[FRONT COVER]


                           LOGANSPORT FINANCIAL CORP.





                  [ARTWORK OF LOGANSPORT SAVINGS BANK BRANCH]








                                      1998

                           SHAREHOLDER ANNUAL REPORT

<PAGE>
                  [ARTWORK APPEARS ON OUTSIDE MARGIN OF EVERY
                  PAGE OF THE 1998 SHAREHOLDER ANNUAL REPORT]


                                TABLE OF CONTENTS


                                                                           Page

Directors and Officers                                                       2

President's Message to Shareholders                                          3

Selected Consolidated Financial Data                                         4

Management's Discussion and Analysis                                         6

Independent Auditor's Report                                                22

Consolidated Statements of Financial Condition                              23

Consolidated Statements of Earnings                                         24

Consolidated Statements of Comprehensive Income                             25

Consolidated Statements of Changes in Stockholders' Equity                  26

Consolidated Statements of Cash Flows                                       27

Notes to Consolidated Financial Statements                                  29






                        BUSINESS OF LOGANSPORT FINANCIAL

Logansport  Financial Corp. (the "Company"),  an Indiana  corporation,  became a
unitary  savings and loan holding  company  upon the  conversion  of  Logansport
Savings Bank,  FSB (the "Bank") from a federal  mutual savings bank to a federal
stock savings bank in June, 1995. The Company and the Bank conduct business from
a  single  office  in  Logansport,   Cass  County,  Indiana.  The  Bank  is  and
historically  has been among the top real estate mortgage lenders in Cass County
and is the oldest financial  institution  headquartered in Cass County. The Bank
offers a variety of retail  deposit  and  lending  services.  The Company has no
other business activity than being the holding company for the Bank. The Company
is the sole shareholder of the Bank.





                                MISSION STATEMENT


"The Board of Directors,  management  and staff of  Logansport  Savings Bank are
dedicated to serving the needs of our  customers,  providing  them with the best
possible service in an efficient,  friendly,  caring atmosphere. As a vital part
of this  community,  Logansport  Savings Bank seeks to continue  partnering with
local business and individuals.  The customers,  employees, and shareholders are
an  integral  part of  Logansport  Savings  Bank and are best served if the Bank
remains an independent,  locally controlled and operated,  profitable  financial
institution."


                                       1
<PAGE>




                           Logansport Financial Corp.


                             DIRECTORS AND OFFICERS


DIRECTORS

     Norbert E.  Adrian  (age 69)  retired as the  General  Manager of  Rockwell
International  ("Rockwell")  in 1984  after  12 years of  service.  Rockwell  is
located in Logansport,  Indiana, and manufactures custom automotive parts. Prior
to his employment with Rockwell,  Mr. Adrian was employed by the accounting firm
of Bailey, Cord and Williams.

     Donald G. Pollit (age 71) is the former  Business and Promotion  Manager of
the Logansport  Pharos-Tribune  and a former President of the Rolling Hills Golf
Course in Logansport, Indiana.

     Susanne  S.  Ridlen  (age 59) has served as an  adjunct  faculty  member of
Indiana  University  Kokomo ("IUK") since 1969. Ms. Ridlen also currently serves
as a member of the Board of Directors of the Logansport Art  Association and the
Cass County Children's Home in Logansport, Indiana.

     William  Tincher,  Jr. (age 59) has served as Plant  Manager for the Modine
Manufacturing  Company  ("Modine") since 1977.  Modine is located in Logansport,
Indiana, and manufactures automotive cooling systems.

     David  G.  Wihebrink  (age  51) has  served  as Vice  President  and  Chief
Financial Officer of TM Morris  Manufacturing  Co., Inc.  ("Morris") since 1988.
Morris is located in Logansport,  Indiana, and manufactures lead wire assemblies
and wiring  harnesses and stampings.  Prior to his employment  with Morris,  Mr.
Wihebrink  was a member of the  accounting  firm  Smith,  Thompson  &  Wihebrink
(Logansport)  for 15 years.  Mr.  Wihebrink also currently serves as a member of
the Board of Directors of the Neal House retirement home in Logansport, Indiana.

     Thomas G. Williams  (age 66) has served as President of Logansport  Savings
Bank, FSB since 1971.

     Charles  J. Evans (age 53) has  served as Vice  President  and Senior  Loan
Officer of Logansport Savings Bank, FSB since 1980.

     Brian J. Morrill (age 41) is the founder and President of Cass County Title
Company,  Inc.  The firm  provides  title  insurance  policies  and real  estate
searches for lenders,  realtors,  attorneys,  and the general  public.  Prior to
founding  Cass  County  Title  Company,  Morrill  served  for ten  years  as the
Executive  Director  of the Cass  County  Family  YMCA in  Logansport,  Indiana.
Morrill has served on several community boards and is currently  President-elect
of the Logansport/Cass County Chamber of Commerce.


LOGANSPORT FINANCIAL CORP.        LOGANSPORT SAVINGS BANK, FSB

Officers                          Officers

THOMAS G. WILLIAMS                THOMAS G. WILLIAMS
President and Chief               President
Executive Officer
                                  CHARLES J. EVANS
CHARLES J. EVANS                  Vice President
Vice President
                                  DIANNE HOFFMAN
DOTTYE ROBESON                    Secretary/Treasurer
Secretary/Treasurer
                                  DOTTYE ROBESON
                                  Chief Financial Officer




                                       2
<PAGE>


Dear Shareholder:


We are  extremely  pleased to share  with you the  achievements  experienced  by
Logansport  Financial Corp. and its subsidiary,  Logansport Savings Bank, during
1998. This was the most profitable year in our history and our total assets also
reached a record high,  ending the year at just over $96 million.  Our growth is
an important factor in our success. Total assets for the year ended December 31,
1997 were $86.1 million  compared to $96.1  million at December 31, 1998.  Total
loans  increased by $9.4 million  during the year and deposits also increased by
$9.4 million.  Earnings for 1998 were $1,247,000 compared to $1,232,000 in 1997.
Basic earnings per share were $1.00 in 1998 compared to $.98 in 1997.

We are proud to report a 1.37%  return on average  assets and a 7.45%  return on
average equity. Our excellent earnings performance and an additional  repurchase
of 5% of our stock  combined to improve the value of our stock to  shareholders.
Since  our  conversion  in 1995 we have  repurchased  10% of our  stock and each
repurchase enhances shareholder value. The Board of Directors also increased the
per share  quarterly  dividend to $.11 per share from $.10 during 1998.  We have
paid quarterly dividends since our conversion to a stock institution and realize
that dividends are important to our shareholders.

We have been  working  hard for a couple of years to  address  all the  concerns
related to the Y2K issue and we will  continue to monitor  the issue  throughout
the year. We have upgraded all our computer equipment to be Y2K compliant and it
is currently  installed and in use.  Testing has been  performed and  additional
tests will be performed  throughout the year to ensure that all systems  perform
correctly.

During 1998 we initiated a new commercial  loan department and now have on board
Mr. Allen Schieber, a local,  well-known commercial loan officer. Allen has been
named a vice  president  of the  Bank  and is  doing  an  excellent  job in loan
production  for the Bank. We expect this division to enhance the earnings of the
Bank as well as provide a much needed service to the community. We welcome Allen
to the Bank.

We have also named a new member to our Board of  Directors,  Mr. Brian  Morrill.
Brian is well known in the  community  for his past work as director of the Cass
County YMCA. He is currently the owner of Cass County Title Company,  Inc. He is
very active in the  community  and will be a great asset to the Company.  Two of
our longtime  directors  will be retiring from the Board during 1999. Mr. Donald
Pollitt was elected to the Board of the Bank in 1961 and Mr.  Norbert Adrian was
elected  in 1979.  Both  have  served  for many  years  and have  made  valuable
contributions  to the growth and  strength of the  Company as it is today.  They
will be missed.

The expansion of our facility is progressing  nicely.  It is anticipated that we
will be moving  into the new  portion  of the Bank by late  February  1999.  The
entire  project,  which includes  remodeling the old portion of the facility and
additional  outside work, will probably not be completed until late April. It is
going to be a beautiful  building and one that we can be extremely  proud of. We
are adding an additional  7,000 square feet and when completed the facility will
total 11,000  square feet.  Three  drive-up  windows and an ATM machine are also
being  added.  This is a much  needed  improvement  that will allow us to better
serve our customers. We invite you to visit us when the facility is complete.

Our  thanks to you all for your  continued  support  and also to our  Directors,
Officers and employees for a very successful year.


Sincerely,


/s/ Thomas G. Williams
Thomas G. Williams



                                       3
<PAGE>


                           Logansport Financial Corp.


                 SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA


The  following  tables  set  forth  certain  information  concerning  Logansport
Financial's  consolidated  financial  position,  results of operations and other
data at the dates and for the periods indicated.

<TABLE>
<CAPTION>

                                                                             At December 31,
Statement of Financial Condition Data:              1998           1997           1996            1995           1994
                                                   -------        -------        -------         -------       --------
                                                                               (In thousands)

<S>                                                <C>            <C>            <C>             <C>            <C>    
Total assets                                       $96,085        $86,115        $77,668         $74,647        $59,351
Loans receivable, net                               73,073         63,635         56,802          49,707         44,020
Mortgage-backed securities                           8,129          9,932          6,674           7,468          1,229
Cash and cash equivalents                            4,328          2,269          3,759           3,243          1,645
Investment securities                                5,033          5,750          7,629          11,285         10,009
Certificates of deposit in other financial
  institutions                                          -             100            100             100             -
Deposits                                            70,011         60,595         57,396          52,461         51,202
Borrowings                                           8,375          8,025          3,400           1,000          1,000
Shareholders' equity - net                          16,488         16,542         15,427          20,454          6,833

                                                                            Year ended December 31,
Summary of Operating Results:                       1998           1997           1996            1995           1994
                                                   -------        -------        -------         -------       --------
                                                                    (In thousands, except share data)

Interest income                                     $6,579         $6,101         $5,653          $4,775         $4,031
Interest expense                                     3,476          3,115          2,719           2,468          2,043
                                                   -------        -------        -------         -------       --------
Net interest income                                  3,103          2,986          2,934           2,307          1,988
Provision for loan losses                               63             26             12              20              6
                                                   -------        -------        -------         -------       --------
Net interest income after provision for
  loan losses                                        3,040          2,960          2,922           2,287          1,982
Other income                                           285            170             82             179             79
General, administrative and other expense            1,322          1,170          1,584           1,032            957
                                                   -------        -------        -------         -------       --------
Earnings before income taxes                         2,003          1,960          1,420           1,434          1,104
Income taxes                                           756            728            507             526            370
                                                   -------        -------        -------         -------       --------
Net earnings                                        $1,247         $1,232        $   913         $   908        $   734
                                                    ======        =======        =======         =======       ========

Basic earnings per share                            $ 1.00         $  .98           $.69             N/A (1)        N/A (1)
                                                    ======        =======        =======         =======       ========

Diluted earnings per share                          $  .97         $  .95           $.69             N/A (1)        N/A (1)
                                                    ======        =======        =======         =======       ========

Cash dividends per share
  Regular                                           $  .43         $  .40           $.40         $   .20            N/A (1)
                                                    ======        =======        =======         =======       ========
  Special (2)                                          N/A            N/A          $3.00             N/A            N/A
                                                    ======        =======        =======         =======       ========
</TABLE>



Footnotes on following page.




                                       4
<PAGE>






                           Logansport Financial Corp.


           SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA (CONTINUED)
<TABLE>
<CAPTION>



                                                                            Year ended December 31,
Supplemental Data:                                  1998           1997           1996            1995           1994
                                                   -------        -------        -------         -------       --------

<S>                                                 <C>             <C>            <C>            <C>             <C>  
Return on assets (3)                                 1.37%           1.50%          1.18%          1.34%           1.27%
Return on equity (4)                                 7.45            7.69           4.76           6.33           10.78
Interest rate spread (5)                             2.70            2.94           2.80           2.77            3.32
Net yield on interest earning assets (6)             3.61            3.86           3.99           3.64            3.67
General, administrative and other
  expense to average assets                          1.45            1.42           2.04           1.53            1.65
Net interest income to general,
  administrative and other expense                 234.72          255.21         185.23         223.55          207.73
Equity-to-assets (7)                                17.16           19.21          19.86          27.40           11.51
Average interest-earning assets to
  average interest-bearing liabilities             122.72          123.36         132.80         122.90          109.64
Non-performing assets to total assets                 .33             .62            .52            .42             .82
Non-performing loans to total loans                   .42             .67            .71            .63             .76
Loan loss allowance to total loans, net               .38             .38            .41            .45             .47
Loan loss allowance to non-performing
  loans                                             90.48           56.84          58.12          71.61           61.13
Dividend payout ratio                               43.00           40.82          57.97(8)        - (1)           - (1)
Net charge-offs to average loans                      .03             .03           *              *               *

*  Less than .01%

</TABLE>




(1)  Information prior to 1996 is not meaningful.
(2)  Special one-time cash distribution  which qualified as a non-taxable return
     of capital pursuant to an IRS Private Letter Ruling.
(3)  Net earnings divided by average total assets.
(4)  Net earnings divided by average total equity.
(5)  Interest rate spread is calculated by subtracting combined weighted average
     interest rate cost from combined  weighted average interest rate earned for
     the period indicated.
(6)  Net interest income divided by average interest-earning assets.
(7)  Total equity divided by assets.
(8)  Excludes special one-time $3.00 per share cash distribution.






                                       5
<PAGE>

                           Logansport Financial Corp.


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


General

The  Company  was  formed as part of the  conversion  of the Bank from a federal
mutual savings bank to a federal stock savings bank which was completed June 13,
1995. Since the Company only recently began operations, certain of the financial
information  presented  herein prior to June 13, 1995  relates  primarily to the
Bank, a wholly-owned subsidiary of the Company. All references to the Company at
or before  June 13,  1995 refer to the Bank only.  The  Company  has no activity
other than being the holding company for the Bank.

The  principal  business  of  savings  associations,  including  the  Bank,  has
historically consisted of attracting deposits from the general public and making
loans  secured  by  residential  and other real  estate.  The Bank and all other
savings   associations  are  significantly   affected  by  prevailing   economic
conditions,  as well as government  policies and regulations  concerning,  among
other things,  monetary and fiscal affairs,  housing and financial institutions.
Deposit flows are  influenced by a number of factors,  including  interest rates
paid on competing  investments,  account maturities and level of personal income
and savings.  In addition,  deposit growth is affected by how customers perceive
the stability of the financial  services  industry amid various  current  events
such as  regulatory  changes,  failures  of  other  financial  institutions  and
financing of the deposit  insurance fund.  Lending  activities are influenced by
the demand for and supply of housing lenders, the availability and cost of funds
and various  other items.  Sources of funds for lending  activities  of the Bank
include  deposits,  payments  on loans,  borrowings  and  income  provided  from
operations.  The Bank's  earnings are primarily  dependent upon its 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 a given  period  and the  yield  earned  on such  loans  and
investments.  Interest  expense is a  function  of the  amount of  deposits  and
borrowings  outstanding  during the same period and interest  rates paid on such
deposits and borrowings. The Bank's earnings are also affected by provisions for
loan losses, service charges, operating expenses and income taxes. 


Forward-Looking Statements

In the  following  pages,  management  presents  an  analysis  of the  Company's
financial  condition as of December 31, 1998,  and the results of operations for
the year ended December 31, 1998, as compared to prior  periods.  In addition to
this historical information,  the following discussion contains  forward-looking
statements that involve risks and  uncertainties.  Economic  circumstances,  the
Company's operations and the Company's actual results could differ significantly
from those discussed in the forward-looking statements. Some of the factors that
could cause or contribute  to such  differences  are  discussed  herein but also
include  changes  in the  economy  and  interest  rates in the nation and in the
Company's general market area.

Without limiting the foregoing,  some of the forward-looking  statements include
the following:

1.   Management's  establishment  of  an  allowance  for  loan  losses  and  its
     statements regarding the adequacy of such allowance for loan losses.

2.   Management's  opinion  as to  the  financial  statement  effect  of  recent
     accounting pronouncements.

3.   Management's  opinion  as to the  effect of the Year 2000 on the  Company's
     information technology system.




                                       6
<PAGE>



                           Logansport Financial Corp.


                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (CONTINUED)


Changes in Financial Condition from December 31, 1997 to December 31, 1998

General

The Company's  total assets were $96.1 million at December 31, 1998, an increase
of $10.0 million,  or 11.6%,  over the $86.1 million total at December 31, 1997.
The increase in assets was funded  primarily  through growth in deposits of $9.4
million  and   increases  in   borrowings   of  $500,000.   The   percentage  of
interest-earning assets to total assets was 96.0% at December 31, 1998 and 1997.

