FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

(Mark One)

[X]      Annual  Report  Pursuant  to  Section  13 or  15(d)  of the  Securities
         Exchange Act of 1934



For the fiscal year ended December 31, 1998

                                       or

[ ]      Transition  Report  Pursuant  to Section 13 or 15(d) of the  Securities
         Exchange Act of 1934

For the transition period from _____________ to _______________

Commission File Number              0-25910

                           LOGANSPORT FINANCIAL CORP.
             (Exact name of registrant as specified in its charter)

                 INDIANA                                  35-1945736
      (State or other Jurisdiction              (I.R.S. Employer Identification
    of Incorporation or Organization)                       Number)

 723 East Broadway, Logansport, Indiana                      46947
(Address of Principal Executive Offices)                  (Zip Code)

Registrant's telephone number including area code:
                                 (219) 722-3855

Securities Registered Pursuant to Section 12(b) of the Act:
                                      NONE

Securities Registered Pursuant to Section 12(g) of the Act:
                         Common Stock, without par value
                                (Title of Class)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  reports)  and  (2)  has  been  subject  to such  filing
requirements  for the past 90 days.  YES NO Indicate by check mark if disclosure
of delinquent  filers pursuant to Item 405,  Regulation S-K (ss. 229.405 of this
chapter) is not  contained  herein,  and will not be  contained,  to the best of
Registrant's   knowledge,   in  definitive   proxy  or  information   statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  The  aggregate  market  value of the  issuer's  voting stock held by
non-affiliates, as of March 22, 1999, was $13,755,605.

The  number of shares of the  Registrant's  Common  Stock,  without  par  value,
outstanding as of March 22, 1999, was 1,198,710 shares.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Annual Report to  Shareholders  for the year ended  December 31,
1998, are  incorporated  into Part II.  Portions of the Proxy  Statement for the
1999 Annual Meeting of Shareholders are incorporated in Part I and Part III.

                            Exhibit Index on Page 30
                               Page 1 of 30 Pages

<PAGE>

                           LOGANSPORT FINANCIAL CORP.

                                    Form 10-K

                                      INDEX

                                                                            Page

Forward Looking Statements..................................................  1

PART I
Item  1.    Business........................................................  1
Item  2.    Properties...................................................... 25
Item  3.    Legal Proceedings............................................... 25
Item  4.    Submission of Matters to a Vote of Security Holders............. 25
Item  4.5.  Executive Officers of Registrant................................ 25

PART II
Item  5.    Market for Registrant's Common Equity and Related
              Stockholder Matters........................................... 26
Item  6.    Selected Financial Data......................................... 27
Item  7.    Management's Discussion and Analysis of Financial
              Condition and Results of Operations........................... 27
Item 7A.    Quantitative and Qualitative Disclosures About Market Risk...... 27
Item  8.    Financial Statements and Supplementary Data..................... 27
Item  9.    Changes in and Disagreements with Accountants on
              Accounting and Financial Disclosure........................... 27

PART III
Item 10.    Directors and Executive Officers of Registrant.................. 27
Item 11.    Executive Compensation.......................................... 27
Item 12.    Security Ownership of Certain Beneficial Owners
              and Management................................................ 27
Item 13.    Certain Relationships and Related Transactions.................. 27

PART IV
Item 14.    Exhibits, Financial Statement Schedules, and Reports
              on Form 8-K................................................... 28
            Signatures...................................................... 29


<PAGE>

                           FORWARD LOOKING STATEMENTS

         This Annual Report on Form 10-K ("Form 10-K") contains statements which
constitute  forward  looking  statements  within  the  meaning  of  the  Private
Securities Litigation Reform Act of 1995. These statements appear in a number of
places in this Form 10-K and include  statements  regarding the intent,  belief,
outlook,  estimate  or  expectations  of the Company  (as  defined  below),  its
directors or its officers primarily with respect to future events and the future
financial  performance  of the Company.  Readers of this Form 10-K are cautioned
that any such forward looking  statements are not guarantees of future events or
performance  and involve risks and  uncertainties,  and that actual  results may
differ  materially from those in the forward  looking  statements as a result of
various  factors.  The  accompanying  information  contained  in this  Form 10-K
identifies  important factors that could cause such  differences.  These factors
include  changes in interest  rates;  loss of deposits  and loan demand to other
savings and financial  institutions;  substantial  changes in financial markets;
changes in real estate values and the real estate market; regulatory changes; or
unanticipated results in pending legal proceedings.

                                     PART I
Item 1.       Business.

General

         Logansport  Financial Corp. (the "Holding  Company" and,  together with
the Bank (as defined below), the "Company") is an Indiana corporation  organized
in February,  1995, to become a unitary  savings and loan holding  company.  The
Holding  Company  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 on June 13, 1995.  The  principal
asset of the  Holding  Company  consists  of 100% of the issued and  outstanding
shares of common stock,  $.01 par value per share,  of the Bank.  The Bank began
operations in Logansport,  Indiana under the name  Logansport  Building and Loan
Association  in 1925. In 1962,  the Bank changed its name to Logansport  Savings
and Loan  Association,  and in 1992, the Bank  converted to a federally  charted
savings bank known as Logansport Savings Bank, FSB. The Bank serves the needs of
primarily residents of Cass County, Indiana.

         The  Bank  is  the  oldest  financial   institution   headquartered  in
Logansport,  Indiana.  Management  believes  the  Bank  has  developed  a  solid
reputation  among its loyal  customer base because of its commitment to personal
service and its strong support of the local community.  The Bank offers a number
of consumer and  commercial  financial  services.  These services  include:  (i)
residential  real estate loans;  (ii) home equity loans;  (iii) home improvement
loans;  (iv)  construction  loans; (v) share loans;  (vi) commercial real estate
loans; (vii) multi-family loans;  (viii) consumer loans; (ix) NOW accounts;  (x)
passbook  savings  accounts;  (xi)  certificates of deposit;  (xii) consumer and
commercial demand deposit accounts;  and (xiii) individual  retirement accounts.
In the  fourth  quarter of 1998 the Bank  decided  to offer a  complete  line of
commercial  lending to include  operating lines of credit secured by receivables
and inventory and term financing for equipment  purchases.  The Holding  Company
and the Bank conduct  business out of their main office  located in  Logansport,
Indiana.  The  Bank is and  historically  has  been a  significant  real  estate
mortgage lender in Cass County, Indiana,  originating approximately 28.3% of the
mortgage loan volume recorded in Cass County by Cass County  institutions during
the year ended December 31, 1998.

         The Bank  historically has  concentrated its lending  activities on the
origination  of  loans  secured  by  first  mortgage  liens  for  the  purchase,
construction  or refinancing of one- to four-family  residential  real property.
One- to four-family residential mortgage loans continue to be the major focus of
the Bank's loan  origination  activities,  representing  69.4% of the  Company's
total loan  portfolio at December 31,  1998.  The Bank also offers  multi-family
mortgage loans,  commercial real estate loans,  construction loans, and consumer
loans.  Mortgage loans secured by  multi-family  properties and commercial  real
estate totaled approximately 2.1% and 4.6%, respectively, of the Company's total
loan portfolio at December 31, 1998.  Residential,  multi-family  and commercial
real estate  construction loans constituted  approximately 4.6% of the Company's
total loan portfolio at December 31, 1998. Installment,  share, home equity, and
home improvement  loans  constituted  approximately  10.0%, .4%, 1.5%, and 7.4%,
respectively, of the Company's total loan portfolio at December 31, 1998.



