NOW MORE THAN EVER...FIRST IN HOMETOWN BANKING




                                                                      1998
                                                                   ANNUAL REPORT

[GRAPHIC-COMPANY LOGO]










                                                          [GRAPHIC-COMPANY LOGO]
                                                                    NORTHEAST
                                                                      INDIANA
                                                                   Bancorp, Inc.
<PAGE>
Table of Contents


PRESIDENT'S MESSAGE TO OUR SHAREHOLDERS                      1


FINANCIAL HIGHLIGHTS                                         3


SELECTED CONSOLIDATED FINANCIAL INFORMATION                  4


MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
  CONDITION AND RESULTS OF OPERATIONS                        5


REPORT OF INDEPENDENT AUDITORS                              16


CONSOLIDATED FINANCIAL STATEMENTS                           17


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                  21


STOCKHOLDER INFORMATION                                     37


DIRECTORS AND OFFICERS                                      38



Description of Business

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 principal  business of First
Federal consists of attracting deposits from the general public and making loans
secured by residential real estate.  Historically,  First Federal has been among
the top real estate  lenders and is the largest  financial  institution by asset
size in Huntington County. In order to serve additional  financial needs of area
residents,  First Federal  established a Trust Department  during 1998, and made
plans  to  provide  brokerage  services  via its new  wholly  owned  subsidiary,
Northeast Indiana Financial,  Inc. First Federal has been serving the Huntington
community since 1912.



                                                                               2
<PAGE>
Financial Highlights

[GRAPHIC-GRAPH DEPICTING TOTAL ASSETS]
[GRAPHIC-GRAPH DEPICTING NET INCOME]
[GRAPHIC-GRAPH DEPICTING RETURN ON ASSETS]
[GRAPHIC-GRAPH DEPICTING RETURN ON EQUITY]


















                                [GRAPHIC-GRAPH DEPICTING EARNINGS PER SHARE]
                                [GRAPHIC-GRAPH DEPICTING DIVIDENDS PAID]
                                [GRAPHIC-GRAPH DEPICTING PER SHARE MARKET VALUE]


--------------------------------------------------------------------------------
1 End of period
2 All share information restated to reflect the November 1998 10% Stock Dividend



3
<PAGE>
<TABLE>
<CAPTION>
Selected Consolidated Financial Information

                                                                                 December 31
                                                       ----------------------------------------------------------------
                                                         1998          1997          1996          1995          1994
                                                       --------      --------      --------      --------      --------
                                                                            (dollars in thousands)
SELECTED FINANCIAL CONDITION DATA:
<S>                                                    <C>           <C>           <C>           <C>           <C>     
Total assets                                           $212,425      $199,369      $169,544      $137,569      $115,095
Loans receivable, net                                   185,906       174,539       146,855       122,641       104,402
Securities                                               14,187        15,385        12,388         6,882         5,395
Deposits                                                123,336       107,550        85,346        68,203        68,533
Total borrowings                                         63,080        63,522        56,000        37,500        35,500
Shareholders' equity                                     25,005        27,293        26,529        31,033        10,238

SELECTED OPERATIONS DATA:
Total interest income                                  $ 16,139      $ 14,316      $ 11,767      $  9,644      $  8,102
Total interest expense                                    9,061         7,950         6,197         5,307         4,072
                                                       --------      --------      --------      --------      --------
Net interest income                                       7,078         6,366         5,570         4,337         4,030
Provision for loan losses                                   360           265           235           251           263
                                                       --------      --------      --------      --------      --------
Net interest income after provision
  for loan losses                                         6,718         6,101         5,335         4,086         3,767
Total noninterest income                                    731           565           402           347           384
Total noninterest expense                                 3,691         3,062         3,208         2,364         1,938
                                                       --------      --------      --------      --------      --------
Income before income taxes                                3,758         3,604         2,529         2,069         2,213
Income tax expense                                        1,369         1,411           962           750           876
Net income                                             $  2,389      $  2,193      $  1,567      $  1,319      $  1,337
                                                       ========      ========      ========      ========      ========

Basic earnings per common share (2)(3)                 $   1.50      $   1.28      $   0.80      $   0.35           N/A

Diluted earnings per common share (2)(3)               $   1.41      $   1.24      $   0.79      $   0.35           N/A


SELECTED FINANCIAL RATIOS AND OTHER DATA:
Performance Ratios:
Return on assets
  (ratio of net income to average total assets)            1.17%         1.21%         1.03%         1.04%         1.22%
Return on equity
(ratio of net income to average total equity)              9.15          8.12          5.43          6.55         13.77
Interest rate spread information:
Average during period                                      2.95          2.91          2.90          2.80          3.51
End of period                                              3.11          2.95          2.70          2.77          2.83
Net interest margin (1)                                    3.57          3.63          3.81          3.57          3.82
Ratio of operating expense to average total
assets                                                     1.81          1.69          2.12           .87          1.81
Ratio of average interest-earning assets to
average interest-bearing liabilities                     113.66        115.97        121.48        117.70        107.93

Quality Ratios:
Non-performing assets to total assets at end
of period                                                   .56           .58           .42           .21           .29
Allowance for loan losses to non-performing
loans                                                    122.53        102.50        144.00        310.21        205.93
Allowance for loan losses to loans receivable, net          .78           .68           .70           .72           .66

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                                                    <C>           <C>           <C>           <C>           <C>     
Capital Ratios:
Shareholders' equity to total assets at
end of period                                             11.77         13.69         15.65         22.56          8.90
Average shareholders' equity to average total
assets                                                    12.80         14.89         19.03         15.92          8.89

Other Data:
Number of full-service offices                                3             3             3             3             2
</TABLE>

(1)  Net interest income divided by average interest-earning assets.
(2)  1995 earnings per share amounts are subsequent to conversion.
(3)  All share and per share amounts have been restated to reflect the 10% stock
     dividend paid on November 23, 1998 to  shareholders  of record  November 6,
     1998.


                                                                               4
<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.

During the year of 1998,  First  Federal  established a trust  department  which
began  operations in the fourth  quarter.  At the end of 1998,  $4.1 million was
held under  asset  management.  In February  1999,  the  Company  announced  the
establishment of Northeast Indiana Financial, Inc., a wholly-owned subsidiary of
the Bank.  Northeast Indiana  Financial,  Inc. will provide  brokerage  services
through  the  purchase  of mutual  funds,  annuities,  stocks  and bonds for its
customers.  Until these operations are well  established,  management  expects a
slight negative impact to net income.

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.  Provisions  for loan losses,  service  charge and fee
income,  other  noninterest  income,  operating  expenses  and income taxes also
affect  First  Federal's  earnings.  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.

Prevailing  economic  conditions  as  well  as  federal  regulations  concerning
monetary and fiscal  policies and financial  institutions  significantly  affect
First  Federal.  The year of 1998 ended  with  inflation  continuing  to stay in
check.  The Federal  Reserve lowered short term rates three times for a total of
75 basis points to help the United States economy offset the effect of the Asian
economic downturn. The economy has stayed relatively stable during 1998 overall.
Although we have had  fluctuations  throughout  1998, in general the economy was
favorable to First Federal's  lending growth.  This volume  increase,  however,
included more  refinances  than normal caused by the decline in rates.  As these
loans refinanced,  we received lower interest income. In addition,  there can be
no assurance 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.
Liquidity  levels and funds available to originate loans may also impact lending
activities.  The  primary  sources  of  funds  for  lending  activities  include
deposits, borrowed funds, loan payments and funds provided from operations.

5
<PAGE>
Forward-Looking Statements

When  used  in this  filing  and in  future  filings  by the  Company  with  the
Securities and Exchange  Commission,  in the Company's  press releases or other
public  or  shareholder  communications,  or in oral  statements  made  with the
approval of an authorized  executive  officer,  the words or phrases "would be",
"will  allow",  "intends  to", "will  likely  result "are  expected  to",  "will
continue", "is anticipated",  "estimate",  "project" or similar  expressions are
intended  to  identify  "forward-looking statements"   within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements are subject to
risks and  uncertainties,  including  but not  limited  to,  changes in economic
conditions  in the  Company's  market area,  changes in policies by  regulatory
agencies,  fluctuations  in interest  rates,  demand for loans in the Company's
market area and competition,  all or some of which could cause actual results to
differ  materially from historical  earnings and those presently  anticipated or
projected.

The Company  wishes to caution  readers not to place undue  reliance on any such
forward-looking  statements,  which speak only as of the date made,  and advises
readers  that  various  factors,   including   regional  and  national  economic
conditions,  substantial  changes in levels of market interest rates, credit and
other risks of lending and investment  activities and competitive and regulatory
factors,  could affect the Company's financial  performance and could cause the
Company's  actual  results for future periods to differ  materially  from those
anticipated or projected.

The Company does not undertake,  and specifically  disclaims any obligation,  to
update any  forward-looking  statements to reflect  occurrences or unanticipated
events or circumstances after the date of such statements.

Impact of the Year 2000

The Company  relies  heavily on computer  technology to provide its products and
services  and is well  aware of all the  issues  involved  with  the  Year  2000
including how operations  could be impacted if a potential  problem would arise.
An overall plan  developed by the Year 2000  Committee was approved by the Board
of Directors and put into effect in 1998. This plan is a step by step process of
assessment,  remediation and testing of hardware,  software, embedded systems as
well as a  customer  awareness  program,  contingency  and  business  continuity
planning and budgeting.

A test was  performed  on all  computer  systems  to make sure they were able to
recognize  year 2000 dates and hold these dates when powered off and on. Any new
computer  equipment  purchased  will go through the same  testing  process.  All
embedded  systems have been  assessed and will  continue to be functional in the
year 2000.

The Company has no software that is internally  developed.  The various types of
software  utilized by the Company are purchased  through third party vendors and
our service  bureau.  Our  service  bureau has kept us informed of the Year 2000
status of the software  products.  Testing of all data file interfaces  began in
the fourth quarter of 1998 and will continue through the first quarter of 1999.
<PAGE>
The Company  recognizes the  importance of customer  awareness and has brochures
that are readily  available as well as  information  on its  website.  Year 2000
customer awareness also includes  assessing our current commercial  borrowers on
their  status.  There  are  also  risk  assessments  and  Year  2000  disclosure
requirements for any new commercial borrower.