At December 31, 1998,  the total of  securities  was $13.2  million  compared to
$15.7  million at December 31, 1997, a decrease of $2.5 million,  or 16.1%.  The
primary investments added to the portfolio were asset-backed securities and FHLB
callable  fixed rate notes.  At December 31, 1998,  the Company held $571,000 of
corporate obligations all of which was debt of domestic corporations rated AA or
better by Moody's Investors Service, Inc. The Company had $300,000 of structured
FHLB notes in its investment portfolio at December 31, 1998.

Total loans  increased by $9.4  million  from  December 31, 1997 to December 31,
1998,  an  increase  of  14.8%.  Most of the  increase  occurred  in the one- to
four-family  mortgages and consumer  loans.  One- to four-family  mortgage loans
increased by $5.8 million, and consumer loans, by $3.1 million. The increase was
funded primarily by the increase in deposits and advances.

During 1997, the Company  invested $1.5 million in a limited  partnership  which
will  construct  and  manage  residential  real  estate  apartments  for low and
moderate income residents. This investment reflects a 49.5% participation in the
partnership.  The affordable housing project is expected to generate significant
tax credits for the Bank in future  years,  beginning in 1999.  This  investment
resulted in an increase to total  assets of $1.5  million  with a  corresponding
increase  in other  liabilities.  At  December  31,  1998,  the project was just
beginning to rent apartments; therefore, there was no material income or loss to
allocate to the Company.

Deposits  increased by $9.4  million to $70.0  million at December 31, 1998 from
$60.6 million at December 31, 1997. Non-interest bearing deposits, NOW accounts,
passbook  savings and money  market  savings  increased  by $5.5  million  while
certificates  of deposit  increased  by $3.9  million.  Borrowings  increased by
$500,000  during the year.  At December 31, 1998,  borrowings  consisted of $7.0
million in FHLB advances and at December 31, 1997  borrowings  consisted of $6.5
million in FHLB advances.

Shareholders'  equity  remained  steady  during  1998.  Equity  was used to fund
regular quarterly dividends and a 5% common stock buy back. Equity was increased
by the  amortization  of the Company's  RRP, a recovery of unrealized  losses on
available for sale  securities  and net earnings for the year ended December 31,
1998 of $1.2 million.

Comparison  of Results of Operations  for the Years Ended  December 31, 1998 and
1997

Net  earnings  totaled  $1.2  million for the year ended  December  31,  1998, a
$15,000, or 1.2%, increase over the net earnings reported for 1997. The increase
in net  earnings  resulted  primarily  from a $117,000  increase in net interest
income and a $115,000 increase in other income, which were partially offset by a
$37,000  increase in the provision for losses on loans,  a $152,000  increase in
general,  administrative  and  other  expense  and a  $28,000  increase  in  the
provision for federal income taxes.





                                       7
<PAGE>

                           Logansport Financial Corp.


                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (CONTINUED)


Comparison  of Results of Operations  for the Years Ended  December 31, 1998 and
1997 (continued)

Interest Income

The Company's total interest income was $6.6 million for the year ended December
31, 1998,  compared to $6.1 million  during  1997,  an increase of $478,000,  or
7.8%. The increase in average interest earning assets from $78.6 million in 1997
to $86.7 million in 1998 helped  contribute to the  increase.  However,  falling
loan rates  contributed  to a 21 basis point  decrease  in the average  yield on
interest earning assets to 7.62% in 1998 compared to 7.83% in 1997. Average loan
yield,  yield  on   mortgage-backed   securities,   investment   securities  and
interest-earning deposits all declined during the year.

Interest Expense

Interest  expense  increased by $361,000,  or 11.6%, for the year ended December
31, 1998  compared to 1997.  This  increase was the result of an increase in the
average balance of interest-bearing liabilities by $7.0 million and the increase
in the average cost of these  liabilities  by 3 basis points,  from 4.89% during
1997 to 4.92% in 1998.  Local  competition  resulted  in  pressure  to  maintain
competitive rates, resulting in a continued decline in the interest rate spread.

Net Interest Income

Net interest income increased by $117,000 for 1998 to approximately $3.1 million
as  compared  with  $3.0  million  in 1997.  The net yield on  weighted  average
interest-earning assets declined in 1998 to 3.61% from 3.86% in 1997.

Provision for Losses on Loans

The Company's provision for losses on loans for the year ended December 31, 1998
and 1997 was $63,000 and $26,000,  respectively.  A larger provision was made in
1998 due to the development of a commercial loan department.  This provision and
the related  increase in the allowance for loan losses were considered  adequate
based on the degree of  delinquencies  in the loan  portfolio  and the Company's
loan loss history.  There were no recoveries in 1998 and recoveries of $1,100 in
1997,  and  charge-offs  of $23,000 in 1998 and  $18,256 in 1997.  The Bank also
recorded  as a  charitable  donation  an  $8,000  property  held in real  estate
acquired through  foreclosure  during 1997 which the Bank donated to Habitat for
Humanity of Cass County,  Indiana, Inc. The Company provides a general allowance
that reflects an estimate of inherent losses based upon the types and categories
of outstanding  loans as well as problem  loans.  At December 31, 1998 and 1997,
the allowance was $285,000 and $245,000,  respectively, a ratio of .38% of total
loans at each  date.  Non-performing  loans at these  dates  were  $315,000  and
$431,000, respectively. The ratio of allowance for loan losses to non-performing
loans  increased  from 56.8% at December 31, 1997 to 90.5% at December 31, 1998.
Based on  management's  review of the loan  portfolio  during these  years,  the
allowance for loan losses at December 31, 1998 and 1997 is  considered  adequate
to cover potential losses inherent in the loan portfolio.

Other Income

The  Company's  other income for the years ended  December 31, 1998 and 1997 was
$285,000 and $170,000, respectively. The year ended December 31, 1997 included a
$24,000 recovery on investments previously written off. During 1997, the Company
recorded $50,000 of net losses on sales of securities.  Structured notes of $2.0
million  were  sold at a net loss and the  proceeds  were  reinvested  in higher
yielding  securities,  primarily  mortgage  and other  asset-backed  securities.
During  1998,  the Company had net gains of $4,000 on  security  sales.  Service
charges on deposit accounts increased by $18,000 in 1998 compared to 1997.





                                       8
<PAGE>

                           Logansport Financial Corp.


                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (CONTINUED)


Comparison  of Results of Operations  for the Years Ended  December 31, 1998 and
1997 (continued)

General, Administrative and Other Expense

General,  administrative and other expense totaled $1.3 million in 1998 compared
to  $1.2  million  in  1997,  an  increase  of  $152,000,   or  13.0%.  Employee
compensation  and benefits  increased by $95,000,  or 14.6%,  due primarily to a
general  compensation  increase and additional  personnel.  Data processing fees
increased  $14,000,  or 14.6%,  for the year.  Various other operating  expenses
increased by $30,000.  The  majority of the  increase was related to  additional
operating  costs  associated  with increased  account  volume,  new services and
advertising.

Income Tax Expense

Income tax expense for the years ended  December  31, 1998 and 1997 was $756,000
and $728,000,  respectively.  Pretax income increased only slightly in 1998 over
1997.  This  resulted in a  corresponding  increase in income tax  expense.  The
effective tax rates amounted to 37.7% and 37.1% for the years ended December 31,
1998 and 1997, respectively.


Comparison  of Results of Operations  for the Years Ended  December 31, 1997 and
1996

Net earnings for the fiscal year ended  December 31, 1997 totaled $1.2  million,
an increase of $319,000, or 34.9%, from the $913,000 in net earnings recorded in
1996.  The increase was  primarily  attributable  to an increase in net interest
income of $52,000 and a decrease in general, administrative and other expense of
$414,000, including the effects of the $335,000 charge in fiscal 1996 related to
the Savings  Association  Insurance Fund ("SAIF")  recapitalization  assessment,
which was  partially  offset by an increase of  $221,000  in the  provision  for
income taxes.

Interest Income

The Company's total interest income was $6.1 million for the year ended December
31, 1997,  compared to $5.7 million  during  1996,  an increase of $448,000,  or
7.9%. The increase in average interest earning assets from $74.9 million in 1996
to $78.6 million in 1997,  combined with stable loan rates,  contributed to a 21
basis point increase in the average yield on interest earning assets to 7.83% in
1997  compared to 7.62% in 1996.  While  average loan yield  remained  constant,
yield on mortgage-backed securities,  investment securities and interest-earning
deposits all improved during the year.

Interest Expense

Interest  expense  increased by $396,000,  or 14.6%, for the year ended December
31, 1997  compared to 1996.  This  increase was the result of an increase in the
average balance of  interest-bearing  liabilities of $7.3 million, or 13.0%, and
the increase in the average cost of these  liabilities  by 7 basis points,  from
4.82% during 1996 to 4.89% in 1997.  Local  competition  resulted in pressure to
maintain competitive rates, however, the interest rate spread improved in 1997.

Net Interest Income

Net interest income increased by $52,000 for 1997 to approximately  $3.0 million
as  compared  with  $2.9  million  in  1996.  Net  yield  on  weighted   average
interest-earning assets declined in 1997 to 3.86% from 3.99% in 1996.






                                       9
<PAGE>

                           Logansport Financial Corp.


                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (CONTINUED)


Comparison of Results of Operations for the Fiscal Years Ended December 31, 1997
and 1996 (continued)

Provision for Losses on Loans

The Company's provision for losses on loans for the year ended December 31, 1997
and 1996 was $26,000 and $12,000,  respectively.  This provision and the related
increase in the allowance for loan losses were considered  adequate based on the
degree  of  delinquencies  in the loan  portfolio  and the  Company's  loan loss
history.  There  were  recoveries  of  $1,100 in 1997 and  $1,270  in 1996,  and
charge-offs of $18,256 in 1997; there were no charge-offs in 1996. The Bank also
recorded  as a  charitable  donation  an  $8,000  property  held in real  estate
acquired through  foreclosure  during 1997 which the Bank donated to Habitat for
Humanity of Cass County,  Indiana, Inc. The Company provides a general allowance
that reflects an estimate of inherent losses based upon the types and categories
of outstanding  loans as well as problem  loans.  At December 31, 1997 and 1996,
the  allowance  was $245,000 and  $236,000,  respectively,  a ratio of 0.38% and
0.41% of total  loans at each  date.  Non-performing  loans at these  dates were
$431,000 and $406,000,  respectively.  The ratio of allowance for loan losses to
non-performing  loans  decreased  from 58.1% at  December  31,  1996 to 56.8% at
December 31, 1997.  Based on  management's  review of the loan portfolio  during
these  years,  the  allowance  for loan losses at December  31, 1997 and 1996 is
considered  to be  adequate  to  cover  potential  losses  inherent  in the loan
portfolio.

Other Income

The  Company's  other income for the years ended  December 31, 1997 and 1996 was
$170,000 and $82,000,  respectively. The year ended December 31, 1996 included a
$17,000  recovery on  investments  previously  written  off while 1997  included
$24,000 of additional recovery. During 1997, the Company recorded $50,000 of net
losses on sales of securities.  Structured  notes of $2.0 million were sold at a
net loss  and the  proceeds  were  reinvested  in  higher  yielding  securities,
primarily mortgage and other asset-backed securities.  This strategy resulted in
a higher yield in mortgage and other asset-backed  securities for the year and a
corresponding  increase in interest income.  Service charges on deposit accounts
increased by $21,000 in 1997 compared to 1996.

General, Administrative and Other Expense

General,  administrative and other expense totaled $1.2 million in 1997 compared
to $1.6 million in 1996, a decrease of $414,000, or 26.1%. Employee compensation
and benefits decreased by $12,000,  or 1.8%, due primarily to a general increase
in  deferred  loan  origination  costs  year-to-year.  Deposit  insurance  costs
decreased by $412,000 due to the absence of the one-time  SAIF  recapitalization
assessment  in  1997  and the new  FDIC  premium  rates.  Data  processing  fees
increased  $5,000,  or 5.5%,  for the year.  Various  other  operating  expenses
increased by $8,000.  The  majority of the  increase  was related to  additional
operating  costs  associated  with increased  account  volume,  new services and
advertising.

Income Tax Expense

Income tax expense for the years ended  December  31, 1997 and 1996 was $728,000
and $507,000,  respectively.  Pretax income increased significantly in 1997 over
1996,   mainly  due  to  the  SAIF  assessment  in  1996.  This  resulted  in  a
corresponding  increase in income tax expense.  The effective tax rates amounted
to 37.1% and 35.7% for the years ended December 31, 1997 and 1996, respectively.




                                       10
<PAGE>


                  AVERAGE BALANCE, YIELD, RATE AND VOLUME DATA

The following  table  presents for the periods  indicated the month-end  average
balances  of  each  category  of  the  Company's   interest-earning  assets  and
interest-bearing  liabilities,  and the average yields earned and interest rates
paid on such balances.  Such yields and costs are determined by dividing  income
or expense by the average  balance of assets or liabilities,  respectively,  for
the periods presented.

<TABLE>
<CAPTION>


                                                                         Year ended December 31,
                                                 1998                            1997                           1996
                                 ----------------------------------  ----------------------------  --------------------------------
                                     Average   Interest                Average  Interest             Average    Interest
                                 outstanding    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:                                                                            
  Interest-earning deposits         $  4,699    $   232       4.93%   $  3,398 $   179       5.27%  $  3,192  $   160        5.01%
  Mortgage- and other asset-                                                                        
    backed securities (1)              9,327        522       5.60       8,380     559       6.67      7,916      510        6.44
  Other investment securities (1)      4,337        277       6.39       6,715     444       6.61      9,965      587        5.89
  Loans receivable (2)                67,793      5,535       8.16      59,606   4,932       8.27     53,409    4,421        8.28
  Stock in FHLB of Indianapolis          549         44       8.01         466      37       7.94        376       29        7.71
                                    --------    -------               -------- -------              --------  -------
     Total interest-earning assets    86,705      6,610       7.62      78,565   6,151       7.83     74,858    5,707        7.62
                                                                                                    
Non-interest-earning assets            4,562                             3,650                         2,709
                                     -------                           -------                       -------
                                                                                                    
     Total assets                    $91,267                           $82,215                       $77,567
                                      ======                            ======                        ======
                                                                                                    
Interest-bearing liabilities:                                                                       
  Savings accounts                  $  3,258         98       3.01    $  3,347     101       3.02   $  3,298      100        3.03
  NOW and money market accounts       23,185        930       4.01      20,169     823       4.08     18,751      769        4.10
  Certificates of deposit             37,581      2,069       5.50      35,636   1,940       5.44     32,432    1,744        5.38
  Borrowings                           6,628        379       5.72       4,535     251       5.53      1,889      106        5.61
                                     -------     ------                -------  ------               -------   ------
     Total interest-bearing 
          liabilities                 70,652      3,476       4.92      63,687   3,115       4.89     56,370    2,719        4.82
                                                  -----   --------               -----   --------               -----    --------
                                                                                                    
Other liabilities                      3,862                             2,506                         2,016
                                     -------                           -------                       -------
                                                                                                    
     Total liabilities                74,514                            66,193                        58,386
                                                                                                    
Shareholders' equity                  16,753                            16,022                        19,181
                                      ------                            ------                        ------
                                                                                                    
     Total liabilities and                                                                          
       shareholders' equity          $91,267                           $82,215                       $77,567
                                      ======                            ======                        ======
                                                                                                    
Net interest-earning assets          $16,053                           $14,878                       $18,488
                                      ======                            ======                        ======
Net interest income                              $3,134                         $3,036                         $2,988
                                                  =====                          =====                          =====
Interest rate spread (3)                                      2.70%                          2.94%                           2.80%
                                                          ========                           ====                            ==== 
Net yield on weighted average                                                                       
  interest-earning assets (4)                                 3.61%                          3.86%                           3.99%
                                                          ========                           ====                            ==== 
Average interest-earning assets                                                                     
  to average interest-bearing liabilities                   122.72%                        123.36%                         132.80%
                                                          ========                         ======                          ====== 
Adjustment of interest on tax-exempt                                                                
  securities to a tax-equivalent basis         $     31                       $     50                       $     54
                                                                                                    
</TABLE>  
                    
-------------------------- 
(1)  Includes securities  available for sale at amortized cost prior to SFAS No.
     115 adjustments.

(2)  Total loans less loans in process.

(3)  Interest rate spread is calculated by subtracting weighted average interest
     rate  cost  from  weighted  average  interest  rate  yield  for the  period
     indicated.

(4)  The net yield on weighted average  interest-earning assets is calculated by
     dividing net interest income by weighted  average  interest-earning  assets
     for the period indicated.