                                     - 1 -
<PAGE>
Lending Activities

         Loan Portfolio  Data. The following table sets forth the composition of
the  Company's  loan  portfolio by loan type and  security  type as of the dates
indicated,   including  a   reconciliation   of  gross  loans  receivable  after
consideration of the allowance for loan losses and loans in process.
<TABLE>
<CAPTION>
                                                                     At December 31,
                                  --------------------------------------------------------------------------------------
                                       1998               1997             1996             1995             1994
                                  ---------------   ---------------  ----------------  ---------------- ----------------
                                          Percent           Percent           Percent           Percent          Percent
                                  Amount of Total   Amount of Total  Amount  of Total  Amount  of Total Amount  of Total
                                  ------ --------   ------ --------  ------  --------  ------  -------- ------  --------
                                                                 (Dollars in thousands)
<S>                               <C>      <C>     <C>      <C>      <C>      <C>     <C>       <C>     <C>      <C>   
TYPE OF LOAN
Mortgage loans:
   Residential.................   $52,205  69.35%  $46,419  72.48%   $41,109  72.05%  $36,608   73.15%  $33,402  74.92%
   Commercial real estate......     3,492   4.64     3,072   4.80      2,701   4.73     1,620    3.24     2,718   6.10
   Multi-family................     1,584   2.10     1,844   2.88      2,370   4.15     1,915    3.83       722   1.62
Construction:
   Residential ................     1,742   2.31     1,333   2.08        574   1.01       575    1.15       330    .74
   Commercial
     real estate...............     1,400   1.86       ---     ---       194    .34       198     .39       ---     ---
   Multi-family................       350    .47       ---     ---       248    .43       250     .50       680   1.52
Commercial paper ..............       ---    ---       ---     ---       ---     ---      878    1.75       500   1.12
Consumer loans:
   Installment (2).............     7,507   9.97     5,409   8.44      4,615   8.09     3,729    7.45     2,778   6.23
   Share ......................       314    .42       313    .49        286    .50       219     .44       244    .55
   Home equity.................     1,090   1.45       685   1.07        595   1.04       398     .79       300    .67
   Home improvement............     5,589   7.43     4,972   7.76      4,368   7.66     3,656    7.31     2,911   6.53
                                  ------- ------   ------- ------    ------- ------   -------  ------   ------- ------ 
     Gross loans receivable....   $75,273 100.00%  $64,047 100.00%   $57,060 100.00%  $50,046  100.00%  $44,585 100.00%
                                  ======= ======   ======= ======    ======= ======   =======  ======   ======= ====== 
TYPE OF SECURITY
   Residential (1).............   $61,291  81.42%  $53,409  83.39%   $46,689  81.83%  $41,407   82.74%  $36,943  82.86%
   Commercial real estate......     4,108   5.46     3,212   5.02      2,895   5.07     1,818    3.63     2,718   6.10
   Multi-family................     1,934   2.57     1,844   2.88      2,618   4.59     2,165    4.33     1,402   3.14
   Deposits....................       314    .42       313    .49        286    .50       219     .44       244    .55
   Auto........................     2,210   2.94     2,148   3.35      2,042   3.58     1,288    2.57     1,005   2.26
   Consumer residential (2)....     1,918   2.55     1,617   2.52      1,074   1.88     1,232    2.46       846   1.90
   Other security..............     3,498   4.64     1,504   2.35      1,456   2.55     1,039    2.08       917   2.05
   Unsecured (3)...............       ---     ---      ---     ---       ---     ---      878    1.75       510   1.14
                                  ------- ------   ------- ------    ------- ------   -------  ------   ------- ------ 
     Gross loans receivable....    75,273 100.00%   64,047 100.00%    57,060 100.00%   50,046  100.00    44,585 100.00
Deduct:
Allowance for loan losses......       285    .38       245    .38        236    .41       223     .45       206    .46
Loans in process...............     1,915   2.54       167    .26         22    .04       116     .23       359    .81
                                  ------- ------   ------- ------    ------- ------   -------  ------   ------- ------ 
   Net loans receivable........   $73,073  97.08%  $63,635  99.36%   $56,802  99.55%  $49,707   99.32%  $44,020  98.73%
                                  =======  =====   =======  =====    =======  =====   =======   =====   =======  ===== 
Mortgage Loans:
   Adjustable-rate.............   $45,552  74.95%  $42,984  81.61%   $38,729  82.06%  $34,715   84.33%  $31,057  82.05%
   Fixed-rate..................    15,221  25.05     9,684  18.39      8,467  17.94     6,451   15.67     6,795  17.95
                                  ------- ------   ------- ------    ------- ------   -------  ------   ------- ------ 
     Total.....................   $60,773 100.00%  $52,668 100.00%   $47,196 100.00%  $41,166  100.00%  $37,852 100.00%
                                  ======= ======   ======= ======    ======= ======   =======  ======   ======= ====== 
</TABLE>

(1)      Includes home equity,  residential  construction  and home  improvement
         loans.
(2)      Includes  "one-pay"  notes  due  in  less  than  one  year  secured  by
         residential real estate.
(3)      Includes commercial paper and bankers' acceptances.



                                     - 2 -
<PAGE>

         The  following  table sets forth  certain  information  at December 31,
1998,  regarding  the dollar  amount of loans  maturing  in the  Company's  loan
portfolio  based on the date that  final  payment  is due under the terms of the
loan.  Demand  loans  having  no stated  schedule  of  repayments  and no stated
maturity and overdrafts  are reported as due in one year or less.  This schedule
does  not  reflect  the  effects  of  possible  prepayments  or  enforcement  of
due-on-sale clauses. Management expects prepayments will cause actual maturities
to be shorter.
<TABLE>
<CAPTION>

                                     Balance                      Due during years ending December 31,
                                   Outstanding                                    2002       2004       2009       2014
                                 at December 31,                                   to         to         to         and
                                      1998        1999      2000       2001       2003       2008       2013     following
                                     -------     ------      ----    ------     ------    -------    -------    -------
                                                                  (In thousands)
Mortgage loans:
<S>                                  <C>        <C>         <C>     <C>        <C>         <C>       <C>        <C>    
   Residential ....................  $53,947    $   323     $  41   $   277    $   602     $7,502    $13,329    $31,873
   Multi-family....................    1,934        ---       ---       ---        190        634        760        350
   Commercial real estate..........    4,892          2         1        30         67      1,251        923      2,618
Consumer loans:
   Home improvement................    5,589         41       153       518        867      2,276      1,423        311
   Home equity.....................    1,090        ---       ---       ---        ---        ---      1,090        ---
   Installment.....................    7,507      2,777       517       711      1,886      1,339        277        ---
   Share...........................      314        314       ---       ---        ---        ---        ---        ---
                                     -------     ------      ----    ------     ------    -------    -------    -------
Total  ............................  $75,273     $3,457      $712    $1,536     $3,612    $13,002    $17,802    $35,152
                                     =======     ======      ====    ======     ======    =======    =======    =======
</TABLE>

         The  following  table sets forth,  as of December 31, 1998,  the dollar
amount  of all loans due after one year  which  have  fixed  interest  rates and
floating or adjustable rates.

<TABLE>
<CAPTION>

                                                      Due After December 31, 1999
                                    --------------------------------------------------------
                                    Fixed Rates             Variable Rates             Total
                                                            (In thousands)

Mortgage loans:
<S>                                 <C>                        <C>                    <C>    
   Residential .................    $ 13,542                   $40,082                $53,624
   Multi-family.................         ---                     1,934                  1,934
   Commercial real estate.......       1,400                     3,490                  4,890
Consumer loans:
   Home improvement.............       5,548                       ---                  5,548
   Home equity..................         ---                     1,090                  1,090
   Installment..................       4,730                       ---                  4,730
                                     -------                   -------                -------
     Total......................     $25,220                   $46,596                $71,816
                                     =======                   =======                =======
</TABLE>

         Residential  Loans.  Residential  loans  consist  primarily  of one- to
four-family  loans.  Approximately  $52.2  million,  or 69.4%  of the  Company's
portfolio  of loans at  December  31,  1998,  consisted  of one- to  four-family
residential mortgage loans, of which approximately 75.0% had adjustable rates.

