[FRONT COVER]

                              [PHOTO OF BRIEFCASE]









                           LOGANSPORT FINANCIAL CORP.

                                      1997
                           SHAREHOLDER ANNUAL REPORT





<PAGE>

                             SHAREHOLDER INFORMATION

Market Information

     The common  stock of the Company is traded on the National  Association  of
Securities  Dealers  Automated  Quotation  System,  Small Cap Market,  under the
symbol "LOGN." As of February 17, 1998, there were 848 shareholders of record of
the Company's Common Stock.

                                 Stock Price                      Per Share
Quarter Ended               High            Low                  Dividends
March 31, 1996             13 1/4           12 3/8                  $0.10
June 30, 1996              13 3/4           12 3/8                  $0.10
September 30, 1996         14 3/4           12 1/2                  $0.10
December 31, 1996          14 3/4           11 1/4                  $3.10*
March 31, 1997             15               11 1/8                  $0.10
June 30, 1997              14               12 1/2                  $0.10
September 30, 1997         16               13 1/4                  $0.10
December 31, 1997          18               15                      $0.10

*    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
fiscal year ended December 31, 1997 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


<PAGE>

                                TABLE OF CONTENTS

                                                                      Page
President's Message to Shareholders..............................       2
Selected Consolidated Financial Data.............................       4
Management's Discussion and Analysis.............................       5
Change in Accountants............................................      15
Independent Auditor's Report.....................................      16
Consolidated Statements of Financial Condition...................      17
Consolidated Statements of Earnings..............................      18
Consolidated Statements of Changes in Shareholders' Equity.......      19
Consolidated Statements of Cash Flows............................      20
Notes to Consolidated Financial Statements.......................      22



                             DESCRIPTION OF BUSINESS



     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.


<PAGE>

Dear Shareholder:

We are pleased to report that  Logansport  Financial  Corp. and its  subsidiary,
Logansport Savings Bank, had another excellent year.

Among our  accomplishments  this year is a 1.50% return on average assets,  well
above  the  industry  average.   Another  important  ratio  of  significance  to
shareholders is return on average equity which increased  substantially to 7.69%
in  1997  from  4.76%  in  1996.  This  is a  result  of our  excellent  earning
performance  and our $3.00 return of capital  distribution  to  shareholders  in
December  1996.  In  addition,  the  performance  of the Company has resulted in
substantial  increases  in the market  value of the stock  during the year.  The
Board of  Directors  has paid a $.10 per  share  quarterly  dividend  since  our
conversion to a stock  institution and remains  committed to regular,  quarterly
dividends  for our  shareholders.  We are pleased  with these  improvements  but
continue to explore additional ways to increase shareholder value.

Another indicator of our financial  soundness is reflected in our growth.  Total
assets for the year ended December 31, 1997 were $86.1 million compared to $77.7
million at December 31, 1996.  Total loans  increased by $6.8 million during the
year. The loan department is headed by Charles Evans,  Vice  President,  who has
been with the Bank for 25 years.  He is an important part of our management team
and instrumental in the excellent performance of the loan portfolio. In addition
to serving on the Board of Directors of Logansport Financial Corp., he was added
to the Bank's Board of Directors in 1997.  The increase in the loan portfolio is
a significant  contributing  factor to our strong earnings.  We continue to be a
community  leader in providing  both  excellent  loan service and products.  Net
earnings for the year ended  December 31, 1997 totaled $1.2 million  compared to
$913,000 for the year ended December 31, 1996.  Earnings per share  increased to
$.98 in 1997  compared  to $.69 in 1996.  The  benefit of lower  FDIC  insurance
premiums is reflected in the increased earnings for 1997.

In looking ahead to 1998, the current interest rate environment could offer many
challenges  for  financial  institutions.  Earnings have been very strong in the
last two years but  declining  rates could  impact  earnings in the coming year.
However, we remain optimistic  regarding our prospects for additional growth and
consistent   profitability  in  1998.   Logansport  Financial  Corp.  has  grown
substantially  in the last few  years  and for this  reason  the  Directors  are
currently  planning for a  facilities  expansion to better meet the needs of our
customers. Tentative plans have been approved with the hope of proceeding in the
early spring.

I would  like  to  thank  our  Directors,  officers,  employees,  customers  and
shareholders  for their part in making 1997 an excellent  year.  We are proud of
the  performance  of  Logansport  Financial  Corp.  and we are grateful for your
support. We look forward to a long and mutually beneficial relationship.

                                                         Sincerely,


                                                         /s/ Thomas G. Williams
                                                         Thomas G. Williams
                                                         President
<PAGE>
                     Officers of Logansport Financial Corp.
                                    [PHOTO]

(left  to  right)   Charles  J.   Evans,   Vice   President;   Dottye   Robeson,
Secretary/Treasurer; Thomas G. Williams, President



                Board of Directors of Logansport Financial Corp.
                                    [PHOTO]

Front (left to right) Thomas G. Williams, Susanne S. Ridlen, Charles J. Evans
Back (left to right) Norbert E. Adrian, William Tincher, Jr., Donald G. Pollitt,
David G. Wihebrink

<PAGE>

                      SELECTED CONSOLIDATED FINANCIAL DATA
                  OF LOGANSPORT FINANCIAL CORP. AND SUBSIDIARY


<TABLE>
<CAPTION>
                                                                            AT  DECEMBER 31,
                                               1997             1996              1995             1994              1993
                                               --------------------------------------------------------------------------
                                                                         (Dollars in thousands)
Statement of Financial Condition Data:
<S>                                         <C>               <C>              <C>               <C>               <C>
Total assets ...........................    $86,115           $77,668          $74,647           $59,351           $56,229
Loans receivable, net ..................     63,635            56,802           49,707            44,020            37,851
Mortgage-backed securities - at market..      9,932             6,674            7,468             1,229             2,784
Cash and cash equivalents...............      2,269             3,759            3,243             1,645             2,700
Investment securities - at market.......      5,750             7,629           11,285            10,009            10,718
Certificates of deposit in other
   financial institutions...............        100               100              100               ---               ---
Deposits................................     60,595            57,396           52,461            51,202            49,558
Borrowings..............................      8,025             3,400            1,000             1,000               ---
Shareholders' equity, net...............     16,542            15,427           20,454             6,833             6,397
</TABLE>

<TABLE>
<CAPTION>

                                                                   YEAR ENDED DECEMBER 31,
                                               1997           1996          1995          1994          1993
                                               -----------------------------------------------------------------
                                                                         (Dollars in thousands)
Summary of Operating Results:
<S>                                          <C>           <C>           <C>            <C>          <C>
Interest income ...........................    $ 6,101      $ 5,653        $ 4,775       $ 4,031       $ 4,033
Interest expense ..........................      3,115        2,719          2,468         2,043         1,984
                                               -------      -------        -------       -------       -------
   Net interest income ....................      2,986        2,934          2,307         1,988         2,049
Provision for loan losses .................         26           12             20             6           161
                                               -------      -------        -------       -------       -------
   Net interest income after provision for
      loan losses .........................      2,960        2,922          2,287         1,982         1,888
Other income:
   Service charges on deposit accounts ....         88           67             47            35            26
   Investment securities gains (losses)  ..        (50)         (47)             3            --            22
   Other ..................................        132           62            129            44            37
                                               -------      -------        -------       -------       -------
      Total other income ..................        170           82            179            79            85
Other expense:
   Employee compensation and benefits .....        649          661            531           493           440
   Occupancy and equipment ................         78           81             81            84            69
   Deposit insurance premiums .............         37          449            116           114            83
   Other ..................................        406          393            304           266           226
                                               -------      -------        -------       -------       -------
        Total other expense ...............      1,170        1,584          1,032           957           818
                                               -------      -------        -------       -------       -------
Earnings before income taxes and cumulative
   effect of change in accounting principle      1,960        1,420          1,434         1,104         1,155
Income taxes ..............................        728          507            526           370           422
Cumulative effect of change
   in accounting principle ................        ---          ---            ---           ---            44
                                               -------      -------        -------       -------       -------
   Net earnings ...........................    $ 1,232      $   913        $   908       $   734       $   777
                                               =======      =======        =======       =======       =======
Basic earnings per share ..................    $   .98      $   .69        $   ---       $   ---       $   ---
                                               =======      =======        =======       =======       =======
Cash dividends per share
   Regular ................................        .40          .40            .20           ---           ---
   Special (2) ............................        ---         3.00            ---           ---           ---
Supplemental Data:
Return on assets (3) ......................       1.50%        1.18%          1.34%         1.27%         1.45%
Return on equity (4) ......................       7.69         4.76           6.33         10.78         12.92
Interest rate spread (5) ..................       2.94         2.80           2.77          3.32          3.75
Net yield on interest-earning assets (6) ..                    3.86           3.99          3.64          3.67
                                                                                                          4.07

<PAGE>

General, administrative and other expense
   to average assets ......................       1.42         2.04           1.53          1.65          1.52
Net interest income to general,
   administrative and
   other expense ..........................      2.55x        1.85x          2.24x         2.08x          2.50x
Equity-to-assets (7) ......................      19.21        19.86          27.40         11.51         11.38
Average interest-earning assets to average
   interest-bearing liabilities ...........     123.36       132.80         122.90        109.64        108.48
Non-performing assets to total assets .....        .62          .52            .42           .82          1.38
Non-performing loans to total loans .......        .67          .71            .63           .76          1.57
Loan loss allowance to total loans, net ...        .38          .41            .45           .47           .53
Loan loss allowance to
    non-performing loans ..................      56.84        58.12          71.61         61.13         33.67
Dividend payout ratio .....................      40.82        57.97(8)         ---           ---(1)        ---(1)
Net charge-offs to average loans ..........        .03          (*)            (*)           (*)           .13
</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.
(*)      Less than .01%

<PAGE>

                     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,  1997,  and the results of
operations for the year ended December 31, 1997 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:

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

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


<PAGE>

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, 1997, (the latest available date), 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 increase.  The value of the
Bank's deposits and borrowings  change in  approximately  the same proportion in
rising or falling rate scenarios.