                                       11
<PAGE>


                           Logansport Financial Corp.

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (CONTINUED)


Rate/Volume Table

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

<TABLE>
<CAPTION>


                                                                          Year ended December 31,
                                                         1998 vs. 1997                       1997 vs. 1996
                                                           Increase                             Increase
                                                          (decrease)                           (decrease)
                                                            due to                               due to
                                                     Volume       Rate      Total          Volume       Rate      Total
                                                     ------       ----      -----          ------       ----      -----
                                                                                (In thousands)
Interest-earning assets:
<S>                                                   <C>       <C>         <C>            <C>         <C>        <C>  
  Interest-earning deposits                           $  65     $  (12)     $  53          $    8      $  11      $  19
  Mortgage-backed securities                             59        (96)       (37)             27         22         49
  Investment securities                                (152)       (15)      (167)           (224)        81       (143)
  Loans receivable                                      670        (67)       603             503          8        511
  Stock in FHLB of Indianapolis                           7         -           7               7          1          8
                                                       ----     ------       ----           -----      -----      -----
     Total interest-earning assets                      649       (190)       459             321        123        444

Interest-bearing liabilities:
  Savings accounts                                       (2)        (1)        (3)              1         -           1
  NOW and money market accounts                         121        (14)       107              58         (4)        54
  Certificates of deposit                               108         21        129             172         24        196
  Borrowings                                            119          9        128             144          1        145
                                                       ----     ------       ----           -----      -----      -----
     Total interest-bearing liabilities                 346         15        361             375         21        396
                                                       ----     ------       ----           -----      -----      -----

Change in net interest income
  (fully taxable equivalent basis)                      303       (205)        98             (54)       102         48

Tax equivalent adjustment                                16          3         19               3          1          4
                                                       ----     ------       ----           -----      -----      -----

Change in net interest income                          $319      $(202)      $117           $ (51)      $103      $  52
                                                        ===       ====        ===            ====        ===       ====

</TABLE>





                                       12
<PAGE>

                           Logansport Financial Corp.


                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (CONTINUED)


Rate/Volume Table (continued)

The  Company's  results of  operations  have been  determined  primarily  by net
interest income and, to a lesser extent,  fee income,  miscellaneous  income and
general and  administrative  expenses.  Net interest income is determined by the
interest rate spread  between the yields earned on  interest-earning  assets and
the rates paid on  interest-bearing  liabilities and by the relative  amounts of
interest-earning assets and interest-bearing liabilities.

The  following  table sets forth the weighted  average  effective  interest rate
earned by the Company on its loan and investment portfolio, the weighted average
effective  costs of the  Company's  deposits and  borrowings,  the interest rate
spread of the Company,  and the net yield on weighted  average  interest-earning
assets for the periods and as of the date shown.  Average  balances are based on
month-end average balances.

<TABLE>
<CAPTION>


                                                             At December 31,                  Year Ended December 31,
                                                                   1998                  1998         1997         1996

Weighted average interest rate earned on:
<S>                                                               <C>                   <C>           <C>          <C>  
  Interest-earning deposits                                       4.43%                 4.93%         5.27%        5.01%
  Mortgage-backed securities                                      5.91                  5.60          6.67         6.44
  Investment securities                                           6.13                  6.39          6.61         5.89
  Loans receivable                                                7.99                  8.16          8.27         8.28
  Stock in FHLB of Indianapolis                                   8.06                  8.01          7.94         7.71
     Total interest-earning assets                                7.55                  7.62          7.83         7.62

Weighted average interest rate cost of:
  Savings accounts                                                2.98                  3.01          3.02         3.03
  NOW and money market accounts                                   3.62                  4.01          4.08         4.10
  Certificates of deposit                                         5.40                  5.50          5.44         5.38
  Borrowings                                                      5.24                  5.72          5.53         5.61
     Total interest-bearing liabilities                           4.68                  4.92          4.89         4.82

Interest rate spread (1)                                          2.87                  2.70          2.94         2.80

Net yield on weighted average
  interest-earning assets (2)                                      N/A                  3.61          3.86         3.99

</TABLE>


(1)    Interest  rate  spread is  calculated  by  subtracting  weighted  average
       interest  rate cost from  weighted  average  interest rate earned for the
       period  indicated.  Interest  rate spread  figures must be  considered in
       light of the relationship between the amounts of interest-earning  assets
       and interest-bearing  liabilities.  Since the Company's  interest-earning
       assets  exceeded its  interest-bearing  liabilities for each of the three
       years  shown  above,  a positive  interest  rate  spread  resulted in net
       interest income.

(2)    The net yield on weighted average  interest-earning  assets is calculated
       by dividing  net  interest  income by weighted  average  interest-earning
       assets for the period indicated.  No net yield percentage is presented at
       December 31, 1998,  because the  computation  of net yield is  applicable
       only over a period rather than at a specific date.





                                       13
<PAGE>






                           Logansport Financial Corp.


                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (CONTINUED)


Asset/Liability Management

The Bank, like other savings  associations,  is subject to interest rate risk to
the degree that its interest-bearing liabilities, primarily deposits with short-
and  medium-term  maturities,  mature or  reprice  at  different  rates than its
interest-earning  assets.  Management  of the Bank  believes  it is  critical to
manage the relationship  between interest rates and the effect on the Bank's net
portfolio value ("NPV").  Generally,  NPV is the discounted present value of the
difference between incoming cash flows on interest-earning  and other assets and
outgoing cash flows on  interest-bearing  liabilities.  Management of the Bank's
assets and liabilities is done within the context of the marketplace, regulatory
limitations  and within  limits  established  by the Board of  Directors  on the
amount of change in NPV which is acceptable given certain interest rate changes.

The Office of Thrift Supervision ("OTS") issued a regulation,  effective January
1, 1994, which uses a net market value  methodology to measure the interest rate
risk exposure of thrift  institutions.  Under OTS regulations,  an institution's
"normal"  level of  interest  rate  risk in the  event of an  assumed  change in
interest rates is a decrease in the institution's NPV in an amount not exceeding
2% of the  present  value of its  assets.  Thrift  institutions  with  over $300
million in assets or less than a 12%  risk-based  capital  ratio are required to
file OTS Schedule  CMR.  Data from  Schedule CMR is used by the OTS to calculate
changes in NPV (and the related "normal" level of interest rate risk) based upon
certain interest rate changes (discussed below).  Institutions which do not meet
either of the filing requirements are not required to file OTS Schedule CMR, but
may do so  voluntarily.  The  Bank  does  not  currently  meet  either  of these
requirements,  but it does voluntarily file Schedule CMR. Presented below, as of
September  30, 1998 (the latest  available  date) and December  31, 1997,  is an
analysis  performed by the OTS of the Bank's  interest  rate risk as measured by
changes in NPV for  instantaneous  and  sustained  parallel  shifts in the yield
curve,  in 100  basis  point  increments,  up and down 400 basis  points  and in
accordance with OTS regulations.  As illustrated in the table, the Bank's NPV is
more sensitive to rising rates than  declining  rates.  This occurs  principally
because,   as  rates  rise,   the  market  value  of  the  Bank's   investments,
adjustable-rate  mortgage loans (many of which have maximum per year adjustments
of 1%), fixed-rate loans and mortgage-backed securities declines due to the rate
increases.   The  value  of  the  Bank's  deposits  and  borrowings   change  in
approximately the same proportion in rising or falling rate scenarios.

<TABLE>
<CAPTION>


                               September 30, 1998
Change in
interest rate                          Net Portfolio Value                             NPV as % of PV of Assets
(Basis Points)            $ Amount         $ Change           % Change                  NPV Ratio       Change
--------------            --------         --------           --------                  ---------       ------
                                (In thousands)

<S>                       <C>               <C>                <C>                      <C>           <C>     
      +400                $12,526           $(4,582)           (27)%                    14.33%        (394 bp)
      +300                 14,099            (3,009)           (18)                     15.77         (250 bp)
      +200                 15,429            (1,679)           (10)                     16.93         (134 bp)
      +100                 16,394              (714)            (4)                     17.72          (55 bp)
        -                  17,108                -               -                      18.27            -
      -100                 17,721               613              4                      18.70           43 bp
      -200                 18,527             1,419              8                      19.29          102 bp
      -300                 19,610             2,502             15                      20.09          182 bp
      -400                 20,852             3,744             22                      20.99          272 bp
</TABLE>



                                       14
<PAGE>


                           Logansport Financial Corp.


                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (CONTINUED)


Asset and Liability Management (continued)
<TABLE>
<CAPTION>


                                December 31, 1997
Change in
interest rate                          Net Portfolio Value                             NPV as % of PV of Assets
(Basis Points)            $ Amount         $ Change           % Change                  NPV Ratio       Change
--------------            --------         --------           --------                  ---------       ------
                               (In thousands)

<S>    <C>                <C>               <C>                <C>                      <C>           <C>     
      +400                $11,904           $(6,160)           (34)%                    14.85%        (579 bp)
      +300                 13,766            (4,298)           (24)                     16.73         (391 bp)
      +200                 15,512            (2,552)           (14)                     18.40         (224 bp)
      +100                 16,991            (1,073)            (6)                     19.73          (91 bp)
        -                  18,064                -               -                      20.64            -
      -100                 18,830               766              4                      21.25           61 bp
      -200                 19,514             1,450              8                      21.76          112 bp
      -300                 20,468             2,404             13                      22.49          185 bp
      -400                 21,701             3,637             20                      23.43          279 bp
</TABLE>

As with any method of measuring  interest rate risk,  certain  shortcomings  are
inherent  in the  method of  analysis  presented  in the  foregoing  table.  For
example,  although certain assets and liabilities may have similar maturities or
periods of 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.
Additionally,  certain assets, such a adjustable-rate loans, have features which
restrict  changes in interest  rates on a short-term  basis and over the life of
the assets.  Further, in the event of a change in interest rates, expected rates
of  prepayment  on loans and early  withdrawal  from  certificates  could likely
deviate significantly from those assumed in calculating the table.


Liquidity and Capital Resources

The Company's primary sources of funds are deposits, proceeds from principal and
interest  payments  of loans,  and  proceeds  from  maturing  securities.  While
maturities  and  scheduled  amortization  of loans are a  predictable  source of
funds,  deposit  flows and mortgage  prepayments  are  generally  influenced  by
general interest rates, economic conditions and competition.

The primary  investing  activity of the Company is the  origination  of mortgage
loans and the purchase of investment securities. During the years ended December
31, 1998, 1997 and 1996, the Company originated mortgage loans in the amounts of
$16.3  million,  $13.5  million  and $13.2  million,  respectively.  The Company
originated  consumer  loans of $10.5  million,  $6.2  million and $6.1  million,
respectively. The Company purchased loans in the amount of $350,000 in 1998. The
Company purchased no loans,  excluding  commercial paper, in 1997, and purchased
loans,  excluding  commercial  paper of $1.0 million in 1996.  Loan  repayments,
excluding  commercial  paper,  totaled  $17.6  million,  $12.8 million and $11.4
million for 1998, 1997 and 1996, respectively.





                                       15
<PAGE>






                           Logansport Financial Corp.


                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (CONTINUED)


Liquidity and Capital Resources (continued)

During the years ended December 31, 1998,  1997 and 1996, the Company  purchased
investment  securities  in the amounts of $6.1  million,  $7.2  million and $8.0
million,  respectively.  Sales  or  maturities  of such  securities  held by the
Company and payments on mortgage-backed  or other  asset-backed  securities were
$8.6  million,  $6.1  million  and  $13.2  million  for  1998,  1997  and  1996,
respectively.

Deposits grew by $3.2 million from  December 31, 1996 to December 31, 1997,  and
by $9.4 million from December 31, 1997 to December 31, 1998.

Cash and cash  equivalents  increased by $2.1 million from  December 31, 1997 to
December 31, 1998.

The Company had outstanding  loan  commitments  including  undisbursed  loans in
process and standby letters of credit totaling $5.8 million and $3.1 million, at
December 31, 1998 and 1997,  respectively.  The Company anticipates that it will
have  sufficient   funds  available  to  meet  its  current  loan   commitments.
Certificates  of deposit  which are scheduled to mature in one year or less from
December  31,  1998  and  1997  totaled   $22.3   million  and  $22.5   million,
respectively. Based upon historical deposit flow data, the Company's competitive
pricing in its market and management's  experience,  management  believes that a
significant portion of such deposits will remain with the Company.

Liquidity  management  is both a daily and  long-term  function of the Company's
management  strategy.  In the event that the Company should require funds beyond
its ability to generate them internally,  additional funds are available through
the use of FHLB advances, and also may be available through sales of securities,
although no sales of securities are planned.  At December 31, 1998 and 1997, the
Company  had  outstanding  FHLB  advances  of $7.0  million  and  $6.5  million,
respectively.

For each  calendar  month,  the Bank is required  to  maintain an average  daily
balance of liquid assets (cash,  certain time  deposits,  bankers'  acceptances,
specified United States Government, state or federal agency obligations,  shares
of certain  mutual funds and certain  corporate  debt  securities and commercial
paper)  equal to an  amount  not less  than a  specified  percentage  of its net
withdrawable  deposit  accounts  plus  short-term  borrowings.   This  liquidity
requirement may be changed from time to time by the OTS to any amount within the
range of 4% to 10% depending  upon economic  conditions and the savings flows of
member  institutions.  The OTS recently  reduced the level of liquid assets that
must be held by a savings  association  from 5% to 4% of the  association's  net
withdrawable  accounts plus short-term  borrowings  based upon the average daily
balance of such liquid assets for each quarter of the association's fiscal year.
The OTS may impose  monetary  penalties upon savings  associations  that fail to
comply with those liquidity requirements.  As of December 31, 1998, the Bank had
liquid assets of $16.3 million, and a regulatory liquidity ratio of 33.42%.





                                       16
<PAGE>






                           Logansport Financial Corp.


                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (CONTINUED)


Liquidity and Capital Resources (continued)

Pursuant to OTS capital regulations,  savings associations must currently meet a
1.5%  tangible  capital  requirement,  a 3%  leverage  ratio  (or core  capital)
requirement, and a total risk-based capital to risk-weighted assets ratio of 8%.
At December 31, 1998, the Bank's tangible  capital ratio as 16.9%,  its leverage
ratio was 16.9%, and its risk-based  capital to  risk-weighted  assets ratio was
30.1%.  Therefore,  at  December  31,  1998,  the Bank's  capital  significantly
exceeded  all of the capital  requirements  currently in effect.  The  following
table  provides  the  minimum  regulatory  capital  requirements  and the Bank's
capital ratios as of December 31, 1998.

<TABLE>
<CAPTION>


                                             OTS Requirement                     The Bank's Capital Level
                                        % of                                % of                        Amount
                                      Assets            Amount            Assets (1)       Amount    of excess
                                                                   (Dollars in thousands)

<S>                                      <C>            <C>                <C>            <C>          <C>    
Tangible capital                         1.5%           $1,436             16.9%          $16,263      $14,827
Core capital (2)                         3.0             2,873             16.9            16,263       13,390
Risk-based capital                       8.0             4,398             30.1            16,548 (3)   12,150
</TABLE>



(1)  Tangible and core capital levels are shown as a percentage of total assets;
     risk-based  capital  levels  are  shown as a  percentage  of  risk-weighted
     assets.

(2)  The OTS has proposed  and is expected to adopt a core  capital  requirement
     for  savings  associations  comparable  to  that  recently  adopted  by the
     Comptroller  of the Currency for national  banks.  The new  regulation,  as
     proposed,  would require at least 3% of total  adjusted  assets for savings
     associations  that received the highest  supervisory  rating for safety and
     soundness, and 4% to 5% for all other savings associations.  The final form
     of such new OTS core  capital  requirement  may differ  from that which has
     been  proposed.  The  Bank  expects  to  be in  compliance  with  such  new
     requirements.

(3)  The Bank's  risk-based  capital  includes  $285,000  of  general  valuation
     allowances.

As of December 31, 1998, management is not aware of any current  recommendations
by regulatory authorities which, if they were to be implemented,  would have, or
are  reasonably  likely  to  have,  a  material  adverse  effect  on the  Bank's
liquidity, capital resources or results of operations.


Impact of Inflation

The audited  consolidated  financial  statements presented elsewhere herein have
been prepared in accordance with generally accepted accounting principles. These
principles  require the measurement of financial  position and operating results
in terms of  historical  dollars,  without  considering  changes in the relative
purchasing power of money over time due to inflation.





                                       17
<PAGE>






                           Logansport Financial Corp.