         The  Bank  currently   offers   adjustable-rate   one-  to  four-family
residential mortgage loans ("ARMs") which adjust annually and are indexed to the
one-year U.S. Treasury securities yields adjusted to a constant maturity.  These
ARMs have a current  margin  above such index of 2.75%,  or 3.00% if interest is
amortized  and payments are due  bi-weekly.  Interest  rates cannot adjust lower
than the rate at the time of origination.  Many of the  residential  ARMs in the
Company's  portfolio at December 31, 1998 provided for a maximum rate adjustment
per year of 1%,  although  the Bank  began  originating  residential  ARMs which
provide  for a  maximum  rate  adjustment  of 2% per  year in 1995.  The  Bank's
residential  ARMs provide for a maximum rate  adjustment  of 5% over the life of
the loan. These ARMs generally bear terms of between 15 and 25 years.

         The Bank also currently  offers  fixed-rate loans which provide for the
payment of principal and interest over a period that  generally  does not exceed
15 years.  At December 31, 1998,  25.0% of the  Company's  residential  mortgage
loans had fixed rates of interest.

         The Bank does not currently originate residential mortgage loans if the
ratio of the loan amount to the lesser of current cost or appraised value of the
property (i.e.,  the  "loan-to-value  ratio") exceeds 95% and does not currently
require private  mortgage  insurance on its residential  single-family  mortgage
loans.

                                     - 3 -
<PAGE>

         Substantially  all of the  residential  mortgage  loans  that  the Bank
originates  include  "due-on-sale"  clauses,  which  give the Bank the  right to
declare a loan  immediately  due and  payable  in the event  that,  among  other
things, the borrower sells or otherwise disposes of the real property subject to
the mortgage and the loan is not repaid.

         The Bank's  residential  mortgage loans are not originated on terms and
conditions and using  documentation that conform with the standard  underwriting
criteria required to sell such loans on the secondary market. The Bank generally
retains its loans in its portfolio and does not  anticipate the need to sell its
non-conforming loans. See "-- Origination, Purchase and Sale of Loans."

         At December 31, 1998,  residential  loans amounting to $269, or .36% of
total loans, were included in non-performing  assets. See "-- Non-Performing and
Problem Assets."

         Commercial Real Estate Loans.  At December 31, 1998,  $3.5 million,  or
4.6% of the Company's total loan portfolio,  consisted of commercial real estate
loans. Of these loans,  $427,000 constituted  participations in loans secured by
commercial real estate which were purchased from other  financial  institutions.
The  commercial  real estate  loans  included  in the  Company's  portfolio  are
primarily secured by non-residential real estate such as small office buildings,
nursing homes and churches. The Bank currently originates commercial real estate
loans as adjustable-rate  loans indexed to the one-year U.S. Treasury securities
yields  adjusted to a constant  maturity with a margin of 4.75% above such index
or as  fixed  rate  loans.  Many of the  commercial  real  estate  loans  in the
Company's  portfolio at December 31, 1998 provided for a maximum rate adjustment
per year of 1%, although the Bank began originating  commercial real estate ARMs
which provide for a maximum rate adjustment of 2% per year in 1995. In addition,
the  maximum  rate  adjustment  over the life of the loan is 5%, and these loans
have a maximum loan-to-value ratio of 80%. The Bank underwrites these loans on a
case-by-case  basis and, in addition to its normal  underwriting  criteria,  the
Bank evaluates the borrower's ability to service the debt from the net operating
income of the property.  No single  commercial  real estate loan at December 31,
1998  exceeded  $363,000.  No  commercial  real  estate  loans were  included in
non-performing assets at that date.

         Loans secured by commercial real estate  generally are larger than one-
to  four-family  residential  loans  and  involve  a  greater  degree  of  risk.
Commercial  real  estate  loans  often  involve  large loan  balances  to single
borrowers  or groups of related  borrowers.  Payments on these loans depend to a
large degree on results of operations  and  management of the properties and may
be affected to a greater extent by adverse  conditions in the real estate market
or the economy in general.  Accordingly, the nature of the loans makes them more
difficult for management to monitor and evaluate.

         Multi-Family  Loans.   Approximately  $1.6  million,  or  2.1%  of  the
Company's  portfolio of loans at December 31,  1998,  consisted of  multi-family
loans.  These  loans are  generally  purchased  participations  and  secured  by
apartment complexes and other multi-family  residential properties.  At December
31, 1998, none of the multi-family loans included in the Company's portfolio was
included in non-performing assets.

         Construction  Loans. The Bank offers construction loans with respect to
owner-occupied  residential  real estate and, in limited  cases,  to builders or
developers constructing such properties on a speculative investment basis (i.e.,
before the  builder/developer  obtains a commitment from a buyer).  The Bank may
also purchase participations.

         At December 31, 1998,  $3.5 million,  or 4.6%,  of the Company's  total
loan portfolio consisted of construction  loans.  Construction loans at December
31,  1998  consisted  of $1.7  million in  residential  loans,  $1.4  million in
commercial  loans and $350,000 of  multi-family  purchased  participations.  The
largest construction loan at December 31, 1998 was approximately  $800,000 which
included the  construction of a commercial  business  facility.  No construction
loans were included in non-performing assets on that date.

         Construction  loans  originated  by the  Bank  are  written  such  that
interest  only is payable  during the  construction  phase,  which is  typically
limited to six (6) months,  and following the  construction  phase,  a permanent
loan  is  made.   Inspections  are  made  prior  to  any  disbursement  under  a
construction loan.



                                     - 4 -
<PAGE>

         Consumer Loans. Federal laws and regulations permit federally chartered
savings  associations  to  make  secured  and  unsecured  consumer  loans  in an
aggregate amount up to 35% of the  association's  total assets.  In addition,  a
federally  chartered  savings  association  has lending  authority above the 35%
limit for certain consumer loans, such as property improvement loans and deposit
account  secured  loans.  However,  the  Qualified  Thrift  Lender  test  places
additional  limitations  on a savings  association's  ability  to make  consumer
loans. See "Regulation -- Qualified Thrift Lender."

         The Company's  consumer  loans,  consisting  primarily of  installment,
share, home improvement,  and home equity loans,  aggregated $14.5 million as of
December 31, 1998,  or 19.3% of the  Company's  total loan  portfolio.  The Bank
consistently originates consumer loans to meet the needs of its customers and to
assist in  meeting  its  asset/liability  management  goals.  All of the  Bank's
consumer loans originated by the Bank,  except home equity loans, are fixed-rate
loans, and substantially all are secured loans.

         Installment  loans,  totaling $7.5 million,  or 10.0% of total loans at
December  31,  1998,  are  fixed-rate  loans  generally  secured by  collateral,
including  automobiles,  and  are  made  for  maximum  terms  of up to 10  years
(depending  on the  collateral).  The  Bank's  installment  loans  also  include
"one-pay" notes, some of which are secured by residential real estate and all of
which  amortize at rates  similar to those for home  improvement  loans and have
maximum terms of 6 months to one year.

         Share loans,  totaling $314,000,  or .4% of total loans at December 31,
1998, are made up to 80% of the original account balance and accrue at a rate of
2-3% over the underlying certificate of deposit rate. Interest on share loans is
paid  quarterly.  Home  improvement  loans totaled $5.6 million,  or 7.4% of the
Company's  total loan  portfolio  at  December  31,  1998,  and are  close-ended
fixed-rate  loans  made  for  maximum  terms up to 15  years.  The  Bank's  home
improvement  loans are generally made only to those  borrowers for whom the Bank
holds the primary mortgage on the property, if any.