The Company is currently  preparing the Year 2000 Business  Continuity  Plan. It
will  address  the  resumption  of  business  in  the  case  of  power  failure,
telecommunication  problems or the  inability of our service  bureau to perform.
This plan will be completed  and  validated by the end of the second  quarter of
1999.

                                                                               6
<PAGE>
IMPACT OF THE YEAR 2000 (continued)


The overall cost of the  Company's  Year 2000 project has not had a significant
impact on  income  in 1998 nor will it be  likely in 1999.  The costs in 1998 of
less than $100,000 are the result of software  upgrades,  new computer equipment
associated  with the  software  upgrades  as well as the  support of our service
bureau.

The Company is progressing  towards Year 2000  readiness in accordance  with the
guidelines  set  forth by the  regulators.  The Year  2000  Committee  regularly
reports to the Board of Directors, Senior Management, and Staff to keep everyone
informed, as well as involved, in our Year 2000 efforts.



Financial Condition


First Federal's total assets increased from $199.4 million at December 31, 1997
to $212.4 million at December 31, 1998, an increase of $13.0  million,  or 6.5%.
The increase was due primarily to the  increases in loans,  net of $11.4 million
or 6.5% and cash and cash equivalents of $1.5 million or 30.6%.  This growth was
funded by a $15.8 million increase in deposits.

The increase in the loan portfolio was partially attributable to mortgage loans,
which  increased  $5.7 million.  Mortgage  loans secured by  one-to-four  family
residences  increased  $4.8  million to $113.9  million at December 31, 1998 and
represent  61.3% of First  Federal's  loan  portfolio.  The  increase in one to
four-family  mortgage  loans was  comprised of a $5.8 million  increase in fixed
rate loans offset by a $1.0 million decrease in adjustable rate loans.  Mortgage
loans secured by multi-family and commercial real estate  increased  $100,000 to
$19.4 million at December 31, 1998 and construction loans secured by residential
and non-residential real estate increased $770,000 to $11.4 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  $5.1  million  to $46.3  million at
December 31, 1998.  Automobile  loans  comprise  $12.2 million of total consumer
loans while home equity and second mortgage loans represent another $5.9 million
at December 31, 1998.

Future  loan  growth  is  dependent  on the  economy.  First  Federal  currently
anticipates  slower  growth in mortgages  compared to the last few years.  First
Federal  will  continue  to  expand  its  commercial   lending  and  anticipates
commercial lending to increase as a percentage of total loans.

Total deposits  increased  $15.8 million to $123.3 million at December 31, 1998.
The 14.7% growth in 1998 was due to aggressive advertising,  pricing of selected
products  for a limited  time  slightly  above  local  market  competitors,  and
accepting jumbo deposits competitively priced from time to time during the year.
Jumbo deposit growth  contributed $9.5 million of the total deposit increase and
came from both inside and outside of our market area.
<PAGE>
Total borrowed funds decreased $441,000,  from $63.5 million to $63.1 million at
December 31, 1998.  Borrowed funds include  advances from the FHLB with variable
interest rates and stated maturities  ranging through 2008.  Management plans to
continue to utilize FHLB  advances in  conjunction  with efforts to increase our
deposit base to provide the necessary funding for loan demand.  First Federal's
borrowing limit at the FHLB as of December 31, 1998, was $74 million. Borrowings
also  include two demand notes  totaling  $781,000  for  investments  in two low
income housing  limited  liability  partnerships  as well as various  repurchase
agreements that started being offered in 1998.


7
<PAGE>
Results of Operations


                            COMPARISON OF YEARS ENDED
                           DECEMBER 31, 1998 AND 1997

General. Net income for the year ended December 31, 1998 provided another record
year of $2.39  million in earnings,  an increase of $196,000  over net income of
$2.19 million for 1997. This improvement was primarily a result of increased net
interest income after provision for loan losses of $618,000, non-interest income
improvements of $165,000 and a decrease in income tax expense of $42,000.  These
increases were partially offset by increases in non-interest  operating expenses
of $629,000.  Further  details  regarding the changes in the income and expenses
are discussed below.

Interest  Income.  Interest  income  increased $1.82 million or 12.73% to $16.14
million for the year ended  December 31, 1998.  The increase in interest  income
was primarily the result of mortgage loan interest income increasing $777,000 to
$10.89  million and an increase  of  $903,000 to $3.90  million in consumer  and
other loan interest income. The average yield for the year on the loan portfolio
increased  by just one basis  point to 8.29% in 1998  compared to 8.28% in 1997.
The increase in loan interest income was largely due to higher average  balances
of loans outstanding in 1998 compared to 1997.

Interest  Expense.  Interest  expense for 1998 rose $1.11 million or 13.97% over
1997 interest  expense.  The majority of the increase was due to higher balances
in time deposits  which  averaged  $19.42 million more in 1998 compared to 1997.
The average rate for time  deposits  decreased 2 basis points from 1997 to 1998.
Average  money market  account  balances  increased in 1998 by $ 6.50 million or
45.7%.  The average rate for money market accounts  decreased by 16 basis points
to 4.89% for 1998.  Interest  expense for borrowed  funds  decreased by $260,000
primarily due to lower average FHLB advance balances during 1998.

Net interest income. Net interest income increased $712,000 or 11.20% from $6.37
million to $7.08  million  for the year ended  December  31,  1998.  The average
spread  increased  by 4 basis  points to 2.95%.  Average  loan yields  increased
slightly to 8.29% due to a higher  percentage  of new  commercial,  consumer and
other installment loans being added in 1998 offsetting the general drop in rates
during 1998 by product type.

Provision  for Loan Losses.  The provision for loan losses for 1998 was $360,000
compared to $265,000 in 1997,  an increase of $95,000.  The  provision  for loan
losses less net charge-offs for the year resulted in a $260,000  increase in the
allowance  for loan losses.  The  allowance  for loan losses of $1.45 million at
December  31,  1998  was a  21.78%  increase  compared  to  December  31,  1997.
Management  will  continue to maintain the  allowance for loan losses at a level
deemed  adequate by management  based on its quarterly  analysis.  This analysis
includes  looking at our mix of loans by major  product  lines.  We  continue to
increase our allowance for loan losses  because of our growth in commercial  and
consumer lending as well as overall loan growth.

Noninterest  income.  Noninterest  income  increased  from  $566,000  in 1997 to
$731,000 in 1998.  The majority of this increase is due to the increases in fees
from  mortgage  loans  refinanced  and  growth  in  commercial   lending.   Loan
modification  fees increased to $273,000  compared to $178,000 in 1997 a $95,000
increase.  Due to our  deposit  growth,  service  charges  and  fees on  deposit
accounts also increased to $287,000 in 1998 compared to $245,000 for 1997, which
was a $42,000 increase.
<PAGE>

Noninterest  expense.  Noninterest expense increased from $3.06 million to $3.69
million or $629,000.  Salaries and employee benefits  increased $311,000 in 1998
over  1997,  the  result of  higher  ESOP  costs,  additional  staff and  salary
increases.  During  1998 data  processing  increased  $125,000.  These costs are
primarily associated with the installation of a wide area network, communication
upgrades,  imaging  equipment  and new  software  which  will  enable  increased
efficiencies  of  operations.  Correspondent  bank  charges  and other  expenses
increased mainly due to increased volume in deposits and loans.

Income tax expense.  Income tax expense  decreased  from $1.41  million to $1.37
million.  This  reduction was mainly the result of the tax benefits in 1998 from
the investment in the low income housing limited liability partnership.

                                                                               8
<PAGE>
RESULTS OF OPERATIONS (continued)


                            COMPARISON OF YEARS ENDED
                           DECEMBER 31, 1997 AND 1996


General.  Net income for the year ended December 31, 1997 was $2.19 million,  an
increase of  $625,000  compared  to net income for the year ended  December  31,
1996.  This  increase  was  primarily  the result of an increase in  noninterest
income of $163,000 and  increases in net interest  income  before  provision for
loan losses of  $795,000,  a decrease  in  non-interest  expenses  of  $146,000,
partially offset by increases in provision for loan losses of $30,000 and income
tax  expense  of  $448,000.  Further  details  regarding  changes  in the  major
categories of income and expense are discussed below.

Interest Income. Interest income increased $2.55 million, or 21.66%, from $11.77
million to $14.32  million for the year ended December 31, 1997. The increase in
interest  income was primarily  the result of an increase in interest  income on
mortgage  loans of $1.46 million and an increase in interest  income on consumer
and other loans of  $230,000.  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 8.16% in 1996 to 8.28% in 1997, due to the
high volume of loans in the  portfolio  which were  originated  or repriced at a
higher interest rate than 1996. Yields are 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 $1.75 million, or 28.3%, from $6.20
million to $7.95 million for the year ended  December 31, 1997.  The majority of
this increase was the result of higher  interest  expense on deposits.  Interest
expense on deposits  increased  $954,000 during 1997 due primarily to the higher
average balance of deposits during the year. The increase in interest expense on
borrowed  funds  was due to a  combination  of a  significantly  larger  average
balance of borrowed  funds during the year,  which  increased by $12.73  million
from $46.13  million for 1996 to $58.86 million for 1997, and the higher average
rate paid for borrowed funds during the year.

Net interest income. Net interest income increased $795,000 or 14.28% from $5.57
million to $6.37 million for the year ended December 31, 1997.  First Federal's
net interest rate spread improved during 1997. The interest rate spread averaged
2.91%  during 1997  compared to 2.90%  during 1996 and was 2.95% at December 31,
1997.  Interest-earning  asset yields  increased  from 8.06% in 1996 compared to
8.16% in 1997, while the average costs of interest bearing liabilities increased
from 5.16% in 1996 compared to 5.25% in 1997.

Provision  for Loan  Losses.  The  provision  for loan losses for the year ended
December  31, 1997 was  $265,000  compared  to  $235,000  in the prior year,  an
increase of $30,000. The provision for loan losses, less net charge-offs for the
year,  increased  the  allowance  for loan losses  $167,000 to $1.19  million at
December 31, 1997, a 16.23% increase  compared to December 31, 1996.  Management
will continue to record a provision  for loan losses at a level deemed  adequate
by management based on a quarterly analysis.