                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (CONTINUED)


Effects of Recent Accounting Pronouncements

In June 1996,  the  Financial  Accounting  Standards  Board (the "FASB")  issued
Statement of Financial  Accounting  Standards ("SFAS") No. 125,  "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,"
that provides accounting guidance on transfers of financial assets, servicing of
financial assets, and extinguishment of liabilities.  SFAS No. 125 introduces an
approach to accounting  for transfers of financial  assets that provides a means
of dealing with more complex transactions in which the seller disposes of only a
partial  interest in the assets,  retains  rights or  obligations,  makes use of
special  purpose  entities  in the  transaction,  or  otherwise  has  continuing
involvement  with  the  transferred  assets.  The  new  accounting  method,  the
financial  components  approach,  provides  that  the  carrying  amount  of  the
financial assets transferred be allocated to components of the transaction based
on their relative fair values.  SFAS No. 125 provides  criteria for  determining
whether control of assets has been relinquished and whether a sale has occurred.
If the transfer  does not qualify as a sale,  it is  accounted  for as a secured
borrowing. Transactions subject to the provisions of SFAS No. 125 include, among
others, transfers involving repurchase agreements,  securitizations of financial
assets,  loan   participations,   factoring   arrangements,   and  transfers  of
receivables with recourse.

An entity that undertakes an obligation to service  financial assets  recognizes
either a servicing asset or liability for the servicing contract (unless related
to a securitization of assets,  and all the securitized  assets are retained and
classified  as  held-to-maturity).  A  servicing  asset  or  liability  that  is
purchased or assumed is initially recognized at its fair value. Servicing assets
and  liabilities are amortized in proportion to and over the period of estimated
net  servicing  income  or net  servicing  loss and are  subject  to  subsequent
assessments for impairment based on fair value.

SFAS No. 125 provides that a liability is removed from the balance sheet only if
the debtor  either pays the creditor and is relieved of its  obligation  for the
liability or is legally released from being the primary obligor.

SFAS No. 125 is effective for  transfers  and servicing of financial  assets and
extinguishment  of liabilities  occurring  after December 31, 1997, and is to be
applied  prospectively.  Earlier or  retroactive  application  is not permitted.
Management  adopted SFAS No. 125 during  1998,  as  required,  without  material
effect  on  the  Company's   consolidated   financial  position  or  results  of
operations.

In June 1997, the FASB issued SFAS No. 130,  "Reporting  Comprehensive  Income."
SFAS No. 130  establishes  standards for reporting and display of  comprehensive
income and its components (revenues,  expenses,  gains and losses) in a full set
of general-purpose  financial  statements.  SFAS No. 130 requires that all items
that are required to be recognized under  accounting  standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same  prominence  as other  financial  statements.  It does  not  require  a
specific  format for that  financial  statement  but requires that an enterprise
display an amount representing total comprehensive income for the period in that
financial statement.





                                       18
<PAGE>






                           Logansport Financial Corp.


                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Effects of Recent Accounting Pronouncements (continued)

SFAS  No.  130  requires  that  an  enterprise   (a)  classify  items  of  other
comprehensive  income by their nature in a financial  statement  and (b) display
the accumulated balance of other  comprehensive  income separately from retained
earnings and additional  paid-in capital in the equity section of a statement of
financial  position.  SFAS No. 130 is effective for fiscal years beginning after
December 15, 1997.  Reclassification of financial statements for earlier periods
provided for comparative  purposes is required.  Management adopted SFAS No. 130
effective January 1, 1998, as required, without material effect on the Company's
financial position or results of operations.

In June 1997,  the FASB issued SFAS No. 131,  "Disclosures  about Segments of an
Enterprise and Related  Information." SFAS No. 131 significantly changes the way
that public business  enterprises report information about operating segments in
annual financial  statements and requires that those enterprises report selected
information  about reportable  segments in interim  financial  reports issued to
shareholders.  It also  establishes  standards  for  related  disclosures  about
products and services, geographic areas and major customers. SFAS No. 131 uses a
"management approach" to disclose financial and descriptive information about an
enterprise's   reportable   operating  segments  which  is  based  on  reporting
information the way that management organizes the segments within the enterprise
for making operating decisions and assessing performance.  For many enterprises,
the management  approach will likely result in more segments being reported.  In
addition,  SFAS No. 131 requires  significantly more information to be disclosed
for each reportable segment than is presently being reported in annual financial
statements  and  requires  that  selected  information  be  reported  in interim
financial  statements.  SFAS No. 131 is effective for financial  statements  for
periods  beginning  after  December  15, 1997.  Management  adopted SFAS No. 131
effective January 1, 1998, as required, without material effect on the Company's
financial position or results of operations.

In June  1998,  the  FASB  issued  SFAS  No.  133,  "Accounting  for  Derivative
Instruments and Hedging  Activities,"  which requires  entities to recognize all
derivatives  in their  financial  statements  as either  assets  or  liabilities
measured at fair value.  SFAS No. 133 also  specifies  new methods of accounting
for hedging  transactions,  prescribes  the items and  transactions  that may be
hedged,  and  specifies  detailed  criteria  to be  met  to  qualify  for  hedge
accounting.

The definition of a derivative  financial instrument is complex, but in general,
it is an instrument  with one or more  underlyings,  such as an interest rate or
foreign exchange rate, that is applied to a notional  amount,  such as an amount
of currency,  to determine the settlement  amount(s).  It generally  requires no
significant initial investment and can be settled net or by delivery of an asset
that is  readily  convertible  to cash.  SFAS No.  133  applies  to  derivatives
embedded in other contracts, unless the underlying of the embedded derivative is
clearly and closely related to the host contract.

SFAS No. 133 is effective  for fiscal years  beginning  after June 15, 1999.  On
adoption, entities are permitted to transfer held-to-maturity debt securities to
the  available-for-sale  or trading category without calling into question their
intent to hold other debt securities to maturity in the future.  SFAS No. 133 is
not expected to have a material  impact on the Company's  financial  position or
results of operations.





                                       19
<PAGE>






                           Logansport Financial Corp.


                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (CONTINUED)


Effects of Recent Accounting Pronouncements (continued)

The  foregoing  discussion  of the effects of recent  accounting  pronouncements
contains  forward-looking  statements  that  involve  risks  and  uncertainties.
Changes  in  economic  circumstances,  interest  rates  or the  balance  of loan
servicing rights sold and retained by the Company could cause the effects of the
accounting pronouncements to differ from management's foregoing assessment.


Year 2000 Compliance Issues

As with all  providers of  financial  services,  the  Company's  operations  are
heavily dependent on information  technology systems. The Bank is addressing the
potential  problems  associated  with the  possibility  that the computers  that
control or operate the Bank's information  technology systems and infrastructure
may not be  programmed  to read  four-digit  date codes and, upon arrival of the
year 2000,  may  recognize  the  two-digit  code "00" as the year 1900,  causing
systems to fail to function or to generate  erroneous  data. The Bank is working
with the companies that supply or service its information  technology systems to
identify and remedy any year 2000 related problems.

Management and the Board of Directors recognize and understand Year 2000 ("Y2K")
risks, are active in overseeing  corrective  efforts,  and are ensuring that all
necessary  resources  are  available to address the problem.  The  awareness and
assessment  phases of the Company's  Year 2000 plan have been  completed and the
testing  phase will begin soon.  The  Company's  data  processing  is  performed
primarily by a third party servicer. The Company also uses software and hardware
which are  covered  under  maintenance  agreements  with  third  party  vendors.
Consequently  the Company is dependent on these vendors to conduct its business.
The  Company  has  contacted  each  vendor to request  time tables for Year 2000
compliance  and the expected  costs,  if any, to be passed along to the Company.
The Company has been informed that its primary  service  provider is on schedule
and testing was conducted in the fourth calendar quarter of 1998.

During 1998 the Company has replaced or upgraded  all  equipment to be Year 2000
compliant at a cost of less than  $40,000.  As of December 31, 1998,  management
has developed an estimate of expenses that are reasonably  likely to be incurred
by the Bank in connection with this issue;  however, the Company does not expect
to incur significant  expenses to implement the necessary  corrective  measures,
and  additional  costs  related  to the Y2K issues  are not  expected  to have a
material impact on the Company's 1999 financial statements.

Should the Company's data center become unable to provide the necessary services
upon arrival of the Year 2000,  the Company will have the  capability to account
for  transactions  on a manual  basis  until the data  center  returns to normal
operations,  or the Company will consider the need to contract with an alternate
service provider.

In addition to possible expense related to its own systems, the Bank could incur
losses if loan  payments  are delayed due to year 2000  problems  affecting  any
major  borrowers  in the Bank's  primary  market  area.  Because the Bank's loan
portfolio is highly diversified with regard to individual borrowers and types of
businesses,  and the Bank's primary market areas are not significantly dependent
upon any one employer or industry,  the Bank does not expect any  significant or
prolonged difficulties that will affect net earnings or cash flow.





                                       20
<PAGE>






                     MARKET PRICE OF LOGANSPORT FINANCIAL'S

                COMMON SHARES AND RELATED SECURITY HOLDER MATTERS

The  common  stock of the  Company  is traded  on the  National  Association  of
Securities Dealers Automated Quotation System ("Nasdaq") Small Cap Market, under
the symbol  "LOGN." As of February  12,  1999,  there were 832  shareholders  of
record of the Company's  common stock. The table below presents the high and low
trade  prices for the common  shares of the  Company,  together  with  dividends
declared  per share,  for each  quarter of the fiscal  years ended  December 31,
1998, 1997 and 1996. Such price information was obtained from Nasdaq.

                                                                    Per Share
Fiscal Year Ending December  31,            High        Low         dividends

1998

Quarter ending March 31, 1998             $18.125      $16.000        $0.10
Quarter ending June 30, 1998               19.625       16.500         0.11
Quarter ending September 30, 1998          17.250       13.000         0.11
Quarter ending December 31, 1998           16.375       13.375         0.11

1997

Quarter ending March 31, 1997             $15.000      $11.125        $0.10
Quarter ending June 30, 1997               14.000       12.500         0.10
Quarter ending September 30, 1997          16.000       13.250         0.10
Quarter ending December 31, 1997           18.000       15.000         0.10

1996

Quarter ending March 31, 1996             $13.250      $12.375        $0.10
Quarter ending June 30, 1996               13.750       12.375         0.10
Quarter ending September 30, 1996          14.750       12.500         0.10
Quarter ending December 31, 1996           14.750       11.250         3.10 (1)


(1)  This includes a $3.00 per share one-time  special cash  distribution  which
     qualified  as a  non-taxable  return of capital  pursuant to an IRS Private
     Letter Ruling.


TRANSFER AGENT AND REGISTRAR.  The Fifth Third Bank of Cincinnati,  Ohio ("Fifth
Third")  is the  Company's  stock  transfer  agent and  registrar.  Fifth  Third
maintains  the  Company's  shareholder  records.  To  change  name,  address  or
ownership of stock,  to report lost  certificates,  or to consolidate  accounts,
contact:

                                Fifth Third Bank
                           Corporate Trust Operations
                                Mail Drop 1090D2
                               38 Fountain Square
                             Cincinnati, Ohio 45263
                                 (800) 837-2755

GENERAL COUNSEL.                                INDEPENDENT AUDITOR.

Barnes & Thornburg                              Grant Thornton LLP
11 South Meridian Street                        625 Eden Park Drive, Suite 900
Indianapolis, Indiana  46204                    Cincinnati, Ohio  45202

SHAREHOLDER  & GENERAL  INQUIRIES.  The  Company is  required  to file an Annual
Report on Form 10-K for its year ended December 31, 1998 with the Securities and
Exchange Commission. Copies of this annual report may be obtained without charge
upon written request to:

                                 Dottye Robeson
                           Logansport Financial Corp.
                           723 East Broadway, Box 569
                            Logansport, Indiana 46947
                                 (219) 722-3855

OFFICE LOCATION.

723 East Broadway
Logansport, Indiana  46947
(219) 722-3855
Fax - (219) 722-3857
Email - logansavings@cqc.com




                                       21
<PAGE>



                          [GRANT THORNTON LETTERHEAD]


               Report of Independent Certified Public Accountants


Board of Directors
Logansport Financial Corp.

We have audited the accompanying  consolidated statements of financial condition
of Logansport  Financial Corp. as of December 31, 1998 and 1997, and the related
consolidated statements of earnings,  shareholders' equity, comprehensive income
and cash flows for each of the years ended  December  31,  1998,  1997 and 1996.
These   consolidated   financial   statements  are  the  responsibility  of  the
Corporation's  management.  Our responsibility is to express an opinion on these
consolidated 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 financial  statements  referred to above present fairly, in
all  material  respects,  the  consolidated  financial  position  of  Logansport
Financial Corp. as of December 31, 1998 and 1997, and the  consolidated  results
of its operations, comprehensive income and its cash flows for each of the years
ended December 31, 1998,  1997 and 1996, in conformity  with generally  accepted
accounting principles.




/s/ Grant Thornton LLP
Cincinnati, Ohio
February 19, 1999




                                       22
<PAGE>






                           Logansport Financial Corp.


                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

                                  December 31,
                        (In thousands, except share data)
<TABLE>
<CAPTION>


         ASSETS                                                                     1998           1997

<S>                                                                              <C>            <C>      
Cash and due from banks                                                          $     363      $     589
Interest-bearing deposits in other financial institutions                            3,965          1,680
                                                                                   -------        -------
         Cash and cash equivalents                                                   4,328          2,269

Certificates of deposit in other financial institutions                                 -             100
Investment securities designated as available for sale - at market                   5,033          5,750
Mortgage-backed securities designated as available for sale - at market              8,129          9,932
Loans receivable - net                                                              73,073         63,635
Real estate acquired through foreclosure - net                                          -             106
Office premises and equipment - at depreciated cost                                  1,528            465
Federal Home Loan Bank stock - at cost                                                 568            494
Investment in real estate partnership                                                1,566          1,540
Accrued interest receivable on loans                                                   337            299
Accrued interest receivable on mortgage-backed securities                               66             83
Accrued interest receivable on investments and interest-bearing deposits                62            121
Prepaid expenses and other assets                                                       36             33
Cash surrender value of life insurance                                               1,135          1,085
Deferred income tax asset                                                              195            203
Prepaid income taxes                                                                    29             -
                                                                                   -------        -------

         Total assets                                                              $96,085        $86,115
                                                                                    ======         ======

         LIABILITIES AND SHAREHOLDERS' EQUITY

Deposits                                                                           $70,011        $60,595
Advances from the Federal Home Loan Bank                                             7,000          6,500
Notes payable                                                                        1,375          1,525
Accrued interest and other liabilities                                               1,211            861
Accrued income taxes                                                                    -              92
                                                                                   -------        -------
         Total liabilities                                                          79,597         69,573

Commitments                                                                             -              -

Shareholders' equity
  Preferred stock - no par value, 2,000,000 shares authorized; none issued              -              -
  Common stock - no par value, 5,000,000 shares authorized; 1,198,710
    and 1,260,920 shares at aggregate value issued and outstanding at
    December 31, 1998 and 1997                                                       6,670          7,566
  Retained earnings - restricted                                                    10,031          9,316
  Less shares acquired by stock benefit plan                                          (368)          (400)
  Unrealized gains on securities designated as available for sale,
    net of related tax effects                                                         155             60
                                                                                   -------        -------
         Total shareholders' equity                                                 16,488         16,542
                                                                                   -------        -------

         Total liabilities and shareholders' equity                                $96,085        $86,115
                                                                                   =======        =======


</TABLE>
The accompanying notes are an integral part of these statements.




                                       23
<PAGE>






                           Logansport Financial Corp.


                       CONSOLIDATED STATEMENTS OF EARNINGS

                         For the year ended December 31,
                        (In thousands, except share data)
<TABLE>
<CAPTION>


                                                                        1998         1997         1996
Interest income
<S>                                                                        <C>          <C>          <C>
  Loans                                                                $ 5,538      $ 4,932      $ 4,421
  Mortgage-backed securities                                               522          559          510
  Investment securities                                                    243          394          533
  Interest-bearing deposits and other                                      276          216          189
                                                                       -------      -------      -------
         Total interest income                                           6,579        6,101        5,653

Interest expense
  Deposits                                                               3,097        2,864        2,613
  Borrowings                                                               379          251          106
                                                                       -------      -------      -------
         Total interest expense                                          3,476        3,115        2,719
                                                                       -------      -------      -------

         Net interest income                                             3,103        2,986        2,934

Provision for losses on loans                                               63           26           12
                                                                       -------      -------      -------

         Net interest income after provision for losses on loans         3,040        2,960        2,922

Other income
  Service charges on deposit accounts                                      106           88           67
  Gain (loss) on sale of investment and mortgage-backed securities           4          (50)         (47)
  Gain on sale of real estate acquired through foreclosure                   6            1            1
  Other operating                                                          169          131           61
                                                                       -------      -------      -------
         Total other income                                                285          170           82

General, administrative and other expense
  Employee compensation and benefits                                       744          649          661
  Occupancy and equipment                                                   90           78           81
  Federal deposit insurance premiums                                        38           37          449
  Data processing                                                          110           96           91
  Other operating                                                          340          310          302
                                                                       -------      -------      -------
         Total general, administrative and other expense                 1,322        1,170        1,584
                                                                       -------      -------      -------

         Earnings before income taxes                                    2,003        1,960        1,420

Income taxes
  Current                                                                  789          761          580
  Deferred                                                                 (33)         (33)         (73)
                                                                       -------      -------      -------
         Total income taxes                                                756          728          507
                                                                       -------      -------      -------

         NET EARNINGS                                                  $ 1,247      $ 1,232      $   913
                                                                       =======      =======      =======

         EARNINGS PER SHARE
           Basic                                                       $  1.00      $   .98      $   .69
                                                                       =======      =======      =======

           Diluted                                                     $   .97      $   .95      $   .69
                                                                       =======      =======      =======
</TABLE>


The accompanying notes are an integral part of these statements.