         The Bank also offers  open-ended  lines of credit  secured by a lien on
the equity in the borrower's home in amounts up to 90% of the appraised value of
the real estate (taking into account any other  mortgages on the property).  The
Bank's home equity loans are adjustable-rate  loans with interest rates equal to
the national  prime rate plus 2%, and payments equal to the greater of 2% of the
outstanding loan balance or $50. The Bank's home equity loans are generally made
only to those  borrowers  for whom the Bank holds the  primary  mortgage  on the
property, if any, and generally have a maximum term of 15 years. At December 31,
1998, the Bank had approved $1,691,000 of home equity loans, of which $1,090,000
were outstanding.

         As a general rule,  consumer  loans involve a higher level of risk than
one- to  four-family  residential  mortgage  loans  because  consumer  loans are
generally  made based upon the  borrower's  ability to repay the loan,  which is
subject to change, rather than the value of the underlying  collateral,  if any.
However,  the relatively higher yields and shorter terms to maturity of consumer
loans are believed to be helpful in reducing  interest-rate  risk.  The Bank has
thus far been  successful  in managing  consumer  loan risk.  As of December 31,
1998, consumer loans totaling $46,000 were included in non-performing assets.

         Letters  of  Credit  Securing  Tax-Exempt  Bonds.  The  Bank  currently
maintains  four  letters of credit,  each in the amount of  $253,000,  to secure
payments  required under  tax-exempt  bonds issued to raise funds for low-income
housing projects in Franklin, Kokomo, Michigan City, Indiana and Hamilton, Ohio.
The issuer of the tax-exempt bonds is permitted to draw against these letters of
credit  only in the event it  defaults  in making  payments  required  under the
bonds, and any such draws made against the letters of credit would be secured by
a mortgage  on the  subject  housing  project.  No draws  against any letters of
credit had been made as of December 31, 1998.

         Origination,  Purchase and Sale of Loans. In an effort to control costs
incurred by its mortgage customers,  the Bank currently  originates its mortgage
loans  pursuant to its own  underwriting  standards  which are not in conformity
with the  standard  criteria  of the  Federal  Home  Loan  Mortgage  Corporation
("FHLMC") or Federal National Mortgage  Association  ("FNMA").  If it desired to
sell its mortgage  loans,  the Bank might  therefore  experience some difficulty
selling such loans quickly in the secondary  market.  The Bank has no intention,
however,  of attempting to sell such loans.  The Bank's ARMs vary from secondary
market criteria because,  among other things,  the Bank does not require current
property  surveys in most cases and does not require  escrow  accounts for taxes
and insurance.



                                     - 5 -
<PAGE>

         The Bank  confines its loan  origination  activities  primarily to Cass
County, Indiana. At December 31, 1998, no loans were secured by property located
outside of Indiana.  The Bank's loan  originations  are generated from referrals
from real estate  dealers and existing  customers,  and newspaper and periodical
advertising.  All loan applications are processed and underwritten at the Bank's
main office.

         Under the Financial Institutions Reform,  Recovery, and Enforcement Act
of 1989 ("FIRREA"),  a savings association  generally may not make any loan to a
borrower or its  related  entities if the total of all such loans by the savings
association  exceeds 15% of its capital (plus up to an additional 10% of capital
in the case of loans fully  collateralized  by readily  marketable  collateral);
provided,  however,  that  loans up to  $500,000  regardless  of the  percentage
limitations  may be made  and  certain  housing  development  loans of up to $30
million or 30% of capital,  whichever is less, are permitted. The maximum amount
which the Bank could have  loaned to one  borrower  and the  borrower's  related
entities  under the 15% of capital  limitation  was $2.5 million at December 31,
1998. The Company's  portfolio of loans currently  contains no loans that exceed
the 15% of capital limitation.

         The Bank's loan approval  process is intended to assess the  borrower's
ability to repay the loan,  the  viability  of the loan and the  adequacy of the
value of the  property  that will  secure  the loan.  To assess  the  borrower's
ability  to repay,  the Bank  studies  the  employment  and credit  history  and
information  on  the  historical  and  projected  income  and  expenses  of  its
mortgagors.

         The Bank generally requires  appraisals or loan officer  evaluations on
all property  securing its loans and requires title insurance or an abstract and
a valid lien on its  mortgaged  real estate.  Appraisals  for  residential  real
property are performed  either by an in-house  appraiser who is a state-licensed
residential appraiser or an independent  state-licensed  residential  appraiser.
From time to time,  the Bank also uses the  services  of  certified  residential
appraisers, who are not in-house, for performance of appraisals related to loans
in excess of $250,000. The Bank requires fire and extended coverage insurance in
amounts at least equal to the  principal  amount of the loan.  It also  requires
flood insurance to protect the property securing its interest if the property is
in a flood plain.

         The Bank's  underwriting  standards for consumer  loans are intended to
protect against some of the risks inherent in making  consumer  loans.  Borrower
character, paying habits and financial strengths are important considerations.

         The Bank historically has not participated in the secondary market as a
seller of its mortgage loans, but does occasionally  purchase  participations in
commercial real estate and multi-family loans from other financial institutions.



                                     - 6 -
<PAGE>

         The  following  table shows loan  origination,  purchase and  repayment
activity for the Bank during the periods indicated.

<TABLE>
<CAPTION>
                                                                Year Ended December 31,
                                                ----------------------------------------------------------
                                                  1998                  1997                      1996
                                                -------                -------                    -------
                                                                    (In thousands)
<S>                                             <C>                    <C>                        <C>    
Gross loans receivable
   at beginning of period...................... $64,047                $57,060                    $50,046
Originations:
   Mortgage loans:
     Residential...............................  14,691                 13,102                     11,277
     Commercial real estate and
       multi-family............................   1,400                    417                      1,885
                                                -------                -------                    -------
     Total mortgage loans......................  16,091                 13,519                     13,162
   Consumer loans:
     Installment...............................   7,321                  3,476                      3,757
     Share.....................................     294                    101                        259
     Home improvement..........................   2,333                  2,510                      1,774
     Home equity...............................     736                    163                        319
                                                -------                -------                    -------
       Total consumer loans....................  10,684                  6,250                      6,109
                                                -------                -------                    -------
            Total originations.................  26,775                 19,769                     19,271
   Purchases:
     Commercial real estate and multi-family...     350                    ---                      1,046
     Commercial paper..........................     ---                    ---                        ---
                                                -------                -------                    -------
       Total originations and purchases........  27,125                 19,769                     20,317
   Repayments:
     Commercial paper..........................     ---                    ---                        878
     Other loans and deductions................  15,899                 12,782                     12,425
                                                -------                -------                    -------
   Gross loans receivable at end of period..... $75,273                $64,047                    $57,060
                                                =======                =======                    =======
</TABLE>

         Origination   and  Other  Fees.  The  Company   realizes   income  from
origination  fees, late charges,  checking account service charges,  credit card
fees, and fees for other miscellaneous services. The Bank currently charges $300
plus closing costs on its adjustable-rate  mortgage loans. Points may be charged
on  fixed-rate  loans.  Late  charges are  generally  assessed if payment is not
received  within a specified  number of days after it is due.  The grace  period
depends on the individual loan documents.

Non-Performing and Problem Assets

         Mortgage  loans are  reviewed  by the Bank on a  regular  basis and are
placed on a  non-accrual  status when the loans  become  contractually  past due
ninety days or more. At the end of each month, delinquency notices are sent with
respect to all mortgage loans for which payments have not been received. Contact
by phone or in person is made, if feasible, with respect to all such loans. When
loans are sixty days in default,  an additional  delinquency  notice is sent and
personal contact is made with the borrower to establish an acceptable  repayment
schedule.  When  loans are  ninety  days in  default,  contact  is made with the
borrower by the Senior Loan  Officer who  attempts to  establish  an  acceptable
repayment schedule. Management is authorized to commence foreclosure proceedings
for any loan upon making a determination  that it is prudent to do so. All loans
for which foreclosure  proceedings have been commenced are placed on non-accrual
status.

