
     total assets............................     2.10         1.86         1.81         2.06          2.10
   Ratio of average interest-earning assets
     to average interest-bearing liabilities.   121.48       117.70       107.93       105.76        107.11

Quality Ratios:
   Non-performing assets to total assets at
     end of period..........................       .42          .21          .29          .07           .64
   Allowance for loan losses to
     non-performing loans...................    144.00       310.21       205.93       672.06         52.22
   Allowance for loan losses to loans
      receivable net........................       .70          .72          .66           .52          .37


Capital Ratios:
   Shareholders' equity to total assets at end of
     period.................................     15.65        22.56         8.90         9.26          9.11
  Average shareholders' equity to average total
     assets.................................     18.64        16.56         8.89         9.16          8.51

Other Data:
   Number of full-service offices...........        3             3            2            2            2

(1) Net interest income divided by average interest-earning assets.
</TABLE>
<PAGE>
--------------------------------------------------------------------------------
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
--------------------------------------------------------------------------------
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


General

Northeast  Indiana  Bancorp,  Inc.  (the  "Company")  was  formed as a  Delaware
corporation  in March,  1995 for the purpose of issuing  common stock and owning
all of the common  stock of First  Federal  Savings  Bank  ("First  Federal"  or
"Bank") as a unitary thrift holding company. The Bank conducts business from its
three offices located in Huntington,  Indiana.  The Company's  primary  business
activity is its investment in the Bank, and therefore,  the following discussion
relates primarily to the operations of the Bank.

The  principal  business  of  savings  banks,   including  First  Federal,   has
historically consisted of attracting deposits from the general public and making
loans secured by residential real estate. First Federal's earnings are primarily
dependent on net interest  income,  the difference  between  interest income and
interest  expense.  Interest  income is a function of the  balances of loans and
investments  outstanding  during the period and the yield earned on such assets.
Interest  expense is a function  of the  balances  of  deposits  and  borrowings
outstanding  during  the same  period and the rates  paid on such  deposits  and
borrowings.  First  Federal's  earnings are also affected by provisions for loan
losses,  service  charge and fee income,  other  noninterest  income,  operating
expenses and income  taxes.  Operating  expenses  consist  primarily of employee
compensation and benefits,  occupancy and equipment  expenses,  data processing,
federal  deposit  insurance   premiums  and  other  general  and  administrative
expenses.

First Federal is  significantly  affected by prevailing  economic  conditions as
well  as  federal  regulations  concerning  monetary  and  fiscal  policies  and
financial  institutions.  The year of 1996 started  with the economy  moderately
reducing potential  inflationary  pressures carried over from the fourth quarter
1995. The economy has stayed relatively stable during 1996 overall. Although, at
times,  throughout 1996 we have had  fluctuations,  in general,  the economy was
favorable to First Federal's lending growth. There can be no assurance, however,
in periods of rising interest  rates,  that the Bank will be able to continue to
market its mortgage loans successfully or that such interest rate movements will
not adversely affect net income.

Deposit balances are influenced by a number of factors including  interest rates
paid on  competing  personal  investments  and the level of personal  income and
savings within First Federal's market.  Lending activities are influenced by the
demand for  housing as well as  competition  from  other  lending  institutions.
Lending  activities may also be impacted by liquidity levels and funds available
to originate loans. The primary sources of funds for lending  activities include
deposits, borrowed funds, loan payments and funds provided from operations.
<PAGE>
--------------------------------------------------------------------------------
Financial Condition
--------------------------------------------------------------------------------

First Federal's total assets  increased from $137.6 million at December 31, 1995
to $169.5 million at December 31, 1996, an increase of $31.9 million,  or 23.2%.
The increase was due  primarily  to the  increases in loans of $24.2  million or
19.7% and  securities  of $5.5  million  or 80.0%.  This  growth  was  funded by
increased  advances  from the Federal  Home Loan Bank  ("FHLB")  totaling  $18.5
million and increased deposits of $17.1 million.

The increase in the loan  portfolio  was comprised  primarily of mortgage  loans
which  increased  $19.7 million.  Mortgage  loans secured by one-to-four  family
residences  increased  $13.8  million to $99.3  million at December 31, 1996 and
represent  65.1% of First  Federal's  loan  portfolio.  The  increase in one- to
four-family  mortgage  loans  was  comprised  of  a  $8.6  million  increase  in
adjustable rate loans and a $5.2 million increase in fixed rate loans.  Mortgage
loans secured by multi-family  and commercial real estate increased $1.5 million
to $15.3  million  at  December  31,  1996 and  construction  loans  secured  by
residential  and  non-residential  real estate  increased  $4.4 million to $10.7
million.

First  Federal  also offers a variety of consumer  loans  including  automobile,
credit card,  commercial,  home equity and second mortgage loans. Total consumer
and  commercial  business  loans  increased  $6.9  million  to $27.2  million at
December 31, 1996.  Automobile  loans  comprise  $8.8 million of total  consumer
loans while home equity and second mortgage loans represent another $4.5 million
at December 31, 1996.

The North Office, in its first full year of operation, continues to offer a wide
range of banking services in an expanding sector of Huntington.

Total  deposits  increased  $17.1 million to $85.3 million at December 31, 1996.
Deposits had remained  relatively  constant  since  December 31, 1991 until this
year. This year's 25.1% growth was due to aggressive  advertising and pricing of
selected products for a limited time slightly above local market competitors.

Total  borrowed  funds  increased  $18.5  million,  from $37.5  million to $56.0
million at December 31, 1996.  Borrowed  funds consist of advances from the FHLB
with variable  interest rates and stated  maturities  ranging  through 2001. The
increase in advances was utilized to fund increases in loans and  investments as
total  deposit  growth wasn't  sufficient to fund our growth in earning  assets.
Management  plans to continue to utilize  FHLB  advances in  conjunction  with a
continued  aggressive  approach to  increasing  our deposit  base as a source of
funds which will provide the necessary funding for loan demand.  First Federal's
borrowing limit at the FHLB as of December 31, 1996, was $60.0 million.
<PAGE>
--------------------------------------------------------------------------------
Results of Operations
--------------------------------------------------------------------------------

Comparison of Years Ended December 31, 1996 and 1995

General.  Net income for the year ended December 31, 1996 was $1.57 million,  an
increase of  $248,000  compared  to net income for the year ended  December  31,
1995.  This  increase  was  primarily  the result of an increase in  noninterest
income  of  $56,000  and  increases  in net  interest  income  of $1.23  million
partially offset by an increase in non-interest  expenses of $844,000 and income
tax expense of $212,000, respectively.  Further details regarding changes in the
major categories of income and expense are discussed below.

Interest Income.  Interest income increased $2.13 million, or 22.10%, from $9.64
million to $11.77  million for the year ended December 31, 1996. The increase in
interest  income was primarily  the result of an increase in interest  income on
mortgage  loans of $1.49 million and an increase in interest  income on consumer
and other loans of  $423,000.  The  increase in interest  income on loans is due
primarily to an increase in the average balance of the loan portfolio. The yield
on the loan portfolio  increased from 8.06% in 1995 to 8.16% in 1996, due to the
high volume of loans in the  portfolio  which were  originated  or repriced at a
higher  interest  rate than 1995.  Yields on the loan  portfolio are expected to
increase  slightly for 1997 as yields on loans that are originated in the recent
falling  interest rate  environment  are offset by the yields on adjustable rate
mortgage ("ARM") loans that are repricing at higher rates but will remain in our
portfolio.  Yields are also expected to be  positively  impacted by increases in
commercial  and consumer  loans which  typically have interest rates higher than
residential mortgage loans.

Interest  Expense.  Interest  expense has risen $890,000,  or 16.8%,  from $5.31
million to $6.20 million for the year ended  December 31, 1996.  The majority of
this increase was the result of higher interest  expense of $485,000 on borrowed
funds. This increase was due to a combination of a significantly  larger average
balance of borrowed  funds during the year,  which  increased by $11.57  million
from $34.56 million for 1995 to $46.13 million for 1996 partially  offset by the
lower average rate paid for borrowed funds during the year.  Interest expense on
deposits  increased  $405,000  during 1996 due primarily to higher average rates
paid for money market deposits and the higher average balance of deposits during
the year.

Net interest  income.  Net interest income increased $1.23 million or 28.4% from
$4.34  million to $5.57  million for the year ended  December  31,  1996.  First
Federal's  net interest  rate spread  improved  during 1996.  The interest  rate
spread averaged 2.90% during 1996 compared to 2.80% during 1995 and was 2.70% at
December 31, 1996. The increase in net interest spread during 1996 was primarily
due to an increase in the average  rates on interest  earning  assets.  Mortgage
loans averaged 8.06% in 1995 compared to 8.16% in 1996,  while the average costs
of interest  bearing  liability  rates  remained  almost stable at 5.15% in 1995
compared to 5.16% in 1996.
<PAGE>
--------------------------------------------------------------------------------
Results of Operations (continued)
--------------------------------------------------------------------------------
Provision  for Loan  Losses.  The  provision  for loan losses for the year ended
December  31, 1996 was  $235,000  compared  to  $251,000  in the prior  year,  a
decrease of $16,000. The provision for loan losses, less net charge-offs for the
year of $188,000,  increased  the  allowance for loan losses to $1.03 million at
December 31, 1996, a 16.7%  increase  compared to December 31, 1995.  Management
will  continue to record a provision  for loan losses to maintain the  allowance
for loan losses at a level deemed  adequate by  management  based on a quarterly
analysis.

Noninterest  Income.  Noninterest  income  increased  from  $347,000  in 1995 to
$403,000 in 1996.  This increase of $56,000 was primarily the result of fees and
service charges on loan and deposit  accounts  increasing by $36,000 during 1996
to $274,000 compared to 1995 income of $238,000.

Noninterest Expense. Noninterest expense increased from $2.36 million in 1995 to
$3.21 million in 1996.  This increase of $844,000,  or 35.7%,  was primarily the
result of  increases  in FDIC  expense of $343,000  including  the one time FDIC
assessment  for the  recapitalization  of the  SAIF  fund of  $453,000  taken in
September 1996. This FDIC assessment  represents  53.7% of the total increase in
the 1996 noninterest  expense compared to 1995. The increase in compensation and
benefits of $241,000 was mostly a result of recording additional benefit expense
of $205,000  related to the stock  incentive  plans approved by  shareholders in
January 1996.  Occupancy and equipment and office supplies also increased due to
increased  volume and the first full year of  operating  the North  Office.  For
1997,  the Bank's  expense  for FDIC  deposit  insurance  will  decrease  as the
assessment rate is expected to be reduced from $.23 per $100 of insured deposits
in 1996 to $.0648 per $100 of insured deposits in 1997.

Income Tax  Expense.  Income tax  expense  increased  from  $750,000  in 1995 to
$962,000 in 1996 due primarily to increased earnings before income taxes.

Comparison of Years Ended December 31, 1995 and 1994

General.  Net income for the year ended December 31, 1995 was $1.32  million,  a
decrease of $18,000 compared to net income for the year ended December 31, 1994.
This decrease was primarily  the result of increases in  noninterest  expense of
$426,000  partially offset by an increase in net interest income of $307,000 and
a decrease  in  provision  for loan losses and income tax expense of $12,000 and
$126,000,   respectively.   Further  details  regarding  changes  in  the  major
categories of income and expense are discussed below.