Noninterest  Income.  Noninterest  income  increased  from  $403,000  in 1996 to
$566,000 in 1997. This increase of $163,000 was primarily the result of fees and
service charges on loan and deposit accounts  increasing by $149,000 during 1997
to $423,000 compared to 1996 income of $274,000.
<PAGE>
Noninterest Expense. Noninterest expense decreased from $3.21 million in 1996 to
$3.06 million in 1997.  This decrease of $145,000,  or 4.55%,  was primarily the
result of the one time FDIC assessment for the recapitalization of the SAIF fund
of $453,000  taken in  September  1996.  The  increase in salaries  and employee
benefits of $190,000 was mostly a result of  additional  staff and normal salary
increases.

Income Tax Expense.  Income tax expense increased from $962,000 in 1996 to $1.41
million in 1997 due primarily to increased earnings before income taxes.


9
<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  (oOTSo)
regulations provide a Net Portfolio Value (oNPVo) 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, 1998,  adjustable  rate loans  comprised  47.68% of the gross loan
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 when  possible  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.

Presented below, as of December 31, 1998, 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.
<PAGE>
<TABLE>
<CAPTION>
At December 31, 1998

                                                                                               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>           <C>  
                  +300 bp              $    22,263         $    (4,155)             (16)             10.92         (130)
                  +200                      24,243              (2,176)              (8)             11.64          (58)
                  +100                      25,697                (721)              (3)             12.09          (13)
                     0                      26,418                   -                -              12.22            - 
                  -100                      26,388                 (31)              (0)             11.68          (19)
                  -200                      25,988                (430)              (2)             11.37          (54)
                  -300                      25,698                (721)              (3)             10.99          (86)
</TABLE>



                                                                              10
<PAGE>
ASSET/LIABILITY MANAGEMENT (continued)

In the event of a 300 basis point change in interest  rate based upon  estimates
as of December  31,  1998,  the Bank would  experience a 3% decrease in NPV in a
declining  rate  environment  and  a  16%  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 deposits
and FHLB  advances to fund its  investment  in loans with  substantially  longer
maturities  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 1998. 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.

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.



11
<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 daily average  balances.  Non-accruing  loans have been
included in the table as loans carrying a zero yield.
<PAGE>
<TABLE>
<CAPTION>
                                                                           Year Ended December 31,
                                      --------------------------------------------------------------------------------------------
                                                    1998                            1997                           1996
                                        Average   Interest           Average     Interest              Average    Interest
                                      Oustanding   Earned/  Yield/  Outstanding   Earned/   Yield/  Outstanding   Earned/   Yield/
                                        Balance     Paid     Rate    Balance       Paid      Rate      Balance     Paid      Rate  
                                       --------   --------   ----   --------     --------    ----     --------   --------     ---- 
                                                                          (Dollars in Thousands)
<S>                                    <C>        <C>        <C>    <C>          <C>         <C>      <C>        <C>          <C>   
Interest-Earning Assets:
 Loans receivable(1)                   $179,114   $ 14,848   8.29%  $159,095     $ 13,167    8.28%    $133,508   $ 10,897     8.16% 
 Securities                              11,692        785   6.71     10,659          709    6.66        8,479        551     6.50  
 FHLB stock                               3,250        260   8.00      3,054          244    7.99        2,411        189     7.84  
 Other interest-earning                                                                                                             
   assets                                 4,006        246   6.14      2,670          195    7.29        1,632        130     7.97 
                                       --------   --------          --------     --------             --------   --------           
     Total interest                                                                                                                 
       earning  assets(1)               198,062     16,139   8.15    175,478       14,315    8.16      146,030     11,767     8.06  
                                       --------   --------          --------     --------             --------   --------           
                                                                                                                                    
Non-interest earning assets               6,086                        6,001                             5,587  
      Total assets                     $204,148                     $181,479                          $151,617  
                                       ========                     ========                          ========  
Interest-Bearing Liabilities:                                                                                                       
  Savings                              $  9,577        235   2.45   $  9,655          265    2.75     $ 10,465        288     2.75  
  Money market                           20,732      1,014   4.89     14,232          719    5.05        8,793        437     4.97  
  Demand and NOW                          9,947        148   1.49      8,960          148    1.65        8,276        184     2.22  
  Time deposit accounts                  79,156      4,516   5.71     59,608        3,416    5.73       46,549      2,685     5.77  
  Borrowings                             54,841      3,148   5.74     58,859        3,402    5.78       46,128      2,603     5.64  
                                       --------   --------          --------     --------             --------   -------- 
     Total interest                                                                                                                 
       bearing liabilities              174,253      9,061   5.20    151,314        7,950    5.25      120,211      6,197     5.16  
                                       --------   --------          --------     --------             --------   -------- 
Non-interest bearing                                                                                                                
  liabilities                             3,774                        3,142                             2,539  
                                       --------                     --------                          --------                      
     Total liabilities                  178,027                      154,456                           122,750                      
     Total equity                        26,121                       27,023                            28,867  
                                       --------                     --------                          --------                      
     Total liabilities and                                                                                                          
       equity                          $204,148                     $181,479                          $151,617                      
                                       ========                     ========                          ========                      
Net interest income                               $ 7,078                        $  6,365                        $  5,570           
                                                  =======                        ========                        ========           
Net interest rate spread                                     2.95%                           2.91%                            2.90% 
Net interest earning assets            $ 23,809                     $ 24,164                          $ 25,819                      
                                       ========                     ========                          ========                      
Net yield on average                                                                                                                
   interest-earning assets                                   3.57%                           3.63%                            3.81% 
                                                             ====                            ====                             ====  
Average interest-earning assets to                                                                                                  
   average interest-bearing liabilities                      1.14x                           1.16x                            1.21x 
                                                             ====                            ====                             ====  
</TABLE>                          
--------------------- 
(1) Calculated net of deferred loan fees, loan  discounts,  loans in process and
allowance for loan losses.
                                                                              12
<PAGE>
Interest Rate Spread

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,
                                                          ------------------------
                                                          1998      1997      1996
                                                          ----      ----      ---- 
<S>                                                       <C>       <C>       <C>  
Weighted average yield on:

 Loans receivable                                         8.17%     8.38%     8.15%

 Investment securities                                    6.68      6.90      6.64

 Other interest-earning assets                            4.68      5.65      7.01

    Combined weighted average yield on
      interest-earning assets                             8.00      8.26      8.01


Weighted average rate on:

 Savings deposits                                         2.00      2.75      2.75

 Money market                                             4.29      5.10      5.01

 NOW deposits                                             1.49      1.53      2.23

 Time deposit accounts                                    5.48      5.76      5.69

 Borrowings                                               5.40      5.83      5.84

 Repurchase agreements                                    4.53      0.00      0.00

    Combined weighted average rate on interest-
      bearing liabilities                                 4.89      5.31      5.31


Spread                                                    3.11      2.95      2.70
</TABLE>
The loans  receivable  yield,  which is the largest portion of interest income,
dropped 21 basis  points to 8.17%,  a 2.5% drop at the end of period  1998 yield
compared  to 8.38% at the end of 1997.  The other  significant  rate drop was in
other  interest  earning  assets.  This is  composed  of mostly  short  term and
overnight  investments.  This yield drop of 97 basis  points  reflects the short
term and overnight investments.  This yield drop of 97 basis points reflects the
short term rate changes during 1998. The overall  weighted average yield dropped
26 basis  points to 8.00% at the end of 1998 down from 8.26% at the end of 1997,
a 3.15%  decrease.  Interest-bearing  liabilities  rates  dropped  on all  major
liability  products.  Time deposits dropped to 5.48% at the end of 1998 compared
<PAGE>

to 5.76% at the end of  1997,  a 28 basis  point  drop.  Money  market  accounts
dropped 81 basis points to 4.29% at the end of 1998 compared to 5.10% at the end
of 1997,  a 15.9% drop,  again  reflecting  the drop in short term rates  during
1998.  Borrowings  rates  dropped 43 basis  points in 1998 to 5.40%  compared to
5.83% at the end of 1997.  The repurchase  agreements  reflect the end of period
rates paid on our sweep  accounts  which were  introduced in 1998 for commercial
customers.  The combined  interest-bearing  liabilities  weighted  average rates
dropped to 4.89% at the end of 1998  compared to 5.31% at the end of 1997.  This
42 basis point reduction in interest costs compared to the earning assets yields
reduction of 26 basis points caused the spread to improve to 3.11% at the end of
1998  compared to 2.95% at the end of 1997,  a 16 basis point  improvement  over
1997.




13
<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,
                                   ----------------------------------------------------------------------------
                                                1998 vs. 1997                            1997 vs. 1996
                                   -----------------------------------        ---------------------------------
                                           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                $ 1,659      $     22     $  1,681        $  2,116       $    154   $  2,270 
   Securities                           69             7           76             145             13        158 
   FHLB stock                           16             -           16              51              4         55 
   Other interest-
     earning assets                     86           (35)          51              77            (12)        65 
                                   -------      --------     --------        --------       --------   -------- 
   Total interest-
     earning assets                $ 1,830      $     (6)    $  1,824        $  2,389       $    159   $  2,548 
                                   =======      ========     ========        ========       ========   ======== 

Interest-bearing
   liabilities:
   Savings                         $    (2)     $    (28)    $    (30)       $    (22)      $     (1)  $    (23)
   Money market                        319           (24)         295             275              7        282 
   NOW                                  15           (15)            -             14            (50)       (36)
   Time deposit
     accounts                        1,115           (15)       1,100             748            (17)       731 
   Repurchase
     agreements                          6              -           6 
   Other borrowings                   (230)          (30)        (260)            734             65        799 
                                   -------      --------     --------        --------       --------   -------- 
   Total interest-
     bearing
     liabilities                   $ 1,223      $   (112)    $  1,111        $  1,749       $      4   $  1,753 
                                   =======      ========     ========        ========       ========   ======== 

Net interest income                                          $    713                                  $    795 
                                                             ========                                  ======== 
</TABLE>
                                                                              14
<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,  1998,  First  Federal's
average  liquidity  ratio was 8.85%,  of which 40.9% was comprised of short-term
investments.

During the year ended  December 31,  1998,  there was a net increase in cash and
cash  equivalents  of $1.5  million.  The major  source of funds during the year
included an increase in deposits of $15.8  million which were used to fund a net
increase of $11.4 million in loans and $4.9 million to purchase treasury stock.

During the year ended  December 31,  1997,  there was a net decrease in cash and
cash  equivalents  of $1.9  million.  The major  source of funds during the year
included net additional borrowings of $7.0 million from the FHLB and an increase
in deposits  of $22.2  million  which were used to fund a net  increase of $28.0
million in loans and a $3.0 million increase in securities.