<TABLE>
<CAPTION>
      Change                          Net Portfolio Value                                NPV as % of PV of Assets
     In Rates     $ Amount          $ Change              % Change              NPV Ratio              Change
--------------------------------------------------------------------------------------------------------------------
                               (Dollars in thousands)
<S>              <C>               <C>                         <C>                  <C>                    <C>
   + 400 bp *     $12,081           $(5,855)                    (33%)                15.05%                 (549  bp)
   + 300 bp       $13,854           $(4,082)                    (23%)                16.83%                 (371  bp)
   + 200 bp       $15,525           $(2,410)                    (13%)                18.42%                 (212  bp)
   + 100 bp       $16,923           $(1,013)                     (6%)                19.68%                  (86  bp)
       0 bp       $17,936         $      ---                     ---%                20.54%                  ---  bp
   - 100 bp       $18,579           $    644                       4%                21.04%                   50  bp
   - 200 bp       $19,130           $  1,195                       7%                21.44%                   89  bp
   - 300 bp       $19,907           $  1,971                      11%                22.02%                  147  bp
   - 400 bp       $20,963           $  3,027                      17%                22.82%                  227  bp
</TABLE>

          Interest Rate Risk Measures: 200 Basis Point (bp) Rate Shock

Pre-Shock NPV Ratio: NPV as % of PV of Assets.............       20.54%
Exposure Measure: Post-Shock NPV Ratio....................       18.42%
Sensitivity Measure: Change in NPV Ratio..................     (212 bp)

*  Basis points


<PAGE>

         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 to  repricing,  they may react in  different  degrees to
changes in market interest  rates.  Also, the interest rates on certain types of
assets and  liabilities  may fluctuate in advance of changes in market  interest
rates,  while  interest  rates on other  types may lag behind  changes in market
rates.  Additionally,  certain  assets,  such  as  adjustable-rate  loans,  have
features which restrict changes in interest rates on a short-term basis and over
the life of the  asset.  Further,  in the event of a change in  interest  rates,
expected rates of prepayments on loans and early  withdrawals from  certificates
could likely deviate significantly from those assumed in calculating the table.

Average Balances and Interest Rates and Yields

         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,
                                           --------------------------------------------------------------------------------------
                                                       1997                         1996                            1995
                                           Average             Yield/     Average           Yield/        Average          Yield/
                                           Balance   Interest   Cost      Balance Interest   Cost         Balance Interest  Cost
                                           -------   --------   ----      ------- --------   ----         ------- --------  ----
                                                                      (Dollars in thousands)
Assets:
Interest-earning assets:
<S>                                       <C>        <C>        <C>     <C>       <C>        <C>       <C>       <C>         <C>
   Interest-earning deposits..............$  3,398   $   179    5.27%   $  3,192  $   160    5.01%     $  2,542  $   146     5.74%
   Mortgage- and other asset-backed
     securities(1)........................   8,380       559    6.67       7,916      510    6.44         3,566      227     6.37
   Other investment securities (1)........   6,715       444    6.61       9,965      587    5.89        11,490      701     6.10
   Loans receivable (2)...................  59,606     4,932    8.27      53,409    4,421    8.28        46,746    3,724     7.97
   Stock in FHLB of Indianapolis..........     466        37    7.94         376       29    7.71           338       27     7.99
                                            ------     -----              ------    -----                ------    -----
     Total interest-earning assets........  78,565     6,151    7.83      74,858    5,707    7.62        64,682    4,825     7.46
Non-interest earning assets, net of
   allowance for loan losses and
   unrealized gain (loss) on securities
   available for sale.....................   3,650                         2,709                          2,822
                                           -------                       -------                        -------
     Total assets......................... $82,215                       $77,567                        $67,504
                                           =======                       =======                        =======
Liabilities and stockholders' equity:
Interest-bearing liabilities:
   Savings accounts.......................  $3,347       101    3.02    $  3,298      100    3.03      $  3,986      121     3.04
   NOW and money
     market accounts......................  20,169       823    4.08      18,751      769    4.10        16,791      698     4.16
   Certificates of deposit................  35,636     1,940    5.44      32,432    1,744    5.38        31,352    1,617     5.16
   Borrowings  ...........................   4,535       251    5.53       1,889      106    5.61           501       32     6.39
                                            ------     -----              ------    -----                ------    -----
     Total interest-bearing liabilities...  63,687     3,115    4.89      56,370    2,719    4.82        52,630    2,468     4.69
Other liabilities.........................   2,506                         2,016                            529
                                           -------                       -------                        -------
     Total liabilities....................  66,193                        58,386                         53,159
Shareholders' equity
     Total shareholders' equity...........  16,022                        19,181                         14,345
                                           -------                       -------                        -------
     Total liabilities and shareholders'
       equity ............................ $82,215                       $77,567                        $67,504
                                           =======    ------             =======   ------               =======   ------
Net interest-earning assets............... $14,878                       $18,488                        $12,052
Net interest income.......................            $3,036                       $2,988                         $2,357
                                                      ======                       ======                         ======
Interest rate spread (3) .................                      2.94%                        2.80%                           2.77%
                                                                ====                         ====                            ====
Net yield on weighted average
   interest-earning assets (4)............                      3.86%                        3.99%                           3.64%
                                                                ====                         ====                            ====
Average interest-earning assets to
   average interest-bearing liabilities...  123.36%                       132.80%                        122.90%
Adjustment of interest on tax-exempt
   securities to a tax-equivalent basis...          $     50                     $     54                       $     50

</TABLE>
<PAGE>

(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.

Interest Rate Spread

         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  portfolios,  the weighted
average  effective cost 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,
                                                            1997                  1997             1996              1995
                                                       --------------------------------------------------------------------

Weighted average interest rate earned on:
<S>                                                         <C>                    <C>              <C>              <C>
   Interest-earning deposits...................             5.32%                  5.27%            5.01%            5.74%
   Mortgage-backed securities..................             6.71                   6.67             6.44             6.37
   Investment securities.......................             6.53                   6.61             5.89             6.10
   Loans receivable............................             8.33                   8.27             8.28             7.97
   Stock in FHLB of Indianapolis...............             8.01                   7.94             7.71             7.99
     Total interest-earning assets.............             7.95                   7.83             7.62             7.46

Weighted average interest rate cost of:
   Savings accounts............................             3.00                   3.02             3.03             3.04
   NOW and money market accounts...............             4.08                   4.08             4.10             4.16
   Certificates of deposit.....................             5.52                   5.44             5.38             5.16
   Borrowings..................................             5.82                   5.53             5.61             6.39
     Total interest-bearing liabilities........             4.98                   4.89             4.82             4.69

Interest rate spread (1).......................             2.97                   2.94             2.80             2.77
Net yield on weighted average
   interest-earning assets (2).................              N/A                   3.86             3.99             3.64
</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, 1997,  because the  computation of net yield is applicable  only over a
     period rather than at a specific date.



<PAGE>

         The following  table  describes the extent to which changes in interest
rates and  changes in volume of  interest-related  assets and  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 (1) changes in rate (i.e.,
changes in rate  multiplied  by old  volume)  and (2)  changes in volume  (i.e.,
changes in volume multiplied by old rate). Changes attributable to both rate and
volume have been  allocated  proportionally  to the change due to volume and the
change due to rate.

<TABLE>
<CAPTION>
                                                                   Increase (Decrease) in Net Interest Income
                                                                 Total Net           Due to              Due to
                                                                  Change              Rate               Volume
                                                                  ------              ----               ------
                                                                                 (In thousands)
Year  ended  December  31,  1997
compared  to  Year  ended  December  31,  1996
Interest-earning assets:
<S>                                                             <C>             <C>                   <C>
   Interest-earning deposits..............................      $   19          $      11             $      8
   Mortgage-backed securities.............................          49                 22                   27
   Investment securities..................................        (143)                81                 (224)
   Loans receivable.......................................         511                  8                  503
   Stock in FHLB of Indianapolis..........................           8                  1                    7
                                                               -------            -------              -------
     Total................................................         444                123                  321
                                                               -------            -------              -------
Interest-bearing liabilities:
   Savings accounts.......................................           1                ---                    1
   NOW and money market accounts..........................          54                 (4)                  58
Certificates of deposit...................................         196                 24                  172
   Borrowings.............................................         145                  1                  144
                                                               -------            -------              -------
     Total................................................         396                 21                  375
                                                               -------            -------              -------
Change in net interest income
   (fully taxable equivalent basis).......................          48                102                  (54)
Tax equivalent adjustment.................................           4                  1                    3
                                                               -------            -------              -------
Change in net interest income.............................     $    52            $   103              $   (51)
                                                               =======            =======              =======


Year  ended  December  31,  1996
compared  to  Year  ended  December  31,  1995
Interest-earning assets:
   Interest-earning deposits..............................      $   14           $    (20)              $   34
   Mortgage-backed securities.............................         283                  3                  280
   Investment securities..................................        (114)               (24)                 (90)
   Loans receivable.......................................         697                150                  547
   Stock in FHLB of Indianapolis..........................           2                 (1)                   3
                                                               -------            -------              -------
     Total................................................         882                108                  774
                                                               -------            -------              -------
Interest-bearing liabilities:
   Savings accounts.......................................         (21)               ---                  (21)
   NOW and money market accounts..........................          71                 (9)                  80
Certificates of deposit...................................         127                 70                   57
   Borrowings.............................................          74                 (4)                  78
                                                               -------            -------              -------
     Total................................................         251                 57                  194
                                                               -------            -------              -------
Change in net interest income
   (fully taxable equivalent basis).......................         631                 51                  580
Tax equivalent adjustment.................................          (4)                 1                   (5)
                                                               -------            -------              -------
Change in net interest income.............................       $ 627            $    52                $ 575
                                                               =======            =======              =======
</TABLE>


<PAGE>

Comparison of Years Ended December 31, 1997 and 1996

         General.  The Company's total assets were $86.1 million at December 31,
1997,  an  increase  of $8.4  million or 10.9% over the $77.7  million  total at
December 31, 1996. The increase in assets was funded primarily through growth in
deposits  of $3.2  million,  increases  in  borrowings  of $4.6  million  and an
increase  in   shareholders'   equity  of  $1.1  million.   The   percentage  of
interest-earning assets to total assets was 96.0% at December 31, 1997 and 96.0%
at December 31, 1996.