Interest  Income.  Interest income increased $1.5 million,  or 19.0%,  from $8.1
million to $9.6 million for the year ended  December  31, 1995.  The increase in
interest  income was primarily  the result of an increase in interest  income on
mortgage  loans of $899,000  and an increase in interest  income on consumer and
other loans of $286,000.  The increase in interest  income on loans is due to an
increase in the  average  balance of the loan  portfolio  and an increase in the
yield  on the loan  portfolio  for the  year.  The  yield on the loan  portfolio
increased  from 7.97% in 1994 to 8.06% in 1995,  due to the high volume of loans
in the portfolio  which were  originated or repriced  during the higher interest
rate cycle earlier in the year.
<PAGE>
--------------------------------------------------------------------------------
Results of Operations (continued)
--------------------------------------------------------------------------------
Interest Expense.  Interest expense increased $1.2 million,  or 30.3%, from $4.1
million to $5.3 million for the year ended  December  31, 1995.  The increase in
interest  expense was the result of an  increase of $791,000 on borrowed  funds.
This increase was the result of a significant increase in the average balance of
borrowed  funds  during the year,  which  increased  by $6.8  million from $27.8
million for 1994 to $34.6 million for 1995.  Also  contributing to this increase
was an increase in the average  rate paid for  borrowed  funds  during the year.
Interest  expense on deposits  increased  $444,000  during 1995 due primarily to
higher average rates paid for  certificates of deposit as the average balance of
deposits remained fairly constant during the year.

Net interest income.  Net interest income  increased  $307,000 or 7.6% from $4.0
million to $4.3 million for the year ended  December 31, 1995.  First  Federal's
net  interest  rate spread  contracted  during 1995.  The  interest  rate spread
averaged  2.80%  during  1995  compared  to 3.51%  during  1994 and was 2.77% at
December  31,  1995.  The  reduction  in net  interest  spread  during  1995 was
primarily  due to an  increase  in the  cost on  interest  bearing  liabilities,
especially  borrowings,  from 4.78% in 1994 to 6.13% in 1995. Although borrowing
rates declined in July and again in December, the average cost of funds remained
higher in 1995 than in 1994.

Provision  for Loan  Losses.  The  provision  for loan losses for the year ended
December  31, 1995 was  $251,000  compared  to  $263,000  in the prior year,  an
decrease of $12,000. The provision for loan losses, less net charge-offs for the
year of $64,000, increased the allowance for loan losses to $881,000 at December
31,  1995, a 26.9%  increase  compared to December  31,  1994.  Management  will
continue to record a provision  for loan losses to maintain  the  allowance  for
loan  losses at a level  deemed  adequate  by  management  based on a  quarterly
analysis.

Noninterest  Income.  Noninterest  income  decreased  from  $384,000  in 1994 to
$347,000 in 1995.  This decrease of $37,000 was primarily the result of a $2,000
loss on the sale of fixed assets during 1995 compared to a $74,000 gain in 1994.
Fees and  service  charges on loan and  deposit  accounts  increased  by $32,000
during 1995 to $237,000 compared to 1994 income of $205,000.

Noninterest Expense.  Noninterest expense increased from $1.9 million in 1994 to
$2.4 million in 1995.  This  increase of $426,000,  or 22.0%,  was primarily the
result of increases in  compensation  and benefits and occupancy  expenses.  The
increase in  compensation  and  benefits of $283,000  was a result of  recording
additional  benefit expense of $159,000  related to the Employee Stock Ownership
Plan  established  in conjunction  with the stock  conversion and staffing costs
related  to the new  office  opened in October  1995.  Part of those  costs were
offset by the deferred  costs contra for lending  operations due to our increase
in loan volume.  Occupancy and equipment and office  supplies also increased due
to increased  volume and the new office  operating  during the fourth quarter of
1995.

Income Tax  Expense.  Income tax  expense  decreased  from  $876,000  in 1994 to
$750,000 in 1995 due primarily to a decrease in earnings before income taxes.
<PAGE>
--------------------------------------------------------------------------------
Asset/Liability Management
--------------------------------------------------------------------------------

First Federal,  like other financial  institutions,  is subject to interest rate
risk to the extent that its interest-bearing  liabilities reprice on a different
basis than its  interest-earning  assets.  Office of Thrift Supervision  ("OTS")
regulations provide a Net Portfolio Value ("NPV") approach to the quantification
of interest  rate risk.  In essence,  this approach  calculates  the  difference
between the present  value of  liabilities,  expected cash flows from assets and
cash flows from off balance sheet contracts.

Management has  established  maximum  limits for changes in net portfolio  value
resulting  from changes in interest rates based on  consideration  of the Bank's
portfolio mix of interest-earning assets and interest-bearing  liabilities along
with  management's  objectives for managing these portfolios in varying interest
rate environments. Management monitors various indicators of interest rate risk,
including NPV, and  expectations  regarding  interest rate movements  along with
consideration  of the Bank's  overall  capital  levels to  determine  acceptable
levels of interest rate risk.  The Bank's  interest-earning  assets are composed
primarily of loans, especially mortgage loans. Management has offered adjustable
rate loan  products  to assist in the  management  of  interest  rate  risk.  At
December 31, 1996,  adjustable rate loans comprised 59.0% of the portfolio.  The
interest rate exposure as outlined in the NPV table reflects the Bank's exposure
to a rising interest rate  environment due to the  concentration  of longer term
mortgage loans funded by relatively  shorter-term deposits and FHLB advances. In
addition, the interest rate risk is also impacted by adjustable rate loans which
are tied to indices which lag behind market rates.  Management is aware of First
Federal's interest rate risk exposure in a rising interest rate environment.  To
address this interest rate risk,  management will continue to market  adjustable
rate mortgage  loans and review  longer term funding  sources.  Management  also
considers the current  capital  position of the Bank and the  composition of the
loan portfolio and monitors these factors in conjunction with its strategic plan
of offering  various  mortgage  loan  products to customers in the Bank's market
area. Nonetheless,  the Bank's interest rate exposure,  particularly in a rising
interest rate environment,  will grow, especially to the extent that loan demand
produces increases in balance sheet growth.
<PAGE>
Asset/Liability Management (continued)
--------------------------------------------------------------------------------
Presented below, as of December 31, 1996, is an analysis of the Bank's estimated
interest rate risk as measured by changes in NPV for instantaneous and sustained
parallel  shifts in interest  rates,  up and down 300 basis  points in 100 point
increments.  Assumptions used in calculating the amounts in this table are those
assumptions  utilized  by the OTS in  assessing  the  interest  rate risk of the
thrifts it regulates.  NPV is calculated by the OTS for the purposes of interest
rate risk  assessment  and should not be  considered as an indicator of value of
the Bank.
<TABLE>
<CAPTION>
                                           At December 31, 1996
            ------------------------------------------------------------------------------------------------
                                                                               Net Portfolio Value as % of
                                          Net Portfolio Value                     Present Value of Assets
            Change In Rates       $ Amount       $ Change      % Change         NPV Ratio           Change
            ---------------       --------       --------      --------         ---------           ------
                                            (Dollars in Thousands)
<S>                            <C>            <C>                <C>               <C>                <C>

                    +300 bp    $     16,286   $    (8,740)       (35)              10.00              442 bp
                    +200             19,439        (5,587)       (22)              11.67              275
                    +100             22,413        (2,613)       (10)              13.17              125
                       0             25,026             -           -              14.42                -
                    -100             26,935         1,909           8              15.29              .87
                    -200             28,083         3,057          12              15.76              134
                    -300             29,129         4,103          16              16.17              175
</TABLE>
In the event of a 300 basis point change in interest  rate based upon  estimates
as of December  31, 1996,  the Bank would  experience a 16% increase in NPV in a
declining  rate  environment  and  a  35%  decrease  in  NPV  in a  rising  rate
environment.  During periods of rising rates,  the value of monetary  assets and
liabilities decline.  Conversely,  during periods of falling rates, the value of
monetary assets and liabilities increase. However, the amount of change in value
of specific  assets and liabilities due to changes in rates is not the same in a
rising rate  environment as in a falling rate  environment  (i.e., the amount of
value  increase  under a specific rate decline may not equal the amount of value
decrease  under  an  identical  upward  rate  movement).   Based  upon  the  NPV
methodology,  the increased level of interest rate risk  experienced by the Bank
in recent  periods was due to the increased use of  relatively  short-term  FHLB
advances to fund its investment in loans with  substantially  longer  maturities
than the advances and the Bank's use of an interest rate index which lags behind
market  rate  indices to adjust the  interest  rate on its ARM loans  originated
prior to December 1996. To the extent that the Bank continues to use liabilities
with  shorter  terms to maturity  than the assets in which it invests,  the Bank
will continue to experience  increased  levels of interest rate risk in a rising
interest rate environment.
<PAGE>
Asset/Liability Management (continued)
--------------------------------------------------------------------------------
In  evaluating  First  Federal's   exposure  to  interest  rate  risk,   certain
shortcomings inherent in the method of analysis presented in the foregoing table
must be considered.  For example,  although  certain assets and  liabilities may
have similar  maturities  or periods to  repricing,  they may react in different
degrees to changes in market interest rates. Also, the interest rates on certain
types of assets and  liabilities  may  fluctuate in advance of changes in market
interest  rates,  while  interest rates on other types may lag behind changes in
market rates.  Further, in the event of a change in interest rates,  prepayments
and early withdrawal  levels could deviate  significantly  from those assumed in
calculating the table.  Finally,  the ability of many borrowers to service their
debt may decrease in the event of an interest rate  increase.  As a result,  the
actual effect of changing  interest  rates may differ from that presented in the
foregoing table.
<PAGE>
--------------------------------------------------------------------------------
Average Balances, Interest Rates and Yields
--------------------------------------------------------------------------------
The following  table presents for the periods  indicated the total dollar amount
of interest  income  from  average  interest  earning  assets and the  resultant
yields, as well as the interest expense on average interest bearing liabilities,
expressed both in dollars and rates.  No tax equivalent  adjustments  were made.
All average balances are monthly average balances.  Non-accruing loans have been
included in the table as loans carrying a zero yield.
<TABLE>
<CAPTION>
                                   ______________________________________Year Ended December 31,________________________________
                                   ----------------------1 9 9 6-----------------   -------------------1 9 9 5------------------
                                       Average           Interest                        Average       Interest
                                     Outstanding          Earned/       Yield/         Outstanding      Earned/        Yield/
                                       Balance             Paid          Rate            Balance         Paid           Rate
                                       -------             ----          ----            -------         ----           ----
                                                                          (Dollars in Thousands)
<S>                                  <C>             <C>                <C>         <C>             <C>                <C>
Interest-Earning Assets:
     Loans receivable(1)             $    133,508    $     10,897         8.16%     $    111,496    $      8,990         8.06%
     Securities                             8,479             551         6.50             3,708             209         5.64
     FHLB stock                             2,411             189         7.84             2,006             158         7.88
     Other interest-earning
       assets                               1,632             130         7.97             4,143             287         6.93
                                     ------------    ------------                   ------------    ------------
         Total interest-earning
           assets(1)                 $    146,030          11,767         8.06      $    121,353           9,644         7.95
                                     ============    ------------                   ============    ------------