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 was
a net increase of $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.

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, 1998,
First  Federal's  tangible  capital ratio was 10.2%, its core capital ratio was
10.2% and its  risk-based  capital  to risk  weighted  assets  ratio was  16.6%.
Therefore,   First  Federal's   capital   significantly   exceeds  all  capital
requirements currently in effect.

During 1998 the Company  completed  its fourth stock  repurchase  program  which
began in July 1997. The Company also received approval from the OTS to begin its
fifth stock repurchase program. As the stock is repurchased, it becomes treasury
stock and can be used for  general  corporate  purposes.  The  fifth  repurchase
program was approved in July 1998 for 10% of the  outstanding  shares or 180,648
shares.  The  Company  had  repurchased  140,200  of these  shares at the end of
December  1998. At December 31, 1998 the Company had 728,049  shares of treasury
stock and 1,672,417 shares outstanding.
<PAGE>
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.


15
<PAGE>
                   [GRAPHIC- LOGO FOR CROWE CHIZEK LETTERHEAD]

                                  CROWE CHIZEK


                         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, 1998 and 1997 and the
related consolidated  statements of income, changes in shareholders' equity and
cash flows for the years ended December 31, 1998, 1997 and 1996. 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, 1998 and 1997 and the results of
their  operations  and their cash flows for the years ended  December  31, 1998,
1997 and 1996 in conformity with generally accepted accounting principles.





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



South Bend, Indiana
February 11, 1999



                                                                              16
<PAGE>
<TABLE>
<CAPTION>
                                NORTHEAST INDIANA BANCORP, INC.
                                  CONSOLIDATED BALANCE SHEETS
                                   December 31, 1998 and 1997

                                                                    1998               1997
                                                              -------------      -------------
<S>                                                           <C>                <C>          
ASSETS
Interest earning cash and cash equivalents                    $   4,079,792      $   3,036,847
Noninterest earning cash and cash equivalents                     2,215,845          1,782,839
                                                              -------------      -------------
     Total cash and cash equivalents                              6,295,637          4,819,686
Interest-earning deposits in financial institutions                 100,000            100,000
Securities available for sale                                    13,658,691         14,628,590
Securities held to maturity (fair value: 1998 - $528,424;
   1997 - $756,846)                                                 528,424            756,846
Loans receivable, net of allowance for loan losses of
   $1,454,000 in 1998 and $1,194,000 in 1997                    185,906,309        174,538,907
Accrued interest receivable                                         487,393            511,950
Premises and equipment, net                                       2,265,347          1,964,374
Investments in limited liability partnerships                     1,400,000            750,000
Other assets                                                      1,782,791          1,298,244
                                                              -------------      -------------

     Total assets                                             $ 212,424,592      $ 199,368,597
                                                              =============      =============

LIABILITIES AND SHAREHOLDERS' EQUITY
Demand deposits                                               $   3,058,581      $   2,502,911
Savings                                                           9,811,696          9,335,489
NOW and MMDA                                                     31,354,647         26,632,568
Time deposits                                                    79,110,658         69,078,818
                                                              -------------      -------------
  Total deposits                                                123,335,582        107,549,786
Borrowed funds                                                   63,080,275         63,521,682
Accrued expenses and other liabilities                            1,004,099          1,004,495
                                                              -------------      -------------
     Total liabilities                                          187,419,956        172,075,963
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                NORTHEAST INDIANA BANCORP, INC.
                                  CONSOLIDATED BALANCE SHEETS
                                   December 31, 1998 and 1997

                                                                    1998               1997
                                                              -------------      -------------
<S>                                                           <C>                <C>          
Shareholders' equity
 Preferred stock, no par value: 500,000 shares
   authorized, 0 shares issued                                         --                 --
 Common stock, $.01 par value: 4,000,000 shares
   authorized; 1998: 2,400,466 shares issued, 1,672,417
   shares outstanding; 1997: 2,182,125 shares issued,
   1,732,327 outstanding                                             24,005             21,821
 Additional paid in capital                                      25,128,717         21,350,326
 Retained earnings, substantially restricted                     12,166,794         13,956,340
 Unearned employee stock ownership plan shares                   (1,163,800)        (1,309,275)
 Unearned recognition and retention plan shares                    (433,672)          (621,817)
 Net unrealized appreciation on securities available
   for sale, net of tax                                              44,105             41,672
 Treasury stock, 728,049 and 449,798 common shares, at
   cost, at December 31, 1998 and 1997                          (10,761,513)        (6,146,433)
                                                              -------------      -------------
     Total shareholders'equity                                   25,004,636         27,292,634
                                                              -------------      -------------

 Total liabilities and shareholders'equity                    $ 212,424,592      $ 199,368,597
                                                              =============      =============
</TABLE>
--------------- 
The  accompanying  notes are an integral  part of these  consolidated  financial
statements.


17
<PAGE>
<TABLE>
<CAPTION>
                                 NORTHEAST INDIANA BANCORP, INC.
                                CONSOLIDATED STATEMENTS OF INCOME
                          Years ended December 31, 1998, 1997 and 1996

                                                       1998             1997           1996
                                                    -----------     -----------     -----------
<S>                                                 <C>             <C>             <C>        
Interest income
 Loans, including fees                              $14,848,080     $13,167,279     $10,897,032
 Taxable securities                                   1,025,151         921,263         707,048
 Non-taxable securities                                  19,706          32,587          33,394
 Deposits with banks                                    246,175         194,647         129,581
                                                    -----------     -----------     -----------
 Total interest income                               16,139,112      14,315,776      11,767,055

Interest expense
 Deposits                                             5,912,572       4,547,834       3,593,583
 Borrowed funds                                       3,148,229       3,402,363       2,603,092
                                                    -----------     -----------     -----------
 Total interest expense                               9,060,801       7,950,197       6,196,675
                                                    -----------     -----------     -----------

Net interest income                                   7,078,311       6,365,579       5,570,380

 Provision for loan losses                              359,988         265,300         235,155
                                                    -----------     -----------     -----------

Net interest income after provision for loan
 losses                                               6,718,323       6,100,279       5,335,225

Noninterest income
 Service charges on deposit accounts                    287,480         245,304         151,666
 Loan servicing fees                                    273,263         177,584         122,190
 Net realized gain on sale of securities                   --              --               348
 Other                                                  170,112         142,698         128,363
                                                    -----------     -----------     -----------
 Total noninterest income                               730,855         565,586         402,567

Noninterest expense
 Salaries and employee benefits                       1,841,998       1,530,579       1,340,887
 Occupancy                                              357,133         318,945         279,894
 Data processing                                        436,757         311,537         274,985
 Deposit insurance premium                               67,637          54,829         605,593
 Professional fees                                      143,960         147,319         137,080
 Correspondent bank charges                             144,637         142,466         143,398
 Other expense                                          699,176         556,648         426,320
                                                    -----------     -----------     -----------
 Total noninterest expense                            3,691,298       3,062,323       3,208,157
                                                    -----------     -----------     -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                 NORTHEAST INDIANA BANCORP, INC.
                                CONSOLIDATED STATEMENTS OF INCOME
                          Years ended December 31, 1998, 1997 and 1996

                                                       1998             1997           1996
                                                    -----------     -----------     -----------
<S>                                                 <C>             <C>             <C>        
Income before income taxes                            3,757,880       3,603,542       2,529,635

 Income tax expense                                   1,368,526       1,410,563         962,090
                                                    -----------     -----------     -----------

Net income                                          $ 2,389,354     $ 2,192,979     $ 1,567,545
                                                    ===========     ===========     ===========

Basic earnings per common share                     $      1.50     $      1.28     $       .80
                                                    ===========     ===========     ===========

Diluted earnings per common share                   $      1.41     $      1.24     $       .79
                                                    ===========     ===========     ===========
</TABLE>
------------ 
The  accompanying  notes are an integral  part of these  consolidated  financial
statements.


                                                                              18
<PAGE>
<TABLE>
<CAPTION>
                                                   NORTHEAST INDIANA BANCORP, INC.
                                      CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
                                            Years ended December 31, 1998, 1997 and 1996

                                                                                              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, 1996                        $   21,821      $21,215,284    $11,393,893    $(1,600,225)         $        -    
                                                                                                                                 
Net income                                               -                -      1,567,545              -                   -    
                                                                                                                                 
Other comprehensive income:                                                                                                      
    Unrealized gains on securities                       -                -              -              -                   -    
    Reclassifications for                                                                                                        
      realized (gains) losses                            -                -              -              -                   -    
    Total tax effect                                     -                -              -              -                   -    
      Total other comprehensive                                                                                                  
         income                                          -                -              -              -                   -    
                                                                                                                                 
Comprehensive income                                                                                                             
                                                                                                                                 
Cash dividends ($.28 per share)                          -                -       (622,519)             -                   -   
                                                                                                                                
Purchase of 408,693 shares of treasury stock             -                -              -              -                   -  
16,002 shares committed to be released                                                                                          
 under the ESOP                                          -           38,174              -        145,475                   -   
Purchase of 83,530 shares for RRP                        -                -              -              -          (1,025,136)  
Amortization of RRP contributions                        -                -              -              -             205,027   
                                                -----------     -----------    -----------    -----------          ----------   
Balance, December 31, 1996                           21,821      21,253,458     12,338,919     (1,454,750)           (820,109)  
                                                                                                                                
Net income                                                -               -      2,192,979              -                   -   
                                                                                                                                
Other comprehensive income:                                                                                                     
   Unrealized gains on securities                         -               -              -              -                   -   
                                                                                                                                
 Total tax effect                                         -               -              -              -                   -   
   Total other comprehensive income                       -               -              -              -                   -   
                                                                                                                                
Comprehensive income                                                                                                            
                                                                                                                                
Cash dividends ($.30 per share)                           -               -       (575,558)             -                   -   
                                                                                                                                
Purchase of 86,745 shares of treasury stock               -               -              -              -                   -   
                                                                                                                                
Sale of 660 shares of treasury stock                      -           1,000              -              -                   -   
                                                                                                                                
16,002 shares committed to be released                                                                                          
  under the ESOP                                          -          95,868              -        145,475                   -   
Purchase of 550 shares for RRP                            -               -              -              -              (7,625)  
Amortization of RRP contributions                         -               -              -              -             205,917   
                                                -----------      -----------    -----------    -----------          ----------  
Balance, December 31, 1997                           21,821      21,350,326     13,956,340     (1,309,275)          (621,817)   
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                   NORTHEAST INDIANA BANCORP, INC.
                                      CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
                                            Years ended December 31, 1998, 1997 and 1996