         At  December  31,  1997,  the total of  securities  was  $15.7  million
compared to $14.3 million at December 31, 1996, an increase of $1.4 million,  or
9.6%.  The  primary   investments  added  to  the  portfolio  were  asset-backed
securities,  with the exception of a $1.0 million FHLB callable  fixed rate note
which was funded with a matching  advance  from the Federal  Home Loan Bank.  At
December 31, 1997 the Company  held  $200,000 of  corporate  obligations  all of
which was debt of domestic  corporations rated AA or better by Moody's Investors
Service,  Inc.  The Company  had $1.1  million of  structured  FHLB notes in its
investment portfolio at December 31, 1997.

         Total  loans  increased  by $6.8  million  from  December  31,  1996 to
December 31, 1997,  an increase of 12.0%.  Most of the increase  occurred in the
one-to-four  family  mortgages and consumer loans.  One-to-four  family mortgage
loans  increased by $5.3  million,  and consumer  loans,  by $1.5  million.  The
increase was funded primarily by the increase in deposits and advances.

         During the 1997 year 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, 1997, the
project  was still in  construction;  therefore,  there was no income or loss to
allocate to the Company.

          Deposits  increased by $3.2  million to $60.6  million at December 31,
1997 from $57.4 million at December 31, 1996. Non-interest bearing deposits, NOW
accounts,  passbook  savings and money market savings  increased by $1.5 million
while  certificates  of deposits  increased  by $1.7  million.  Borrowings  also
increased  by $4.6  million  during the year.  At December  31,1996,  borrowings
consisted  of $2.0  million in FHLB  advances  and $1.4  million  borrowed  from
another  bank.  The $1.4 million  borrowed from another bank was repaid in early
1997 and at December 31, 1997 all borrowings were FHLB advances.

         Shareholders'  equity increased by $1.1 million during 1997. Equity was
used to fund regular  quarterly  dividends and was increased by the amortization
of the Company's RRP, and a recovery of unrealized  losses on available for sale
securities.  Net earnings for the year ended December 31, 1997 was $1.2 million.
This compares to net earnings of $913,000 for the year ended December 31, 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 (fully taxable  equivalent  basis). 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.  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 21 basis points 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.


<PAGE>

         Interest  Expense.  Interest expense increased by $396,000 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 by $7.3 million
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 (fully  taxable  equivalent  basis).  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.

         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  chargeoffs  of $18,256 in 1997;  there were no
chargeoffs in 1996.  The Bank also  recorded as a charitable  donation an $8,000
property held in real estate acquired through  foreclosure  during 1997 which it
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 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 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.  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.

Comparison of Years Ended December 31, 1996 and 1995

         General.  Net  earnings  for the  year  ended  December  31,  1996  was
$913,000.  This compares to net earnings of $908,000 for the year ended December
31, 1995. An increase in net interest income was offset primarily by an increase
in other expenses, including the one-time special SAIF Assessment.


<PAGE>

         Interest Income (fully taxable  equivalent  basis). The Company's total
interest  income was $5.7 million for the year ended  December 31, 1996 compared
to $4.8 million during 1995, an increase of $882,000.  Interest  income for 1996
compared  to 1995  increased  $108,000  due to higher  rates  earned on  assets,
primarily loans.  However, the largest percentage of the increase,  or $774,000,
was due to an increase in the volume of average interest earnings assets,  which
grew by $10.2 million.  The increase in average  interest  earnings  assets from
$64.7  million in 1995 to $74.9  million in 1996,  combined  with  improved loan
rates,  contributed  to an  increase in the  average  yield on interest  earning
assets of 7.62% in 1996 compared to 7.46% in 1995.  Average loan yield and yield
on asset-backed  securities improved while yield on other investment  securities
and interest-earning deposits declined.

         Interest  Expense.  Interest expense increased by $251,000 for the year
ended  December 31, 1996  compared to 1995.  This  increase was the result of an
increase  in the average  balance of the  interest-bearing  liabilities  by $3.7
million and the  increase in the average cost of these  liabilities  by 13 basis
points,  from 4.69% during 1995 to 4.82% in 1996. Local competition  resulted in
pressure  to maintain  competitive  rates;  however,  the  interest  rate spread
improved slightly in 1996.

          Net Interest  Income (fully taxable  equivalent  basis).  Net interest
income increased by $631,000 for 1996 to approximately  $3.0 million as compared
with $2.4 million in 1995. Net yield on weighted average interest-earning assets
increased to 3.99% in 1996 from 3.64% in 1995.The Company increased its yield on
earning  assets  more than its cost of funds in 1996 and this  coupled  with the
increase in total average earning assets caused the significant improvement.

         Provision for losses on loans.  The  Company's  provision for losses on
loans for the year ended  December  31,  1996 and 1995 was  $12,000  and $20,000
respectively.  This provision and the related increase in the allowance for loan
losses were considered adequate based on the condition of the loan portfolio and
the  Company's  loan loss history.  There were  recoveries of $1,270 in 1996, no
chargeoffs  in 1996 and  chargeoffs  of $3,622 in 1995.  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, 1996 and 1995,  the  allowance was $236,000 and  $223,000,  respectively,  a
ratio of 0.41% and 0.45% of total  loans at each date.  Non-performing  loans at
these dates were $406,000 and $311,000, respectively. The ratio of allowance for
loan losses to non-performing loans decreased from 71.7% at December 31, 1995 to
58.1% at December 31, 1996.  Based on management's  review of the loan portfolio
during these years,  the allowance for loan losses at December 31, 1996 and 1995
was considered to be adequate to cover losses inherent in the loan portfolio.

         Other Income.  The Company's  other income for the year ended  December
31,  1996  and 1995 was  $82,000  and  $179,000,  respectively.  The year  ended
December 31, 1995 included a $90,000 recovery on investments  previously written
off while 1996 included only $17,000 of additional  recovery.  During 1996,  the
Company recorded $47,000 of net losses on sales of securities.  Structured notes
of $3.0  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  $20,000 in 1996
compared  to 1995.  Income on the cash  surrender  value of life  insurance  was
$34,000 in 1996 and $25,000 in 1995.

         General,  Administraive and Other Expense. General,  administrative and
other expense  totaled $1.6 million in 1996 compared to $1.0 million in 1995, an
increase of $552,000 or 53.5%.  Salaries and payroll taxes increased by $162,000
as a result of additional personnel, merit pay increases,  implementation of the
RRP, and higher costs of other fringe benefits.  Pension plan expense  decreased
by $36,000 resulting in a net increase in employee  compensation and benefits of
$130,000.  Deposit  insurance costs increased  $333,000 due to the one-time SAIF
recapitalization assessment. Data processing fees decreased $2,000 for the year.
Various other operating expenses increased by $93,000. Expenses related to being
a public company such as accounting fees, legal fees, filing fees, annual report
and  meeting  costs and  transfer  agent  costs  accounted  for  $57,000  of the
increase.  The balance of the increase was related to additional operating costs
associated with increased account volume, new services, and advertising.


<PAGE>

         Income Tax Expense. Income tax expense for the years ended December 31,
1996 and 1995 was $507,000 and $526,000. Pretax income declined slightly in 1996
over 1995 and this resulted in a corresponding decrease in income tax expense.

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, 1997, 1996, and 1995, the Company originated  mortgage loans in the
amounts of $13.5  million,  $13.2  million and $8.6 million,  respectively.  The
Company  originated  consumer  loans  of $6.2  million,  $6.1  million  and $4.8
million,  respectively.  The Company  purchased no loans,  excluding  commercial
paper, in 1997, and purchased loans, excluding commercial paper, of $1.0 million
in 1996 and 1995. Loan repayments,  excluding  commercial  paper,  totaled $12.9
million, $12.4 million, and $9.3 million for 1997, 1996, and 1995, respectively.

         During the years ended  December 31, 1997,  1996, and 1995, the Company
purchased  investment  securities in the amounts of $7.5 million,  $8.7 million,
and $13.6 million, respectively.  Sales or maturities of such securities held by
the Company and payments on  mortgage-backed  or other  asset-backed  securities
were $5.7 million,  $12.8  million,  and $6.6 million for 1997,  1996, and 1995,
respectively.

         Deposits  grew by $4.9 million  from  December 31, 1995 to December 31,
1996, and by $3.2 million from December 31, 1996 to December 31, 1997.

         The Company  experienced  an increase in cash and cash  equivalents  to
$3.8 million at December  31, 1996 from $3.2 million at December 31, 1995.  From
December 31, 1996 to December 31, 1997, cash and cash  equivalents  decreased by
$1.5 million.

         At  December  31,  1997 and 1996,  the  Company  had  outstanding  loan
commitments  and  standby  letters  of credit  totaling  $3.1  million  and $2.3
million,  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, 1997 and
1996  totaled  $22.5  million  and  $19.9  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, 1997 and 1996, the Company had outstanding FHLB advances of $6.5 million and
$2.0 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
associations's  fiscal year. The OTS may impose monetary  penalties upon savings
associations  that fail to  comply  with  those  liquidity  requirements.  As of
December 31, 1997, the Bank had liquid assets of $16.0 million, and a regulatory
liquidity ratio of 37.4%.