         Consumer  loans are reviewed by the Bank on a daily basis.  Notices are
sent to borrowers  when any consumer  loan is 5, 10 and 15 days past due.  After
consumer  loans are 15 days  delinquent,  a late fee in the amount of 10% of the
payment is imposed until the loan is brought current.

         Non-Performing  Assets. At December 31, 1998, $315,000,  or .33% of the
Company's total assets, were  non-performing  assets (loans delinquent more than
90  days,   non-accruing  loans,  real  estate  owned  ("REO"),   troubled  debt
restructurings and non-accruing investments),  compared to $537,000, or .62%, of
the  Company's  total  assets at  December  31,  1997.  At  December  31,  1998,
residential loans,  multi-family loans,  commercial real estate loans,  consumer
loans and REO  accounted  for 85.4%,  0%,  0%,  14.6% and 0%,  respectively,  of
non-performing  assets.  There were no non-accruing  investments at December 31,
1998.



                                     - 7 -
<PAGE>

         The table below sets forth the amounts and  categories of the Company's
non-performing  assets (non-accruing  investments,  non-accruing loans, and real
estate owned).  It is the policy of the Company that all earned but  uncollected
interest on all loans be reviewed  monthly to determine  if any portion  thereof
should  be  classified  as  uncollectible  for any loan past due in excess of 90
days.

<TABLE>
<CAPTION>
                                                                                 At December 31,
                                                            ----------------------------------------------------------
                                                            1998         1997         1996         1995          1994
                                                            -----      -------      -------       -------       ------
                                                                               (Dollars in thousands)
<S>                                                      <C>           <C>          <C>           <C>           <C>  
Non-accruing investments (1).........................    $   ---       $  ---       $  ---        $  ---        $ 150
Non-accruing loans (2)...............................        315          431          406           311          337
Real estate owned, net...............................        ---          106          ---           ---          ---
                                                            ----         ----         ----          ----        -----
   Total non-performing assets.......................       $315         $537         $406          $311        $ 487
                                                            ====         ====         ====          ====        =====

Non-performing loans to total loans, net (3).........        .42%          .67%         .71%         .63%         .76%
Non-performing assets to total assets................        .33           .62          .52          .42          .82
</TABLE>
---------------
(1)      Non-accruing  investments  consist of certain corporate  obligations at
         market value.
(2)      The Company  generally  places loans on a non-accruing  status when the
         loans become  contractually  past due 90 days or more.  At December 31,
         1998, $269,000 of non-accruing loans were residential loans and $46,000
         were consumer  loans.  For the year ended December 31, 1998, the income
         that would have been recorded had the non-accruing  loans not been in a
         non-performing   status  totaled  $26,000  compared  to  actual  income
         recorded of $5,200.
(3)      Total loans less loans in process.

         Classified  Assets.  Federal  regulations  and the Bank's Internal Loan
Review policy provide for the  classification  of loans and other assets such as
debt and  equity  securities  considered  by the OTS to be of lesser  quality as
"substandard," "doubtful" or "loss" assets. An asset is considered "substandard"
if it is inadequately  protected by the current net worth and paying capacity of
the obligor or of the collateral pledged, if any.  "Substandard"  assets include
those  characterized  by the "distinct  possibility"  that the association  will
sustain "some loss" if the deficiencies are not corrected.  Assets classified as
"doubtful"   have  all  of  the   weaknesses   inherent   in  those   classified
"substandard,"  with the added  characteristic  that the weaknesses present make
"collection or liquidation in full," on the basis of currently  existing  facts,
conditions,  and values, "highly questionable and improbable." Assets classified
as "loss" are those  considered  "uncollectible"  and of such little  value that
their continuance as assets without the establishment of a specific loss reserve
is not warranted.  Assets which do not currently expose the insured  institution
to  sufficient  risk  to  warrant  classification  in one of the  aforementioned
categories  but  possess  weaknesses  are  required  to be  designated  "special
mention" by management.

         An insured  institution is required to establish general allowances for
loan  losses in an amount  deemed  prudent by  management  for loans  classified
substandard or doubtful,  as well as for other problem loans. General allowances
represent loss allowances  which have been established to recognize the inherent
risk associated with lending activities,  but which, unlike specific allowances,
have  not  been  allocated  to  particular  problem  assets.   When  an  insured
institution  classifies  problem  assets as  "loss,"  it is  required  either to
establish  a specific  allowance  for losses  equal to 100% of the amount of the
asset so classified or to charge off such amount. An institution's determination
as to  the  classification  of its  assets  and  the  amount  of  its  valuation
allowances is subject to review by the OTS which can order the  establishment of
additional general or specific loss allowances.



                                     - 8 -
<PAGE>

         At December 31, 1998, the aggregate amount of the Company's  classified
assets,  and of the  Company's  general and  specific  loss  allowances  were as
follows:

                                                            At December 31, 1998
                                                            --------------------
                                                                (In thousands)
Substandard loans.........................................           $315
Doubtful loans............................................            ---
Loss loans................................................            ---
                                                                     ----
   Total classified loans.................................           $315
                                                                     ====
General loss allowances...................................           $285
Specific loss allowances..................................            ---
                                                                     ----
   Total allowances.......................................           $285
                                                                     ====

         The Company  regularly  reviews its loan portfolio to determine whether
any loans require classification in accordance with applicable regulations.

Allowance for Loan Losses

         The allowance  for loan losses is maintained  through the provision for
loan losses,  which is charged to  earnings.  The  provision  for loan losses is
determined in  conjunction  with  management's  review and evaluation of current
economic conditions (including those of the Bank's lending area), changes in the
character and size of the loan portfolio,  loan delinquencies (current status as
well as past and  anticipated  trends) and adequacy of collateral  securing loan
delinquencies,  historical and estimated net  charge-offs,  and other  pertinent
information  derived  from a  review  of the  loan  portfolio.  In  management's
opinion,  the  Company's  allowance  for  loan  losses  is  adequate  to  absorb
anticipated future losses from loans at December 31, 1998. However, there can be
no assurance that regulators, when reviewing the Company's loan portfolio in the
future,  will not require  increases in its  allowances  for loan losses or that
changes in economic  conditions  will not adversely  affect the  Company's  loan
portfolio.

         Summary of Loan Loss  Experience.  The following table analyzes changes
in the allowance for loan losses during the past five (5) one-year periods ended
December 31, 1998.
<TABLE>
<CAPTION>
                                                                       Year Ended December 31,
                                                     ----------------------------------------------------------
                                                     1998          1997         1996         1995         1994
                                                     -----        -----        -----        ------       ------
                                                                       (Dollars in thousands)
Balance of allowance at beginning
<S>                                                   <C>         <C>          <C>          <C>          <C>  
   of period................................          $245        $ 236        $ 223        $ 206        $ 201
Recoveries..................................           ---            1            1          ---          ---
Less charge-offs:
   Residential real estate loans............            13           10          ---          ---          ---
   Consumer loans...........................            10            8          ---            3            1
                                                      ----         ----         ----         ----        -----
Net charge-offs.............................            23           18          ---            3            1
Provisions for losses on loans..............            63           26           12           20            6
                                                      ----         ----         ----         ----        -----
Balance of allowance at end of period.......          $285         $245         $236         $223        $ 206
                                                      ====         ====         ====         ====        =====
   Net charge-offs to total average
     loans receivable for period............           .03          .03       ---          (*)              (*)
   Allowance at end of period to
     net loans receivable at end
     of period (1)..........................           .39          .38          .41          .45          .47
   Allowance to total non-performing
     loans at end of period.................         90.48        56.84        58.12        71.61        61.13
-------------------
</TABLE>
(1)  Total loans less loans in process.
(*)  Less than .01%.