                                                                                              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>          
Net income                                      $        -      $         -     $2,389,354    $         -         $        -    
                                                                                                                                
Other comprehensive income:                                                                                                     
  Unrealized gains on securities                         -                -              -              -                  -    
                                                                                                                                
  Total tax effect                                       -                -              -              -                  -    
     Total other comprehensive income                    -                -              -              -                  -    
                                                                                                                                
Comprehensive income                                     -                -              -              -                  -    
                                                                                                                                
Cash dividends ($.32 per share)                          -                -       (576,273)             -                  -    
                                                                                                                                
Purchase of 257,591 shares of treasury stock             -                -              -              -                  -    
Sale of 23,220 shares of treasury stock-           (31,234)               -              -              -                  -    
                                                                                                                                
Tax effect on stock plans                                -           50,762              -              -                  -    
16,002 shares committed to be released                                                                                          
  under the ESOP                                         -          149,764              -        145,475                  -    
Purchase of 1,100 shares for RRP                         -            8,656              -              -             (21,843)  
Amortization of RRP contributions                        -                -              -              -             209,988   
                                                                                                                                
Issuance of 218,341 common shares from                                                                                          
  declaration of 10% stock dividend                  2,184        3,600,443     (3,602,627)             -                   -   
                                                ----------      -----------    -----------    -----------          ----------   
Balance, December 31, 1998                      $   24,005      $25,128,717    $12,166,794    $(1,163,800)         $ (433,672)  
                                                ==========      ===========    ===========    ===========          ==========   
</TABLE>  
<PAGE>
<TABLE>
<CAPTION>
                                                Net Unrealized                             
                                                 Appreciation                              
                                                 on Securities                             Total      
                                                  Available For        Treasury        Shareholders' 
                                                Sale, Net of Tax         Stock            Equity     
                                                ----------------         -----            ------                                
<S>                                                <C>                <C>               <C>             
Balance, January 1, 1996                           $   2,272          $         -       $31,033,045     
                                                                                                       
Net income                                                 -                    -         1,567,545    
                                                                                                       
Other comprehensive income:                                                                            
    Unrealized gains on securities                    22,742                                           
    Reclassifications for                                                                              
      realized (gains) losses                           (348)                   -                 -    
    Total tax effect                                  (8,867)                   -                 -    
      Total other comprehensive                                                                        
         income                                       13,527                    -            13,527    
                                                                                                       
Comprehensive income                                                                      1,581,072    
                                                                                                       
Cash dividends ($.28 per share)                            -                               (622,519)   
                                                                                                       
Purchase of 408,693 shares of treasury stock               -           (4,826,022)       (4,826,022)                            
16,002 shares committed to be released                                                                 
 under the ESOP                                            -                    -           183,649                             
Purchase of 83,530 shares for RRP                          -                    -        (1,025,136)                            
Amortization of RRP contributions                          -                                205,027    
                                                   ---------          ------------     ------------    
Balance, December 31, 1996                            15,799           (4,826,022)       26,529,116    
                                                                                                       
Net income                                                 -                    -         2,192,979    
                                                                                                       
Other comprehensive income:                                                                            
   Unrealized gains on securities                     42,836                                           
                                                                                                       
 Total tax effect                                    (16,963)                   -                 -    
   Total other comprehensive income                   25,873                    -            25,873    
                                                                                                       
Comprehensive income                                                                      2,218,852    
                                                                                                       
Cash dividends ($.30 per share)                            -                               (575,558)   
                                                                                                       
Purchase of 86,745 shares of treasury stock                -            (1,328,211)      (1,328,211)                            
Sale of 660 shares of treasury stock                       -                 7,800            8,800                             
16,002 shares committed to be released                                                                 
  under the ESOP                                           -                     -          241,343    
                                                                                                       
Purchase of 550 shares for RRP                             -                                 (7,625)   
                                                                                                       
Amortization of RRP contributions                          -                                205,917    
                                                    ---------          ------------     ------------   
Balance, December 31, 1997                            41,672            (6,146,433)      27,292,634    
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                Net Unrealized                             
                                                 Appreciation                              
                                                 on Securities                             Total      
                                                  Available For        Treasury        Shareholders' 
                                                Sale, Net of Tax         Stock            Equity     
                                                ----------------         -----            ------                                
<S>                                                <C>                <C>               <C>             
Net income                                        $        -          $          -       $2,389,354    
                                                                                                       
Other comprehensive income:                                                                            
  Unrealized gains on securities                       5,996                                           
                                                                                                       
  Total tax effect                                    (3,563)                    -                -    
     Total other comprehensive income                  2,433                                  2,433    
                                                                                                       
Comprehensive income                                       -                     -        2,391,787    
                                                                                                       
Cash dividends ($.32 per share)                            -                               (576,273)   
                                                                                                       
Purchase of 257,591 shares of treasury stock               -            (4,907,522)      (4,907,522)                            
Sale of 23,220 shares of treasury stock-                                   279,255          248,021    
                                                                                                       
Tax effect on stock plans                                  -                     -           50,762                             
16,002 shares committed to be released                                                                 
  under the ESOP                                           -                     -          295,239                             
Purchase of 1,100 shares for RRP                           -                13,187                -                             
Amortization of RRP contributions                          -                                209,988    
                                                                                                       
Issuance of 218,341 common shares from                                                                 
  declaration of 10% stock dividend                        -                     -                -    
                                                   ---------          ------------     ------------    
Balance, December 31, 1998                         $  44,105          $(10,761,513)    $ 25,004,636    
                                                   =========          ============     ============    
</TABLE>
----------- 
The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

19
<PAGE>
<TABLE>
<CAPTION>
                                       NORTHEAST INDIANA BANCORP, INC.
                                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                Years ended December 31, 1998, 1997 and 1996


                                                                1998              1997              1996
                                                           ------------      ------------      ------------
<S>                                                        <C>               <C>               <C>         
Cash flows from operating activities
   Net income                                              $  2,389,354      $  2,192,979      $  1,567,545
   Adjustments to reconcile net income
      to net cash from operating activities
   Net (gain) loss on sale of premises and equipment             (8,481)             (152)              421
   Gain on sale of securities                                      --                --                (348)
   Gain on sale of foreclosed real estate                       (10,387)           (1,335)           (6,879)
   Provision for loan losses                                    359,988           265,300           235,155
   Depreciation and amortization                                161,240           144,898           186,555
   Reduction of obligation under ESOP                           295,239           241,343           183,649
   Amortization of RRP                                          209,988           205,917           205,027
   Net change in:
     Other assets                                              (326,636)         (381,807)         (247,136)
      Accrued interest receivable                                24,557          (148,387)         (130,639)
      Accrued expenses and other liabilities                       (396)         (668,619)          823,528
                                                           ------------      ------------      ------------
      Total adjustments                                         705,112          (342,842)        1,249,333
                                                           ------------      ------------      ------------
         Net cash from operating activities                   3,094,466         1,850,137         2,816,878

Cash flows from investing activities
   Proceeds from maturities and principal payments
      of securities held to maturity                            228,422           135,190            93,870
   Proceeds from maturities and principal payments
      of securities available for sale                        6,328,978         1,716,890         2,600,000
   Proceeds from sale of securities available for sale             --                --           2,100,348
   Purchases of securities available for sale                (5,334,188)       (4,803,829)      (10,316,095)
   Proceeds from sale of loans                                2,430,541           351,500              --   
   Purchases of loans                                        (3,045,695)       (3,261,911)             --   
   Net change in loans                                      (11,390,311)      (25,136,614)      (24,469,186)
   Expenditures on premises and equipment                      (481,452)         (110,826)          (22,455)
   Proceeds from sale of premises and equipment                   8,825             5,948                50
   Proceeds from sale of foreclosed real estate                 177,750            98,843            26,990
                                                           ------------      ------------      ------------
         Net cash from investing activities                 (11,077,130)      (31,004,809)      (29,986,478)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                       NORTHEAST INDIANA BANCORP, INC.
                                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                Years ended December 31, 1998, 1997 and 1996


                                                                1998              1997              1996
                                                           ------------      ------------      ------------
<S>                                                        <C>               <C>               <C>         
Cash flows from financing activities
   Advances from FHLB                                        67,000,000        56,000,000        58,000,000
   Repayment of FHLB advances                               (67,898,967)      (48,998,968)      (39,500,000)
   Payments of demand notes                                    (393,750)
   Net change in other borrowed funds                           201,310              --                --   
   Dividends paid                                              (576,273)         (575,558)         (622,519)
   Purchase of stock                                         (4,907,522)       (1,335,836)       (5,851,158)
   Sale of treasury stock                                       248,021             8,800              --   
   Net change in deposits                                    15,785,796        22,203,546        17,143,310
                                                           ------------      ------------      ------------
          Net cash from financing activities                  9,458,615        27,301,984        29,169,633
                                                           ------------      ------------      ------------

Net change in cash and cash equivalents                       1,475,951        (1,852,688)        2,000,033

Cash and cash equivalents at beginning of year                4,819,686         6,672,374         4,672,341
                                                           ------------      ------------      ------------

Cash and cash equivalents at end of year                   $  6,295,637      $  4,819,686      $  6,672,374
                                                           ============      ============      ============
Cash paid for:
   Interest                                                $  9,093,839      $  7,909,627      $  6,154,009
   Income taxes                                               1,637,000         1,573,308         1,034,925

Non-cash transactions:
   Investment in obligation relative to
   a limited partnership                                   $    650,000      $    525,000      $       --   
   Transfer from loans to other real estate                     278,075            97,508            20,112
</TABLE>
-------------- 


The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

                                                                              20
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 1 - Summary of Significant Accounting Policies

Nature of Operations 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.  Intercompany
transactions and balances have been eliminated in consolidation.

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% and 77% of the loan portfolio at
December 31, 1998 and 1997, 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 and fair values of financial
instruments 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. Net cash flows are reported for customer loan
and  deposit  transactions  as well  as  securities  sold  under  agreements  to
repurchase.

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 in other comprehensive income.
Trading securities are carried at fair value, with changes in unrealized holding
gains and losses included in income.  Other securities such as Federal Home Loan
Bank stock are carried at cost.

Interest income includes amortization of purchase premium or discount. Gains and
losses on sales are based on the amortized cost of the security sold. Securities
are written down to fair value when a decline in fair value is not temporary.