<PAGE>

         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, 1997, the Bank's tangible  capital ratio was 19.1%,
its leverage ratio was 19.1%, and its risk-based capital to risk-weighted assets
ratio  was  35.2%.   Therefore,   at  December  31,  1997,  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, 1997:

<TABLE>
<CAPTION>
                                                                     At December 31, 1997
                                                       OTS Requirement                        The Bank's Capital Level
                                                   % of                               % of                              Amount
Capital Standard                                  Assets            Amount          Assets(1)          Amount          of Excess
                                                                             (Dollars in thousands)
<S>                                                 <C>              <C>             <C>               <C>               <C>
Tangible capital............................        1.5%             $1,289          19.1%             $16,412           $15,123
Core capital (2)............................        3.0               2,578          19.1               16,412            13,834
Risk-based capital..........................        8.0               3,781          35.2               16,657 (3)        12,876
</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  $245,000 of general valuation
         allowances.

         As of  December  31,  1997,  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.

Year 2000 Compliance

         Because computer memory was so expensive on early mainframe  computers,
some  computer  programs used only the final two digits for the year in the date
field while maintaining the first two digits of each year constant. As a result,
some computer  applications may be unable to interpret the change from year 1999
to the year 2000.  The Company is  actively  monitoring  its year 2000  computer
compliance  issues.  The bulk of the Company's  computer  processing is provided
under  contract  by  Intrieve  Corporation  in  Cincinnati,  Ohio  ("Intrieve").
Intrieve  expects to be year 2000  compliant by December,  1998.  Intrieve  will
assist the Company  with other  phases of year 2000  compliance  throughout  the
remainder of 1998 and 1999. The Bank's loan documentation  system is provided by
Banker's  Systems and is also expected to be year 2000 compliant within the next
year.  The Company has also  appointed one of its executive  officers to address
all aspects of year 2000 compliance.


<PAGE>

Effects of Recent Accounting Pronouncements

         In June 1996, the Financial  Accounting Standards Board ("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  effective  January  1,  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.

         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.  SFAS No. 130 is not expected to
have a material impact on the Company's financial statements.

         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 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 also requires that  selected  information  be
reported in interim financial  statements.  SFAS No. 131 is effective for fiscal
years  beginning after December 15, 1997. SFAS No. 131 is not expected to have a
material impact on the Company's financial statements.


<PAGE>

                              CHANGE IN ACCOUNTANTS

         On August 12,  1997,  the Board of  Directors  of the  Holding  Company
selected the accounting  firm of Grant Thornton LLP to examine the  consolidated
financial  statements  of the Company for the fiscal  year ending  December  31,
1997.

         The audit reports issued by Geo. S. Olive & Co. LLC with respect to the
Company's consolidated financial statements for 1995 and 1996 did not contain an
adverse  opinion  or  disclaimer  of  opinion,  and  were  not  qualified  as to
uncertainty, audit scope or accounting principles. During 1995 and 1996 (and any
subsequent interim period), there have been no disagreements between the Company
and Geo. S. Olive & Co. LLC on any matter of accounting principles or practices,
financial   statement   disclosure  or  auditing   scope  or  procedure,   which
disagreements,  if not resolved to the  satisfaction of Geo. S. Olive & Co. LLC,
would  have  caused  it to  make  a  reference  to  the  subject  matter  of the
disagreement in connection with its audit report.  Moreover,  none of the events
listed in Item  304(a)(1)(v)  of Regulation S-K occurred  during 1995 or 1996 or
any subsequent interim period.

         In  1996,  the  Company  consulted  Grant  Thornton  LLP for  financial
accounting and tax advice  regarding a tax-free return of capital which was paid
in 1996.  Grant Thornton LLP provided a letter to the Company  stating its views
with respect to accounting  for the exercise  price of stock  options  following
such return of capital  distribution.  Their written views are  incorporated  by
reference to Exhibit A to the Company's  Current  Report on Form 8-K, filed with
the Commission on August 19, 1997. Geo. S. Olive & Co. LLC was consulted  during
its  completion of the 1996 audit of the  consolidated  financial  statements in
1997 for concurrence with Grant Thornton LLP on their written views, and Geo. S.
Olive & Co. LLC concurred.

<PAGE>

                                                                       Suite 900
                                                             625 Eden Park Drive
                                                      Cincinnati, OH  45202-4181
                                                                    513 762-5000

                                                                FAX 513 241-6125



                                                                  GRANT THORNTON
                                                              Grant Thornton LLP
                                                                 Accountants and
                                                          Management Consultants

                                                         The U.S. Member Firm of
                                                    Grant Thornton International


               Report of Independent Certified Public Accountants

Board of Directors
Logansport Financial Corp.

We have audited the accompanying  consolidated  statement of financial condition
of  Logansport  Financial  Corp.  as of  December  31,  1997,  and  the  related
consolidated  statements of earnings,  shareholders'  equity, and cash flows for
the  year  then  ended.   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 audit. The
consolidated  financial  statements  as of December 31, 1996,  and for the years
ended  December 31, 1996 and 1995 were audited by other  auditors,  whose report
thereon  dated  January 23,  1997,  expressed  an  unqualified  opinion on those
statements.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

In our opinion,  the 1997 financial statements referred to above present fairly,
in all material  respects,  the  consolidated  financial  position of Logansport
Financial  Corp. as of December 31, 1997,  and the  consolidated  results of its
operations  and its cash  flows  for the year then  ended,  in  conformity  with
generally accepted accounting principles.

/s/ Grant Thornton LLP

Cincinnati, Ohio
February 24, 1998


<PAGE>

                           LOGANSPORT FINANCIAL CORP.
                 Consolidated Statements of Financial Condition

                                  December 31,
                        (In thousands, except share data)

<TABLE>
<CAPTION>
   ASSETS                                                                             1997            1996

<S>                                                                                <C>             <C>
Cash and due from banks                                                            $      589      $       998
Interest-bearing deposits in other financial institutions                               1,680            2,761
                                                                                      -------          -------
   Cash and cash equivalents                                                            2,269            3,759
Certificates of deposit in other financial institutions                                   100              100
Investment securities available for sale - at market                                    5,750            7,629
Mortgage-backed securities available for sale - at market                               9,932            6,674
Loans receivable - net                                                                 63,635           56,802
Real estate acquired through foreclosure - net                                            106               -
Office premises and equipment - at depreciated cost                                       465              476
Federal Home Loan Bank stock - at cost                                                    494              387
Investment in real estate partnership                                                   1,540               -
Accrued interest receivable on loans                                                      299              266
Accrued interest receivable on mortgage-backed securities                                  83               54
Accrued interest receivable on investments and interest-bearing deposits                  121              127
Prepaid expenses and other assets                                                          33               42
Cash surrender value of life insurance                                                  1,085            1,040
Deferred income tax asset                                                                 203              312
                                                                                      -------          -------
   Total assets                                                                       $86,115          $77,668
                                                                                      =======          =======

   LIABILITIES AND SHAREHOLDERS' EQUITY

Deposits                                                                              $60,595          $57,396
Advances from the Federal Home Loan Bank                                                6,500            2,000
Notes payable                                                                           1,525            1,400
Accrued interest and other liabilities                                                    861            1,391
Accrued income taxes                                                                       92               54
                                                                                      -------          -------
   Total liabilities                                                                   69,573           62,241

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; 1,260,920
    and 1,256,375 shares at aggregate value issued and outstanding at
    December 31, 1997 and 1996                                                          7,566            7,518
  Retained earnings - restricted                                                        9,316            8,588
  Less shares acquired by stock benefit plan                                             (400)            (522)
  Unrealized gains (losses) on securities designated as available for sale,
    net of related tax effects                                                             60             (157)
                                                                                      -------          -------
     Total shareholders' equity                                                        16,542           15,427
                                                                                      -------          -------
     Total liabilities and shareholders' equity                                       $86,115          $77,668
                                                                                      =======          =======
</TABLE>

The accompanying notes are an integral part of these statements.

<PAGE>

                           LOGANSPORT FINANCIAL CORP.
                       Consolidated Statements of Earnings

                         For the Year Ended December 31,
                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                      1997             1996              1995
Interest income
<S>                                                                  <C>               <C>              <C>
   Loans                                                             $4,932            $4,421           $3,724
   Mortgage-backed securities                                           559               510              227
   Investment securities                                                394               533              651
   Interest-bearing deposits and other                                  216               189              173
                                                                   --------          --------          -------
     Total interest income                                            6,101             5,653            4,775

Interest expense
   Deposits                                                           2,864             2,613            2,436
   Borrowings                                                           251               106               32
                                                                   --------          --------          -------
     Total interest expense                                           3,115             2,719            2,468
                                                                   --------          --------          -------
   Net interest income                                                2,986             2,934            2,307

Provision for losses on loans                                            26                12               20
                                                                   --------          --------          -------
   Net interest income after provision for losses on loans            2,960             2,922            2,287

Other income
   Service charges on deposit accounts                                   88                67               47
   Gain (loss) on sale of investment and mortgage-backed securities     (50)              (47)               3
   Gain on sale of real estate acquired through foreclosure               1                 1               12
   Other operating                                                      131                61              117
                                                                   --------          --------          -------
     Total other income                                                 170                82              179

General, administrative and other expense
   Employee compensation and benefits                                   649               661              531
   Occupancy and equipment                                               78                81               81
   Federal deposit insurance premiums                                    37               449              116
   Data processing                                                       96                91               93
   Other operating                                                      310               302              211
                                                                   --------          --------          -------
     Total general, administrative and other expense                  1,170             1,584            1,032
                                                                   --------          --------          -------
   Earnings before income taxes                                       1,960             1,420            1,434

Income taxes
   Current                                                              761               593              519
   Deferred                                                             (33)              (86)               7
                                                                   --------          --------          -------
     Total income taxes                                                 728               507              526
                                                                   --------          --------          -------
   NET EARNINGS                                                      $1,232           $   913          $   908
                                                                   ========          ========          =======
   EARNINGS PER SHARE
   Basic                                                           $    .98          $    .69              N/A
                                                                   ========          ========          =======
   Diluted                                                         $    .95          $    .69              N/A
                                                                   ========          ========          =======
</TABLE>

The accompanying notes are an integral part of these statements.