                                     - 9 -
<PAGE>

         Allocation of Allowance for Loan Losses.  The following  table presents
an analysis of the allocation of the Company's  allowance for loan losses at the
dates indicated.
<TABLE>
<CAPTION>


                                                                  At December 31,
                              --------------------------------------------------------------------------------------
                                    1998             1997               1996             1995              1994
                              ----------------  ---------------  ----------------  ----------------  ---------------
                                       Percent          Percent           Percent           Percent          Percent
                                      of loans         of loans          of loans          of loans         of loans
                                       in each          in each           in each           in each          in each
                                      category         category          category          category         category
                                      of total         of total          of total          of total         of total
                              Amount    loans   Amount   loans    Amount   loans    Amount   loans   Amount   loans
                              ------    -----   ------   -----    ------   -----    ------   -----   ------   -----
                             (Dollars in thousands)
<S>                             <C>    <C>       <C>     <C>       <C>    <C>       <C>     <C>       <C>    <C>   
Balance at end of period
   applicable to:
Residential..................   $232   69.35%    $193    72.48%    $158   72.05%    $122    73.15%    $103   74.92%
Commercial real estate.......      6    4.64        6     4.80        6    4.73        6     3.24        6    6.10
Multi-family.................      1    2.10        1     2.88        1    4.15        1     3.83        2    1.62
Construction loans...........    ---    4.64      ---     2.08      ---    1.78      ---     2.04      ---    2.26
Commercial paper and
   bankers' acceptances......    ---      ---     ---       ---     ---      ---     ---     1.75      ---    1.12
Consumer loans...............     46   19.27       45    17.76       71   17.29       86    15.99       80   13.98
Unallocated..................    ---      ---     ---       ---     ---      ---       8    ---         15      ---
                                ----  ------     ----   ------     ----  ------     ----   ------     ----  ------ 
   Total.....................   $285  100.00%    $245   100.00%    $236  100.00%    $223   100.00%    $206  100.00%
                                ====  ======     ====   ======     ====  ======     ====   ======     ====  ====== 
</TABLE>

Investments and Mortgage- and Other Asset-Backed Securities

         Federally  chartered savings  associations have the authority to invest
in  various  types  of  liquid  assets,  including  U.S.  Treasury  obligations,
securities  of various  federal  agencies,  certain  certificates  of deposit of
insured banks and savings institutions,  repurchase agreements and federal funds
sold. Subject to various restrictions,  federally chartered savings associations
may also  invest a portion of their  assets in  corporate  debt  securities  and
asset-backed securities. The investment policy of the Bank, which is established
and implemented by the Bank's  Investment  Committee,  is designed  primarily to
maximize  the yield on the  investment  portfolio  subject to minimal  liquidity
risk, default risk, interest rate risk, and prudent asset/liability management.

         The Company's  investments  consist of U.S. government and other agency
securities,  mortgage- and other  asset-backed  securities,  state and municipal
bonds,  corporate  obligations,  marketable equity  securities,  certificates of
deposit,  and FHLB stock. At December 31, 1998,  approximately $13.2 million, or
13.7% of the Company's total assets, consisted of such investments.

         At December  31, 1998,  the Company had $8.1  million of mortgage-  and
other  asset-backed  securities  outstanding,  all of which were  classified  as
available for sale. These fixed-rate mortgage- and other asset-backed securities
may be used as collateral for borrowings and through repayments,  as a source of
liquidity.  Mortgage- and other asset-backed securities offer yields above those
available  for   investments   of  comparable   credit   quality  and  duration.
Mortgage-backed securities are qualifying thrift investments under the Qualified
Thrift Lender test. See "Regulation--Qualified Thrift Lender."


                                     - 10 -
<PAGE>

         The following  table sets forth the carrying  value and market value of
the Company's investments and mortgage- and other asset-backed securities at the
dates indicated.

<TABLE>
<CAPTION>
                                                                         At December 31,
                                         ---------------------------------------------------------------------------
                                                  1998                        1997                     1996
                                         ---------------------      --------------------      ----------------------
                                          Carrying      Market      Carrying      Market      Carrying        Market
                                            Value        Value        Value        Value        Value          Value
                                            -----        -----        -----        -----        -----          -----
                                                                         (In thousands)
Securities available for sale:
<S>                                      <C>          <C>            <C>          <C>        <C>           <C>     
   Federal agencies...................   $  2,845     $  2,825       $3,598       $3,451     $  5,245      $  4,880
   State and municipal................      1,323        1,393        1,780        1,847        2,194         2,242
   Mortgage- and other asset-backed
     securities.......................      8,193        8,129        9,998        9,932        6,768         6,674
   Corporate obligations..............        561          571          200          209          350           348
   Marketable equity securities.......          4          244            6          243            6           159
                                          -------      -------      -------      -------      -------       -------
     Total securities
     available for sale...............     12,926       13,162       15,582       15,682       14,563        14,303
Certificate of deposit (1)............        ---          ---          100          100          100           100
FHLB stock (1)........................        568          568          494          494          387           387
                                          -------      -------      -------      -------      -------       -------
     Total investments................    $13,494      $13,730      $16,176      $16,276      $15,050       $14,790
                                          =======      =======      =======      =======      =======       =======
</TABLE>

(1)  Market value approximates carrying values.

         Included in the  Company's  investment  portfolio  at December 31, 1998
were approximately  $300,000  (amortized cost) in derivative  securities,  which
were  structured  notes  issued by the FHLBs.  The fair value of these  security
investments was  approximately  $289,000 at December 31, 1998.  These structured
notes,  which are not  obligations  of, or  guaranteed  by, the  United  States,
represent  obligations to repay  principal with interest that is either fixed or
fluctuates in accordance with an interest formula tied to various  indices.  The
interest on the  Company's  structured  notes  generally  adjusts  quarterly  or
semi-annually  based on  certain  indices  such as the LIBOR  and the CMT.  This
structured  note had  fluctuating  interest  rates that adjust on the basis of a
formula  tied to two  different  indices,  such as the CMT and an inverse  LIBOR
rate.  This dually  indexed  security was  classified  as available  for sale at
December 31, 1998.

         The average yield at December 31, 1998, of these derivative securities,
was 2.64%. In a rising  interest rate  environment,  it is anticipated  that the
yield on and market  value of these  securities  will  decline,  and may decline
substantially.



                                     - 11 -
<PAGE>

         The following  table sets forth  investment  securities,  mortgage- and
other  asset-backed  securities  and FHLB stock which mature  during each of the
periods  indicated and the weighted  average yields for each range of maturities
at December 31, 1998.