Interest-Bearing Liabilities:
     Savings                         $     10,465             288         2.75      $     12,752             375         2.94
     Money market                           8,793             437         4.97             4,246             137         3.23
     Demand and NOW                         8,276             184         2.22             8,101             208         2.57
     Certificate accounts                  46,549           2,685         5.77            43,448           2,469         5.68
     Borrowings                            46,128           2,603         5.64            34,560           2,118         6.13
                                     ------------    ------------                   ------------    ------------

         Total interest-bearing
           liabilities               $    120,211           6,197         5.16      $    103,107           5,307         5.15
                                     ============    ------------                   ============    ------------
 Net interest income                                 $      5,570                                   $      4,337
                                                     ============                                   ============
 Net interest rate spread                                                 2.90%                                          2.80%
                                                                      ========                                       ========
 Net interest earning assets         $     25,819                                   $     18,246
                                     ============                                   ============
Net yield on average interest-
  earning assets                                                          3.81%                                          3.57%
                                                                      ========                                       ========

Average interest-earning assets
    to average interest-bearing
    liabilities                                   1.21x                                          1.18x


<PAGE>
<CAPTION>
                                      --------------------1 9 9 4-----------------
                                           Average       Interest
                                         Outstanding      Earned/          Yield/
                                           Balance         Paid             Rate
                                           -------         ----             ----
<S>                                     <C>              <C>
Interest-Earning Assets:
     Loans receivable(1)                $     97,450     $    7,762         7.97%
     Securities                                3,477            154         4.43
     FHLB stock                                1,488             87         5.85
     Other interest-earning
       assets                                  3,072             99         3.22
                                        ------------     ----------
         Total interest-earning
           assets(1)                    $    105,487          8,102         7.68
                                        ============     ----------

Interest-Bearing Liabilities:
     Savings                            $     12,912            388         3.00
     Money market                              6,332            196         3.10
     Demand and NOW                            9,503            217         2.28
     Certificate accounts                     41,223          1,944         4.72
     Borrowings                               27,765          1,327         4.78
                                        ------------     ----------

         Total interest-bearing
           liabilities                  $     97,735          4,072         4.17
                                        ============     ----------
 Net interest income                                     $    4,030
                                                         ==========
 Net interest rate spread                                                   3.51%
                                                                            ====
 Net interest earning assets            $      7,752
                                        ============
Net yield on average interest-
  earning assets                                                            3.82%
                                                                            ====

Average interest-earning assets
    to average interest-bearing
    liabilities                                                             1.08x

-----------------
(1) Calculated net of deferred loan fees, loan  discounts,  loans in process and
allowance for loan losses.
</TABLE>
<PAGE>
--------------------------------------------------------------------------------
The following table presents the weighted  average yields on loans,  investments
and other interest-earning assets, and the weighted average rate on deposits and
borrowings and the resultant interest rate spreads at the dates indicated.
<TABLE>
<CAPTION>

                                                                           At December 31,
                                                                   ------------------------------
                                                                   1996         1995         1994
                                                                   ----         ----         ----
<S>                                                                <C>          <C>          <C>
Weighted average yield on:
 Loans receivable............................................      8.15%        8.09%        7.82%
 Investment securities.......................................      6.64         6.61         6.06
 Other interest-earning assets...............................      7.01         6.01         2.80
   Combined weighted average yield on interest-
     earning assets..........................................      8.01         7.98         7.65


Weighted average rate on:
 Savings deposits............................................      2.75         2.74         3.00
 Money market................................................      5.01         3.45         3.19
 Demand and NOW deposits.....................................      2.23         2.26         2.25
 Certificate accounts........................................      5.69         5.83         5.25
 Borrowings..................................................      5.84         5.99         5.95
   Combined weighted average rate on interest-
     bearing liabilities.....................................      5.31         5.21         4.82

Spread.......................................................      2.70         2.77         2.83

</TABLE>

Due in part to the  increase  in  rates  overall,  the Bank  has  experienced  a
narrowing of its average interest rate spread from 2.77% at December 31, 1995 to
2.70% at December 31, 1996. A narrowing of the Bank's  interest  rate spread may
have the effect of reducing net interest income in future periods.
<PAGE>
--------------------------------------------------------------------------------
Rate/Volume Analysis
--------------------------------------------------------------------------------
The following  schedule presents the dollar amount of changes in interest income
and  interest  expense  for major  components  of  interest-earning  assets  and
interest-bearing  liabilities.  It distinguishes  between the changes related to
outstanding  balances  and that due to the changes in interest  rates.  For each
category   of   interest-earning   assets  and   interest-bearing   liabilities,
information is provided on changes  attributable to (i) changes in volume (i.e.,
changes  in  volume  multiplied  by old rate) and (ii)  changes  in rate  (i.e.,
changes in rate multiplied by old volume).  For purposes of this table,  changes
attributable  to both rate and volume,  which  cannot be  segregated,  have been
allocated  proportionately  to the  change  due to volume  and the change due to
rate.
<TABLE>
<CAPTION>
                         ___________________________________Year Ended December 31,________________________________
                                          1996 vs. 1995                                 1995 vs. 1994
                                    Increase                                      Increase
                                   (Decrease)                Total               (Decrease)                Total
                                     Due to                Increase                Due to                Increase
                             Volume           Rate        (Decrease)       Volume           Rate        (Decrease)
                             ------           ----        ----------       ------           ----        ----------
                                                             (Dollars in Thousands)
<S>                        <C>            <C>             <C>            <C>            <C>             <C>
Interest-earning assets:
     Loans receivable      $     1,795    $       112     $     1,907    $     1,134    $        94     $     1,228
     Securities                    306             36             342             11             44              55
     FHLB stock                     32             (1)             31             36             35              71
     Other interest-
       earning assets             (209)            52            (157)           117             71             188
                           -----------    -----------     -----------    -----------    -----------     -----------

     Total interest-
       earning assets      $     1,924    $       199     $     2,123    $     1,298    $       244     $     1,542
                           ===========    ===========     ===========    ===========    ===========     ===========

Interest-bearing
   liabilities:
     Savings               $       (64)   $       (23)    $       (87)   $        (5)   $        (8)    $       (13)
     Money market                  200            100             300            (67)             8             (59)
     Demand and
       NOW                           4            (28)            (24)            (2)            (7)             (9)
     Certificate
       accounts                    177             39             216            109            416             525
     Borrowings                    781           (296)            485            367            424             791
                           -----------    -----------     -----------    -----------    -----------     -----------

         Total interest-
           bearing
           liabilities     $     1,098    $      (208)            890    $       402    $       833           1,235
                           ===========    ===========     -----------    ===========    ===========     -----------

Net interest income                                       $     1,233                                   $       307
                                                          ===========                                   ===========
</TABLE>
<PAGE>
Liquidity and Capital Resources
--------------------------------------------------------------------------------
First Federal's primary sources of funds are deposits,  borrowings from the FHLB
and  principal and interest  payments on loans.  While  scheduled  repayments of
loans are a predictable source of funds,  deposit flows and mortgage prepayments
are greatly  influenced  by general  interest  rates,  economic  conditions  and
competition.  First Federal has managed this  fluctuation in its source of funds
through borrowings from the FHLB.

A standard measure of liquidity for thrift institutions is the ratio of cash and
eligible  investments to a certain  percentage of net  withdrawable  savings and
borrowings due within one year. As of December 31, 1996, First Federal's average
liquidity   ratio  was  5.69%,  of  which  83.8%  was  comprised  of  short-term
investments.

During the year ended  December 31,  1996,  there was a net increase in cash and
cash  equivalents  of $2.0  million.  The major  source of funds during the year
included an additional $18.5 million of borrowings from the FHLB and an increase
in deposits  of $17.1  million  which were used to fund a net  increase of $24.5
million in loans and a $5.5 million increase in securities.

During the year ended  December 31,  1995,  there was a net increase in cash and
cash equivalents of $1.9 million The major source of funds during the year was a
net increase of $2.0 million of  borrowings  from the FHLB and proceeds of $19.5
million  (which  is net of ESOP  shares  acquired)  from the  sale of the  stock
received  when the Bank  converted  on June 27,  1996.  These  funds  were  used
primarily to support the $18.5 million net increase in loans.

During the year ended  December 31,  1994,  there was a net increase in cash and
cash  equivalents  of $880,000.  The major source of funds during the year was a
net increase of $18.0 million of borrowings from the FHLB which was used to fund
a net increase of $19.7 million in loans.

Under currently effective capital regulations,  savings associations must meet a
1.5% tangible capital  requirement,  a 3.0% core capital requirement and a total
risk-based  capital to risk weighted assets ratio of 8.0%. At December 31, 1996,
First  Federal's  tangible  capital ratio was 12.5%,  its core capital ratio was
12.5% and its  risk-based  capital  to risk  weighted  assets  ratio was  21.8%.
Therefore,   First   Federal's   capital   significantly   exceeds  all  capital
requirements currently in effect.

During 1996 the Company  received  three  approvals  from the OTS to  repurchase
stock in addition to the repurchase by its  Recognition and Retention Plan Stock
("RRP").  The repurchase  program's stock when purchased becomes treasury shares
and can be used for general corporate  purposes.  The RRP approval was for 4% or
87,285 shares of which 75,936 were  allocated  shares and 11,349 were for future
awards.  This program was  completed in March 1996.  The first  repurchase  plan
approved  in February  1996 for  purchasing  treasury  stock was for up to 5% or
109,106  shares  and was  completed  in  March  1996.  A  request  for a  second
repurchase  program  for up to 5% of  outstanding  shares or 103,084  shares was
approved  by OTS and the  board  in  July  1996.  This  repurchase  program  was
completed  in August 1996.  In September  the third  treasury  stock  repurchase
program was approved for up to 10% of the outstanding  shares or 195,859 shares.
At December  31, 1996 the Company  had  repurchased  371,539  shares as treasury
stock and had 1,810,586  shares  outstanding.  The Company has purchased  30,500
shares as treasury  stock  during  January and February  1997 to further  reduce
outstanding shares to 1,780,086 as of the end of February 1997.
<PAGE>
Impact of New Accounting Standards
--------------------------------------------------------------------------------
Financial  Accounting Standard No. 125,  "Accounting for Transfers and Servicing
of  Financial  Assets and  Extinguishments  of  Liabilities",  was issued by the
Financial  Accounting  Standards  Board in 1996. It revises the  accounting  for
transfers  of  financial  assets,   such  as  loans  and  securities,   and  for
distinguishing  between sales and secured  borrowings.  It is effective for some
transactions in 1997 and others in 1998. The effect on the financial  statements
has not yet been determined.