<PAGE>

                           LOGANSPORT FINANCIAL CORP.
                 Consolidated Statements of Shareholders' Equity

              For the years ended December 31, 1997, 1996 and 1995

                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                             Shares       Unrealized
                                                                            acquired   gains (losses) on
                                                                            by stock      securities
                                                  Common      Retained       benefit       available
                                                   stock      earnings        plan         for sale       Total
                                                 ------------------------------------------------------------------
<S>                                             <C>           <C>             <C>          <C>          <C>
Balance at January 1, 1995                        $     -       $7,131          $ -          $(297)       $  6,834

Net earnings for the year ended
  December 31, 1995                                     -          908            -             -              908
Proceeds from issuance of common
  stock - net                                       12,670          -             -             -           12,670
Unrealized gains on securities designated
  as available for sale, net of related
  tax effects                                           -           -             -            307             307
Cash dividends of $.20 per share                        -         (265)           -             -             (265)
                                                  --------      ------         -----        ------         -------
Balance at December 31, 1995                        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
                                                  ========      ======         =====        ======         =======
</TABLE>


The accompanying notes are an integral part of these statements.

<PAGE>
                           LOGANSPORT FINANCIAL CORP.
                      Consolidated Statements of Cash Flows
                         For the year ended December 31,
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                1997              1996              1995

Cash flows from operating activities:
<S>                                                            <C>             <C>               <C>
   Net earnings for the year                                   $  1,232        $     913         $     908
   Adjustments to reconcile net earnings
      to net cash provided by
      (used in) operating activities:
   Depreciation and amortization                                     37               38                46
   Amortization of premiums on investments and
      mortgage-backed securities                                    104               36               (21)
   Amortization expense of stock benefit plan                       122               93                -
   (Gain) loss on sale of investment and
      mortgage-backed securities                                     50               47                (3)
      Provision for losses on loans                                  26               12                20
      Gain on sale of real estate acquired through foreclosure       (1)              (1)              (12)
      Increase (decrease) in cash, due to changes in:
      Accrued interest receivable on loans                          (33)             (37)              (56)
      Accrued interest receivable on mortgage-backed securities     (29)              (2)              (48)
      Accrued interest receivable on investments                      6               58                (6)
      Prepaid expenses and other assets                               9               25               (95)
      Accrued interest and other liabilities                       (530)             (89)              302
      Federal income taxes
         Current                                                     38              (32)              149
         Deferred                                                   (33)             (86)                7
                                                               --------        ---------         ---------
   Net cash provided by operating activities                        998              975             1,191

Cash flows provided by (used in) investing activities:
   Increase in certificates of deposit in
      other financial institutions                                    -                -              (100)
   Proceeds from sale of investment securities
      designated as available for sale                            2,495            3,835               708
   Purchase of investment securities designated
      as available for sale                                      (2,100)          (2,834)           (8,057)
   Purchase of investment securities designated
      as held to maturity                                             -                -              (356)
   Maturities of investment securities designated
      as available for sale                                       1,471            2,877             3,939
   Maturities of investment securities designated
      as held to maturity                                             -                -               450
   Purchase of Federal Home Loan Bank stock                        (107)             (38)              (41)
   Proceeds from sale of mortgage-backed
      securities designated as
      available for sale                                            421            3,503                -
   Purchase of mortgage-backed securities designated
      as available for sale                                      (5,126)          (5,178)               -
   Purchase of mortgage-backed securities designated
      as held to maturity                                            -                -             (5,175)
   Principal repayments on mortgage-backed
      securities designated as
      available for sale                                          1,665            2,971             1,109
   Purchase of loans                                                 -            (1,046)           (4,852)
   Loan disbursements                                           (19,769)         (19,211)          (13,397)
   Investment in real estate partnership                            (15)              -                 -
   Principal repayments on loans                                 12,791           13,303            12,461
   Purchases and additions to office premises and equipment         (26)             (83)              (63)
   Proceeds from sale of real estate acquired through foreclosure    14               15                 9
   Increase in cash surrender value of life insurance policy        (45)             (35)              (25)
                                                               --------        ---------         ---------
   Net cash used in investing activities                         (8,331)          (1,921)          (13,390)
                                                               --------        ---------         ---------
   Net cash used in operating and investing activities
      (subtotal carried forward)                                 (7,333)            (946)          (12,199)
                                                               --------        ---------         ---------
</TABLE>

<PAGE>

                           LOGANSPORT FINANCIAL CORP.
                      Consolidated Statements of Cash Flows
                         For the year ended December 31,
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                1997              1996              1995
<S>                                                            <C>               <C>              <C>
   Net cash used in operating and investing activities
      (subtotal brought forward)                               $ (7,333)         $  (946)         $(12,199)

Cash provided by (used in) financing activities:
   Net increase in deposit accounts                               3,199            4,935             1,259
   Proceeds from Federal Home Loan Bank advances                 10,500            6,000             1,000
   Proceeds from note payable                                       100            1,400                -
   Repayment of Federal Home Loan Bank advances                  (6,000)          (5,000)           (1,000)
   Repayment of note payable                                     (1,500)              -                 -
   Proceeds from the exercise of stock options                       48               -                 -
   Proceeds from issuance of common stock - net                      -                -             12,670
   Return of capital distribution                                    -            (3,930)               -
   Purchase of shares for stock benefit plan                         -              (615)               -
   Dividends on common stock                                       (504)            (529)             (132)
   Purchase of shares                                                -              (799)               -
                                                               --------        ---------         ---------
      Net cash provided by financing activities                   5,843            1,462            13,797
                                                               --------        ---------         ---------
Net increase (decrease) in cash and cash equivalents             (1,490)             516             1,598

Cash and cash equivalents at beginning of year                    3,759            3,243             1,645
                                                               --------        ---------         ---------
Cash and cash equivalents at end of year                       $  2,269           $3,759         $   3,243
                                                               ========           ======         =========

Supplemental disclosure of cash flow information:
Cash paid during the year for:
  Income taxes                                                 $    680           $  629         $     412
                                                               ========           ======         =========
  Interest on deposits and borrowings                          $  3,129           $2,699         $   2,450
                                                               ========           ======         =========
Supplemental disclosure of noncash investing
  and financing activities:
  Foreclosed mortgage loans transferred to real
      estate acquired through foreclosure                      $    136           $   18         $      84
                                                               ========           ======         =========
  Transfer of investment and mortgage-backed securities
      to an available for sale classification                  $    ---           $  ---         $  10,016
                                                               ========           ======         =========
  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                     $    217           $ (167)       $      307
                                                               ========           ======         =========
  Due from broker for called securities                        $    ---           $  ---        $      400
                                                               ========           ======         =========
  Due to broker for purchased securities                       $    ---           $  706        $      ---
                                                               ========           ======         =========
  Dividends payable at end of year                             $    126           $  126        $      132
                                                               ========           ======         =========
</TABLE>


The accompanying notes are an integral part of these statements.

<PAGE>

                           LOGANSPORT FINANCIAL CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1997, 1996 and 1995

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

During  1995,  the Board of  Directors  of  Logansport  Savings  Bank,  FSB (the
"Savings  Bank") adopted an overall plan of conversion and  reorganization  (the
"Plan")  whereby the Savings  Bank would  convert to the stock form of ownership
(the  "Conversion"),  followed  by the  issuance  of all of the  Savings  Bank's
outstanding stock to a newly formed holding company,  Logansport Financial Corp.
(the  "Corporation"),  and the issuance of common shares of the  Corporation  to
subscribing  members of the Savings  Bank.  The  conversion to the stock form of
ownership was completed in June 1995,  culminating in the Corporation's issuance
of 1,322,500 common shares.  Condensed  financial  statements of the Corporation
are presented in Note O. Future references are made to either the Corporation or
the Savings Bank as applicable.

The  Corporation  is a savings and loan holding  company  whose  activities  are
primarily  limited to holding the common stock of 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, 1997 and 1996, the Corporation's  shareholders'  equity accounts
reflected a net unrealized  gain and a net unrealized loss on available for sale
securities of $60,000 and $157,000, respectively.

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


<PAGE>

                           LOGANSPORT FINANCIAL CORP.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                        December 31, 1997, 1996 and 1995

NOTE A - SUMMARY OF SIGNIFICANT 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.


<PAGE>

                           LOGANSPORT FINANCIAL CORP.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                        December 31, 1997, 1996 and 1995

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,  1997 and 1996,  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.

9.  Income Taxes

The Corporation  accounts for income taxes pursuant to SFAS No. 109, "Accounting
for Income Taxes". SFAS No. 109 established  financial  accounting and reporting
standards  for the effects of income  taxes that  result from the  Corporation's
activities  within the current and previous  years.  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


<PAGE>

                           LOGANSPORT FINANCIAL CORP.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                        December 31, 1997, 1996 and 1995

NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

9.  Income Taxes (continued)

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, 1997 and 1996.  Pension  expense was $36,000
for the year ended  December 31, 1995.  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 and $1.0  million at December  31, 1997 and 1996.  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  $99,000,  $87,000  and  $76,000  for the years  ended
December 31, 1997, 1996 and 1995, respectively.

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, 1997, 1996 or 1995.