<TABLE>
<CAPTION>

                                                      Amount at December 31, 1998, which matures in
                                  -------------------------------------------------------------------------------------
                                          One                 One to                Five to                  Over
                                     Year or Less           Five Years             Ten Years            Ten Years(4)
                                  -------------------  ------------------     -------------------   -------------------
                                             Weighted            Weighted               Weighted               Weighted
                                  Carrying    Average  Carrying   Average     Carrying   Average    Carrying    Average
                                    Value      Yield     Value     Yield        Value     Yield       Value      Yield
                                    -----      -----     -----     -----        -----     -----       -----      -----
                                                                 (Dollars in thousands)
<S>                                <C>        <C>      <C>        <C>          <C>       <C>        <C>        <C>  
Securities available for sale (1)(3) :
   Federal agencies.............. $   ---       ---%    $  800    4.75%        $1,845    6.66%     $   200     6.80%
   State and municipal (2).......      25     6.88         175    4.72          1,113    5.27           10     7.25
   Mortgage- and other
      asset-backed securities....   2,337     4.13       2,723    5.05            875    6.45        2,258     6.87
   Corporate obligations.........     ---       ---        ---      ---           461    6.12          100     7.41
   Marketable equity securities..     ---       ---        ---      ---           ---      ---           4    50.77
                                   ------     ----     -------    ----         ------    ----       ------     ---- 
     Total securities
        available for sale.......   2,362     4.16       3,698    4.97          4,294    6.20        2,572     6.96
FHLB stock.......................     ---       ---        ---      ---           ---      ---         568     8.00
                                   ------     ----     -------    ----         ------    ----       ------     ---- 
     Total investments...........  $2,362     4.16%    $ 3,698    4.97%        $4,294    6.20%      $3,140     7.14%
                                   ======     ====     =======    ====         ======    ====       ======     ==== 
</TABLE>

(1)      Securities  available  for sale are set  forth  at  amortized  cost for
         purposes of this table.
(2)      Fully taxable equivalent basis.
(3)      No effect is given for possible prepayments.
(4)      Includes perpetual marketable equity securities.


Sources of Funds

         General.  Deposits have traditionally been the Bank's primary source of
funds for use in lending and investment activities. In addition to deposits, the
Company derives funds from scheduled loan payments,  loan prepayments,  retained
earnings and income on earning assets.  While scheduled loan payments and income
on earning assets are relatively  stable sources of funds,  deposit  inflows and
outflows can vary widely and are influenced by prevailing interest rates, market
conditions and levels of  competition.  Borrowings from the FHLB of Indianapolis
may be used in the  short-term  to  compensate  for  reductions  in  deposits or
deposit  inflows at less than  projected  levels.  The Bank rarely  borrows on a
longer-term basis, for example,  to support expanded  activities or to assist in
its asset/liability management.

         Deposits. Deposits are attracted,  principally from within Cass County,
through the offering of a broad selection of deposit  instruments  including NOW
and other transaction accounts,  fixed-rate certificates of deposit,  individual
retirement accounts, and savings accounts. The Bank does not actively solicit or
advertise for deposits outside of Cass County.  Substantially  all of the Bank's
depositors are residents of that county.  Deposit  account terms vary,  with the
principal differences being the minimum balance required, the amount of time the
funds remain on deposit and the interest  rate.  The Bank does not pay a fee for
any deposits it receives.

         Deposits totaled $70.0 million at December 31, 1998.

         Interest  rates  paid,  maturity  terms,  service  fees and  withdrawal
penalties are  established  by the Bank on a periodic  basis.  Determination  of
rates and terms are predicated on funds acquisition and liquidity  requirements,
rates paid by  competitors,  growth  goals,  and federal  regulations.  The Bank
relies,  in part,  on customer  service  and  long-standing  relationships  with
customers  to attract  and  retain its  deposits,  but also  closely  prices its
deposits in relation to rates offered by its competitors.



                                     - 12 -
<PAGE>

         The flow of deposits is influenced  significantly  by general  economic
conditions,   changes  in  money  market  and  prevailing   interest  rates  and
competition.  The variety of deposit accounts offered by the Bank has allowed it
to be competitive in obtaining funds and to respond with  flexibility to changes
in  consumer  demand.  The  Bank  has  become  more  susceptible  to  short-term
fluctuations  in deposit  flows as  customers  have  become more  interest  rate
conscious.  The Bank  manages  the pricing of its  deposits in keeping  with its
asset/liability   management  and   profitability   objectives.   Based  on  its
experience,  the Bank believes that its passbook,  NOW and  non-interest-bearing
checking  accounts  are  relatively  stable  sources of deposits.  However,  the
ability of the Bank to attract and  maintain  certificates  of deposit,  and the
rates paid on these  deposits,  has been and will  continue to be  significantly
affected by market conditions.

         An analysis of the Bank's deposit accounts by type, maturity,  and rate
at December 31, 1998, is as follows:

<TABLE>
<CAPTION>

                                                           Minimum         Balance at                          Weighted
                                                           Opening        December 31,         % of             Average
Type of Account                                            Balance            1998           Deposits            Rate
---------------                                            -------            ----           --------            ----
                                                                              (Dollars in thousands)
Withdrawable:
<S>                                                      <C>               <C>                 <C>               <C>  
   Passbook savings accounts.........................    $      25         $  3,171            4.53%             2.98%
   Regular money market accounts.....................        2,500            1,153            1.65              3.23
   Hi yield money market accounts....................       10,000           19,362           27.66              4.07
   Super NOW accounts................................        2,500              366             .52              2.33
   NOW and other transaction accounts................          200            4,790            6.84              2.02
   Other transaction accounts........................          100            1,492            2.13               ---
                                                                            -------          ------
Total withdrawable...................................                        30,334           43.33              3.38
Certificates (original terms):
   91 days...........................................        1,000            1,227            1.75              4.57
   6 months..........................................        1,000            3,591            5.13              4.86
   12 months.........................................        1,000            5,971            8.53              5.28
   18 months.........................................          500            1,832            2.62              5.48
   24 months.........................................          500           11,133           15.90              5.49
   30 months.........................................          500            7,569           10.81              5.83
   60 months.........................................        1,000            3,619            5.17              5.65
IRAs
   18 months.........................................          100            4,735            6.76              5.11
                                                                            -------          ------
Total certificates...................................                        39,677           56.67
                                                                            -------          ------   
Total deposits ......................................                       $70,011          100.00%             5.40%
                                                                            =======          ======              ==== 
</TABLE>

         The following table sets forth by various  interest rate categories the
composition of time deposits of the Bank at the dates indicated:
<TABLE>
<CAPTION>
                                                      At December 31,
                                    ---------------------------------------------------
                                     1998                  1997                  1996
                                    -------               -------               -------
                                                      (In thousands)

<C>                                <C>                  <C>                   <C>      
4.00% and under................    $    234             $     136             $     199
4.01 - 6.00 %..................      39,027                35,087                32,499
6.01 - 8.00%...................         416                   508                 1,285
                                    -------               -------               -------
Total  ........................     $39,677               $35,731               $33,983
                                    =======               =======               =======
</TABLE>


                                     - 13 -
<PAGE>

         The following table  represents,  by various  interest rate categories,
the amounts of time deposits  maturing  during each of the three years following
December  31,  1998,  and  the  total  amount   maturing   thereafter.   Matured
certificates  which have not been  renewed as of December  31,  1998,  have been
allocated based upon certain rollover assumptions:

                                              Amounts At
                                    December 31, 1998, Maturing in
                     ----------------------------------------------------------
                     One Year          Two            Three        Greater Than
                      or Less         Years           Years         Three Years
                      -------         -----           -----         -----------
                                            (In thousands)
4.00% and under...  $     234     $       ---      $     ---         $     ---
4.01 - 6.00 %.....     21,930          13,784          1,366             1,947
6.01-8.00%........        178             218            ---                20
                      -------         -------         ------            ------
Total  ...........    $22,342         $14,002         $1,366            $1,967
                      =======         =======         ======            ======


         The following table indicates the amount of the Bank's  certificates of
deposit of greater than $100,000 by time remaining until maturity as of December
31, 1998.

            Maturity                                           (In thousands)
            --------                                           --------------
     Three months or less...................................      $   475
     Greater than three months
          through six months................................        1,141
     Greater than six months
          through twelve months.............................        1,044
     Over twelve months.....................................          817
                                                                   ------
          Total.............................................       $3,477
                                                                   ======



                                     - 14 -
<PAGE>

         The  following  table sets  forth the  dollar  amount of savings in the
various types of deposits  programs  offered by the Bank at the dates indicated,
and the amount of  increase  or  decrease  in such  deposits  as compared to the
previous period.