Loans: Loans are reported at the principal balance outstanding,  net of unearned
interest, deferred loan fees and costs, and an 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 the loan is
impaired or 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 for probable credit losses, increased by the provision for loan losses
and decreased by charge-offs less recoveries. Management estimates the allowance
<PAGE>
balance  required using past loan loss  experience,  known and inherent risks in
the nature and volume of the  portfolio,  information  about  specific  borrower
situations  and estimated  collateral  values,  economic  conditions,  and other
factors.  Allocations of the allowance may be made for specific  loans,  but the
entire  allowance is available  for any loan that,  in  management's  judgment,
should be charged-off.

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

Foreclosed  Assets:  Assets acquired  through or instead of loan foreclosure are
initially  recorded at fair value when acquired,  establishing a new cost basis.
If fair value declines, a valuation allowance is recorded through expense. Costs
after acquisition are expensed.

Premises  and  Equipment:  Premises  and  equipment  are  stated  at  cost  less
accumulated  depreciation.  Depreciation  is computed over asset useful lives on
the straight line basis.

Long-term Assets:  These assets are reviewed for impairment when events indicate
their  carrying  amount may not be  recoverable  from future  undiscounted  cash
flows. If impaired, the assets are recorded at discounted amounts.


21
<PAGE>
NOTE 1 - Summary of Significant Accounting Policies (Continued)

Repurchase  Agreements:   Substantially  all  repurchase  agreement  liabilities
represent amounts advanced by various customers. Securities are pledged to cover
these liabilities, which are not covered by federal deposit insurance.

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

Income Taxes: Income tax expense is the total of the current year income tax due
or refundable  and the change in deferred tax assets and  liabilities.  Deferred
tax assets and liabilities are the expected future tax amounts for the temporary
differences  between  carrying  amounts and tax bases of assets and liabilities,
computed  using enacted tax rates.  A valuation  allowance,  if needed,  reduces
deferred tax assets to the amount expected to be realized.

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

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

Earnings Per Common Share: Basic earnings per common share is net income divided
by the weighted average number of common shares  outstanding  during the period.
ESOP shares are considered  outstanding for this  calculation  unless  unearned.
Diluted  earnings per common share  includes the dilutive  effect of  additional
potential common shares issuable under stock options. Earnings and dividends per
share are restated for all stock splits and dividends  through the date of issue
of the financial statements.

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

New  Accounting  Pronouncements:  Beginning  January 1, 2000,  a new  accounting
standard  will  require all  derivatives  to be  recorded at fair value.  Unless
designated  as hedges,  changes in these fair  values  will be  recorded  in the
income statement. Fair value changes involving hedges will generally be recorded
by offsetting  gains and losses on the hedge and on the hedged item, even if the
fair value of the hedged item is not otherwise recorded. This is not expected to
have a material  effect but the effect will depend on  derivative  holdings when
this standard applies.
<PAGE>
Loss  Contingencies:  Loss  contingencies,  including  claims and legal  actions
arising in the ordinary course of business, are recorded as liabilities when the
likelihood  of loss is probable and an amount or range of loss can be reasonably
estimated. Management does not believe there now are such matters that will have
a material effect on the financial statements.

Dividend  Restriction:  Banking  regulations require maintaining certain capital
levels and may limit the dividends paid by the bank to the holding company or by
the holding company to shareholders.

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

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


                                                                              22
<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 - 1998
   U.S. Government agencies     $  4,057,809     $     21,658      $       --        $  4,079,467
   Mutual funds                      775,412             --                --             775,412
   Mortgage-backed                 5,300,481           60,362            (7,031)        5,353,812
   States and political
      subdivisions                   200,000             --                --             200,000
   Equity securities               3,250,000             --                --           3,250,000
                                ------------     ------------      ------------      ------------

                                $ 13,583,702     $     82,020      $     (7,031)     $ 13,658,691
                                ============     ============      ============      ============

Available for sale - 1997
   U.S. Government agencies     $  4,047,866     $       --        $     (3,507)     $  4,044,359
   Mutual funds                      735,584             --                --             735,584
   Mortgage-backed                 6,526,147           74,992            (2,492)        6,598,647
   Equity securities               3,250,000             --                --           3,250,000
                                ------------     ------------      ------------      ------------

                                $ 14,559,597     $     74,992      $     (5,999)     $ 14,628,590
                                ============     ============      ============      ============

Held to maturity - 1998
   States and political
      subdivisions              $    412,000     $       --        $       --        $    412,000
   Other debt securities             116,424             --                --             116,424
                                ------------     ------------      ------------      ------------

                                $    528,424     $       --        $       --        $    528,424
                                ============     ========          ========          ============

Held to maturity - 1997
   States and political
      subdivisions              $    639,000     $       --        $       --        $    639,000
   Other debt securities             117,846             --                --             117,846
                                ------------     ------------      ------------      ------------

                                $    756,846     $       --        $       --        $    756,846
                                ============     ========          ========          ============

</TABLE>

Contractual  maturities  of debt  securities  at year-end  1998 were as follows.
Securities  not  due  at  a  single  maturity  date,  primarily  mortgage-backed
securities, are shown separately.


23
<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                              $             -      $            -      $             -      $            -
Due from one to five years                                 1,999,242           2,004,763                1,424               1,424
Due from five to ten years                                 2,258,567           2,274,704              527,000             527,000
Mortgage backed securities                                 5,300,481           5,353,812                    -                   -
                                                     ---------------      --------------      ---------------      --------------

                                                     $     9,558,290      $    9,633,279      $       528,424      $      528,424
                                                     ===============      ==============      ===============      ==============
</TABLE>

Sales of securities available for sale were as follows:
<TABLE>
<CAPTION>

                                     1998             1997                1996
                                     ----             ----                ----
<S>                                <C>               <C>              <C>       
Proceeds                           $   --            $  --            $2,100,348
Gross gains                            --               --                   348
Gross losses                           --               --                    --
</TABLE>
<PAGE>
NOTE 3 - Loans Receivable, Net

Year-end loans were as follows:
<TABLE>
<CAPTION>
                                                        1998               1997
                                                  -------------      -------------
<S>                                               <C>                <C>          
Mortgage
    Secured by one-to-four family residences      $ 113,919,222      $ 109,079,816
    Secured by other properties                      19,421,609         19,339,654
    Construction - residential                        6,065,036          8,661,893
    Construction - nonresidential                     5,300,066          1,934,354
Automobile                                           12,247,990         11,572,940
Credit card                                           1,365,708          1,297,424
Commercial                                           21,392,663         14,579,936
Home equity and second mortgage                       5,948,157          6,162,479
Mobile home                                                --            2,945,635
Other consumer                                        5,301,984          4,619,695
                                                  -------------      -------------

    Subtotal                                        190,962,435        180,193,826

Less:
    Loans in process                                   (663,499)          (355,314)
    Undisbursed portion of construction loans        (2,799,621)        (3,980,594)
    Net deferred loan origination fees                 (139,006)          (125,011)
    Allowance for loan losses                        (1,454,000)        (1,194,000)
                                                  -------------      -------------

    Loans receivable, net                         $ 185,906,309      $ 174,538,907
                                                  =============      =============
</TABLE>
                                                                              24
<PAGE>
NOTE 3 - Loans Receivable, Net (Continued)

Activity in the allowance for loan losses was as follows:
<TABLE>
<CAPTION>

                                      1998             1997             1996
                                  -----------      -----------      -----------
<S>                               <C>              <C>              <C>        
 Balance at beginning of year     $ 1,194,000      $ 1,027,300      $   880,566
 Provision charged to income          359,988          265,300          235,155
 Charge-offs                         (145,989)        (136,601)        (133,561)
 Recoveries                            46,001           38,001           45,140
                                  -----------      -----------      -----------

 Balance at end of year           $ 1,454,000      $ 1,194,000      $ 1,027,300
                                  ===========      ===========      ===========
</TABLE>

Impaired loans were not material in 1998 and 1997.

NOTE 4 - Premises and Equipment, Net

Year-end premises and equipment were as follows:
<TABLE>
<CAPTION>
                                                       1998             1997
                                                   -----------      -----------
<S>                                                <C>              <C>   

Land                                               $   458,331      $   458,331
Buildings and leasehold improvements                 1,665,995        1,625,036
Furniture, fixtures and equipment                    1,114,069          718,310
Total costs                                          3,238,395        2,801,677
Accumulated depreciation and amortization             (973,048)        (837,303)
                                                   -----------      -----------

                                                   $ 2,265,347      $ 1,964,374
                                                   ===========      ===========
</TABLE>
NOTE 5 - Deposits

Time deposits of $100,000 or more were  $36,827,000  and $27,358,000 at year-end
1998 and 1997.

Scheduled maturities of time deposits for the next five years were as follows:

                           1999                      $   56,809,274
                           2000                          17,700,232
                           2001                           3,931,438
                           2002                             361,195
                           2003                             308,519
                                                     --------------
                                                     $   79,110,658
                                                     ==============


25
<PAGE>
NOTE 6 - Borrowed Funds

Year-end borrowed funds were as follows:
<TABLE>
<CAPTION>
                                                         1998            1997
                                                     -----------     -----------
<S>                                                  <C>             <C>        
Federal Home Loan Bank advances                      $62,097,715     $62,996,682
Demand notes                                             781,250         525,000
Securities sold under repurchase agreements              201,310            --
                                                     -----------     -----------

                                                     $63,080,275     $63,521,682
                                                     ===========     ===========
</TABLE>

The majority of the FHLB  advances  have  variable  interest  rates ranging from
4.60% to 6.54%. Scheduled maturities at year-end 1998 were as follows:

                           1999                            $   18,099,170
                           2000                                11,599,170
                           2001                                   399,375
                           2002                                 2,000,000
                           2003                                17,000,000
                           Thereafter                          13,000,000
                                                           --------------

                                                           $   62,097,715
                                                           ==============


Advances  are  required,  under a blanket  agreement,  to be  collateralized  by
securities  and loans in an amount at least equal to 160% of the total  advances
outstanding.  In  addition  to  Federal  Home Loan Bank  stock of $3.3  million,
approximately  $111.3  million in eligible  mortgage  loans and $8.9 in eligible
securities  were  available in connection  with these  borrowings.  The Bank may
borrow up to an aggregate of $74 million from the Federal Home Loan Bank.