Impact of Inflation and Changing Prices

The  Financial  Statements  have been  prepared  in  accordance  with  generally
accepted  accounting  principles,  which  require the  measurement  of financial
position  and  operating   results  in  terms  of  historical   dollars  without
consideration  for changes in the relative  purchasing  power of money over time
due to inflation.  The impact of inflation can be found in the increased cost of
the Company's  operations.  Nearly all the assets and liabilities of the Company
are financial,  unlike most  industrial  companies.  As a result,  the Company's
performance  is  directly  impacted  by changes  in  interest  rates,  which are
indirectly  influenced by inflationary  expectations.  The Company's  ability to
match the financial assets to the financial  liabilities in its  asset/liability
management  will tend to minimize the change of interest  rates on the Company's
performance.  Changes in investment  rates do not  necessarily  move to the same
extent as changes in the price of goods and services.
<PAGE>
--------------------------------------------------------------------------------






                         REPORT OF INDEPENDENT AUDITORS



Board of Directors
Northeast Indiana Bancorp, Inc.
Huntington, Indiana


We have  audited  the  accompanying  consolidated  balance  sheets of  Northeast
Indiana  Bancorp,  Inc. and  Subsidiary as of December 31, 1996 and 1995 and the
related consolidated  statements of income,  changes in shareholders' equity and
cash flows for the years ended December 31, 1996, 1995 and 1994. These financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial  position of Northeast Indiana
Bancorp, Inc. and Subsidiary as of December 31, 1996 and 1995 and the results of
their  operations  and their cash flows for the years ended  December  31, 1996,
1995 and 1994 in conformity with generally accepted accounting principles.



                                                /s/Crowe, Chizek and Company LLP
                                                --------------------------------
                                                   Crowe, Chizek and Company LLP

South Bend, Indiana
January 28, 1997
<PAGE>
<TABLE>
<CAPTION>

                                           NORTHEAST INDIANA BANCORP, INC.

                                             CONSOLIDATED BALANCE SHEETS
                                             December 31, 1996 and 1995



                                                                                     1996                 1995
                                                                             -----------------    -----------------
<S>                                                                          <C>                  <C>
Cash and cash equivalents                                                    $       6,672,374    $       4,672,341
Interest-earning deposits in financial institutions                                    100,000              100,000
Securities available for sale                                                       11,496,031            5,895,759
Securities held to maturity (fair value: 1996 - $891,236;
  1995 - $986,000)                                                                     892,036              985,906
Loans receivable, net                                                              146,854,690          122,640,770
Accrued interest receivable                                                            363,563              232,924
Premises and equipment                                                               2,009,026            2,131,617
Other assets                                                                         1,156,400              909,264
                                                                             -----------------    -----------------

     Total assets                                                            $     169,544,120    $     137,568,581
                                                                             =================    =================

LIABILITIES AND SHAREHOLDERS' EQUITY
Demand deposits                                                              $       1,847,734    $       1,791,586
Savings, NOW and MMDA                                                               30,274,738           22,106,480
Other time deposits                                                                 53,223,768           44,304,864
                                                                             -----------------    -----------------
     Total deposits                                                                 85,346,240           68,202,930
Borrowed funds                                                                      56,000,000           37,500,000
Accrued expenses and other liabilities                                               1,668,764              832,606
                                                                             -----------------    -----------------
     Total liabilities                                                             143,015,004          106,535,536

Shareholders' equity
     Common stock, $.01 par value:  4,000,000 shares
       authorized; 2,182,125 shares issued                                              21,821               21,821
     Additional paid in capital                                                     21,253,458           21,215,284
     Retained earnings, substantially
       restricted                                                                   12,338,919           11,393,893
     Unearned employee stock ownership plan shares                                  (1,454,750)          (1,600,225)
     Unearned recognition and retention plan shares                                   (820,109)                   -
     Net unrealized appreciation on securities available
       for sale                                                                         15,799                2,272
     Treasury stock, 371,539 and -0- common shares, at
       cost, at December 31, 1996 and 1995                                          (4,826,022)                   -
                                                                             -----------------    -----------------
         Total shareholders' equity                                                 26,529,116           31,033,045
                                                                             -----------------    -----------------

              Total liabilities and shareholders' equity                     $     169,544,120    $     137,568,581
                                                                             =================    =================


The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                          CONSOLIDATED STATEMENTS OF INCOME

                                    Years ended December 31, 1996, 1995 and 1994

                                                                    1996              1995               1994
                                                               --------------     --------------    ---------------
<S>                                                            <C>                <C>               <C>
Interest income
     Loans, including fees                                     $   10,897,032     $    8,989,561    $     7,762,452
     Taxable securities                                               707,048            331,244            207,054
     Non-taxable securities                                            33,394             36,132             33,523
     Deposits with banks                                              129,581            286,837             98,511
                                                               --------------     --------------    ---------------
         Total interest income                                     11,767,055          9,643,774          8,101,540

Interest expense
     Deposits                                                       3,593,583          3,188,996          2,745,305
     Borrowed funds                                                 2,603,092          2,117,798          1,326,413
                                                               --------------     --------------    ---------------
         Total interest expense                                     6,196,675          5,306,794          4,071,718
                                                               --------------     --------------    ---------------

Net interest income                                                 5,570,380          4,336,980          4,029,822
     Provision for loan losses                                        235,155            250,648            262,799
                                                               --------------     --------------    ---------------

Net interest income after provision for loan losses                 5,335,225          4,086,332          3,767,023

Noninterest income
     Service charges on deposit accounts                              151,666            140,127            134,627
     Loan servicing fees                                              122,190             97,288             70,406
     Net realized gain on sale of securities                              348                  -                  -
     Other                                                            128,363            109,637            178,910
                                                               --------------     --------------    ---------------
         Total noninterest income                                     402,567            347,052            383,943

Noninterest expense
     Salaries and employee benefits                                 1,340,887          1,099,642            817,129
     Occupancy                                                        279,894            229,918            176,759
     Data processing                                                  274,985            160,963            158,946
     Insurance expense                                                605,593            262,652            228,473
     Professional fees                                                137,080             85,114            102,713
     Correspondent bank charges                                       143,398            136,757            136,160
     Other expense                                                    426,320            389,291            317,843
                                                               --------------     --------------    ---------------
         Total noninterest expense                                  3,208,157          2,364,337          1,938,023
                                                               --------------     --------------    ---------------

Income before income taxes                                          2,529,635          2,069,047          2,212,943
     Income tax expense                                               962,090            749,759            875,946
                                                               --------------     --------------    ---------------

Net income                                                     $    1,567,545     $    1,319,288    $     1,336,997
                                                               ==============     ==============    ===============

Earnings per common share subsequent to
  conversion (Note 1)                                          $          .84     $         .39     $           N/A
                                                               ==============     =============     ===============

The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                   NORTHEAST INDIANA BANCORP, INC.

                                      CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
                                            Years Ended December 31, 1996, 1995 and 1994

                                                                                                      Unearned
                                                                                                      Employee       Unearned
                                                                 Additional                             Stock       Recognition
                                                 Common            Paid in        Retained            Ownership    and Retention
                                                  Stock            Capital        Earnings           Plan Shares    Plan Shares
                                                  -----            -------        --------           -----------    -----------
<S>                                          <C>               <C>               <C>              <C>              <C>
Balance, January 1, 1994                     $            -    $            -    $    8,901,268   $           -    $

Net income                                                -                 -         1,336,997               -
                                             --------------    --------------    --------------   -------------    --------------
Balance, December 31, 1994                                -                 -        10,238,265               -

Proceeds from the sale of 2,182,125 shares
  of common stock, net of conversion costs           21,821        21,189,036                 -               -

Unearned ESOP shares                                      -                 -                 -      (1,745,700)

Cash dividends ($.075 per share)                          -                 -          (163,660)              -

Shares committed to be released under the
  Employee Stock Ownership Plan                           -            26,248                 -         145,475

Change in net unrealized appreciation on
  securities available for sale                           -                 -                 -               -

Net income                                                -                 -         1,319,288               -
                                             --------------    --------------    --------------   -------------    --------------
Balance, December 31, 1995                           21,821        21,215,284        11,393,893      (1,600,225)

Cash dividends ($.305 per share)                          -                 -          (622,519)              -                 -

Purchase of shares of treasury stock                      -                 -                 -               -                 -

Shares committed to be released under the ESOP            -            38,174                 -         145,475                 -


Purchase of shares for RRP                                -                 -                 -               -        (1,025,136)

Amortization of RRP contributions                         -                 -                 -               -           205,027

Change in net unrealized appreciation on
  securities available for sale                           -                 -                 -               -                 -

Net income                                                -                 -         1,567,545               -                 -
                                             --------------    --------------    --------------   -------------    --------------

Balance, December 31, 1996                   $       21,821    $   21,253,458    $   12,338,919   $  (1,454,750)   $     (820,109)
                                             ==============    ==============    ==============   =============    ==============

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                               Net
                                                           Unrealized
                                                          Appreciation
                                                          on Securities                    Total
                                                            Available     Treasury     Shareholders'
                                                            For Sale        Stock         Equity
                                                            --------        -----         ------
<S>                                                      <C>             <C>           <C>
Balance, January 1, 1994                                 $          -    $             $    8,901,268

Net income                                                          -                       1,336,997
                                                         ------------    -----------   --------------
Balance, December 31, 1994                                          -                      10,238,265

Proceeds from the sale of 2,182,125 shares
  of common stock, net of conversion costs                          -                      21,210,857

Unearned ESOP shares                                                -                      (1,745,700)

Cash dividends ($.075 per share)                                    -                        (163,660)

Shares committed to be released under the
  Employee Stock Ownership Plan                                     -                         171,723

Change in net unrealized appreciation on
  securities available for sale                                 2,272                           2,272

Net income                                                          -                       1,319,288
                                                         ------------    -----------   --------------
Balance, December 31, 1995                                      2,272                      31,033,045

Cash dividends ($.305 per share)                                    -              -         (622,519)

Purchase of shares of treasury stock                                -     (4,826,022)      (4,826,022)

Shares committed to be released under the ESOP                       -             -          183,649


Purchase of shares for RRP                                          -              -       (1,025,136)

Amortization of RRP contributions                                   -              -          205,027

Change in net unrealized appreciation on
  securities available for sale                                13,527              -           13,527

Net income                                                          -              -        1,567,545
                                                         ------------    -----------   --------------

Balance, December 31, 1996                               $    (15,799)   $(4,826,022)  $   26,529,116
                                                         ============    ============  ==============

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                   NORTHEAST INDIANA BANCORP, INC.
                                                CONSOLIDATED STATEMENTS OF CASH FLOWS
                                            Years ended December 31, 1996, 1995 and 1994

                                                                   1996               1995               1994
                                                                 -----------       -------------      -------------
<S>                                                             <C>                <C>                <C>
Cash flows from operating activities
     Net income                                                 $  1,567,545       $   1,319,288      $   1,336,997
     Adjustments to reconcile net income
       to net cash from operating activities
         Net (gain) loss on sale of premises and equipment               421               2,289            (74,223)
         Gain on sale of securities                                     (348)                  -                  -
         Gain on sale of foreclosed real estate                       (6,879)                  -                  -
         Provision for loan losses                                   235,155             250,648            262,799
         Depreciation and amortization                               186,555             113,950             80,009
         Reduction of obligation under ESOP                          183,649             171,723                  -
         Amortization of RRP                                         205,027                   -                  -
         Net change in other assets                                 (247,136)             32,586           (179,984)
         Net change in accrued interest receivable                  (130,639)            (83,517)           (31,717)
         Net change in accrued expenses and other liabilities        823,528               8,009            289,589
                                                                 -----------       -------------      -------------
              Total adjustments                                    1,249,333             495,688            346,473
                                                                 -----------       -------------      -------------
                  Net cash from operating activities               2,816,878           1,814,976          1,683,470