                                       24
<PAGE>






                           Logansport Financial Corp.


                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

                         For the year ended December 31,
                                 (In thousands)
<TABLE>
<CAPTION>


                                                        1998         1997        1996

<S>                                                        <C>          <C>         <C>
Net earnings                                           $ 1,247      $ 1,232     $   913

Other comprehensive income, net of tax:
  Unrealized holding gains (losses) on securities
    during the period                                       98          186        (196)
  Reclassification adjustment for realized (gains)
    losses included in earnings                             (3)          31          29
                                                       -------      -------     -------

Comprehensive income                                   $ 1,342      $ 1,449     $   746
                                                       =======      =======     =======
</TABLE>







The accompanying notes are an integral part of these statements.





                                       25
<PAGE>






                           Logansport Financial Corp.


                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                        For the years ended December 31,
                             1998, 1997 and 1996 
                       (In thousands, except share data)

<TABLE>
<CAPTION>

                                                                                                Unrealized
                                                                                  Shares    gains (losses)
                                                                                acquired     on securities
                                                                                by stock     designated as
                                                    Common       Retained        benefit         available
                                                     stock       earnings           plan          for sale        Total

<S>                                                <C>             <C>               <C>             <C>        <C>    
Balance at January 1, 1996                         $12,670         $7,774            $-              $  10      $20,454

Net earnings for the year ended
  December 31, 1996                                     -             913             -                 -           913
Return of capital distribution to
  shareholders                                      (3,930)            -              -                 -        (3,930)
Purchase of shares for stock benefit plan               -              -            (615)               -          (615)
Purchase of shares                                    (799)            -              -                 -          (799)
Unrealized losses on securities
  designated as available for sale, net of
  related tax effects                                   -              -              -               (167)        (167)
Amortization of stock benefit plan                      -              -              93                -            93
Cash dividends of $.40 per share                      (423)           (99)            -                 -          (522)
                                                    ------        -------          -----              ----      -------

Balance at December 31, 1996                         7,518          8,588           (522)             (157)      15,427

Net earnings for the year ended
  December 31, 1997                                     -           1,232             -                 -         1,232
Issuance of shares under stock option plan              48             -              -                 -            48
Unrealized gains on securities designated
  as available for sale, net of related
  tax effects                                           -              -              -                217          217
Amortization of stock benefit plan                      -              -             122                -           122
Cash dividends of $.40 per share                        -            (504)            -                 -          (504)
                                                    ------        -------          -----              ----      -------

Balance at December 31, 1997                         7,566          9,316           (400)               60       16,542

Net earnings for the year ended
  December 31, 1998                                     -           1,247             -                 -         1,247
Purchase of shares for stock benefit plan               -              -             (93)               -           (93)
Purchase of shares                                    (945)            -              -                 -          (945)
Issuance of shares under stock option plan               9             -              -                 -             9
Unrealized gains on securities designated
  as available for sale, net of related
  tax effects                                           -              -              -                 95           95
Amortization of stock benefit plan                      40             -             125                -           165
Cash dividends of $.43 per share                        -            (532)            -                 -          (532)
                                                    ------        -------          -----              ----      -------

Balance at December 31, 1998                        $6,670        $10,031          $(368)             $155      $16,488
                                                    ======        =======          =====              ====      =======
</TABLE>



The accompanying notes are an integral part of these statements.





                                       26
<PAGE>






                           Logansport Financial Corp.


                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                         For the year ended December 31,
                                 (In thousands)
<TABLE>
<CAPTION>

                                                                                     1998          1997          1996
Cash flows from operating activities:
<S>                                                                                <C>           <C>           <C>     
  Net earnings for the year                                                        $  1,247      $  1,232      $    913
  Adjustments to reconcile net earnings to net cash provided by
  (used in) operating activities:
    Depreciation and amortization                                                        39            37            38
    Amortization of premiums on investments and mortgage-backed securities              200           104            36
    Amortization expense of stock benefit plan                                          165           122            93
    (Gain) loss on sale of investment and mortgage-backed securities                     (4)           50            47
    Provision for losses on loans                                                        63            26            12
    Gain on sale of real estate acquired through foreclosure                             (6)           (1)           (1)
    Increase (decrease) in cash, due to changes in:
      Accrued interest receivable on loans                                              (38)          (33)          (37)
      Accrued interest receivable on mortgage-backed securities                          17           (29)           (2)
      Accrued interest receivable on investments                                         59             6            58
      Prepaid expenses and other assets                                                  (3)            9           425
      Accrued interest and other liabilities                                            350          (530)          617
      Federal income taxes
        Current                                                                        (121)           38           (32)
        Deferred                                                                        (33)          (33)          (73)
                                                                                   --------      --------      --------
         Net cash provided by operating activities                                    1,935           998         2,094

Cash flows provided by (used in) investing activities:
  Decrease in certificates of deposit in other financial institutions                   100            --            --
  Proceeds from sale of investment securities designated as available for sale          806         2,495         3,835
  Purchase of investment securities designated as available for sale                 (3,057)       (2,100)       (2,834)
  Maturities of investment securities designated as available for sale                3,104         1,471         2,877
  Purchase of Federal Home Loan Bank stock                                              (74)         (107)          (38)
  Proceeds from sale of mortgage-backed securities designated as
    available for sale                                                                1,174           421         3,503
  Purchase of mortgage-backed securities designated as available for sale            (3,039)       (5,126)       (5,178)
  Principal repayments on mortgage-backed securities designated as
    available for sale                                                                3,472         1,665         2,971
  Purchase of loans                                                                    (350)           --        (1,046)
  Loan disbursements                                                                (26,775)      (19,769)      (19,286)
  Investment in real estate partnership                                                (176)          (15)           --
  Principal repayments on loans                                                      17,585        12,791        12,252
  Purchases and additions to office premises and equipment                           (1,102)          (26)          (83)
  Proceeds from sale of real estate acquired through foreclosure                        151            14            15
  Increase in cash surrender value of life insurance policy                             (50)          (45)          (35)
                                                                                   --------      --------      --------
         Net cash used in investing activities                                       (8,231)       (8,331)       (3,047)
                                                                                   --------      --------      --------

         Net cash used in operating and investing activities
           (subtotal carried forward)                                                (6,296)       (7,333)         (953)
                                                                                   --------      --------      --------

</TABLE>





                                       27
<PAGE>






                           Logansport Financial Corp.


                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                         For the year ended December 31,
                                 (In thousands)

<TABLE>
<CAPTION>

                                                                                       1998          1997          1996
<S>                                                                                  <C>           <C>           <C>      
         Net cash used in operating and investing activities
           (subtotal brought forward)                                                $ (6,296)     $ (7,333)     $   (953)

Cash provided by (used in) financing activities:
  Net increase in deposit accounts                                                      9,416         3,199         4,935
  Proceeds from Federal Home Loan Bank advances                                         8,000        10,500         4,600
  Proceeds from note payable                                                               --           100         1,400
  Repayment of Federal Home Loan Bank advances                                         (7,500)       (6,000)       (5,000)
  Repayment of note payable                                                                --        (1,500)           --
  Proceeds from the exercise of stock options                                               9            48            --
  Return of capital distribution                                                           --            --        (3,930)
  Purchase of shares for stock benefit plan                                               (93)           --          (615)
  Dividends on common stock                                                              (532)         (504)         (522)
  Purchase of shares                                                                     (945)           --          (799)
                                                                                     --------      --------      --------
         Net cash provided by financing activities                                      8,355         5,843         1,469
                                                                                     --------      --------      --------

Net increase (decrease) in cash and cash equivalents                                    2,059        (1,490)          516

Cash and cash equivalents at beginning of year                                          2,269         3,759         3,243
                                                                                     --------      --------      --------

Cash and cash equivalents at end of year                                             $  4,328      $  2,269      $  3,759
                                                                                     ========      ========      ========


Supplemental disclosure of cash flow information: Cash paid during the year for:
    Income taxes                                                                     $    689      $    680      $    629
                                                                                     ========      ========      ========

    Interest on deposits and borrowings                                              $  3,465      $  3,129      $  2,699
                                                                                     ========      ========      ========

Supplemental disclosure of noncash investing and financing activities:
  Foreclosed mortgage loans transferred to real estate acquired
    through foreclosure                                                              $     40      $    136      $     18
                                                                                     ========      ========      ========

  Investment in real estate partnership via financing from notes payable             $     --      $  1,525      $     --
                                                                                     ========      ========      ========

  Unrealized gains (losses) on securities designated as available
    for sale, net of related tax effects                                             $     95      $    217      $   (167)
                                                                                     ========      ========      ========

</TABLE>


The accompanying notes are an integral part of these statements.





                                       28
<PAGE>






                           Logansport Financial Corp.


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 1998, 1997 and 1996


NOTE A - SUMMARY OF ACCOUNTING POLICIES

    Logansport Financial Corp. (the "Corporation") is a savings and loan holding
    company whose  activities are primarily  limited to holding the common stock
    of Logansport  Savings  Bank,  FSB (the  "Savings  Bank").  The Savings Bank
    conducts a general banking business in north-central  Indiana which consists
    of attracting  deposits from the general  public and applying those funds to
    the  origination  of loans  for  residential,  consumer  and  nonresidential
    purposes. The Savings Bank's profitability is significantly dependent on its
    net  interest  income,  which  is the  difference  between  interest  income
    generated from interest-earning  assets (i.e. loans and investments) and the
    interest  expense  paid  on  interest-bearing   liabilities  (i.e.  customer
    deposits  and  borrowed  funds).  Net  interest  income is  affected  by the
    relative amount of interest-earning assets and interest-bearing  liabilities
    and the interest  received or paid on these balances.  The level of interest
    rates paid or received by the Savings Bank can be  significantly  influenced
    by a number of environmental  factors, such as governmental monetary policy,
    that are outside of management's control.

    The financial  information  presented herein has been prepared in accordance
    with  generally  accepted   accounting   principles   ("GAAP")  and  general
    accounting  practices within the financial services  industry.  In preparing
    consolidated  financial  statements in accordance  with GAAP,  management is
    required to make estimates and assumptions  that affect the reported amounts
    of assets  and  liabilities  and the  disclosure  of  contingent  assets and
    liabilities  at  the  date  of the  consolidated  financial  statements  and
    revenues and expenses  during the  reporting  period.  Actual  results could
    differ from such estimates.

    The  following  is a summary  of the  Corporation's  significant  accounting
    policies  which have been  consistently  applied in the  preparation  of the
    accompanying consolidated financial statements.

    1.  Principles of Consolidation

    The  consolidated   financial   statements   include  the  accounts  of  the
    Corporation   and  its   subsidiary,   the  Savings  Bank.  All  significant
    intercompany balances and transactions have been eliminated.

    2. Investment and Mortgage-backed Securities

    The Corporation  accounts for investments and mortgage-backed  securities in
    accordance with Statement of Financial Accounting Standards ("SFAS") No. 115
    "Accounting for Certain Investments in Debt and Equity Securities". SFAS No.
    115 requires that investments be categorized as  held-to-maturity,  trading,
    or available for sale. Securities classified as held to maturity are carried
    at cost only if the  Corporation has the positive intent and ability to hold
    these securities to maturity.  Trading  securities and securities  available
    for sale are carried at fair value with resulting unrealized gains or losses
    charged to operations or shareholders' equity, respectively.

    At  December  31,  1998 and 1997,  the  Corporation's  shareholders'  equity
    accounts reflected a net unrealized gain on available for sale securities of
    $155,000 and $60,000, respectively.

    Realized gains and losses on sales of securities  are  recognized  using the
    specific identification method.







                                       29
<PAGE>






                           Logansport Financial Corp.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

    3.  Loans Receivable

    Loans  receivable are stated at the principal amount  outstanding,  adjusted
    for the allowance for loan losses. Interest is accrued as earned, unless the
    collectibility of the loan is in doubt. Uncollectible interest on loans that
    are  contractually  past due is charged off, or an allowance is  established
    based on management's periodic evaluation. The allowance is established by a
    charge to interest  income equal to all  interest  previously  accrued,  and
    income is subsequently  recognized only to the extent that cash payments are
    received  until, in management's  judgment,  the borrower's  ability to make
    periodic  interest and principal  payments has returned to normal,  in which
    case the loan is returned to accrual status. If the ultimate  collectibility
    of the loan is in  doubt,  in whole or in part,  all  payments  received  on
    nonaccrual  loans  are  applied  to reduce  principal  until  such  doubt is
    eliminated.

    4.  Loan Origination Fees

    The Savings Bank accounts for loan  origination fees in accordance with SFAS
    No.  91,  "Accounting  for  Nonrefundable  Fees and  Costs  Associated  with
    Originating or Acquiring Loans and Initial Direct Costs of Leases". Pursuant
    to the provisions of SFAS No. 91,  origination fees received from loans, net
    of certain direct  origination costs, are deferred and amortized to interest
    income using the interest method,  giving effect to actual loan prepayments.
    Additionally,   SFAS  No.  91  generally   limits  the  definition  of  loan
    origination  costs to the direct costs  attributable  to originating a loan,
    i.e.  principally actual personnel costs. Fees received for loan commitments
    that are expected to be drawn upon,  based on the Savings Bank's  experience
    with similar  commitments,  are deferred and amortized  over the life of the
    loan  using the  level-yield  method.  Fees for other loan  commitments  are
    deferred and amortized over the loan  commitment  period on a  straight-line
    basis.

    5.  Allowance for Losses on Loans

    It is  the  Savings  Bank's  policy  to  provide  valuation  allowances  for
    estimated losses on loans based on past loss experience, trends in the level
    of delinquent  and problem  loans,  adverse  situations  that may affect the
    borrower's   ability  to  repay,  the  estimated  value  of  any  underlying
    collateral and current and  anticipated  economic  conditions in the primary
    lending area. When the collection of a loan becomes  doubtful,  or otherwise
    troubled,  the  Savings  Bank  records  a loan loss  provision  equal to the
    difference  between the fair value of the property securing the loan and the
    loan's  carrying  value.  Major loans and major  lending  areas are reviewed
    periodically to determine potential problems at an early date. The allowance
    for loan  losses is  increased  by  charges to  earnings  and  decreased  by
    charge-offs (net of recoveries).

    The Savings Bank  accounts for impaired  loans in  accordance  with SFAS No.
    114,  "Accounting  by  Creditors  for  Impairment  of a Loan".  SFAS No. 114
    requires  that  impaired  loans be measured  based upon the present value of
    expected future cash flows discounted at the loan's effective  interest rate
    or, as an alternative,  at the loan's  observable market price or fair value
    of the  collateral.  The Savings  Bank's  current  procedures for evaluating
    impaired  loans  result in carrying  such loans at the lower of cost or fair
    value.












                                       30
<PAGE>






                           Logansport Financial Corp.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

    5.  Allowance for Losses on Loans (continued)

    A loan is  defined  under SFAS No. 114 as  impaired  when,  based on current
    information  and events,  it is probable  that a creditor  will be unable to
    collect all  amounts  due  according  to the  contractual  terms of the loan
    agreement.  In applying  the  provisions  of SFAS No. 114,  the Savings Bank
    considers  its  investment  in one- to  four-family  residential  loans  and
    consumer  installment  loans to be homogeneous  and therefore  excluded from
    separate  identification  for evaluation of impairment.  With respect to the
    Savings Bank's  investment in  nonresidential  and multi-family  residential
    real estate loans, and its evaluation of impairment thereof,  such loans are
    generally  collateral dependent and, as a result, are carried as a practical
    expedient at the lower of cost or fair value.