<PAGE>

                           LOGANSPORT FINANCIAL CORP.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                        December 31, 1997, 1996 and 1995

NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

10.  Benefit Plans (continued)

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 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. Amortization expense under the RRP
totaled  $123,000  and $92,000 for the years ended  December  31, 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
1,259,162  and  1,316,372  for the  years  ended  December  31,  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 32,384 and 8,600  incremental  shares from  assumed  exercise of stock
options,  totaled  1,291,546 and 1,324,972 for the years ended December 31, 1997
and 1996,  respectively.  The provisions of SFAS No. 128,  "Earnings Per Share,"
are not applicable for the year ended December 31, 1995, as the  Corporation was
not a stock  company for the entire year.  During  1996,  the  Corporation  paid
capital distributions of $3.32 with respect to its common stock and dividends of
$.08 per share.

Effective December 31, 1997, the Corporation began presenting earnings per share
pursuant to the  provisions of SFAS No. 128. In accordance  with the  Statement,
the 1996 earnings per share presentation has been revised to conform to SFAS No.
128.

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.


<PAGE>

                           LOGANSPORT FINANCIAL CORP.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                        December 31, 1997, 1996 and 1995

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, 1997 and
1996:

         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, 1997 and 1996.  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,
         1997 and 1996,  the  difference  between  the fair  value and  notional
         amount of loan commitments was not material.


<PAGE>

                           LOGANSPORT FINANCIAL CORP.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                        December 31, 1997, 1996 and 1995

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>

                                                       1997                      1996
                                              Carrying       Fair       Carrying       Fair
                                                value        value        value        value
                                                               (In thousands)
Financial assets
<S>                                          <C>          <C>           <C>          <C>
   Cash and cash equivalents                 $  2,269     $  2,269      $  3,759     $  3,759
   Certificates of deposit                        100          100           100          100
   Investment securities                        5,750        5,750         7,629        7,629
   Mortgage-backed securities                   9,932        9,932         6,674        6,674
   Loans receivable                            63,635       66,286        56,802       57,310
   Federal Home Loan Bank stock                   494          494           387          387
                                              -------      -------       -------      -------
                                              $82,180      $84,831       $75,351      $75,859
                                              =======      =======       =======      =======

Financial liabilities
   Deposits                                   $60,595      $60,554       $57,396      $57,257
   Advances from Federal Home
     Loan Bank                                  6,500        6,499         2,000        1,998
   Notes payable                                1,525        1,525         1,400        1,400
   Due to broker                                  ---          ---           706          706
                                              -------      -------       -------      -------
                                              $68,620      $68,578       $61,502      $61,361
                                              =======      =======       =======      =======
</TABLE>

14.  Advertising

Advertising costs are expensed when incurred.

15.  Reclassifications

Certain  prior  year  amounts  have been  reclassified  to  conform  to the 1997
consolidated financial statement presentation.


<PAGE>

                           LOGANSPORT FINANCIAL CORP.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                        December 31, 1997, 1996 and 1995

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, 1997 and 1996, are as follows:

<TABLE>
<CAPTION>
                                                                         1997
                                                                Gross             Gross          Estimated
                                             Amortized       unrealized        unrealized          fair
                                               cost             gains            losses            value
                                                                     (In thousands)
<S>                                            <C>               <C>                <C>             <C>
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>


<TABLE>
<CAPTION>

                                                                         1996
                                                                Gross             Gross          Estimated
                                             Amortized       unrealized        unrealized          fair
                                               cost             gains            losses            value
                                                                     (In thousands)
<S>                                            <C>               <C>                <C>             <C>
U.S. Government agency obligations             $5,245            $    1             $366            $4,880
State and municipal obligations                 2,194                48               -              2,242
FHLMC stock                                         6               153               -                159
Corporate debt obligations                        350                -                 2               348
                                               ------              ----             ----            ------
   Total investment securities                 $7,795              $202             $368            $7,629
                                               ======              ====             ====            ======

</TABLE>
The amortized cost and estimated fair value of investment  securities by term to
maturity at December 31, 1997, are shown below.

                                                                Estimated
                                          Amortized               fair
                                            cost                  value
                                                (In thousands)
Due in one year or less                    $   356               $   359
Due after one year through five years          475                   452
Due after five through ten years             4,437                 4,375
Due after ten years                            310                   321
                                            ------                ------
                                             5,578                 5,507
FHLMC stock                                      6                   243
                                            ------                ------
                                            $5,584                $5,750
                                            ======                ======


<PAGE>

                           LOGANSPORT FINANCIAL CORP.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                        December 31, 1997, 1996 and 1995

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

The  amortized  cost,  gross  unrealized  gains,  gross  unrealized  losses  and
estimated  fair values of  mortgage-backed  securities  at December 31, 1997 and
1996.

<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>

<TABLE>
<CAPTION>
                                                                         1996
                                                                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      $1,112            $    2            $  11            $1,103
Government National Mortgage
   Association participation certificates       1,758                -                47             1,711
Federal National Mortgage
   Association participation certificates       2,202                 5               32             2,175
Federal Housing Authority participation
   certificates                                   703                -                -                703
Small Business Administration
   participation certificates                     729                -                10               719

Other                                             264                 1                2               263
                                               ------               ---            -----            ------
   Total mortgage-backed securities            $6,768            $    8             $102            $6,674
                                               ======            ======             ====            ======
</TABLE>

The amortized  cost and estimated  fair value of  mortgage-backed  securities at
December 31, 1997 and 1996, by contractual  terms to maturity,  are shown below.
Expected  maturities will differ from contractual  maturities  because borrowers
may generally prepay obligations without prepayment penalties.
<PAGE>


                           LOGANSPORT FINANCIAL CORP.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                        December 31, 1997, 1996 and 1995

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

<TABLE>
<CAPTION>
                                                       1997                                1996
                                                              Estimated                          Estimated
                                             Amortized          fair            Amortized          fair
                                               cost             value             cost             value
                                                                    (In thousands)
<S>                                            <C>               <C>              <C>               <C>
Due within one year                            $1,927            $1,915           $1,556            $1,539
Due after one year to three years               2,285             2,266            1,483             1,464
Due after three years to five years             1,349             1,337              816               803
Due after five years to ten years               1,825             1,806            1,331             1,307
Due after ten years                             2,612             2,608            1,582             1,561
                                               ------            ------           ------            ------
Total mortgage-backed securities               $9,998            $9,932           $6,768            $6,674
                                               ======            ======           ======            ======
</TABLE>

NOTE C - LOANS RECEIVABLE

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

<TABLE>
<CAPTION>
                                                       1997                    1996
                                                                 (In thousands)
Residential real estate
<S>                                                    <C>                   <C>
   One- to four-family residential                     $46,419               $41,109
   Multi-family residential                              1,844                 2,370
   Construction                                          1,333                 1,016
Commercial                                               3,072                 2,701
Consumer and other                                      11,379                 9,864
                                                       -------               -------
                                                        64,047                57,060
Less:
   Undisbursed portion of loans in process                 167                    22
   Allowance for loan losses                               245                   236
                                                       -------               -------
                                                       $63,635               $56,802
                                                       =======               =======
</TABLE>

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  $49.6 million,  or 77%, of the total loan portfolio at
December 31, 1997, and $44.5 million,  or 78% of the total portfolio at December
31, 1996.  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  $431,000 and $492,000, at December 31, 1997 and
1996, respectively.


<PAGE>

                           LOGANSPORT FINANCIAL CORP.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                        December 31, 1997, 1996 and 1995

NOTE D - ALLOWANCE FOR LOAN LOSSES

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

                                                  1997      1996        1995
                                                       (In thousands)
Beginning balance                                 $236       $223        $206
Provision for loan losses                           26         12          20
Recoveries (charge-offs) of loans - net            (17)         1          (3)
                                                  ----       ----        ----
Ending balance                                    $245       $236        $223
                                                  ====       ====        ====

At December 31, 1997, 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,  1997,  1996 and 1995,  the Savings Bank had loans of $431,000,
$406,000 and $311,000,  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 $24,000,  $22,000 and $15,000 for the years ended December
31, 1997, 1996 and 1995, respectively.

NOTE E - OFFICE PREMISES AND EQUIPMENT

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

                                                          1997        1996
                                                             (In thousands)
Land                                                      $203        $203
Buildings and improvements                                 460         443
Furniture and equipment                                    264         264
                                                          ----        ----
                                                           927         910
Less accumulated depreciation and amortization            (462)       (434)
                                                          ----        ----
                                                          $465        $476
                                                          ====        ====

The  Corporation  intends to commence with expansion of its main office facility
in 1998. As of December 31, 1997, the  Corporation  has committed  approximately
$1.5 million to such expansion and renovation  which is expected to be completed
during fiscal 1999.


<PAGE>

                           LOGANSPORT FINANCIAL CORP.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                        December 31, 1997, 1996 and 1995

NOTE F - DEPOSITS

Deposits consist of the following major classifications at December 31:

<TABLE>
<CAPTION>
Deposit type and weighted average
interest rate                                               1997               1996
                                                                (In thousands)
NOW accounts
<S>                                                     <C>                 <C>
   December 31, 1997 - 1.99%                              $  4,196
   December 31, 1996 - 2.14%                                                $  4,017
Passbook and club accounts
   December 31, 1997 - 3.00%                                 3,070
   December 31, 1996 - 3.00%                                                   3,119
Money market deposit accounts
   December 31, 1997 - 4.61%                                16,736
   December 31, 1996 - 4.59%                                                  15,646
Non-interest bearing accounts                                  862               631
                                                            ------            ------
    Total demand, transaction and passbook deposits         24,864            23,413

Certificates of deposit
Original maturities of:
Less than 12 months
   December 31, 1997 - 5.01%                                 3,903
   December 31, 1996 - 5.07%                                                   4,883
12 months to 18 months
   December 31, 1997 - 5.42%                                 6,770
   December 31, 1996 - 5.31%                                                   5,906
24 months to 30 months
   December 31, 1997 - 5.65%                                16,812
   December 31, 1996 - 5.53%                                                  14,790
More than 30 months
   December 31, 1997 - 5.53%                                 3,552
   December 31, 1996 - 5.55%                                                   3,757
Individual retirement accounts
   December 31, 1997 - 5.63%                                 4,694
   December 31, 1996 - 5.61%                                                   4,647
                                                           -------           -------
Total certificates of deposit                               35,731            33,983
                                                           -------           -------
Total deposits                                             $60,595           $57,396
                                                           =======           =======
</TABLE>


At December  31,  1997 and 1996,  the Savings  Bank had  certificate  of deposit
accounts  with  balances  greater than  $100,000  totaling $3.8 million and $4.4
million, respectively.