Cash flows from investing activities
     Proceeds from maturities and principal payments
       of securities held to maturity                                 93,870              67,770             41,852
     Proceeds from maturities and principal payments
       of securities available for sale                            2,600,000                   -                  -
     Proceeds from sale of securities available for sale           2,100,348                   -                  -
     Purchases of securities available for sale                  (10,316,095)         (1,551,154)        (1,001,410)
     Purchases of securities held to maturity                              -                   -           (160,000)
     Net change interest-earning deposits in financial
       institutions                                                              -                  (100,000)              -
     Proceeds from sale of participation loans                             -                   -          2,750,000
     Purchase of participation loans                                       -          (2,690,155)          (182,000)
     Net change in loans                                         (24,469,186)        (15,799,442)       (19,507,620)
     Expenditures on premises and equipment                          (22,455)           (860,152)          (222,980)
     Proceeds from sale of premises and equipment                         50               4,150            115,000
     Proceeds from sale of foreclosed real estate                     26,990                   -                  -
                                                                 -----------       -------------      -------------
         Net cash from investing activities                      (29,986,478)        (20,928,983)       (18,167,158)

Cash flows from financing activities
     Advances from FHLB                                           58,000,000          17,000,000         33,500,000
     Repayment of FHLB advances                                  (39,500,000)        (15,000,000)       (15,500,000)
     Dividends paid                                                 (622,519)           (163,660)                 -
     Proceeds from issuance of stock, net of
       conversion costs and stock acquired by ESOP                         -          19,465,157                  -
     Purchase of stock                                            (5,851,158)                  -                  -
     Net change in deposits                                       17,143,310            (329,573)          (636,751)
                                                                 -----------       -------------      -------------
         Net cash from financing activities                       29,169,633          20,971,924         17,363,249
                                                                 -----------       -------------      -------------
<PAGE>
<CAPTION>
                                                   NORTHEAST INDIANA BANCORP, INC.
                                                CONSOLIDATED STATEMENTS OF CASH FLOWS
                                            Years ended December 31, 1996, 1995 and 1994

                                                                   1996               1995               1994
                                                                 -----------       -------------      -------------
<S>                                                             <C>                <C>                <C>
Net increase change cash and cash equivalents                      2,000,033           1,857,917            879,561

Cash and cash equivalents at beginning of year                     4,672,341           2,814,424          1,934,863
                                                                 -----------       -------------      -------------

Cash and cash equivalents at end of year                        $  6,672,374       $   4,672,341      $   2,814,424
                                                                ============       =============      =============
Cash paid for:
     Interest                                                   $  6,154,009       $   5,268,413      $   4,017,792
     Income taxes                                                  1,034,925             803,594            952,076

     Transfer from investment securities to
       securities available for sale                            $          -       $           -      $   3,339,432
     Transfer from investment securities to
       securities held to maturity                                         -                   -            935,528
     Transfer from loans to other real estate                         20,112                   -                  -
</TABLE>
<PAGE>
                         NORTHEAST INDIANA BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1996, 1995 and 1994

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization  and  Principles  of  Consolidation:   The  consolidated  financial
statements  include  the  accounts  of  Northeast  Indiana  Bancorp,  Inc.  (the
"Company")  and its  wholly-owned  subsidiary,  First Federal  Savings Bank (the
"Bank"). Northeast Indiana Bancorp, Inc. was organized for the purpose of owning
all of the  outstanding  stock of First Federal  Savings Bank.  All  significant
intercompany  transactions  and balances have been eliminated in  consolidation.
Financial information presented herein, prior to the conversion to stock form of
ownership,  reflects the  financial  position,  results of  operations  and cash
flows, and concentration of credit risk of the Bank.

Nature  of  Business:  The  primary  source  of income  for the  Company  is the
origination  of commercial  and  residential  real estate loans in  northeastern
Indiana.  Loans secured by real estate mortgages  comprise  approximately 82% of
the loan portfolio at December 31, 1996 and are primarily secured by residential
mortgages.

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

Cash Flow Reporting:  Cash and cash equivalents are defined as cash and due from
banks and short-term  interest earning deposits in financial  institutions  with
original   maturities   under  90  days.   Included  in  cash   equivalents  are
interest-earning  deposits in financial  institutions  totaling  $2,654,963  and
$2,204,407  at  December  31,  1996 and 1995,  respectively.  Net cash flows are
reported for customer loan and deposit transactions.

Securities:  Securities  are  classified  as held to  maturity  and  carried  at
amortized cost when  management has the positive intent and ability to hold them
to maturity.  Securities are classified as available for sale when they might be
sold before maturity.  Securities  available for sale are carried at fair value,
with unrealized  holding gains and losses reported  separately in  shareholders'
equity,  net of tax.  Securities  are  classified as trading when held for short
term periods in  anticipation  of market  gains,  and are carried at fair value.
Securities  are  written  down to fair value when a decline in fair value is not
temporary.

Gains and  losses  on sales  are  determined  using  the  amortized  cost of the
specific  security  sold.  Interest  income  includes  amortization  of purchase
premiums and discounts.
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)


Loans: Loans are reported at the principal balance outstanding,  net of deferred
loan  fees and costs  and the  allowance  for loan  losses.  Interest  income is
reported on the interest  method and includes  amortization of net deferred loan
fees and costs over the loan term.

Interest income is not reported when full loan repayment is in doubt,  typically
when  payments  are past due over 90 days.  Payments  received on such loans are
reported as principal reductions.

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

Loan  impairment  is  reported  when full  payment  under the loan  terms is not
expected.  Impaired  loans are carried at the present  value of expected  future
cash flows discounted at the loan's effective interest rate or at the fair value
of the  collateral  if the  loan  is  collateral  dependent.  A  portion  of the
allowance  for loan losses is allocated  to impaired  loans if the value of such
loans is less than the unpaid balance.  If these allocations cause the allowance
for loan losses to require increase,  such increase is reported in the provision
for loan losses.

Commercial  loans and mortgage  loans secured by other  properties are evaluated
individually  for  impairment.   Smaller-balance   homogeneous   loans  such  as
residential  first mortgage loans,  are evaluated for impairment in total.  When
analysis of borrower  operating results and financial  condition  indicates that
underlying  cash flows of the borrower's  business are not adequate to meet debt
service requirements,  the loan is evaluated for impairment.  Impaired loans, or
portions thereof, are charged off when deemed uncollectible.

Other Real  Estate:  Real estate  acquired in  settlement  of loans is initially
reported at estimated fair value at acquisition.  After acquisition, a valuation
allowance reduces the reported amount to the lower of the initial amount or fair
value less costs to sell. Expenses, gains and losses on disposition, and changes
in the valuation allowance are reported as a net loss on other real estate.



<PAGE>


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Premises and Equipment.  Asset cost is reported net of accumulated depreciation.
Depreciation  expense  is  calculated  on  the  straight-line  method  over  the
estimated  useful lives of the assets  ranging from 3 to 40 years.  These assets
are reviewed for impairment  under  Financial  Accounting  Standard No. 121 when
events indicate the carrying amount may not be recoverable.

Income  Taxes:  Deferred tax assets and  liabilities  are reflected at currently
enacted  income tax rates  applicable  to the period in which the  deferred  tax
assets or liabilities are expected to be realized or settled.  As changes in tax
laws or rates are  enacted,  deferred  tax assets and  liabilities  are adjusted
through income tax expense.

Stock Compensation.  Expense for employee  compensation under stock option plans
is based on Opinion 25, with expense  reported only if options are granted below
market price at grant date. Pro forma disclosures of net income and earnings per
share are provided as if the fair value method of Financial  Accounting Standard
No. 123 were used for stock-based compensation.

Earnings   Per  Share:   Earnings   per  share  of  common  stock  is  based  on
weighted-average  outstanding  shares during the year plus dilutive common stock
equivalents  using  the  average  stock  price.  Diluted  earnings  per share is
calculated  assuming any conversions  occurred at the start of the year and uses
ending market price,  if more dilutive.  The  weighted-average  number of shares
outstanding  in 1996 was  1,870,474.  Earnings  per  common  share  for 1995 was
computed by dividing net income  subsequent to the Bank's conversion from mutual
to stock  form  (the  "conversion")  by the  weighted  average  number of shares
outstanding  subsequent  to  the  conversion.   Net  income  subsequent  to  the
conversion  was $788,008 for the period  ended  December 31, 1995.  The weighted
average  number of shares  outstanding  for the 1995  period  subsequent  to the
conversion was 2,014,829.

Reclassifications:   Some  items  in  prior   financial   statements  have  been
reclassified to conform with the current presentation.




<PAGE>


NOTE 2 - SECURITIES

Year end securities were as follows:
<TABLE>
<CAPTION>

                                                                   Gross             Gross
                                              Amortized         Unrealized        Unrealized           Fair
                                                Cost               Gains            Losses             Value
                                          ----------------    -------------      -------------    --------------
<S>                                       <C>                 <C>                <C>              <C>
Available for sale - 1996
     U.S. Government agencies             $      1,797,805    $           -      $     (10,727)   $    1,787,078
     Mutual funds                                  697,358                -                  -           697,358
     Mortgage-backed                             6,124,711           38,833             (1,949)        6,161,595
     Equity securities                           2,850,000                -                  -         2,850,000
                                          ----------------    -------------      -------------    --------------

                                          $     11,469,874    $      38,833      $     (12,676)   $   11,496,031
                                          ================    =============      =============    ==============


Available for sale - 1995
     U.S. Government agencies             $      1,099,666   $        3,771     $          (8)   $     1,103,429
     Equity securities                           2,075,000                -                 -          2,075,000
     Mutual funds                                2,717,330                -                 -          2,717,330
                                          ----------------   --------------     -------------    ---------------

                                          $      5,981,996    $       3,771     $          (8)   $     5,895,759
                                          ================    =============     =============    ===============


Held to maturity - 1996
     States and political
       subdivisions                       $        703,000    $           -     $        (800)   $       702,200
     Other debt securities                         189,036                -                 -            189,036
                                          ----------------    -------------     -------------    ---------------

                                          $        892,036    $           -     $        (800)   $       891,236
                                          ================    =============     =============    ===============


Held to maturity - 1995
     States and political
       subdivisions                       $        764,000    $           -     $           -    $       764,000
     Other debt securities                         221,906               94                 -            222,000
                                          ----------------    -------------     -------------    ---------------

                                          $        985,906    $          94     $           -    $       986,000
                                          ================    =============     =============    ===============
</TABLE>
The  amortized  cost and fair value of debt  securities at December 31, 1996, by
contractual  maturity,  are shown below.  Expected  maturities  will differ from
contractual  maturities  because  borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.  Securities not due at
a  single  maturity  date,  primarily  mortgage-backed   securities,  are  shown
separately.
<PAGE>