    Collateral  dependent  loans which are more than ninety days  delinquent are
    considered  to  constitute  more than a minimum  delay in repayment  and are
    evaluated for impairment under SFAS No. 114 at that time.

    At December  31, 1998 and 1997,  the Savings Bank had no loans that would be
    defined as impaired under SFAS No. 114.

    6.  Real Estate Acquired Through Foreclosure

    Real  estate  acquired  through  foreclosure  is carried at the lower of the
    loan's unpaid principal  balance (cost) or fair value less estimated selling
    expenses  at the  date of  acquisition.  Real  estate  loss  provisions  are
    recorded if the properties' fair value subsequently declines below the value
    determined at the recording  date. In determining  the lower of cost or fair
    value at  acquisition,  costs  relating to  development  and  improvement of
    property are  capitalized.  Costs  relating to holding real estate  acquired
    through  foreclosure,  net of rental income, are charged against earnings as
    incurred.

    7.  Office Premises and Equipment

    Office  premises and equipment are carried at cost and include  expenditures
    which extend the useful lives of existing assets.  Maintenance,  repairs and
    minor   renewals  are  expensed  as  incurred.   For  financial   reporting,
    depreciation  and  amortization  are  provided  on  the   straight-line  and
    accelerated  methods  over the useful  lives of the assets,  estimated to be
    thirty to forty  years for  buildings,  five to  twenty  years for  building
    improvements,  five to fifteen  years for  furniture  and equipment and five
    years for  automobiles.  An  accelerated  method  is used for tax  reporting
    purposes.

    8.  Investment in Real Estate Partnership

    During  1997,  the  Corporation  invested  $1.5  million  in a  real  estate
    partnership  which  will  construct  and  manage   residential  real  estate
    apartments for low and moderate income residents.  The investment reflects a
    49.5%  participation in the partnership.  This affordable housing project is
    expected to generate  significant tax credits for the Savings Bank in future
    years.











                                       31
<PAGE>






                           Logansport Financial Corp.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

    9.  Income Taxes

    The  Corporation  accounts  for  income  taxes  pursuant  to SFAS  No.  109,
    "Accounting  for Income Taxes".  In accordance with SFAS No. 109, a deferred
    tax  liability  or deferred  tax asset is  computed by applying  the current
    statutory  tax rates to net  taxable  or  deductible  temporary  differences
    between the tax basis of an asset or liability  and its  reported  amount in
    the  consolidated  financial  statements  that will result in net taxable or
    deductible amounts in future periods.  Deferred tax assets are recorded only
    to the extent that the amount of net  deductible  temporary  differences  or
    carryforward  attributes may be utilized  against  current period  earnings,
    carried back against prior years' earnings, offset against taxable temporary
    differences  reversing  in future  periods,  or  utilized  to the  extent of
    management's  estimate of future taxable  income.  A valuation  allowance is
    provided  for  deferred  tax  assets  to the  extent  that the  value of net
    deductible  temporary   differences  and  carryforward   attributes  exceeds
    management's  estimates of taxes payable on future taxable income.  Deferred
    tax   liabilities  are  provided  on  the  total  amount  of  net  temporary
    differences taxable in the future.

    Deferral of income taxes results  primarily  from the  different  methods of
    accounting for certain  retirement  plans,  general loan loss allowances and
    percentage of earnings bad debt deductions. Additional temporary differences
    result  from  depreciation   computed  using  accelerated  methods  for  tax
    purposes.

    10.  Benefit Plans

    Employees of the Savings Bank are covered by the Pentegra Group,  previously
    the Financial Institutions  Retirement Fund (the "Fund"), which is a defined
    benefit pension plan to which  contributions are made for the benefit of the
    employees.  Contributions are determined to cover the normal cost of pension
    benefits,  the  one-year  cost of the  pre-retirement  death and  disability
    benefits and the amortization of any unfunded accrued liabilities.

    The Fund had previously advised the Savings Bank that the pension plan meets
    the  criteria of a  multi-employer  pension  plan as defined in SFAS No. 87,
    "Employers'  Accounting for Pensions".  In accordance  with SFAS No. 87, net
    pension cost is recognized for any required  contribution  for the period. A
    liability is recognized for any contributions  due and unpaid.  During 1993,
    the Savings Bank acquired  additional  benefits for all qualified  employees
    covered by the Fund which were paid for by reducing the  overfunded  amount.
    Due to a continuation of the funds overfunded  status, no contributions were
    made to the pension plan during the years ended December 31, 1998,  1997 and
    1996. The provision for pension expense was computed by the Fund's actuaries
    utilizing the  projected  unit credit cost method and assuming a 7.5% return
    on Fund assets.

    The Savings Bank has purchased life insurance  policies on certain  officers
    and  directors.  The insurance  policies had an  approximate  cash surrender
    value of $1.1  million at December  31, 1998 and 1997.  The Savings Bank has
    approved  compensation  arrangements  that  provide  retirement  benefits to
    certain officers and deferral of fees for directors covered by the policies.
    The benefit  arrangement  for one  individual  requires that the  individual
    provide consulting  services to the Savings Bank during the five-year period
    following   retirement.   The  benefits  to  be  paid,   excluding   amounts
    attributable  to consulting,  are being accrued from the date of approval of
    the  arrangements  to the date that full  eligibility  is attained.  Expense
    related to the above  described plans totaled  $81,000,  $99,000 and $87,000
    for the years ended December 31, 1998, 1997 and 1996, respectively.








                                       32
<PAGE>






                           Logansport Financial Corp.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

    10.  Benefit Plans (continued)

    The Savings Bank adopted the  Logansport  Savings Bank,  FSB Employee  Stock
    Ownership Plan and Trust Agreement  ("ESOP") in 1995, for eligible employees
    of the  Savings  Bank.  The ESOP will be funded  by  discretionary  employer
    contributions  made  in  cash,  which  will be  invested  in  shares  of the
    Corporation's  common stock. No  contributions  were made to the ESOP during
    the years ended December 31, 1998, 1997 or 1996.

    In April  1996,  the  Corporation's  shareholders  approved  the  Logansport
    Savings Bank, FSB Recognition and Retention Plan and Trust ("RRP").  The RRP
    may acquire up to 52,900 shares of the Corporation's common stock, an amount
    equal to 4.0% of the number of shares issued in the  Conversion,  for awards
    to management.  Shares awarded to management under the RRP vest at a rate of
    20% at the end of each full twelve  months of service  with the Savings Bank
    after the date of grant. During 1996, the Savings Bank contributed  $615,000
    to the RRP for the  purchase of 46,675  shares of the  Corporation's  common
    stock   awarded  to   management   and   recorded  the  amount  as  unearned
    compensation.  During  1998,  the Savings Bank  contributed  $93,000 for the
    purchase of the 6,225 remaining allowable shares. Amortization expense under
    the RRP totaled $125,000,  $123,000 and $92,000 for the years ended December
    31, 1998, 1997 and 1996, respectively.

    11.  Earnings Per Share and Cash Distributions Per Share

    Basic earnings per share is computed based upon the weighted-average  shares
    outstanding  during the year.  Weighted-average  common  shares  outstanding
    totaled 1,243,972,  1,259,162 and 1,316,372 for the years ended December 31,
    1998, 1997 and 1996,  respectively.  Diluted  earnings per share is computed
    taking into  consideration  common shares outstanding and dilutive potential
    common  shares  to be issued  under the  Corporation's  stock  option  plan.
    Weighted-average  common shares deemed outstanding for purposes of computing
    diluted earnings per share,  which gives effect to 43,879,  32,384 and 8,600
    incremental   shares  from  assumed  exercise  of  stock  options,   totaled
    1,287,851,  1,291,546 and  1,324,972 for the years ended  December 31, 1998,
    1997 and 1996, respectively.

    12.  Cash and Cash Equivalents

    For purposes of reporting  cash flows,  cash and cash  equivalents  includes
    cash and due from banks and  interest-bearing  deposits  in other  financial
    institutions with original maturities of less than 90 days.

    13.  Fair Value of Financial Instruments

    SFAS No.  107,  "Disclosures  about  Fair Value of  Financial  Instruments",
    requires disclosure of fair value of financial instruments,  both assets and
    liabilities,  whether or not  recognized  in the  consolidated  statement of
    financial condition, for which it is practicable to estimate that value. For
    financial  instruments  where quoted market prices are not  available,  fair
    values  are based on  estimates  using  present  value  and other  valuation
    methods.

    The methods used are greatly affected by the assumptions applied,  including
    the discount  rate and estimates of future cash flows.  Therefore,  the fair
    values  presented  may not  represent  amounts  that could be realized in an
    exchange for certain financial instruments.





                                       33
<PAGE>






                           Logansport Financial Corp.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

    13.  Fair Value of Financial Instruments (continued)

    The  following  methods  and  assumptions  were used by the  Corporation  in
    estimating its fair value disclosures for financial  instruments at December
    31, 1998 and 1997:

                  Cash and cash  equivalents:  The carrying amounts presented in
                  the  consolidated  statements of financial  condition for cash
                  and cash equivalents are deemed to approximate fair value.

                  Certificates of deposit:  The carrying amount presented in the
                  consolidated  statements  of financial  condition is deemed to
                  approximate fair value.

                  Investment and mortgage-backed  securities: For investment and
                  mortgage-backed  securities, fair value is deemed to equal the
                  quoted market price.

                  Loans receivable:  The loan portfolio has been segregated into
                  categories  with  similar  characteristics,  such  as  one- to
                  four-family     residential,     multi-family     residential,
                  nonresidential real estate and consumer. These loan categories
                  were further  delineated into  fixed-rate and  adjustable-rate
                  loans.  The fair values for the resultant loan categories were
                  computed via  discounted  cash flow  analysis,  using  current
                  interest  rates  offered  for  loans  with  similar  terms  to
                  borrowers of similar credit quality.

                  Federal Home Loan Bank stock: The carrying amount presented in
                  the consolidated  statements of financial  condition is deemed
                  to approximate fair value.

                  Deposits:  The fair value of NOW  accounts,  passbook and club
                  accounts,  and money market  deposits is deemed to approximate
                  the amount  payable on demand at  December  31, 1998 and 1997.
                  Fair values for fixed-rate  certificates  of deposit have been
                  estimated using a discounted cash flow  calculation  using the
                  interest  rates  currently  offered  for  deposits  of similar
                  remaining maturities.

                  Federal  Home Loan Bank  advances:  The fair  value of Federal
                  Home Loan Bank advances has been  estimated  using  discounted
                  cash flow  analysis,  based on the  interest  rates  currently
                  offered for advances of similar remaining maturities.

                  Notes Payable:  The fair  value  of notes payable is deemed to
                  approximate the carrying value.

                  Commitments   to   extend    credit:    For   fixed-rate   and
                  adjustable-rate  loan  commitments,  the fair  value  estimate
                  considers the  difference  between  current levels of interest
                  rates and committed  rates. At December 31, 1998 and 1997, the
                  difference  between the fair value and notional amount of loan
                  commitments was not material.








                                       34
<PAGE>






                           Logansport Financial Corp.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

    13.  Fair Value of Financial Instruments (continued)

    Based on the foregoing methods and assumptions,  the carrying value and fair
    value of the Corporation's  financial instruments are as follows at December
    31:

<TABLE>
<CAPTION>
    
                                                      1998                    1997
                                             Carrying       Fair     Carrying       Fair
                                                value      value        value      value
                                                              (In thousands)
        Financial assets
    <S>                                        <C>         <C>         <C>         <C>    
      Cash and cash equivalents                $ 4,328     $ 4,328     $ 2,269     $ 2,269
      Certificates of deposit                       --          --         100         100
      Investment securities                      5,033       5,033       5,750       5,750
      Mortgage-backed securities                 8,129       8,129       9,932       9,932
      Loans receivable                          73,073      74,668      63,635      66,286
      Federal Home Loan Bank stock                 568         568         494         494
                                               -------     -------     -------     -------
    
                                               $91,131     $92,726     $82,180     $84,831
                                               =======     =======     =======     =======
    
    Financial liabilities
      Deposits                                 $70,011     $70,406     $60,595     $60,554
      Advances from Federal Home Loan Bank       7,000       6,999       6,500       6,499
      Notes payable                              1,375       1,375       1,525       1,525
                                               -------     -------     -------     -------
    
                                               $78,386     $78,780     $68,620     $68,578
                                               =======     =======     =======     =======
</TABLE>
    
    14. Advertising
    
    Advertising costs are expensed when incurred.
    
    15.  Reclassifications

    Certain  prior year  amounts have been  reclassified  to conform to the 1998
    consolidated financial statement presentation.









                                       35
<PAGE>






                           Logansport Financial Corp.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE B - INVESTMENT AND MORTGAGE-BACKED SECURITIES

    The amortized cost, gross unrealized  gains,  gross unrealized  losses,  and
    estimated  fair value of investment  securities  designated as available for
    sale at December 31, 1998 and 1997, are as follows:

<TABLE>
<CAPTION>
                                                                          1998
                                                                Gross               Gross      Estimated
                                             Amortized     unrealized          unrealized           fair
                                                  cost          gains              losses          value
                                                                      (In thousands)

<S>                                             <C>            <C>                  <C>           <C>   
    U.S. Government agency obligations          $2,845         $    3               $  23         $2,825
    State and municipal obligations              1,323             70                  -           1,393
    FHLMC stock                                      4            240                  -             244
    Corporate debt obligations                     561             10                  -             571
                                                ------           ----                  --         ------

         Total investment securities            $4,733           $323               $  23         $5,033
                                                 =====            ===                ====          =====


                                                                          1997
                                                                Gross               Gross      Estimated
                                             Amortized     unrealized          unrealized           fair
                                                  cost          gains              losses          value
                                                                      (In thousands)

    U.S. Government agency obligations          $3,598         $    6                $153         $3,451
    State and municipal obligations              1,780             67                  -           1,847
    FHLMC stock                                      6            237                  -             243
    Corporate debt obligations                     200              9                  -             209
                                                ------          -----                  --         ------

         Total investment securities            $5,584           $319                $153         $5,750
                                                 =====            ===                 ===          =====

</TABLE>





                                       36
<PAGE>






                           Logansport Financial Corp.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE B - INVESTMENT AND MORTGAGE-BACKED SECURITIES (continued)

    The amortized cost and estimated fair value of investment securities by term
    to maturity at December 31, 1998, are shown below.


                                                                   Estimated
                                                 Amortized              fair
                                                      cost             value
                                                           (In thousands)

    Due in one year or less                       $     25          $     25
    Due after one year through five years              975               969
    Due after five through ten years                 3,419             3,482
    Due after ten years                                310               313
                                                    ------            ------
                                                     4,729             4,789
    FHLMC stock                                          4               244
                                                    ------            ------

                                                    $4,733            $5,033
                                                     =====             =====

    Proceeds  from sales and calls of investment  securities  available for sale
    during the year ended December 31, 1998, totaled $3.7 million,  resulting in
    gross realized gains of $96,000 and gross realized losses of $92,000.

    Proceeds  from sales and calls of investment  securities  available for sale
    during the year ended December 31, 1997, totaled $3.7 million,  resulting in
    gross realized gains of $2,000 and gross realized losses of $54,000.