<PAGE>


                           LOGANSPORT FINANCIAL CORP.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                        December 31, 1997, 1996 and 1995

NOTE F - DEPOSITS (continued)

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

<TABLE>
<CAPTION>
                                                   1997              1996              1995
                                                               (In thousands)
<S>                                               <C>               <C>              <C>
Passbook and money market deposit accounts        $   837           $   763          $   715
NOW accounts                                           87               106              104
Certificates of deposit                             1,940             1,744            1,617
                                                   ------            ------           ------
                                                   $2,864            $2,613           $2,436
                                                   ======            ======           ======
</TABLE>

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

                                                    1997              1996
                                                         (In thousands)
Less than one year                                 $22,523          $19,939
One to three years                                  11,989           12,789
Over three years                                     1,219            1,255
                                                   -------          -------
                                                   $35,731          $33,983
                                                   =======          =======

NOTE G - ADVANCES FROM THE FEDERAL HOME LOAN BANK

Advances from the Federal Home Loan Bank, collateralized at December 31, 1997 by
a  blanket  pledge  of  residential  mortgage  loans,  and  the  Savings  Bank's
investment in certain U.S.  Government  agency  securities  and  mortgage-backed
securities totaling $13.3 million, are summarized as follows:

                      Maturing year            December 31,
Interest rate      ending December 31,     1997             1996
                                              (In thousands)
5.38%                       1997          $   -             $2,000
5.70% - 5.89%               1998           4,000                -
5.65% - 6.09%               1999           2,500                -
                                          ------            ------
                                          $6,500            $2,000
                                          ======            ======
Weighted-average interest rate             5.79%              5.38%
                                          ======            ======

NOTE H - NOTES PAYABLE

At December 31, 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. At December 31, 1997, the interest rate
on the variable rate borrowing was 4.35%.

At December 31, 1996, notes payable consisted of short-term  borrowings  secured
by 100% of the Bank's  common  stock,  with  interest at the prime rate,  from a
commercial bank. The note was repaid in January 1997.

<PAGE>


                           LOGANSPORT FINANCIAL CORP.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                        December 31, 1997, 1996 and 1995

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>
                                                                  1997              1996              1995
                                                                               (In thousands)
<S>                                                                <C>              <C>               <C>
Federal income taxes computed at the statutory rate                $666             $483              $488
Increase (decrease) in taxes resulting from:
  Tax exempt interest                                               (34)             (37)              (35)
  Increase in cash surrender value of life insurance                (15)             (12)               (9)
  State income taxes                                                112               79                82
  Other                                                              (1)              (6)               -
                                                                   ----             ----              ----
Income tax provision per consolidated
  financial statements                                             $728             $507              $526
                                                                   ====             ====              ====
</TABLE>


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

<TABLE>
<CAPTION>
Taxes (payable) refundable on temporary                               1997                     1996
differences at statutory rate:                                              (In thousands)
Deferred tax assets:
<S>                                                                   <C>                     <C>
   Other than temporary declines in investment securities             $  23                   $  33
   Retirement expense                                                   132                     101
   General loan loss allowance                                          104                     100
   Unrealized losses on securities designated as available for sale      -                      103
   Stock benefit plan expense                                            83                      72
   Other                                                                  7                       7
                                                                       ----                    ----
     Total deferred tax assets                                          349                     416

Deferred tax liabilities:
   State income taxes                                                   (23)                    (21)
   Percentage of earnings bad debt deduction                            (74)                    (74)
   Unrealized gains on securities designated as available for sale      (40)                     -
   Book vs. tax depreciation                                             (9)                     (9)
                                                                       ----                    ----
     Total deferred tax liabilities                                    (146)                   (104)
                                                                       ----                    ----
     Net deferred tax asset                                            $203                    $312
                                                                       ====                    ====
</TABLE>

<PAGE>

                           LOGANSPORT FINANCIAL CORP.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                        December 31, 1997, 1996 and 1995

NOTE I - INCOME TAXES (continued)

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, 1997. 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,
1997.  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.

At  December  31,  1997,  the  Savings  Bank  had  outstanding   commitments  of
approximately  $1.5 million to originate loans.  Additionally,  the Savings Bank
had unused  lines of credit  totaling  $560,000 at  December  31,  1997.  In the
opinion of management, all loan commitments equaled or exceeded prevalent market
interest rates as of December 31, 1997, and will be funded from normal cash flow
from  operations.  Finally,  the Savings Bank had a  commitment  under a standby
letter of credit  totaling  $759,000 at December  31, 1997.  Standby  letters of
credit are conditional  commitments  issued by the Savings Bank to guarantee the
performance of a customer to a third party.


<PAGE>

                           LOGANSPORT FINANCIAL CORP.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                        December 31, 1997, 1996 and 1995

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, 1997 and 1996,  management believes that the Savings Bank met
all capital adequacy requirements to which it is subject.

<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>        <C> <C>         <C> <C>
Tangible capital       $16,412      19.1%         (1) $1,289      (1) 1.5%       (1) $4,297      (1) 5.0%
Core capital           $16,412      19.1%         (1) $2,578      (1) 3.0%       (1) $5,156      (1) 6.0%
Risk-based capital     $16,657      35.2%         (1) $3,781      (1) 8.0%       (1) $4,726     (1) 10.0%

1996:                                                                                 To be "well-
                                                                                   capitalized" under
                                                          For capital               prompt corrective
                             Actual                    adequacy purposes            action provisions
                      ---------------------       ---------------------------    ------------------------
                      Amount         Ratio           Amount          Ratio          Amount        Ratio
                                                      (Dollars in thousands)
Tangible capital       $17,018      21.9%         (1) $1,166      (1) 1.5%       (1) $3,886      (1) 5.0%
Core capital           $17,018      21.9%         (1) $2,332      (1) 3.0%       (1) $4,664      (1) 6.0%
Risk-based capital     $17,254      41.1%         (1) $3,356      (1) 8.0%       (1) $4,195     (1) 10.0%
---------
(1) Equal to or greater than sign omitted for EDGAR.
</TABLE>

At December 31, 1997 and 1996, the Savings Bank met all regulatory  requirements
for classification as a  "well-capitalized"  institution.  A  "well-capitalized"
institution must have risk-based capital of 10.0%, and core capital of 5.0%. The
Savings Bank's  regulatory  capital  exceeded the minimum  required  amounts for
classification as a "well-capitalized" institution at December 31, 1997 by $11.9
million and $12.1 million, respectively.

<PAGE>

                           LOGANSPORT FINANCIAL CORP.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                        December 31, 1997, 1996 and 1995

NOTE K - REGULATORY CAPITAL (continued)

Regulations of the Office of Thrift  Supervision  ("OTS") impose  limitations on
the  payment  of  dividends   and  other   capital   distributions   by  savings
associations.  Under such regulations,  a savings association that,  immediately
prior to, and on a pro forma basis after  giving  effect to, a proposed  capital
distribution,  has total capital (as defined by OTS regulation) that is equal to
or  greater  than the  amount  of its fully  phased-in  capital  requirement  is
generally permitted without OTS approval (but subsequent to 30 days prior notice
to the OTS of the  planned  dividend)  to make  capital  distributions  during a
calendar year in the amount of (i) up to 100% of its net earnings to date during
the year  plus an  amount  equal to  one-half  of the  amount by which its total
capital to assets ratio exceeded its fully phased-in  capital to assets ratio at
the  beginning  of the year (ii) or 75% of its net  earnings for the most recent
four quarters.  Pursuant to such OTS dividend regulations,  the Savings Bank had
the ability to pay dividends of approximately $6.9 million to the Corporation at
December 31, 1997.

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.

The legislation also provided for a reduction of future annual deposit insurance
premiums from $.235 per $100 of SAIF deposits to $.064 per $100 of SAIF deposits
beginning in 1997.

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.


<PAGE>

                           LOGANSPORT FINANCIAL CORP.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                        December 31, 1997, 1996 and 1995

NOTE L - LEGISLATIVE DEVELOPMENTS (continued)

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.

NOTE M - STOCK OPTION PLAN

During  fiscal  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 accordance with SFAS No. 123, the Corporation  continues to apply  Accounting
Principles  Board 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:

                                                   1997              1996
Net earnings                  As reported         $1,232             $913
                                                  ======             ====
                               Pro-forma          $1,232             $883
                                                  ======             ====
Basic earnings per share      As reported         $  .98             $.69
                                                  ======             ====
                               Pro-forma          $  .98             $.67
                                                  ======             ====
Diluted earnings per share    As reported         $  .95             $.69
                                                  ======             ====
                               Pro-forma          $  .95             $.67
                                                  ======             ====

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 1996;  dividend  yield of 3.67%  and  expected
volatility of 11.5%; risk-free interest rate of 6.5% and expected lives of seven
years.