NOTE 2 - SECURITIES (Continued)
<TABLE>
<CAPTION>

                                            --------Available for Sale-------     --------Held to Maturity---------
                                                Amortized           Fair             Amortized            Fair
                                                  Cost              Value              Cost               Value
                                            ---------------    --------------     --------------    ---------------
<S>                                         <C>                <C>                <C>               <C>

Due in one year or less                     $             -    $            -     $      134,000    $       134,000
Due from one to five years                        1,297,493         1,286,766            452,036            451,236
Due from five to ten years                          500,312           500,312            306,000            306,000
Due after ten years                                       -                 -                  -                  -
Mortgage backed securities                        6,124,711         6,161,595                  -                  -
                                            ---------------    --------------     --------------    ---------------

                                            $     7,922,516    $    7,948,673     $      892,036    $       891,236
                                            ===============    ==============     ==============    ===============
</TABLE>
Sales of  securities  available  for sale were as  follows  for the years  ended
December 31:
<TABLE>
<CAPTION>
                                                                    1996              1995               1994
                                                                    ----              ----               ----
<S>                                                            <C>                <C>               <C>
        Proceeds                                               $    2,100,348     $            -    $             -
        Gross gains                                                       348                  -                  -
        Gross losses                                                        -                  -                  -

</TABLE>
NOTE 3 - LOANS RECEIVABLE, NET

Year end loans were as follows:
<TABLE>
<CAPTION>
                                                                                  1996                 1995
                                                                           ------------------    ---------------
<S>                                                                        <C>                   <C>
       Mortgage loans (principally conventional)
           Principal balances
                Secured by one-to-four family residences                   $       99,325,141    $    85,532,582
                Secured by other properties                                        15,293,158         13,770,839
                Construction - residential                                          8,256,360          4,210,201
                Construction - nonresidential                                       2,492,913          2,148,712
                                                                           ------------------    ---------------
                                                                                  125,367,572        105,662,334
                Less
                    Loans in process                                                 (208,005)          (169,390)
                    Undisbursed portion of construction
                      loans                                                        (4,380,437)        (2,209,804)
                    Net deferred loan origination fees                               (113,593)           (95,197)
                                                                           ------------------    ---------------
                         Total mortgage loans                                     120,665,537        103,187,943
</TABLE>
<PAGE>
NOTE 3 - LOANS RECEIVABLE, NET (Continued)
<TABLE>
<CAPTION>
                                                                                   1996                 1995
                                                                           -----------------    ----------------
<S>                                                                        <C>                  <C>
        Consumer and other loans
           Principal balances
                Automobile                                                 $       8,820,024    $      7,756,339
                Credit card                                                          982,421             795,295
                Commercial                                                         9,567,748           5,783,183
                Home equity and second mortgage                                    4,466,938           3,378,623
                Other                                                              3,379,322           2,619,953
                                                                           -----------------    ----------------
                    Total consumer and other loans                                27,216,453          20,333,393
                                                                           -----------------    ----------------

           Less
                Allowance for loan losses                                         (1,027,300)           (880,566)
                                                                           -----------------    ----------------

                    Loans receivable, net                                  $     146,854,690    $    122,640,770
                                                                           =================    ================
</TABLE>
Activity in the allowance for loan losses is summarized as follows for the years
ended December 31:
<TABLE>
<CAPTION>
                                                                        1996              1995            1994
                                                                   ---------------    ------------     ------------
<S>                                                                <C>                <C>              <C>
     Balance at beginning of year                                  $       880,566    $    694,000     $    457,050
     Provision charged to income                                           235,155         250,648          262,799
     Charge-offs                                                          (133,561)        (73,846)         (33,148)
     Recoveries                                                             45,140           9,764            7,299
                                                                   ---------------    ------------     ------------
     Balance at end of year                                        $     1,027,300    $    880,566     $    694,000
                                                                   ===============    ============     ============
</TABLE>
NOTE 4 - PREMISES AND EQUIPMENT, NET

Premises and equipment at December 31 are summarized as follows:
<TABLE>
<CAPTION>
                                                                                      1996                1995
                                                                                  --------------    ---------------
<S>                                                                               <C>               <C>
     Land                                                                         $      458,331    $       458,331
     Buildings and leasehold improvements                                              1,568,122          1,556,236
     Furniture, fixtures and equipment                                                   681,104            677,299
                                                                                  --------------    ---------------
         Total costs                                                                   2,707,557          2,691,866
     Accumulated depreciation and amortization                                          (698,531)          (560,249)
                                                                                  --------------    ---------------

                                                                                  $    2,009,026    $     2,131,617
                                                                                  ==============    ===============
</TABLE>
<PAGE>
NOTE 5 - DEPOSITS

Certificates of deposit accounts individually exceeding $100,000 or more totaled
$14,705,000 and $8,755,000 at December 31, 1996 and 1995.

At December 31, 1996,  scheduled maturities of certificates of deposit were, for
the years ended December 31:
<TABLE>
<CAPTION>

<S>                                                         <C>
                           1997                             $    38,699,013
                           1998                                  12,000,846
                           1999                                   1,470,826
                           2000                                     529,674
                           2001                                     523,409
                                                            ---------------

                                                            $    53,223,768
                                                            ===============

</TABLE>

NOTE 6 - BORROWED FUNDS

Borrowed  funds  consisted  of  advances  from the  Federal  Home  Loan  Bank of
Indianapolis  totaling  $56,000,000  at December 31,  1996.  The majority of the
advances  have  variable  interest  rates  ranging  from  5.06% to 6.80% and the
scheduled maturities at December 31, 1996 are as follows:

<TABLE>
<CAPTION>

<S>                                                         <C>
                           1997                             $    21,000,000
                           1998                                  20,900,000
                           1999                                  13,100,000
                           2000                                     600,000
                           2001                                     400,000
                                                            ---------------

                                                            $    56,000,000
                                                            ===============
</TABLE>
At December 31, 1996,  collateral  consisting of qualifying first mortgage loans
totaling  approximately $97.7 million and U.S. Government and Agency securities,
including  mortgage-backed  securities,  totaling  approximately $7.9 million is
pledged  to the  Federal  Home Loan  Bank of  Indianapolis  to  secure  advances
outstanding.  Also,  the Bank may borrow up to an  aggregate of $60 million from
the Federal Home Loan Bank.
<PAGE>


NOTE 7 - EMPLOYEE BENEFITS

Employee Pension Plan: The Company is part of a  noncontributory  multi-employer
defined benefit pension plan covering  substantially all employees.  The plan is
administered  by the trustees of the  Financial  Institutions  Retirement  Fund.
There is no separate  actuarial  valuation of plan benefits nor  segregation  of
plan assets  specifically  for the Company because the plan is a  multi-employer
plan and  separate  actuarial  valuations  are not  made  with  respect  to each
employer  nor are the plan assets so  segregated.  The pension  plan expense was
$52,465,  $50,895,  and $50,632 for the years ended December 31, 1996,  1995 and
1994.

401(k) Plan:  The Company has a 401(k) plan for all employees who have completed
one year of service (1,000 hours).  Participants may make deferrals up to 15% of
compensation.  The Company matches 50% of elective  deferrals on the first 6% of
the participant's compensation.  Expense under the plan was $17,846, $13,787 and
$12,405 for the years ended December 31, 1996, 1995 and 1994.

Supplemental Retirement Plan: The Company has a supplemental retirement plan for
the  President  and a deferred  compensation  plan for certain  directors of the
Company.  The Company is recording an expense equal to the change in the present
value of the payment due at retirement based on the projected remaining years of
service using the projected unit credit method. The cost of the plans charged to
expense was $64,204,  $56,484 and $49,634 for the years ended December 31, 1996,
1995  and  1994.  The  Company  has  purchased  insurance  on the  lives  of the
participants in the supplemental  retirement plan and the deferred  compensation
plan with the  Company  as  beneficiary.  The cash  surrender  value of the life
insurance was approximately $809,000 and $769,000 at December 31, 1996 and 1995.
The income  derived  from the  investment  in life  insurance  included in other
income was $40,071,  $35,981 and $33,930 for the years ended  December 31, 1996,
1995 and 1994.

Employee Stock Ownership Plan (ESOP): As part of the conversion transaction, the
Company  established  an ESOP for the benefit of  substantially  all  employees.
Contributions  to the ESOP are made by the  Company  and are  determined  by the
Company's Board of Directors at their discretion.  The contributions may be made
in the form of cash or the Company's common stock. The annual  contributions may
not be greater than the amount  deductible  for federal  income tax purposes and
cannot cause the Company to violate regulatory capital requirements.




<PAGE>


--------------------------------------------------------------------------------
NOTE 7 - EMPLOYEE BENEFITS (Continued)
--------------------------------------------------------------------------------
To fund the plan, the ESOP borrowed  $1,745,700 from the Company for the purpose
of purchasing  174,570 shares of stock at $10 per share.  Principal  payments on
the loan are due in equal  semi-annual  installments  over a twelve-year  period
beginning June 30, 1995.  Interest is payable  semi-annually  during the term of
the loan at 6.65%.  The loan is  collateralized  by the shares of the  Company's
common  stock  purchased  with the  proceeds and will be repaid by the ESOP with
funds from the Bank's  contributions  to the ESOP and  earnings on ESOP  assets.
Dividends  on  allocated  ESOP shares are  recorded  as a reduction  of retained
earnings;  dividends on  unallocated  ESOP shares are recorded as a reduction of
debt.

Shares  are  allocated  among  participants  each  December  31 on the  basis of
principal repayments made by the ESOP on the loan from the Company, according to
each participant's relative compensation.

During the years ended December 31, 1996 and 1995,  contributions of $96,134 and
$132,427,  respectively,  were  made to the  ESOP.  For the same  periods,  ESOP
compensation expense was $134,308 and $158,613,  respectively. The 14,548 shares
committed to be released in 1996 will be allocated on January 1, 1997.