    The amortized cost, gross  unrealized  gains,  gross  unrealized  losses and
    estimated fair values of mortgage-backed securities at December 31, 1998 and
    1997 are presented below.
<TABLE>
<CAPTION>

                                                                                         1998
                                                                               Gross            Gross         Estimated
                                                         Amortized        unrealized       unrealized              fair
                                                              cost             gains           losses             value
                                                                                    (In thousands)

    Federal Home Loan Mortgage
<S>                                                        <C>                <C>              <C>              <C>    
      Corporation participation certificates               $   994            $    1           $    4           $   991
    Government National Mortgage
      Association participation certificates                 3,701                 1               60             3,642
    Federal National Mortgage
      Association participation certificates                 1,584                 7               10             1,581
    Federal Housing Authority participation
      certificates                                             874                10               -                884
    Small Business Administration
      participation certificates                             1,040                 1               10             1,031
                                                             -----             -----             ----             -----

         Total mortgage-backed securities                   $8,193             $  20            $  84            $8,129
                                                             =====              ====             ====             =====
</TABLE>









                                       37
<PAGE>






                           Logansport Financial Corp.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE B - INVESTMENT AND MORTGAGE-BACKED SECURITIES (continued)
<TABLE>
<CAPTION>


                                                                                         1997
                                                                               Gross            Gross         Estimated
                                                         Amortized        unrealized       unrealized              fair
                                                              cost             gains           losses             value
                                                                                    (In thousands)

    Federal Home Loan Mortgage
<S>                                                        <C>              <C>              <C>                <C>   
  Corporation participation certificates                   $  949           $    1           $   14             $  936
Government National Mortgage                                                                                
  Association participation certificates                    3,880                5               51              3,834
Federal National Mortgage                                                                                   
  Association participation certificates                    2,849                6               16              2,839
Federal Housing Authority participation                                                                     
  certificates                                                884                6               --                890
Small Business Administration                                                                               
  participation certificates                                1,298                1                5              1,294
Other                                                         138                1               --                139
                                                           ------           ------           ------             ------
                                                                                                            
         Total mortgage-backed securities                  $9,998           $   20           $   86             $9,932
                                                           ======           ======           ======             ======
</TABLE>

           
    The amortized cost and estimated fair value of mortgage-backed securities at
    December 31, 1998 and 1997,  by  contractual  terms to  maturity,  are shown
    below.  Expected maturities will differ from contractual  maturities because
    borrowers may generally prepay obligations without prepayment penalties.
<TABLE>
<CAPTION>


                                                                     1998                              1997
                                                                           Estimated                          Estimated
                                                         Amortized              fair           Amortized           fair
                                                              cost             value             cost             value
                                                                                    (In thousands)

<S>                                                         <C>               <C>              <C>               <C>   
      Due within one year                                   $2,337            $2,309           $1,927            $1,915
      Due after one year to three years                      1,859             1,838            2,285             2,266
      Due after three years to five years                      864               861            1,349             1,337
      Due after five years to ten years                        875               868            1,825             1,806
      Due after ten years                                    2,258             2,253            2,612             2,608
                                                             -----             -----            -----             -----

         Total mortgage-backed securities                   $8,193            $8,129           $9,998            $9,932
                                                             =====             =====            =====             =====
</TABLE>

    Proceeds  from  sales of  mortgage-backed  securities  during the year ended
    December 31, 1998,  totaled $1.2 million,  resulting in gross realized gains
    of $3,000 and gross realized losses of $3,000.

    Proceeds  from  sales of  mortgage-backed  securities  during the year ended
    December 31, 1997,  totaled  $421,000,  resulting in gross realized gains of
    $2,000 and no gross realized losses.






                                       38
<PAGE>






                           Logansport Financial Corp.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE C - LOANS RECEIVABLE

    The composition of the loan portfolio at December 31 is as follows:

                                               1998        1997
                                                (In thousands)
Residential real estate
  One- to four-family residential             $52,205     $46,419
  Multi-family residential                      1,584       1,844
  Construction                                  3,492       1,333
Nonresidential real estate and land             3,492       3,072
Consumer and other                             14,500      11,379
                                              -------     -------
                                               75,273      64,047

Less:
  Undisbursed portion of loans in process       1,915         167
  Allowance for loan losses                       285         245
                                              -------     -------

                                              $73,073     $63,635
                                              =======     =======

    The Savings  Bank's  lending  efforts have  historically  focused on one- to
    four-family  residential  and  multi-family  residential  real estate loans,
    which  comprised  approximately  $55.4  million,  or 76%,  of the total loan
    portfolio  at December  31,  1998,  and $49.4  million,  or 78% of the total
    portfolio at December 31, 1997. Generally, such loans have been underwritten
    on  the  basis  of no  more  than  an 80%  loan-to-value  ratio,  which  has
    historically  provided the Savings Bank with adequate collateral coverage in
    the event of default.  Nevertheless,  the Savings  Bank, as with any lending
    institution,   is  subject  to  the  risk  that  real  estate  values  could
    deteriorate in its primary lending area of  north-central  Indiana,  thereby
    impairing collateral values. However,  management is of the belief that real
    estate  values in the Savings  Bank's  primary  lending  area are  presently
    stable.

    In the normal  course of  business,  the Savings  Bank has made loans to its
    directors,  officers and their  related  business  interests.  Related party
    loans are made on the same terms,  including  interest rates and collateral,
    as those prevailing at the time for comparable  transactions  with unrelated
    persons  and do not  involve  more than the normal  risk of  collectibility.
    Loans to officers and directors totaled approximately $721,000 and $431,000,
    at December 31, 1998 and 1997, respectively.















                                       39
<PAGE>

                           Logansport Financial Corp.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE D - ALLOWANCE FOR LOAN LOSSES

    The activity in the allowance for loan losses for the year ended December 31
    is as follows:

                                                   1998       1997       1996
                                                        (In thousands)
    
    Beginning balance                             $ 245      $ 236      $ 223
    Provision for loan losses                        63         26         12
    Recoveries (charge-offs) of loans - net         (23)       (17)         1
                                                  -----      -----      -----
    
    Ending balance                                $ 285      $ 245      $ 236
                                                  =====      =====      =====
    
    At December  31,  1998,  the Savings  Bank's  allowance  for loan losses was
    comprised entirely of a general loan loss allowance which is includible as a
    component of regulatory risk-based capital.

    At December 31, 1998, 1997 and 1996, the Savings Bank had loans of $315,000,
    $431,000 and  $406,000,  respectively,  which had been placed on  nonaccrual
    status due to concerns as to borrowers' ability to pay. Interest income that
    would have been  recognized  had  nonaccrual  loans  performed  pursuant  to
    contractual terms totaled approximately $26,000, $24,000 and $22,000 for the
    years ended December 31, 1998, 1997 and 1996, respectively.


NOTE E - OFFICE PREMISES AND EQUIPMENT

    Office premises and equipment is comprised of the following at December 31:

                                                           1998           1997
                                                              (In thousands)

    Land                                                $   203           $203
    Buildings and improvements                            1,459            460
    Furniture and equipment                                 367            264
                                                         ------            ---
                                                          2,029            927
    Less accumulated depreciation and amortization         (501)          (462)
                                                         ------            ---

                                                         $1,528           $465
                                                          =====            ===

    The Corporation  commenced an expansion of its main office facility in 1998.
    As of December 31, 1998,  the  Corporation  had  outstanding  commitments of
    approximately  $352,000 for such expansion and renovation  which is expected
    to be completed during 1999.





                                       40
<PAGE>






                           Logansport Financial Corp.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE F - DEPOSITS

    Deposits consist of the following major classifications at December 31:

<TABLE>
<CAPTION>

    Deposit type and weighted average
    interest rate                                                    1998             1997
                                                                          (In thousands)
    NOW accounts
<S>                                                               <C>    
      December 31, 1998 - 2.04%                                   $ 5,156
      December 31, 1997 - 1.99%                                                   $  4,196
    Passbook and club accounts
      December 31, 1998 - 2.98%                                     3,171
      December 31, 1997 - 3.00%                                                      3,070
    Money market deposit accounts
      December 31, 1998 - 4.02%                                    20,515
      December 31, 1997 - 4.61%                                                     16,736
    Non-interest bearing accounts                                   1,492              862
                                                                  -------         --------

        Total demand, transaction and passbook deposits            30,334           24,864

    Certificates of deposit
     Original maturities of:
        Less than 12 months
          December 31, 1998 - 4.69%                                 4,818
          December 31, 1997 - 5.01%                                                  3,903
        12 months to 18 months
          December 31, 1998 - 5.33%                                 7,803
          December 31, 1997 - 5.42%                                                  6,770
        24 months to 30 months
          December 31, 1998 - 5.62%                                18,702
          December 31, 1997 - 5.65%                                                 16,812
        More than 30 months
          December 31, 1998 - 5.65%                                 3,619
          December 31, 1997 - 5.53%                                                  3,552
      Individual retirement accounts
        December 31, 1998 - 5.11%                                   4,735
        December 31, 1997 - 5.63%                                                    4,694
                                                                  -------          -------

      Total certificates of deposit                                39,677           35,731
                                                                   ------           ------

      Total deposits                                              $70,011          $60,595
                                                                   ======           ======
</TABLE>

    At December 31, 1998 and 1997,  the Savings Bank had  certificate of deposit
    accounts with balances greater than $100,000  totaling $3.5 million and $3.8
    million, respectively.







                                       41
<PAGE>

                           Logansport Financial Corp.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996



NOTE F - DEPOSITS (continued)

    Interest expense on deposits for the year ended December 31 is summarized as
    follows:

<TABLE>
<CAPTION>

                                                           1998            1997           1996
                                                                     (In thousands)

<S>                                                     <C>             <C>            <C>    
    Passbook and money market deposit accounts          $   923         $   837        $   763
    NOW accounts                                            105              87            106
    Certificates of deposit                               2,069           1,940          1,744
                                                          -----           -----          -----

                                                         $3,097          $2,864         $2,613
                                                          =====           =====          =====
</TABLE>

    Maturities  of  outstanding  certificates  of  deposit  at  December  31 are
    summarized as follows:

                                         1998              1997
                                                (In thousands)

    Less than one year                  $22,342           $22,523
    One to three years                   15,368            11,989
    Over three years                      1,967             1,219
                                        -------           -------

                                        $39,677           $35,731
                                         ======            ======


NOTE G - ADVANCES FROM THE FEDERAL HOME LOAN BANK

    Advances  from the Federal  Home Loan Bank,  collateralized  at December 31,
    1998 by a blanket  pledge  of  residential  mortgage  loans  totaling  $50.2
    million, and the Savings Bank's investment in certain U.S. Government agency
    securities  and  mortgage-backed  securities  totaling  $11.0  million,  are
    summarized as follows:
<TABLE>
<CAPTION>


                                                 Maturing year                           December 31,
    Interest rate                                ending December 31,             1998                1997
                                                                                        (In thousands)

<S>                                                  <C>                      <C>                 <C>   
    5.70% - 5.89%                                     1998                     $   -               $4,000
    5.19% - 6.09%                                     1999                      5,000                  -
    4.87% - 6.09%                                     2000                      2,000               2,500
                                                                                -----               -----

                                                                               $7,000              $6,500
                                                                                =====               =====

    Weighted-average interest rate                                               5.24%               5.79%
                                                                                 ====                ==== 


</TABLE>



                                       42
<PAGE>

                           Logansport Financial Corp.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE H - NOTES PAYABLE

    At  December  31, 1998 and 1997,  notes  payable  consists  of  construction
    borrowings  secured  by the  Savings  Bank's  investment  in a  real  estate
    partnership.  The Savings Bank pays only  interest  until  completion of the
    project  at  which  time  repayment   terms  will  convert  to  a  ten  year
    amortization. The interest rate on the variable rate borrowing was 3.02% and
    4.35% at December 31, 1998 and 1997, respectively.


NOTE I - INCOME TAXES

    The  provision  for income taxes differs from that computed at the statutory
    corporate tax rate for the year ended December 31 as follows:
<TABLE>
<CAPTION>


                                                             1998            1997          1996
                                                                       (In thousands)

<S>                                                          <C>             <C>           <C> 
    Federal income taxes computed at the statutory rate      $681            $666          $483
    Increase (decrease) in taxes resulting from:
      Tax exempt interest                                     (23)            (34)          (37)
      Increase in cash surrender value of life insurance      (17)            (15)          (12)
      State income taxes                                      116             112            79
      Other                                                    (1)             (1)           (6)
                                                             ----           -----         -----

    Income tax provision per consolidated
      financial statements                                   $756            $728          $507
                                                              ===             ===           ===

</TABLE>








                                       43
<PAGE>

                           Logansport Financial Corp.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE I - INCOME TAXES (continued)

    The composition of the  Corporation's  net deferred tax asset at December 31
    is as follows:

<TABLE>
<CAPTION>


    Taxes (payable) refundable on temporary                                 1998           1997
    differences at statutory rate:                                             (In thousands)

<S>                                                                        <C>            <C>  
    Deferred tax assets:
      Other than temporary declines in investment securities               $  23          $  23
      Retirement expense                                                     134            132
      General loan loss allowance                                            115            104
      Stock benefit plan expense                                              91             83
      Other                                                                   10              7
                                                                            ----          -----
         Total deferred tax assets                                           373            349

    Deferred tax liabilities:
      State income taxes                                                     (27)           (23)
      Percentage of earnings bad debt deduction                              (61)           (74)
      Unrealized gains on securities designated as available for sale        (81)           (40)
      Book vs. tax depreciation                                               (9)            (9)
                                                                           -----          -----
         Total deferred tax liabilities                                     (178)          (146)
                                                                             ---            ---

         Net deferred tax asset                                             $195           $203
                                                                             ===            ===
</TABLE>


    The  Savings  Bank was  allowed  a  special  bad debt  deduction  based on a
    percentage of earnings, generally limited to 8% of otherwise taxable income,
    or the amount of qualifying and nonqualifying  loans outstanding and subject
    to certain limitations based on aggregate loans and savings account balances
    at the end of the year.  This  percentage of earnings bad debt deduction had
    accumulated  to  approximately  $1.7 million as of December 31, 1998. If the
    amounts that qualify as deductions  for federal  income taxes are later used
    for  purposes  other  than  bad  debt  losses,  including  distributions  in
    liquidation,  such  distributions will be subject to federal income taxes at
    the then  current  corporate  income  tax rate.  The  approximate  amount of
    unrecognized  deferred tax  liability  relating to the  cumulative  bad debt
    deduction is  approximately  $500,000 at December  31, 1998.  See Note L for
    additional  information  regarding  future  percentage  of earnings bad debt
    deductions.


NOTE J - COMMITMENTS

    The Savings Bank is a party to financial instruments with  off-balance-sheet
    risk in the normal  course of  business to meet the  financing  needs of its
    customers including  commitments to extend credit. Such commitments involve,
    to varying degrees,  elements of credit and interest-rate  risk in excess of
    the amount recognized in the consolidated  statement of financial condition.
    The contract or notional  amounts of the  commitments  reflect the extent of
    the Savings Bank's involvement in such financial instruments.

    The Savings Bank's exposure to credit loss in the event of nonperformance by
    the other party to the financial instrument for commitments to extend credit
    is represented by the contractual notional amount of those instruments.  The
    Savings  Bank  uses the same  credit  policies  in  making  commitments  and
    conditional obligations as those utilized for on-balance-sheet instruments.





                                       44
<PAGE>

                           Logansport Financial Corp.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE J - COMMITMENTS (continued)

    At December  31,  1998,  the Savings  Bank had  outstanding  commitments  of
    approximately  $1.2 million to originate  loans.  Additionally,  the Savings
    Bank had unused lines of credit  totaling $1.6 million at December 31, 1998.
    In the  opinion of  management,  all loan  commitments  equaled or  exceeded
    prevalent  market interest rates as of December 31, 1998, and will be funded
    from  normal cash flow from  operations.  Finally,  the  Savings  Bank had a
    commitment  under a standby  letter  of  credit  totaling  $1.0  million  at
    December 31, 1998.  Standby  letters of credit are  conditional  commitments
    issued by the Savings Bank to guarantee the  performance  of a customer to a
    third party.


NOTE K - REGULATORY CAPITAL

    The Savings Bank is subject to minimum capital  requirements  promulgated by
    the Office of Thrift  Supervision  ("OTS").  Failure to meet minimum capital
    requirements  can initiate  certain  mandatory  -- and  possibly  additional
    discretionary  -- actions by regulators  that, if  undertaken,  could have a
    direct  material effect on the  Corporation's  financial  statements.  Under
    capital  adequacy  guidelines  and  the  regulatory   framework  for  prompt
    corrective  action,  the Savings Bank must meet specific capital  guidelines
    that  involve   quantitative   measures  of  the  Savings   Bank's   assets,
    liabilities,   and  certain  off-balance-sheet  items  as  calculated  under
    regulatory  accounting  practices.  The Savings Bank's  capital  amounts and
    classifications are also subject to qualitative  judgments by the regulators
    about components,  risk weightings,  and other factors. Such minimum capital
    standards generally require the maintenance of regulatory capital sufficient
    to meet each of three tests,  hereinafter  described as the tangible capital
    requirement,  the  core  capital  requirement  and  the  risk-based  capital
    requirement.  The tangible capital requirement provides for minimum tangible
    capital (defined as shareholders'  equity less all intangible  assets) equal
    to 1.5% of adjusted total assets. The core capital requirement  provides for
    minimum core capital  (tangible  capital plus certain  forms of  supervisory
    goodwill and other qualifying  intangible  assets) equal to 3.0% of adjusted
    total assets.  An OTS proposal,  if adopted in present form,  would increase
    the core  capital  requirement  to a range of 4.0% - 5.0% of adjusted  total
    assets for substantially all savings institutions. Management anticipates no
    material  change to the Savings  Bank's present  excess  regulatory  capital
    position  as a result  of this  proposed  change to the  regulatory  capital
    requirement.  The risk-based capital requirement  currently provides for the
    maintenance of core capital plus general loan loss allowances  equal to 8.0%
    of risk-weighted assets. In computing risk-weighted assets, the Savings Bank
    multiplies  the value of each asset on its statement of financial  condition
    by a defined  risk-weighting  factor, e.g., one- to four-family  residential
    loans carry a risk-weighted factor of 50%.