Approximately  $564,000  in  securities  were  pledged  in  connection  with the
securities sold under repurchase agreements.

The  demand  notes  relate  to  investments  in  limited  partner  interests  in
partnerships formed for the construction, ownership and management of affordable
housing  projects.  The total  original  amount of the notes was  $1,400,000 and
$750,000 for 1998 and 1997,  with $618,750 and $225,000  funded at year-end 1998
and 1997. Payments are required within five days of written demand; however, the
note  may be  prepaid  in full or in part at the  option  of  maker  at any time
without penalty.  The obligation to make payment is absolute and  unconditional.
No interest is required by the note.


                                                                              26
<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 trustees
of the Financial  Institutions  Retirement Fund administer the plan. 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. Expense for 1998, 1997 and 1996 was approximately
$23,000, $30,000, and $52,000.

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  for  1998,  1997  and  1996  was
approximately $32,000, $23,000 and $18,000.

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 balance of the plans was
approximately  $200,000 and $182,000 at year-end 1998 and 1997.  The cost of the
plans  charged to expense  was  approximately  $61,000,  $48,000 and $64,000 for
1998, 1997 and 1996.

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
$887,000 and  $847,000 at year-end  1998 and 1997.  The income  derived from the
investment in life insurance included in other income was approximately $40,000,
$38,000 and $40,000 for 1998, 1997 and 1996.

Employee  Stock  Ownership  Plan  (ESOP):  An ESOP  exists  for the  benefit  of
substantially  all employees.  Contributions to the ESOP are made by the Company
and  are  determined  by  the  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.

To fund the plan, the ESOP borrowed  $1,745,700 from the Company for the purpose
of purchasing 192,042 shares of stock at $9.09 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.

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  1998 and 1997,  contributions,  including  dividends  on  unearned  ESOP
shares, were approximately  $99,000 and $98,000.  ESOP compensation  expense was
approximately $249,000, $194,000, and $134,000 for 1998, 1997 and 1996.
<PAGE>
Shares held by the ESOP at year-end are as follows:
<TABLE>
<CAPTION>

                                            1998                1997     
                                         ----------          ----------   
<S>                                      <C>                 <C>          
Allocated shares                             47,717              31,715   
Shares released for allocation               16,002              16,002   
Unreleased shares                           128,018             144,020   
Shares vested and withdrawn                     305                 305   
                                         ----------          ----------   
                                                                          
  Total ESOP shares                         192,042             192,042   
                                         ==========          ==========   
                                                                          
  Fair value of unreleased shares        $2,144,302          $2,896,760   
                                         ==========          ==========   
                                                            
</TABLE>

Recognition  and Retention  Plan (RRP):  The RRP provides for issue of shares to
directors,  officers and employees. The maximum total shares available under the
RRP are 96,014.  During 1996,  83,530 shares were awarded to RRP participants at
$12.27 per share.  In 1997, an additional 550 shares were awarded at $13.86;  in
1998,  there were an  additional  1,100  shares  awarded at 19.86.  The  expense
associated  with the RRP was  approximately  $210,000,  $206,000 and $205,000 in
1998, 1997 and 1996.


27
<PAGE>
NOTE 8 - Income Taxes

Income tax expense is summarized as follows:
<TABLE>
<CAPTION>
                                    1998              1997              1996
                                -----------       -----------       -----------
<S>                             <C>               <C>               <C>        
 Current federal                $ 1,147,495       $ 1,154,613       $   850,741
 Deferred federal                   (95,097)          (55,894)         (100,203)
 Current state                      329,538           327,116           239,901
 Deferred state                     (13,410)          (15,272)          (28,349)
                                -----------       -----------       -----------

Income tax expense              $ 1,368,526       $ 1,410,563       $   962,090
                                ===========       ===========       ===========
</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>
                                                         1998                   1997                    1996
                                                   --------------         ---------------         -------------- 
<S>                                                <C>                    <C>                     <C>            
Income taxes at statutory rate                     $    1,277,679         $     1,225,204         $      860,076 
Tax effect of:
   State tax, net of federal income tax effect           208,644                 205,817                139,624 
   Low income housing credit                             (72,372)                (14,000)                     - 
   Other, net                                            (45,425)                 (6,458)               (37,610)
   Income tax expense                              $   1,368,526          $    1,410,563          $     962,090 
                                                   --------------         ---------------         -------------- 

Effective tax rate                                          36.4%                   39.1%                  38.0%
                                                            ====                    ====                   ==== 
</TABLE>
The  components  of the net deferred tax asset  recorded in the balance sheet at
year end are as follows:
<PAGE>
<TABLE>
<CAPTION>
                                                     1998                1997
                                                  ---------           ---------
<S>                                               <C>                 <C>      
Deferred tax assets
Deferred compensation                             $  79,080           $  72,055
Bad debts                                           325,901             196,844
Deferred loan fees                                   55,047              49,517
Unearned compensation                                68,957              81,564
Other                                                15,752               9,698
                                                  ---------           ---------
                                                    544,737             409,678
Deferred tax liabilities
Depreciation                                       (118,533)           (120,333)
Other                                               (73,099)            (41,185)
                                                  ---------           ---------
                                                   (191,632)           (161,518)
Valuation allowance                                    --                  --   
                                                  ---------           ---------

Net deferred tax asset                            $ 353,105           $ 248,160
                                                  =========           =========
</TABLE>
Retained  earnings at  December  31, 1998 and 1997  include  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,  1998  and  1997.
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 in 1998.


                                                                              28
<PAGE>
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.

Prompt  corrective  action  regulations  provide  five   classifications:   well
capitalized,    adequately    capitalized,    undercapitalized,    significantly
undercapitalized, and critically undercapitalized,  although these terms are not
used to  represent  overall  financial  condition.  If  adequately  capitalized,
regulatory   approval   is   required   to   accept   brokered   deposits.    If
under-capitalized,  capital  distributions  are limited,  as is asset growth and
expansion, and capital restoration plans are required.

At year end,  actual Bank  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>   
1998
Total capital
  (to risk weighted assets)             $  23.0        16.6%           $      11.1         8.0%           $   13.9        10.0%     
Tier 1 (core) capital                                                                                                       
  (to risk weighted assets)                21.6        15.6                    5.5         4.0                 8.3         6.0 
Tier 1 (core) capital                                                                                                       
  (to adjusted total assets)               21.6        10.2                    6.4         3.0                 N/A         N/A      
Tangible capital                                                                                                            
  (to adjusted total assets)               21.6        10.2                    3.2         1.5                 N/A         N/A      
Tier 1 (core) capital                                                                                                       
  (to average assets)                      21.6        10.6                    8.2         4.0                10.2         5.0  
                                                                                                                            
1997                                                                                                                        
Total capital                                                                                                               
  (to risk weighted assets)             $  24.8        19.8%           $      10.1         8.0%           $   12.6        10.0%     
Tier 1 (core) capital                                                                                                       
  (to risk weighted assets)                23.7        18.9                    5.0         4.0                 7.5         6.0      
Tier 1 (core) capital                                                                                                       
  (to adjusted total assets)               23.7        11.9                    6.0         3.0                 N/A         N/A 
Tangible capital                                                                                                            
  (to adjusted total assets)               23.7        11.9                    3.0         1.5                 N/A         N/A    
Tier 1 (core) capital                                                                                                       
  (to average assets)                      23.7        13.0                    7.3         4.0                 9.1         5.0      
                                                                                                             
</TABLE>                                                              
<PAGE>
The Bank was categorized as well capitalized at year end 1998 and 1997.

Regulations of the Office of Thrift  Supervision limit capital  distributions by
savings  institutions.  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 up to  one-half  the  capital  in excess  of the most  stringent  capital
requirement   at  the  beginning  of  the  calendar  year.  At  year  end  1998,
approximately  $4.8  million of the Bank's  retained  earnings  is  potentially
available for distribution to the Company.


29
<PAGE>
NOTE 10 - Commitments and Contingencies and
          Financial Instruments with Off-Balance-Sheet Risk

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



Financial instruments with off-balance-sheet risk were as follows at year end.
<TABLE>
<CAPTION>
                                                     1998                1997
                                                 -----------         -----------
<S>                                              <C>                 <C>        
Fixed rate commitments                           $ 8,525,000         $ 4,159,000
Variable rate commitments                         13,628,000          14,916,000
Credit card arrangements                           2,835,000           2,636,000
Letters of credit                                    770,000             760,000

</TABLE>

Most  loan  commitments  have  terms  up to 60 days.  At  year-end  1998,  fixed
commitments  have contractual  rates ranging from 6.50% to 8.875%.  Credit cards
are fixed at 14.9%.  Most variable rate arrangements are tied either to national
monthly  median  cost of funds,  prime or the U.S.  Treasury  bill rate and have
spreads between 0% and 5%.






NOTE 11 - Stock Options

Options to buy stock are granted to directors,  officers and employees under the
stock option and incentive  plan.  Exercise price is the market price at date of
grant. The maximum option term is ten years and options vest over five years. At
year end 1998, 25,056 shares were authorized for future grants.

Financial  Accounting  Standard  No.123,  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 fair value method been used to measure
compensation  cost for stock option  plans.  No  compensation  cost was actually
recognized for stock options for 1998, 1997 and 1996.


                                                                              30
<PAGE>
NOTE 11 - Stock Options (Continued)
<TABLE>
<CAPTION>
                                                         1998                 1997              1996
                                                  ----------------      ---------------    --------------
<S>                                               <C>                   <C>                <C>           
Net income as reported                            $      2,389,354      $     2,192,979    $    1,567,545
Pro forma net income                                     2,215,835            2,022,367         1,398,379

Basic earnings per common share as reported       $           1.50      $          1.28    $          .80
Diluted earnings per common share as reported                 1.41                 1.24               .79

Pro forma basic earnings per common share                     1.39                 1.18               .71
Pro forma diluted earnings per common share                   1.31                 1.15               .71
</TABLE>

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

Information about option grants follows:
<TABLE>
<CAPTION>
                                               Number        Exercise      Fair Value
                                             of Options       Price        of Grants
                                             ----------       -----        ---------
<S>                                            <C>          <C>            <C>
 Outstanding, beginning of 1997                210,027
 Granted                                         1,650      $   13.86      $   4.38
 Exercised                                        (110)         10.68
 Outstanding, end of 1997                      211,567
 Granted, January 1, 1998                        1,650          19.38          4.27
 Granted, June 16, 1998                          1,650          20.34          4.54
 Exercised                                     (23,220)         10.68
 Outstanding, end of 1998                      191,647
</TABLE>

The fair value of options  granted during 1998 is estimated  using the following
weighted-average  information:  risk-free  interest  rate of  5.46%  and  5.52%,
expected  life of 7 years,  expected  volatility  of stock  price of 17.5%,  and
expected dividends of 1.47% per year.