Shares held by the ESOP at December 31, 1996 are as follows:
<TABLE>
<CAPTION>

                                                                               1996             1995
                                                                         --------------     --------------
<S>                                                                      <C>                <C>
     Allocated shares                                                            14,548                  -
     Shares released for allocation                                              14,548             14,548
     Unreleased shares                                                          145,474            160,022
                                                                         --------------     --------------

         Total ESOP shares                                                      174,570            174,570
                                                                         ==============     ==============

         Fair value of unreleased shares                                 $    1,982,083     $    1,920,264
                                                                         ==============     ==============
</TABLE>


Recognition  and Retention Plan (RRP): In 1996, the Company's Board of Directors
and shareholders established an RRP for the benefit of officers and directors as
a method of providing a proprietary interest in the Company in a manner designed
to encourage  such persons to remain with the Bank. The RRP is  administered  by
the compensation  committee of the Company.  Eligible persons will become vested
in shares of common stock  covered by the award equally over a five year period.
The maximum total shares available under the RRP are 87,285. During 1996, 75,936
shares  were  awarded  to RRP  participants  at $13.50 per  share.  The  expense
associated with the RRP was $205,027 in 1996.
<PAGE>


--------------------------------------------------------------------------------
NOTE 8 - INCOME TAXES
--------------------------------------------------------------------------------
Income tax expense for the years ended December 31 are summarized as follows:
<TABLE>
<CAPTION>

                                                                          1996            1995            1994
                                                                      ------------    ------------     ------------
<S>                                                                   <C>             <C>              <C>
         Current federal                                              $    850,741    $    664,372     $    717,339
         Deferred federal                                                 (100,203)        (89,538)         (37,645)
         Current state                                                     239,901         197,302          215,342
         Deferred state                                                    (28,349)        (22,377)         (19,090)
                                                                      ------------    ------------     ------------

     Income tax expense                                               $    962,090    $    749,759     $    875,946
                                                                      ============    ============     ============
</TABLE>
Total income tax expense differed from the amounts computed by applying the U.S.
federal  income tax rate of 34% to income before income taxes as a result of the
following:
<TABLE>
<CAPTION>

                                                                          1996             1995            1994
                                                                      ------------    ------------     ------------
<S>                                                                   <C>             <C>              <C>
Income taxes at statutory rate                                        $    860,076    $    703,476     $    752,401
Tax effect of:
     State tax, net of federal income tax effect                           139,624         115,450          129,526
     Other, net                                                            (37,610)        (69,167)          (5,981)
                                                                      ------------    ------------     ------------

         Income tax expense                                           $    962,090    $    749,759     $    875,946
                                                                      ============    ============     ============

Effective tax rate                                                            38.0%           36.2%            39.6%
                                                                              ====            ====             ====
</TABLE>
<PAGE>
The components of the net deferred tax asset recorded in the balance sheet as of
December 31 are as follows:
<TABLE>
<CAPTION>

                                                                                           1996           1995
                                                                                      ------------     ------------
<S>                                                                                   <C>              <C>
     Deferred tax assets
         Deferred compensation                                                        $     65,750     $     74,379
         Bad debts                                                                         130,711           72,970
         Deferred loan fees                                                                 44,994           37,698
         Unearned compensation                                                              81,211                -
         Other                                                                               2,763                -
                                                                                      ------------     ------------
                                                                                           325,429          185,047
     Deferred tax liabilities
         Depreciation                                                                     (121,114)        (109,374)
         Other                                                                             (10,358)          (1,401)
                                                                                      ------------     ------------
                                                                                          (131,472)        (110,775)
     Valuation allowance                                                                         -                -
                                                                                      ------------     ------------

         Net deferred tax asset                                                       $    193,957     $     74,272
                                                                                      ============     ============
</TABLE>
<PAGE>


--------------------------------------------------------------------------------
NOTE 8 - INCOME TAXES (Continued)
--------------------------------------------------------------------------------
Retained  earnings at December  31, 1996 and 1995  includes  approximately  $1.3
million for which no deferred  federal income tax liability has been recognized.
This amount  represents an allocation of income to bad debt  deductions  for tax
purposes only. Reduction of amounts so allocated for purposes other than tax bad
debt losses or adjustments  arising from carryback of net operating losses would
create income for tax purposes only,  which would be subject to the then-current
corporate  income tax rate. The unrecorded  deferred income tax liability on the
above  amount  was  approximately  $449,000  at  December  31,  1996  and  1995.
Legislation passed in August 1996 now requires the Company to deduct a provision
for bad debts for tax purposes based on actual loss  experience and to recapture
the excess bad debt  reserve  accumulated  in tax years after 1986.  The related
amount of deferred tax  liability  which must be  recaptured  is $276,000 and is
payable over a six year period beginning no later than 1998.


NOTE 9 - REGULATORY MATTERS

The Bank is subject to regulatory capital  requirements  administered by federal
regulatory  agencies.  Capital adequacy  guidelines and prompt corrective action
regulations involve quantitative  measures of assets,  liabilities,  and certain
off-balance-sheet   items  calculated  under  regulatory  accounting  practices.
Capital amounts and classifications are also subject to qualitative judgments by
regulators  about  components,  risk  weightings,  and  other  factors,  and the
regulators can lower  classifications in certain cases.  Failure to meet various
capital  requirements  can initiate  regulatory  action that could have a direct
material  effect on the  financial  statements.  The  prompt  corrective  action
regulations provide five classifications, including well capitalized, adequately
capitalized,  undercapitalized,  significantly undercapitalized,  and critically
undercapitalized,  although  these  terms  are  not  used to  represent  overall
financial condition.


<PAGE>


NOTE 9 - REGULATORY MATTERS (Continued)

At year end,  actual  capital levels (in millions) and minimum  required  levels
were:
<TABLE>
<CAPTION>

                                                                                                Minimum Required
                                                                                                   To Be Well
                                                                     Minimum Required              Capitalized
                                                                        For Capital          Under Prompt Corrective
                                                Actual               Adequacy Purposes         Action Regulations
                                          Amount      Ratio          Amount      Ratio         Amount     Ratio
                                          ------      -----          ------      -----         ------     -----
<S>                                       <C>        <C>             <C>         <C>           <C>        <C>
1996

Total capital (to risk weighted assets)   $  22.0    21.8%           $  8.1      8.0%          $ 10.1     10.0%
Tier 1 (core) capital (to risk weighted
  assets)                                    21.2    21.0               4.0      4.0              6.1      6.0
Tier 1 (core) capital (to adjusted total
  assets)                                    21.2    12.5               5.1      3.0              8.5      5.0
Tangible capital (to adjusted total
  assets)                                    21.2    12.5               2.5      1.5              N/A

1995

Total capital (to risk weighted assets)   $  21.1    25.1%           $  6.7      8.0%          $  8.4     10.0%
Tier 1 (core) capital (to risk weighted
  assets)                                    20.5    24.3               3.4      4.0              5.1      6.0
Tier 1 (core) capital (to average total
  assets)                                    20.5    14.9               4.1      3.0              6.9      5.0
Tangible capital (to adjusted total
  assets)                                    20.5    14.9               2.1      1.5              N/A
</TABLE>


The Bank at year end 1996 was categorized as well capitalized.

Regulations  of the Office of Thrift  Supervision  limit the amount of dividends
and  other  capital  distributions  that may be paid by a  savings  institutions
without  prior  approval  of the Office of Thrift  Supervision.  The  regulatory
restriction  is based on a  three-tiered  system with the  greatest  flexibility
being afforded to well-capitalized (Tier 1) institutions.  The Bank is currently
a Tier 1 institution.  Accordingly,  the Bank can make, without prior regulatory
approval,  distributions  during a calendar year up to 100% of its net income to
date during the  calendar  year plus an amount that would reduce by one-half its
"surplus  capital  ratio"  (the excess  over its  capital  requirements)  at the
beginning of the calendar year. Accordingly,  at December 31, 1996 approximately
$8,546,000  of  the  Bank's  retained  earnings  is  potentially  available  for
distribution to the Company.


<PAGE>


NOTE 10 - COMMITMENTS AND CONTINGENCIES AND FINANCIAL INSTRUMENTS
  WITH OFF-BALANCE SHEET RISK
<TABLE>
<CAPTION>

                                                                                 1996                1995
                                                                           ---------------     ---------------
<S>                                                                        <C>                 <C>

     Fixed rate commitments                                                $     2,440,000     $       374,000
     Variable rate commitments                                                  16,604,000           8,089,000
     Credit card arrangements                                                    1,698,000           1,397,000
     Letters of credit                                                              50,000              50,000
</TABLE>


Most  loan  commitments  have  terms up to 60  days.  At year  end  1996,  fixed
commitments have contractual  rates ranging from 7.25% to 9.5%. Credit cards are
fixed at 14.9%.  Most variable rate arrangements are tied either to prime or the
U.S. Treasury bill rate and have spreads between .75% and 2%.

The Company and the Bank are subject to certain claims and legal actions arising
in the  ordinary  course  of  business.  In the  opinion  of  management,  after
consultation  with legal counsel,  the ultimate  disposition of these matters is
not expected to have a material  adverse  effect on the  consolidated  financial
position or results of operations of the Company.


NOTE 11 - STOCK OPTIONS

The Company  established a stock option plan during 1996.  Financial  Accounting
Standard  No.  123,  which  became  effective  for  1996,   requires  pro  forma
disclosures for companies that do not adopt its fair value accounting method for
stock-based  employee  compensation.   Accordingly,   the  following  pro  forma
information  presents net income and earnings per share had the Standard's  fair
value  method been used to measure  compensation  cost for stock  option  plans.
Compensation cost actually recognized for stock options was $0 for 1996.
<TABLE>
<CAPTION>

                                                                                  1996
                                                                             ---------------
<S>                                                                          <C>
     Net income as reported                                                  $     1,567,545
     Pro forma net income                                                          1,398,379

     Earnings per share as reported                                                $     .84
     Pro forma earnings per share                                                        .75
</TABLE>


In future years,  the pro forma effect of not applying this standard is expected
to increase as additional options are granted.


<PAGE>


NOTE 11 - STOCK OPTIONS (Continued)

Stock  option  plans  are used to  reward  employees  and  provide  them with an
additional equity interest. Options are issued for 10 year periods, with vesting
occurring evenly over the first five years. At year end 1996, 27,280 shares were
authorized for future grants. Information about option grants follows.
<TABLE>
<CAPTION>
                                                   Number                 Exercise                 Fair Value
                                                 of Options                 Price                   of Grants
                                                ------------             -----------                ---------
<S>                                             <C>                      <C>                        <C>

     Outstanding, beginning of 1996                        -             $         -                $       -
     Granted                                         190,932                   11.75                     4.43
     Exercised                                             -                       -                        -
                                                ------------
     Outstanding, end of 1996                        190,932                   11.75                     4.43
                                                ============
</TABLE>
The fair value of options  granted during 1996 is estimated  using the following
weighted-average information: risk-free interest rate of 6.15%, expected life of
10 years, expected volatility of stock price of 3.01%, and expected dividends of
2.35% per year.

At year end 1996, options outstanding were as follows:
<TABLE>
<CAPTION>
<S>                                                                                                   <C>

     Number of options                                                                                 190,932
     Exercise price                                                                                     $11.75
     Weighted-average remaining option life                                                            9 years
</TABLE>
There are no options exerciseable at year end 1996.