    As of December 31, 1998 and 1997,  management believes that the Savings Bank
    met all capital adequacy requirements to which it is subject.
<TABLE>
<CAPTION>


    1998:                                                                                        To be "well-
                                                                                              capitalized" under
                                                                     For capital               prompt corrective
                                             Actual                adequacy purposes          action provisions
                                         Amount    Ratio           Amount    Ratio             Amount     Ratio
                                                                  (Dollars in thousands)

<S>                                     <C>        <C>             <C>         <C>             <C>          <C> 
    Tangible capital                    $16,263    17.0%           *$1,436     *1.5%           *$4,787      * 5.0%

    Core capital                        $16,263    17.0%           *$2,873     *3.0%           *$5,745      * 6.0%

    Risk-based capital                  $16,548    30.1%           *$4,398     *8.0%           *$5,498      *10.0%
</TABLE>

* Greater than or equal to




                                       45
<PAGE>

                           Logansport Financial Corp.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE K - REGULATORY CAPITAL (continued)
<TABLE>
<CAPTION>


    1997:                                                                                        To be "well-
                                                                                              capitalized" under
                                                                     For capital               prompt corrective
                                             Actual                adequacy purposes          action provisions
                                         Amount    Ratio           Amount    Ratio             Amount     Ratio
                                                                  (Dollars in thousands)

<S>                                     <C>        <C>             <C>         <C>             <C>          <C> 
    Tangible capital                    $16,412    19.1%           *$1,289     *1.5%           *$4,297       *  5.0%

    Core capital                        $16,412    19.1%           *$2,578     *3.0%           *$5,156       *  6.0%

    Risk-based capital                  $16,657    35.2%           *$3,781     *8.0%           *$4,726       * 10.0%
</TABLE>

* Greater than or equal to

    The Savings Bank's  management  believes that, under the current  regulatory
    capital  regulations,  the  Savings  Bank will  continue to meet its minimum
    capital requirements in the foreseeable future.  However,  events beyond the
    control of the Savings Bank, such as increased  interest rates or a downturn
    in the economy in the primary market areas,  could  adversely  affect future
    earnings and,  consequently,  the ability to meet future minimum  regulatory
    capital requirements.

    Regulations  of the OTS impose  limitations  on the payment of dividends and
    other  capital  distributions  by  savings  associations.  The OTS  recently
    amended  its  capital  distribution  regulation  in a final rule which takes
    effect on April 1, 1999.  Because  the  Savings  Bank is a  subsidiary  of a
    savings and loan holding  company,  it is required to file a notice with the
    OTS 30 days before making any capital  distributions to the Holding Company.
    It may also have to file an application  for approval of a proposed  capital
    distribution  with the OTS if the  association is not eligible for expedited
    treatment under the OTS's application  processing rules, or the total amount
    of all capital  distributions,  including the proposed capital distribution,
    for the applicable calendar year would exceed an amount equal to the savings
    association's   net  income   for  that  year  to  date  plus  the   savings
    association's  retained net income for the  preceding  two years.  A savings
    association must also file an application for approval of a proposed capital
    distribution if, following the proposed distribution,  the association would
    not be at least  adequately  capitalized  under  the OTS  prompt  corrective
    action  regulations,  or  if  the  proposed  distribution  would  violate  a
    prohibition  contained in any applicable statute,  regulation,  or agreement
    between the OTS or the FDIC.


NOTE L - LEGISLATIVE DEVELOPMENTS

    The deposit  accounts of the Savings Bank and of other savings  associations
    are insured by the Federal Deposit  Insurance  Corporation  ("FDIC") through
    the SAIF.  The  reserves  of the SAIF were below the level  required by law,
    because a significant portion of the assessments paid into the fund had been
    used to pay the cost of prior  thrift  failures.  The  deposit  accounts  of
    commercial banks are insured by the FDIC in the Bank Insurance Fund ("BIF"),
    except to the extent such banks have acquired SAIF deposits. The reserves of
    the BIF met the level required by law in 1995. As a result of the respective
    reserve levels of the funds,  deposit insurance  assessments paid by healthy
    savings  associations  exceeded  those paid by healthy  commercial  banks by
    approximately $.19 per $100 in deposits in 1995. In 1996, no BIF assessments
    were required for healthy commercial banks except for a $2,000 minimum fee.

    On September 30, 1996, the President enacted legislation to recapitalize the
    SAIF which  provided for a special  assessment of $.657 per $100 of deposits
    held at March 31, 1995.  The Savings Bank had $50.9 million in SAIF deposits
    at March 31, 1995, resulting in an assessment of approximately  $335,000, or
    $221,000 after-tax, which was recorded as a charge in 1996.





                                       46
<PAGE>

                           Logansport Financial Corp.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE L - LEGISLATIVE DEVELOPMENTS (continued)

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

    Under separate legislation related to the recapitalization plan, the Savings
    Bank is required to  recapture  as taxable  income  approximately  $220,000,
    representing  its post-1987  percentage of earnings bad debt deduction.  The
    Savings Bank has provided deferred taxes for this amount and is permitted by
    such legislation to recapture such income over a six year period  commencing
    in 1998.


NOTE M - STOCK OPTION PLAN

    During  1996,  the  Board of  Directors  adopted  a Stock  Option  Plan that
    provided  for the  issuance of 132,250  shares of  authorized,  but unissued
    shares of common  stock at the fair  market  value at the date of grant.  In
    April 1996, the Corporation granted options to purchase 108,691 shares at an
    exercise  price of $12.50  per  share.  As a result of the return of capital
    distribution  of $3.00 per share during  fiscal  1996,  the number of shares
    awarded  and  exercise  price were  adjusted to ensure  equivalent  economic
    consequences to option holders following the distribution.

    In 1996, the Corporation  adopted SFAS No. 123,  "Accounting for Stock-Based
    Compensation,"   which  contains  a  fair  value-based  method  for  valuing
    stock-based  compensation that entities may use, which measures compensation
    cost at the grant date based on the fair value of the award. Compensation is
    then  recognized  over the  service  period,  which is usually  the  vesting
    period. Alternatively,  SFAS No. 123 permits entities to continue to account
    for stock options and similar equity instruments under Accounting Principles
    Board ("APB")  Opinion No. 25,  "Accounting  for Stock Issued to Employees."
    Entities that continue to account for stock options using APB Opinion No. 25
    are required to make pro forma  disclosures of net earnings and earnings per
    share, as if the fair value-based  method of accounting  defined in SFAS No.
    123 had been applied.

    The Corporation  applies APB Opinion No. 25 and related  Interpretations  in
    accounting for its stock option plan. Accordingly,  no compensation cost has
    been recognized for the plan. Had  compensation  cost for the  Corporation's
    stock option plan been determined based on the fair value at the grant dates
    for awards under the plan consistent with the accounting  method utilized in
    SFAS No. 123,  the  Corporation's  net earnings and earnings per share would
    have been reduced to the pro forma amounts indicated below:






                                       47
<PAGE>

                           Logansport Financial Corp.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE M - STOCK OPTION PLAN (continued)
<TABLE>
<CAPTION>


                                                                                  1998          1997         1996

<S>                                                <C>                           <C>         <C>           <C>
    Net earnings (In thousands)                    As reported                   $ 1,247     $   1,232     $    913
                                                                                 =======     =========     ========

                                                   Pro-forma                     $ 1,246     $   1,232     $    883
                                                                                 =======     =========     ========

    Basic earnings per share                       As reported                   $  1.00     $     .98     $    .69
                                                                                 =======     =========     ========

                                                   Pro-forma                     $  1.00     $     .98     $    .67
                                                                                 =======     =========     ========

    Diluted earnings per share                     As reported                   $   .97     $     .95     $    .69
                                                                                 =======     =========     ========

                                                   Pro-forma                     $   .97     $     .95     $    .67
                                                                                 =======     =========     ========
</TABLE>


    The fair value of each option  grant is estimated on the date of grant using
    the  modified   Black-Scholes   options-pricing  model  with  the  following
    weighted-average  assumptions  used for  grants in 1998 and  1996;  dividend
    yield of 3.14%  and  3.67%  and  expected  volatility  of  11.5%;  risk-free
    interest rate of 6.5% and expected lives of seven years.

    A  summary  of the  status  of the  Corporation's  stock  option  plan as of
    December 31, 1998,  1997 and 1996,  and changes during the periods ending on
    those dates is presented below:
<TABLE>
<CAPTION>


                                                1998                        1997                         1996
                                                      Weighted-                  Weighted-                    Weighted-
                                                        average                    average                      average
                                                       exercise                   exercise                     exercise
                                            Shares        price        Shares        price          Shares        price

<S>                                        <C>          <C>           <C>           <C>                         <C>    
    Outstanding at beginning of year       124,795      $10.53        129,340       $10.53              -       $     -
    Granted                                  2,500      $13.75             -        $    -         108,691      $12.50
    Adjustment for return of capital
     distribution                               -       $    -             -        $    -          20,649      $ (1.97)
    Exercised                                  880      $10.53          4,545       $10.53              -       $    -
    Forfeited                                   -       $    -             -        $    -              -       $    -
                                           -------       ---------  ---------        ---------   ---------       -----

    Outstanding at end of year             126,415      $10.59        124,795       $10.53         129,340      $10.53
                                           =======       =====        =======        =====         =======       =====

    Options exercisable at year-end         46,311      $10.53         21,323       $10.53              -       $    -
                                            ======       =====       ========        =====       =========       =====
    Weighted-average fair value of
      options granted during the year                    $2.77                         N/A                      $ 1.81
                                                         =====                       =====                      ======

</TABLE>

    The following  information  applies to options  outstanding  at December 31,
    1998:


    Number outstanding                                         126,415
    Range of exercise prices                           $10.53 - $13.75
    Weighted-average exercise price                             $10.59
    Weighted-average remaining contractual life             7.33 years




                                       48
<PAGE>






                           Logansport Financial Corp.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE N - CONDENSED FINANCIAL STATEMENTS OF LOGANSPORT FINANCIAL CORP.

    The  following  condensed  financial   statements  summarize  the  financial
    position of Logansport Financial Corp. as of December 31, 1998 and 1997, and
    the results of its  operations  and cash flows for the years ended  December
    31, 1998, 1997 and 1996.

                           Logansport Financial Corp.
                        STATEMENTS OF FINANCIAL CONDITION
                                  December 31,
                                 (In thousands)

ASSETS                                                 1998          1997

Cash and cash equivalents                            $    152      $    160
Investment in subsidiary                               16,418        16,471
Prepaid expenses and other                                  5             5
                                                     --------      --------

      Total assets                                   $ 16,575      $ 16,636
                                                     ========      ========

LIABILITIES AND SHAREHOLDERS' EQUITY

Accrued expenses and other liabilities               $     87      $     94

Shareholders' equity
  Common stock                                          6,670         7,566
  Retained earnings                                    10,031         9,316
  Shares acquired by stock benefit plan                  (368)         (400)
  Unrealized gains on securities designated
    as available for sale, net                            155            60
                                                     --------      --------
      Total shareholders' equity                       16,488        16,542
                                                     --------      --------

      Total liabilities and shareholders' equity     $ 16,575      $ 16,636
                                                     ========      ========












                                       49
<PAGE>






                           Logansport Financial Corp.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE  N  -  CONDENSED  FINANCIAL   STATEMENTS  OF  LOGANSPORT   FINANCIAL  CORP.
(continued)


                           Logansport Financial Corp.
                             STATEMENTS OF EARNINGS
                             Year ended December 31,
                                 (In thousands)

<TABLE>
<CAPTION>

                                                 1998         1997         1996
Revenue
<S>                                             <C>          <C>          <C>    
  Interest income                               $    13      $    12      $   174
  Equity in earnings of subsidiary                1,279        1,270          869
                                                -------      -------      -------
                                                  1,292        1,282        1,043

Interest expense                                     --            5           --

General and administrative expenses                  66           70          100
                                                -------      -------      -------

     Earnings before income taxes (credits)       1,226        1,207          943

Income taxes (credits)                              (21)         (25)          30
                                                -------      -------      -------

     NET EARNINGS                               $ 1,247      $ 1,232      $   913
                                                =======      =======      =======
</TABLE>




                                       50
<PAGE>






                           Logansport Financial Corp.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE  N  -  CONDENSED  FINANCIAL   STATEMENTS  OF  LOGANSPORT   FINANCIAL  CORP.
(continued)


                           Logansport Financial Corp.
                            STATEMENTS OF CASH FLOWS
                             Year ended December 31,
                                 (In thousands)

<TABLE>
<CAPTION>


                                                                 1998         1997         1996
<S>                                                            <C>          <C>          <C>    
Cash flows provided by (used in) operating activities:
  Net earnings for the year                                    $ 1,247      $ 1,232      $   913
  Adjustments to reconcile net earnings to net cash
  provided by (used in) operating activities:
    (Undistributed earnings of ) excess distributions from
      consolidated subsidiary                                      221          730         (869)
    Decreases in cash due to changes in:
      Other liabilities                                             (7)         (34)          --
      Other                                                         (1)          (1)          (4)
                                                               -------      -------      -------
     Net cash provided by operating activities                   1,460        1,927           40

Cash flows provided by (used in) investing activities:
  Purchase of securities available for sale                         --           --       (1,638)
  Maturities of investment securities available for sale            --           --        2,245
  Proceeds from sale of securities designated as available
    for sale                                                        --           --        1,824
  Loan repayments                                                   --           --          878
                                                               -------      -------      -------
     Net cash provided by (used in) investment activities           --           --        3,309

Cash flows provided by (used in) financing activities:
  Proceeds from issuance of common stock                             9           48           --
  Proceeds from note payable                                        --          100        1,400
  Return of capital distribution                                    --           --       (3,930)
  Repayment of note payable                                         --       (1,500)          --
  Dividends on common stock                                       (532)        (504)        (522)
  Purchase of shares                                              (945)          --         (799)
                                                               -------      -------      -------
     Net cash used in financing activities                      (1,468)      (1,856)      (3,851)
                                                               -------      -------      -------

Net increase (decrease) in cash and cash equivalents                (8)          71         (502)

Cash and cash equivalents at beginning of year                     160           89          591
                                                               -------      -------      -------

Cash and cash equivalents at end of year                       $   152      $   160      $    89
                                                               =======      =======      =======
</TABLE>





                                       51
<PAGE>






                           Logansport Financial Corp.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE O - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

         The following table summarizes the Corporation's  quarterly results for
the years ended  December  31, 1998 and 1997.  Certain  amounts,  as  previously
reported, have been reclassified to conform to the 1998 presentation.
<TABLE>
<CAPTION>

                                                              Three Months Ended
                                                March 31,    June 30,    September 30,  December 31,
    1998:                                           (In thousands, except per share data)
<S>                                              <C>           <C>           <C>           <C>   
Total interest income                            $1,588        $1,639        $1,664        $1,688
Total interest expense                              826           857           894           899
                                                 ------        ------        ------        ------

Net interest income                                 762           782           770           789
Provision for losses on loans                         9             9            13            32
Other income                                         52            70            60           103
General, administrative and other expense           317           320           320           365
                                                 ------        ------        ------        ------

Earnings before income taxes                        488           523           497           495
Income taxes                                        184           198           189           185
                                                 ------        ------        ------        ------

Net earnings                                     $  304        $  325        $  308        $  310
                                                 ======        ======        ======        ======

Earnings per share:
  Basic                                          $  .24        $  .26        $  .24        $  .26
                                                 ======        ======        ======        ======

  Diluted                                        $  .23        $  .25        $  .24        $  .25
                                                 ======        ======        ======        ======


                                                              Three Months Ended
                                                March 31,    June 30,    September 30,  December 31,
    1997:                                           (In thousands, except per share data)

Total interest income                            $1,452        $1,504        $1,570        $1,620
Total interest expense                              729           761           804           821
                                                 ------        ------        ------        ------

Net interest income                                 723           743           766           799
Provision for losses on loans                         3             5             9             9
Other income                                          4            41            19            38
General, administrative and other expense           282           286           292           287
                                                 ------        ------        ------        ------

Earnings before income taxes                        442           493           484           541
Income taxes                                        159           179           176           214
                                                 ------        ------        ------        ------

Net earnings                                     $  283        $  314        $  308        $  327
                                                 ======        ======        ======        ======

Earnings per share:
  Basic                                          $  .22        $  .24        $  .23        $  .29
                                                 ======        ======        ======        ======

  Diluted                                        $  .21        $  .24        $  .23        $  .27
                                                 ======        ======        ======        ======


                                       52

</TABLE>