Options outstanding at year-end were as follows: 
<TABLE>
<CAPTION>
                                                                  1998                         1997
                                                            --------------               --------------
<S>                                                         <C>                          <C>    
Number of options                                                  191,647                      211,567
Minimum exercise price                                      $        10.68               $        10.68
Maximum exercise price                                      $        20.34               $        13.86
Weighted-average exercise price                             $        10.87               $        10.71
Weighted-average remaining option life                           7.1 years                    8.0 years
</TABLE>

There are 68,209 options exerciseable at year-end 1998.


31
<PAGE>
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:

            Balance - January 1, 1998                            $   2,538,569 
                New loans                                              634,500 
                Repayments                                            (312,447)
                                                                 -------------

            Balance - December 31, 1998                          $   2,860,622 
                                                                 ============= 

Related party deposits were $418,000 at year-end 1998.

NOTE 13 - Fair Values of Financial Instruments

Following are carrying amounts and estimated fair values at year end:
<TABLE>
<CAPTION>
                                               1 9 9 8                                1 9 9 7
---------------------------------------------------------------------------------------------------------- 
                                      Carrying           Estimated           Carrying         Estimated
                                       Amount           Fair Value            Amount          Fair Value
                                   -------------      -------------      -------------      -------------
<S>                                <C>                <C>                <C>                <C>          
Financial assets:
 Cash and cash equivalents
 and interest earning deposits
 in financial institutions         $   6,395,637      $   6,395,637      $   4,919,686      $   4,919,686
 Securities available for sale        13,658,691         13,658,691         14,628,590         14,628,590
 Securities held to maturity             528,424            528,424            756,846            756,846
 Loans receivable, net               185,906,309        189,539,000        174,538,907        176,470,000
 Accrued interest receivable             487,393            487,393            511,950            511,950

Financial liabilities:
 Deposits                           (123,335,582)      (124,152,000)      (107,549,786)      (107,866,000)
 Borrowed funds                      (63,080,275)       (63,463,000)       (63,521,682)       (63,469,000)
 Accrued interest payable               (250,389)          (250,389)          (283,427)          (283,427)
</TABLE>


                                                                              32
<PAGE>
NOTE 13 - Fair Values of Financial Instruments (Continued)

For purposes of the above  disclosures  of estimated  fair value,  the following
assumptions  were used. The estimated  fair value for cash and cash  equivalents
and interest-earning  deposits in financial institutions and accrued interest 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, 1998 and 1997,  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 time  deposits  and  borrowed  funds is based on  estimates  of the rate the
Company would pay on such  deposits or for such  borrowings at December 31, 1998
and 1997,  applied for the time period until maturity.  The estimated fair value
of  other  financial   instruments  and  off-balance   sheet  loan   commitments
approximates cost and is 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, 1998 or 1997,  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, 1998 and 1997 should not  necessarily  be  considered to apply at subsequent
dates.


NOTE 14 - Parent Company Only Condensed
    Financial Information

Condensed  financial  information  of  Northeast  Indiana  Bancorp,  Inc.  is as
follows:
<TABLE>
<CAPTION>

                            CONDENSED BALANCE SHEETS
                           December 31, 1998 and 1997

                                                           1998            1997
                                                       -----------     -----------
<S>                                                    <C>             <C>        
ASSETS
Cash and cash equivalents                              $ 1,875,884     $   225,944
Securities available for sale                              200,000            --
Loan receivable from Employee Stock Ownership Plan       1,163,800       1,309,275
Loan receivable from subsidiary bank                          --         2,000,000
Investment in subsidiary bank                           21,649,524      23,757,476
Other assets                                               119,229           8,899
                                                       -----------     -----------

    Total assets                                       $25,008,437     $27,301,594
                                                       ===========     ===========

LIABILITIES
Accrued expenses                                       $     3,801     $     8,960

SHAREHOLDERS' EQUITY                                    25,004,636      27,292,634
                                                       -----------     -----------

    Total liabilities and shareholders' equity         $25,008,437     $27,301,594
                                                       ===========     ===========
</TABLE>


33
<PAGE>
NOTE 14 - Parent Company Only Condensed
    Financial Information (Continued)

<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF INCOME
For the years ended December 31, 1998, 1997 and 1996

                                                    1998             1997            1996
                                                -----------      -----------     -----------
<S>                                             <C>              <C>             <C>        
Interest income                                 $   118,569      $   263,767     $   497,921
Dividend from subsidiary                          5,000,000             --              --   
                                                -----------      -----------     -----------

  Total income                                    5,118,569          263,767         497,921

Operating expenses                                  189,742          166,532         176,014
                                                -----------      -----------     -----------

Income before income taxes and equity in
  undistributed earnings of subsidiary bank       4,928,827           97,235         321,907

Income tax expense/(benefit)                        (54,297)          11,774         100,391
                                                -----------      -----------     -----------


Income before equity in undistributed
  earnings of subsidiary bank                     4,983,124           85,461         221,516

Equity in undistributed earnings of
  subsidiary bank                                (2,593,770)       2,107,518       1,346,029
                                                -----------      -----------     -----------


Net income                                      $ 2,389,354      $ 2,192,979     $ 1,567,545
                                                ===========      ===========     ===========

</TABLE>
                                                                              34
<PAGE>
<TABLE>
<CAPTION>
CONDENSED  STATEMENTS OF CASHFLOWS For the years ended  December 31, 1998,  1997
and 1996
                                                         1998             1997              1996
                                                     -----------      -----------      -----------
<S>                                                  <C>              <C>              <C>        
Cash flows from operating activities
 Net income                                          $ 2,389,354      $ 2,192,979      $ 1,567,545
 Adjustments to reconcile net income to cash
     provided by operations
 Equity in undistributed earnings of
     subsidiary bank                                   2,593,770       (2,107,518)      (1,346,029)
 Change in
   Other assets                                          (59,569)          57,050           73,466
   Accrued expenses                                       (5,159)        (288,197)         229,806
                                                     -----------      -----------      -----------
     Net cash from operating activities                4,918,396         (145,686)         524,788

Cash flows from investing activities
   Repayments on loan receivable from
     subsidiary bank                                   2,000,000        1,750,000        4,850,000
   Repayments on loan receivable from ESOP               145,475          145,475          145,475
   Purchase of securities available for sale            (200,000)            --               --   
                                                     -----------      -----------      -----------
     Net cash from investing activities                1,945,475        1,895,475        4,995,475

Cash flows from financing activities
   Dividends paid                                       (576,273)        (575,558)        (622,519)
   Purchase of stock                                  (4,907,522)      (1,328,211)      (4,826,022)
   Proceeds from sales of stock                          269,864            8,800             --   
                                                     -----------      -----------      -----------
     Net cash from financing activities               (5,213,931)      (1,894,969)      (5,448,541)
                                                     -----------      -----------      -----------

Net change in cash and cash equivalents                1,649,940         (145,180)          71,722

Cash and cash equivalents at beginning of period         225,944          371,124          299,402
                                                     -----------      -----------      -----------

Cash and cash equivalents at end of period           $ 1,875,884      $   225,944      $   371,124
                                                     ===========      ===========      ===========
</TABLE>
35
<PAGE>
NOTE 15 - Earnings Per Share

A  reconciliation  of the numerators and denominators of the earnings per common
share and earnings per common share assuming dilution computations for the years
ended December 31, 1998, 1997 and 1996 is presented below.
<TABLE>
<CAPTION>

                                                     1998           1997           1996
                                                  ----------     ----------     ----------
<S>                                               <C>            <C>            <C>       
Earnings Per Share

 Net income available to common
   shareholders                                   $2,389,354     $2,192,979     $1,567,545
                                                  ==========     ==========     ==========

 Weighted average common shares
   outstanding before adjustment                   1,790,450      1,942,723      2,225,544

 Less: unallocated ESOP shares                       144,019        160,021        176,024

 Less: non-vested RRP shares                          48,788         67,368         83,530
                                                  ----------     ----------     ----------

 Weighted average common shares
   outstanding for basic earnings per share        1,597,643      1,715,334      1,965,990
                                                  ----------     ----------     ----------

 Earnings Per Share                               $     1.50     $     1.28     $      .80
                                                  ==========     ==========     ==========

Earnings Per Share Assuming Dilution

 Net income available to common
   shareholders, per above                        $2,389,354     $2,192,979     $1,567,545
                                                  ==========     ==========     ==========

 Weighted average common shares
   outstanding                                     1,597,643      1,715,334      1,965,990

 Add: dilutive effects of assumed conversions
   and exercises of stock options                     92,008         47,034         12,066
                                                  ----------     ----------     ----------

 Weighted average common and dilutive
   potential common shares outstanding             1,689,651      1,762,368      1,978,056
                                                  ==========     ==========     ==========

Earnings Per Share Assuming Dilution              $     1.41     $     1.24     $      .79
                                                  ==========     ==========     ==========

</TABLE>
                                                                              36
<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, 1997                     $14.32                  $12.27                 $.073
            June 30, 1997                      $14.55                  $11.36                 $.073
            September 30, 1997                 $18.41                  $13.41                 $.073
            December 31, 1997                  $20.12                  $16.59                 $.077

            March 31, 1998                     $20.68                  $19.09                 $.077
            June 30, 1998                      $21.02                  $18.97                 $.077
            September 30, 1998                 $20.91                  $15.00                 $.077
            December 31, 1998                  $18.00                  $14.89                 $.090

</TABLE>
Dividend payment  decisions are made with  consideration of a variety of factors
including earnings,  financial condition,  market  considerations and regulatory
restrictions.

As of February 11, 1999,  there were  approximately  555 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


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

<PAGE>
INVESTOR INFORMATION

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

<TABLE>
<CAPTION>

<S>                                             <C>                                     <C>    
      Corporate Office                          Special Counsel                         Independent Auditor
      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., P.O. Box 7
      Huntington, Indiana 46750                 Washington, D.C. 20005                  South Bend, Indiana 46624
      (219) 356-3311
</TABLE>
37