NOTE 12 - RELATED PARTY TRANSACTIONS

Certain  directors and officers of the Company are loan customers.  A summary of
related  party loan  activity for loans  aggregating  $60,000 or more to any one
related party is as follows:
<TABLE>
<CAPTION>

<S>                                                                         <C>
         Balance - January 1, 1996                                          $    308,101
              New loans                                                           95,591
              Repayments                                                         (14,280)
              Other changes                                                      (44,714)
                                                                            ------------

         Balance - December 31, 1996                                        $    344,698
                                                                            ============
</TABLE>

Other changes include  adjustments for loans  applicable to one reporting period
that are excludable from the other reporting period.
<PAGE>


--------------------------------------------------------------------------------
NOTE 13 - FAIR VALUES OF FINANCIAL INSTRUMENTS
--------------------------------------------------------------------------------

Statement of Financial  Accounting Standards No. 107 prescribes that the Company
disclose the estimated  fair value of its financial  instruments.  The following
table shows those values and the related  carrying amounts at December 31, 1996.
Items which are not financial instruments are not included.
<TABLE>
<CAPTION>

                                                            1 9 9 6                            1 9 9 5
                                                            -------                            -------
                                                  Carrying            Estimated       Carrying          Estimated
                                                   Amount            Fair Value        Amount          Fair Value
                                                   ------            ----------        ------          ----------
<S>                                             <C>              <C>               <C>              <C>
Financial assets
      Cash and interest-earning deposits
        in financial institutions               $    6,772,374   $     6,772,374   $   4,772,341    $     4,772,341
      Securities held to maturity                      892,036           891,236         985,906            986,000
      Securities available for sale                 11,496,031        11,496,031       5,895,759          5,895,759
      Loans receivable, net                        146,854,690       147,769,000     122,640,770        122,881,000

Financial liabilities
      Deposit liabilities                           85,346,240        85,633,000      68,202,930         70,879,066
      Advances from the Federal
        Home Loan Bank                              56,000,000        55,949,000      37,500,000         37,542,000
</TABLE>


For purposes of the above  disclosures  of estimated  fair value,  the following
assumptions were used as of December 31, 1996 and 1995. The estimated fair value
for cash and interest-earning  deposits in financial  institutions is considered
to approximate  cost. The estimated fair value for securities is based on quoted
market  values for the  individual  securities  or  equivalent  securities.  The
estimated  fair value for loans is based on  estimates  of the rate the  Company
would charge for similar  such loans at December 31, 1996 and 1995,  applied for
the time period until estimated  repayment.  The estimated fair value for demand
and savings  deposits is based on their carrying value. The estimated fair value
for  certificates  of deposit and  advances  from the Federal Home Loan Bank are
based on  estimates  of the rate the Company  would pay on such  deposits or for
such  advances at December 31, 1996 and 1995,  applied for the time period until
maturity.   The  estimated  fair  value  of  other  financial   instruments  and
off-balance  sheet  loan  commitments  approximate  cost and are not  considered
significant for this presentation.

While these  estimates of fair value are based on  management's  judgment of the
most  appropriate  factors,  there is no assurance that were the Company to have
disposed of such items at December 31, 1996 or 1995,  the estimated  fair values
would  necessarily  have been  achieved at that date,  since  market  values may
differ depending on various circumstances. The estimated fair values at December
31, 1996 and 1995 should not  necessarily  be  considered to apply at subsequent
dates.



<PAGE>

--------------------------------------------------------------------------------
NOTE   14   -   PARENT    COMPANY   ONLY   CONDENSED    FINANCIAL    INFORMATION
--------------------------------------------------------------------------------
Condensed  financial  information  of  Northeast  Indiana  Bancorp,  Inc.  is as
follows:
<TABLE>
<CAPTION>
                             CONDENSED BALANCE SHEET
                           December 31, 1996 and 1995

                                                                                    1996                1995
                                                                                ---------------    ----------------
<S>                                                                             <C>                <C>
ASSETS
Cash and cash equivalents                                                       $       371,124    $        299,402
Loan receivable from Employee Stock Ownership Plan                                    1,454,750           1,600,225
Loan receivable from subsidiary bank                                                  3,750,000           8,600,000
Investment in subsidiary bank                                                        21,184,450          20,461,354
Other assets                                                                             65,949             139,415
                                                                                ---------------    ----------------

     Total assets                                                               $    26,826,273    $     31,100,396
                                                                                ===============    ================
LIABILITIES
Accrued expenses                                                                $       297,157    $         67,351

SHAREHOLDERS' EQUITY                                                                 26,529,116          31,033,045
                                                                                ---------------    ----------------

     Total liabilities and shareholders' equity                                 $    26,826,273    $     31,100,396
                                                                                ===============    ================
<CAPTION>
                          CONDENSED STATEMENT OF INCOME
                    For the year ended December 31, 1996 and
             the period from July 1, 1995 through December 31, 1995

                                                                                     1996                1995
                                                                                ---------------    ----------------
<S>                                                                             <C>                <C>
Interest income                                                                 $       497,921    $        266,012

Operating expenses                                                                      176,014              50,873
                                                                                ---------------    ----------------

Income before income taxes and equity in undistributed
  earnings of subsidiary bank                                                           321,907             215,139

Income tax expense                                                                      100,391              85,216
                                                                                ---------------    ----------------

Income before equity in undistributed earnings of
  subsidiary bank                                                                       221,516             129,923

Equity in undistributed earnings of subsidiary bank                                   1,346,029             658,085
                                                                                ---------------    ----------------

Net income                                                                      $     1,567,545    $        788,008
                                                                                ===============    ================
</TABLE>
<PAGE>

NOTE 14 - PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION
  (Continued)
<TABLE>
<CAPTION>

                        CONDENSED STATEMENT OF CASH FLOWS
                    For the year ended December 31, 1996 and
             the period from July 1, 1995 through December 31, 1995


                                                                                     1996                1995
                                                                                ---------------    ----------------
<S>                                                                             <C>                <C>
Cash flows from operating activities
     Net income                                                                 $     1,567,545    $        788,008
     Adjustments to reconcile net income to cash provided by
       operations
         Equity in undistributed earnings of subsidiary bank                         (1,346,029)           (658,085)
         Change in
              Other assets                                                               73,466            (139,415)
              Accrued expenses                                                          229,806              67,351
                                                                                ---------------    ----------------
                  Net cash from operating activities                                    524,788              57,859

Cash flows from investing activities
     Origination of loan receivable from ESOP                                                 -          (1,745,700)
     Origination of loan receivable from subsidiary bank                                      -          (8,600,000)
     Repayments on loan receivable from subsidiary bank                               4,850,000                   -
     Repayments on loan receivable from ESOP                                            145,475             145,475
     Purchase of stock in subsidiary bank                                                     -         (10,605,429)
                                                                                ---------------    ----------------
         Net cash used for investing activities                                       4,995,475         (20,805,654)

Cash flows from financing activities
     Dividend paid                                                                     (622,519)          (163,660)
     Purchase of stock                                                               (4,826,022)                  -
     Proceeds from issuance of common stock, net of
       conversion costs                                                                       -          21,210,857
                                                                                ---------------    ----------------
         Net cash from financing activities                                          (5,448,541)         21,047,197
                                                                                ---------------    ----------------

Net change in cash and cash equivalents                                                  71,722             299,402

Cash and cash equivalents at beginning of period                                        299,402                   -
                                                                                ---------------    ----------------

Cash and cash equivalents at end of period                                      $       371,124    $        299,402
                                                                                ===============    ================

</TABLE>
<PAGE>


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

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

                                TABLE OF CONTENTS


     PRESIDENT'S LETTER TO STOCKHOLDERS

     SELECTED CONSOLIDATED FINANCIAL INFORMATION

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

     REPORT OF INDEPENDENT AUDITORS

     CONSOLIDATED FINANCIAL STATEMENTS

     STOCKHOLDER INFORMATION




<PAGE>


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

                             STOCKHOLDER INFORMATION

Stock Listing Information

The  Company's  common stock is traded on the NASDAQ  National  Market under the
symbol "NEIB".

Stock Price Information

The  following  table  sets  forth  the high and low bid  prices  and  dividends
declared per share of common stock for the periods indicated.  The prices do not
represent actual  transactions  and do not include retail markups,  markdowns or
commissions.
<TABLE>
<CAPTION>

                                                                                               Dividends
                   Quarter Ended                     High                       Low             Declared
                   -------------                     ----                       ---             --------
<S>                                                <C>                       <C>                 <C>
              March 31, 1995                         N/A                        N/A              N/A
              June 30, 1995                        $     11.75               $11.00              -
              September 30, 1995                   $     12.75               $11.25              -
              December 31, 1995                    $     12.50               $11.50$.075

              March 31, 1996                       $     13.50               $11.50$.075
              June 30, 1996                        $     13.25               $11.50$.075
              September 30, 1996                   $     13.00               $11.75$.075
              December 31, 1996                    $     14.00               $12.63$.080
</TABLE>


Dividend payment  decisions are made with  consideration of a variety of factors
including earnings,  financial condition,  market  considerations and regulatory
restrictions.  Restrictions of dividend  payments are described in Note 9 of the
Notes to Consolidated Financial Statements included in this report.

As of February 10, 1997,  there were  approximately  608 shareholders of record,
not  including  those  shares  held in nominee or street  name  through  various
brokerage firms or banks.

Annual Report on Form 10-KSB
A copy of the Company's annual report on Form 10-KSB,  filed with the Securities
and Exchange Commission, is available without charge by writing:

         Darrell E. Blocker
         Chief Financial Officer
         Northeast Indiana Bancorp, Inc.
         648 North Jefferson Street
         Huntington, Indiana  46750
<PAGE>

Stock Transfer Agent
Inquiries regarding stock transfer,  registration,  lost certificates or changes
in name and address should be directed to the stock transfer agent and registrar
by writing:

         Registrar and Transfer Company
         10 Commerce Drive
         Cranford, New Jersey  07016

Investor Information

Stockholders,  investors,  and analysts interested in additional information may
contact Darrell E. Blocker, Chief Financial Officer,  Northeast Indiana Bancorp,
Inc.
<TABLE>
<CAPTION>

           Corporate Office                   Special Counsel                       Independent Auditor
           ----------------                   ---------------                       -------------------
<S>                                     <C>                                  <C>
   Northeast Indiana Bancorp, Inc.      Silver, Freedman & Taff, L.L.P.      Crowe, Chizek and Company LLP
   648 North Jefferson Street           1100 New York Avenue, N.W.           330 E. Jefferson Blvd.
   Huntington, Indiana  46750           Washington, D.C. 20005               South Bend, Indiana  46624
   (219) 356-3311

</TABLE>
<PAGE>

                        DIRECTORS AND EXECUTIVE OFFICERS
--------------------------------------------------------------------------------
                         NORTHEAST INDIANA BANCORP, INC.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

<S>                                            <C>
BOARD OF DIRECTORS                             EXECUTIVE OFFICERS

Stephen E. Zahn                                Stephen E. Zahn
Chairman of the Board                          President and Chief Executive Officer
President and Chief Executive Officer

Dan L. Stephan                                 Dee Ann Hammel
State Representative                           Senior Vice President
  Indiana Legislature                            and Chief Operations Officer
Agent
  Variable Annuity Life Insurance Company      Darrell E. Blocker
                                               Senior Vice President,
                                                 Treasurer and Chief Financial Officer
Richard G. Carnes
Retired Former owner/manager
  Wissel's Clothing Store

J. David Carnes
Medical Doctor and Associate
  Family Practice Associates

Samuel Preston, Jr.
Retired Pharmacist

Randall C. Rider
President
  Lime City Manufacturing Company, Inc.
</TABLE>




                                 ANNUAL MEETING


     The Annual Meeting of Stockholders of Northeast Indiana Bancorp, Inc., will
     be held on April 23,  1997 at 1:00 p.m.  at First  Federal  Savings  Bank's
     north office located at 100 Frontage Road, Huntington, Indiana 46750.