<PAGE>

                           LOGANSPORT FINANCIAL CORP.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                        December 31, 1997, 1996 and 1995

NOTE M - STOCK OPTION PLAN (continued)

A summary of the status of the  Corporation's  fixed  stock  option  plans as of
December 31, 1997 and 1996, and changes during the periods ending on those dates
is presented below:

<TABLE>
<CAPTION>
                                                         1997                               1996
                                                                   Weighted-                          Weighted-
                                                                    average                            average
                                                                   exercise                           exercise
                                                Shares               price           Shares             price
<S>                                                <C>             <C>             <C>                 <C>
Outstanding at beginning of year                   129,340         $  10.53                -            $     -
Granted                                                 -          $     -            108,691           $ 12.50
Adjustment for return of capital distribution           -          $     -             20,649           $ (1.97)
Exercised                                            4,545         $  10.53                -            $     -
Forfeited                                               -          $     -                 -            $     -
                                                   -------         --------           -------           -------
Outstanding at end of year                         124,795         $  10.53           129,340           $ 10.53
                                                   =======         ========           =======           =======

Options exercisable at year-end                     21,323         $  10.53                -            $     -
                                                   =======         ========           =======           =======
Weighted-average fair value of
  options granted during the year                                    N/A                                $  1.81
                                                                   ========                             =======
The following information applies to options outstanding at December 31, 1997:
Number outstanding                                                                                      124,795
Exercise price                                                                                           $10.53
Weighted-average exercise price                                                                          $10.53
Weighted-average remaining contractual life                                                          8.25 years
</TABLE>


NOTE N - CORPORATE REORGANIZATION AND CONVERSION TO STOCK FORM

In  October  1994,  the  Savings  Bank's  Board of  Directors  adopted a Plan of
Conversion  whereby  the  Savings  Bank  would  convert  to the  stock  form  of
ownership,  followed by the  issuance of all of the Savings  Bank's  outstanding
common stock to a newly formed holding company, Logansport Financial Corp.

In June 1995,  the Savings Bank  completed  its  conversion to the stock form of
ownership, and issued all of the Association's  outstanding common shares to the
Corporation.

In connection with the conversion,  the Corporation  sold 1,322,500  shares at a
price of $10.00  per share  which,  after  consideration  of  offering  expenses
totaling approximately $555,000 resulted in net equity proceeds of approximately
$12.7 million.

<PAGE>

                           LOGANSPORT FINANCIAL CORP.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                        December 31, 1997, 1996 and 1995

NOTE N -   CORPORATE REORGANIZATION AND CONVERSION TO STOCK FORM    (continued)

At the date of the  conversion,  the  Savings  Bank  established  a  liquidation
account in an amount equal to retained  earnings  reflected in the  statement of
financial  condition used in the conversion  offering circular.  The liquidation
account will be maintained for the benefit of eligible  savings  account holders
who maintained  deposit  accounts in the Savings Bank after  conversion.  In the
event of a complete  liquidation (and only in such event), each eligible savings
account holder will be entitled to receive a liquidation  distribution  from the
liquidation  account  in the  amount of the then  current  adjusted  balance  of
deposit  accounts held,  before any  liquidation  distribution  may be made with
respect to common  stock.  Except  for the  repurchase  of stock and  payment of
dividends by the Savings Bank, the existence of the liquidation account will not
restrict the use or application of such retained earnings.  The Savings Bank may
not declare,  pay a cash dividend on, or repurchase any of its common stock,  if
the effect thereof would cause retained  earnings to be reduced below either the
amount  required  for  the  liquidation   account  or  the  regulatory   capital
requirements for SAIF insured institutions.

NOTE O - CONDENSED FINANCIAL STATEMENTS OF LOGANSPORT FINANCIAL CORP.

The following condensed financial statements summarize the financial position of
Logansport  Financial Corp. as of December 31, 1997 and 1996, and the results of
its operations and cash flows for the periods ended December 31, 1997,  1996 and
1995.

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

<TABLE>
<CAPTION>
ASSETS                                                          1997                  1996
<S>                                                           <C>                  <C>
Cash and cash equivalents                                     $     160            $       89
Investment in subsidiary                                         16,471                16,861
Prepaid expenses and other                                            5                     5
                                                                -------               -------
     Total assets                                               $16,636               $16,955
                                                                =======               =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Borrowings                                                     $     -               $  1,400
Other liabilities                                                    94                   128
                                                                -------               -------
     Total liabilities                                               94                 1,528

Shareholders' equity
   Common stock                                                   7,566                 7,518
   Retained earnings                                              9,316                 8,588
   Shares acquired by stock benefit plan                           (400)                 (522)
   Unrealized gains (losses) on securities designated
     as available for sale, net                                      60                  (157)
     Total shareholders' equity                                  16,542                15,427
                                                                -------               -------
     Total liabilities and shareholders' equity                 $16,636               $16,955
                                                                =======               =======
</TABLE>


<PAGE>

                           LOGANSPORT FINANCIAL CORP.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                        December 31, 1997, 1996 and 1995

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

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

<TABLE>
<CAPTION>
                                                1997             1996             1995
Revenue
<S>                                          <C>                <C>                 <C>
  Interest income                            $     12           $   174             $120
  Equity in earnings of subsidiary              1,270               869              852
                                               ------           -------             ----
                                                1,282             1,043              972

Interest expense                                    5                -                -

General and administrative expenses                70               100               28
                                               ------           -------             ----
     Earnings before income taxes               1,207               943              944

Income taxes (credits)                            (25)               30               36
                                               ------           -------             ----
     NET EARNINGS                              $1,232           $   913             $908
                                               ======           =======             ====
</TABLE>


<PAGE>

                           LOGANSPORT FINANCIAL CORP.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                        December 31, 1997, 1996 and 1995

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

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

<TABLE>
<CAPTION>
                                                                 1997             1996              1995
Cash flows provided by (used in) operating activities:
<S>                                                              <C>             <C>             <C>
     Net earnings for the period                                 $1,232          $   913         $     908
     Adjustments to reconcile net earnings to net cash
       provided by (used in) operating activities:
     (Undistributed earnings of ) excess distributions from
       consolidated subsidiary                                      730             (869)             (852)
     Increases (decreases) in cash due to changes in:
       Other liabilities                                            (34)               -                 -
       Other                                                         (1)               3                 -
                                                                -------         --------         ---------
       Cash provided by operating activities                      1,927               47                56
Cash flows provided by (used in) investing activities:
     Purchase of securities available for sale                       -            (1,638)           (2,431)
     Maturities of investment securities available for sale          -             2,245               246
     Proceeds from sale of securities designated as available
       for sale                                                      -             1,824                -
     Purchase of securities held to maturity                         -                -               (253)
     Investment in subsidiary                                        -                -             (8,687)
     Loan disbursements                                              -                -               (878)
     Loan repayments                                                 -               878                -
                                                                -------         --------         ---------
       Net cash provided by (used in) investment activities          -             3,309           (12,003)
Cash flows provided by (used in) financing activities:
     Proceeds from issuance of common stock                          48               -             12,670
     Proceeds from note payable                                     100            1,400                -
     Return of capital distribution                                  -            (3,930)               -
     Repayment of note payable                                   (1,500)              -                 -
     Dividends on common stock                                     (504)            (529)             (132)
     Purchase of shares                                              -              (799)               -
                                                                -------         --------         ---------
       Net cash provided by (used in) financing activities       (1,856)          (3,858)           12,538
                                                                -------         --------         ---------
Net increase (decrease) in cash and cash equivalents                 71             (502)              591
Cash and cash equivalents at beginning of period                     89              591                -
                                                                -------         --------         ---------
Cash and cash equivalents at end of period                      $   160         $     89         $     591
                                                                =======         ========         =========

</TABLE>

<PAGE>

                           LOGANSPORT FINANCIAL CORP.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                        December 31, 1997, 1996 and 1995

NOTE P - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following table summarizes the Corporation's quarterly results for the years
ended December 31, 1997 and 1996. Certain amounts, as previously reported,  have
been reclassified to conform to the 1997 presentation.

<TABLE>
<CAPTION>
                                                                    Three Months Ended
                                              March 31,        June 30,       September 30,       December 31,
1997:                                                      (In thousands, except per share data)
<S>                                            <C>               <C>              <C>               <C>
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
                                               ======            ======           ======            ======

Basic earnings per share                       $  .22            $  .24           $  .23            $  .29
                                               ======            ======           ======            ======
</TABLE>


<TABLE>
<CAPTION>
                                                                    Three Months Ended
                                              March 31,        June 30,       September 30,       December 31,
1996:                                                      (In thousands, except per share data)
<S>                                            <C>               <C>              <C>               <C>
Total interest income                          $1,339            $1,403           $1,453            $1,458
Total interest expense                            641               653              684               741
                                               ------            ------           ------            ------
Net interest income                               698               750              769               717
Provision for losses on loans                       3                 3                3                 3
Other income                                       36                41               (2)               29
General, administrative and other expense         297               335              658               316
                                               ------            ------           ------            ------
Earnings before income taxes                      434               453              106               427
Income taxes                                      160               170               25               152
                                               ------            ------           ------            ------
Net earnings                                   $  274            $  283          $    81            $  275
                                               ======            ======           ======            ======

Basic earnings per share                       $  .21            $  .21          $   .06            $  .21
                                               ======            ======           ======            ======
</TABLE>



<PAGE>

                             DIRECTORS AND OFFICERS
Directors

     Norbert E.  Adrian  (age 68)  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. Pollitt (age 70) 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 58) has served as an  adjunct  faculty  member of
Indiana  University  Kokomo ("IUK") since 1969. Ms. Ridlen also currently serves
as a member of the Boards of Directors of the Logansport Art Association and the
Cass County Children's Home in Logansport, Indiana.

     William  Tincher,  Jr. (age 58) 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  50) 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 65) has served as President of Logansport  Savings
Bank, FSB since 1971.

     Charles  J. Evans (age 52) has  served as Vice  President  and Senior  Loan
Officer of Logansport Savings Bank, FSB since 1980.

         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

         DOTTYE ROBESON                       DIANNE HOFFMAN
         Secretary/Treasurer                  Secretary/Treasurer

                                              DOTTYE ROBESON
                                              Chief Financial Officer

<PAGE>

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                             "Bank on our Strength"

                  725 EAST BROADWAY, LOGANSPORT, INDIANA 46947
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