<TABLE>
<CAPTION>
                                                                        Deposit Activity
                                        ------------------------------------------------------------------------------
                                                                     Increase                               Increase
                                                                    (Decrease)                             (Decrease)
                                         Balance at                    from      Balance at                   from
                                        December 31,       % of    December 31, December 31,     % of     December 31,
                                            1998         Deposits      1997         1997       Deposits       1996
                                            ----         --------      ----         ----       --------       ----
                                                                     (Dollars in thousands)
Withdrawable:
<S>                                        <C>             <C>      <C>           <C>             <C>      <C>      
   Passbook savings accounts............   $3,171          4.53%    $   101       $3,070          5.07%    $    (49)
   Regular money market accounts........    1,153          1.65         103        1,050          1.73         (108)
   Hi yield money market accounts.......   19,362         27.66       3,676       15,686         25.89        1,198
   Super NOW accounts...................      366           .52         (98)         464           .76         (222)
   NOW accounts.........................    4,790          6.84       1,058        3,732          6.16          401
   Other transaction accounts...........    1,492          2.13         630          862          1.42          231
                                          -------        ------      ------      -------        ------       ------
Total withdrawable......................   30,334         43.33       5,470       24,864         41.03        1,451
Certificates (original terms):
   91 days..............................    1,227          1.75         865          362           .60           43
   6 months.............................    3,591          5.13          50        3,541          5.84       (1,023)
   12 months............................    5,971          8.53         220        5,751          9.49          789
   18 months............................    1,832          2.62         813        1,019          1.68           75
   24 months............................   11,133         15.90         603       10,530         17.38         (930)
   30 months............................    7,569         10.81       1,287        6,282         10.37        2,952
   60 months............................    3,619          5.17          67        3,552          5.86         (205)
IRAs
   18 months............................    4,735          6.76          41        4,694          7.75           47
                                          -------        ------      ------      -------        ------       ------
Total certificates......................   39,677         56.67       3,946       35,731         58.97        1,748
                                          -------        ------      ------      -------        ------       ------
Total deposits..........................  $70,011        100.00%     $9,416      $60,595        100.00%      $3,199
                                          =======        ======      ======      =======        ======       ======
</TABLE>

<TABLE>
<CAPTION>
                                                             Deposit Activity
                                             -----------------------------------------------
                                                                                  Increase
                                                                                 (Decrease)
                                              Balance at                            from
                                             December 31,            % of       December 31,
                                                 1996              Deposits         1995
                                             ------------          --------     ------------
                                                             (Dollars in thousands)

Withdrawable:
<S>                                         <C>                      <C>        <C>      
   Passbook savings accounts............    $   3,119                5.43%      $    (77)
   Regular money market accounts........        1,158                2.02           (179)
   Hi yield money market accounts.......       14,488               25.24          1,796
   Super NOW accounts...................          686                1.20            124
   NOW accounts.........................        3,331                5.80            101
   Other transaction....................          631                1.10            162
                                              -------              ------         ------
Total withdrawable......................       23,413               40.79          1,927
Certificates (original terms):
   91 days..............................          319                 .56           (621)
   6 months.............................        4,564                7.95          1,056
   12 months............................        4,962                8.65           (310)
   18 months............................          944                1.64           (149)
   24 months............................       11,460               19.97          4,236
   30 months............................        3,330                5.80         (1,231)
   60 months............................        3,757                6.54           (401)
IRAs
   18 months............................        4,647                8.10            428
                                              -------              ------         ------
Total certificates......................       33,983               59.21          3,008
                                              -------              ------         ------
Total deposits .........................      $57,396              100.00%        $4,935
                                              =======              ======         ======
</TABLE>


                                     - 15 -
<PAGE>

         Borrowings.  The Bank focuses on generating high quality loans and then
seeks the best source of funding from deposits, investments or borrowings. There
are  regulatory  restrictions  on advances from the FHLBs.  See  "Regulation  --
Federal Home Loan Bank System" and "-- Qualified Thrift Lender." At December 31,
1998, the Company had $5.0 million in borrowings  from the FHLB of  Indianapolis
which mature  within one year and $2.0 million which mature in one to two years.
The weighted  average  interest  rate related to these  borrowings  was 5.24% at
December 31, 1998.  The Company does not  anticipate any difficulty in obtaining
advances  appropriate to meet its  requirements  in the future.  At December 31,
1998 and 1997, notes payable consisted of construction borrowings secured by the
Bank's  investment  in a real estate  partnership.  The Bank pays only  interest
until  completion of the project at which time repayment terms will convert to a
ten year  amortization.  The interest  rate on the variable  rate  borrowing was
3.02% and 4.35% at December 31, 1998 and 1997, respectively.

Employees

         As of December  31, 1998,  the Bank  employed 14 persons on a full-time
basis and four persons on a part-time  basis.  None of the Bank's  employees are
represented by a collective bargaining group.  Management considers its employee
relations to be excellent.

         The Bank's employee  benefits for full-time  employees  include,  among
other things, a Financial  Institutions  Retirement Fund ("FIRF" or the "Pension
Plan") defined benefit  pension plan and major medical and long-term  disability
insurance.

         Employee  benefits are considered by management to be competitive  with
those offered by other financial  institutions and major employers in the Bank's
market area. See "Executive Compensation and Related Transactions."

Competition

         The Bank operates in North Central  Indiana and makes almost all of its
loans to and  accepts  most of its  deposits  from  residents  of Cass County in
Indiana.

         The Bank is subject to competition from various financial institutions,
including  state and national  banks,  state and federal  savings  institutions,
credit unions,  certain  non-banking  consumer  lenders,  and other companies or
firms,  including  brokerage houses and mortgage  brokers,  that provide similar
services in Cass County.  The Bank must also compete with money market funds and
with insurance companies with respect to its individual retirement accounts. See
"Regulation--Acquisitions or Dispositions and Branching."

         The primary  factors in competing  for deposits are interest  rates and
convenience  of  office  locations.  The Bank  competes  for  loan  originations
primarily  through the efficiency and quality of services it provides  borrowers
and through interest rates and loan fees it charges. Competition is affected by,
among other things,  the general  availability  of lendable  funds,  general and
local economic conditions, current interest rate levels, and other factors which
are not readily predictable.

                                   REGULATION
General

      As a federally chartered,  SAIF-insured  savings association,  the Bank is
subject to extensive  regulation by the OTS and the FDIC. For example,  the Bank
must obtain OTS  approval  before it may engage in certain  activities  and must
file reports with the OTS regarding its activities and financial condition.  The
OTS periodically  examines the Bank's books and records and, in conjunction with
the FDIC in certain  situations,  has examination and enforcement  powers.  This
supervision  and  regulation  are  intended  primarily  for  the  protection  of
depositors  and the federal  deposit  insurance  funds.  The Bank's semi- annual
assessment  owed to the OTS,  which  is based  upon a  specified  percentage  of
assets, is approximately $14,000.

      The Bank is also  subject  to  federal  and  state  regulation  as to such
matters as loans to officers,  directors,  or principal  shareholders,  required
reserves,  limitations as to the nature and amount of its loans and investments,
regulatory  approval of any merger or consolidation,  issuance or retirements of
securities,  and  limitations  upon  other  aspects of  banking  operations.  In
addition,  the  Bank's  activities  and  operations  are  subject to a number of
additional  detailed,  complex and sometimes  overlapping federal and state laws



                                     - 16 -
<PAGE>

and regulations.  These include state usury and consumer credit laws, state laws
relating to fiduciaries,  the Federal Truth-In-Lending Act and Regulation Z, the
Federal Equal Credit Opportunity Act and Regulation B, the Fair Credit Reporting
Act, the Community  Reinvestment Act,  anti-redlining  legislation and antitrust
laws.

      The United States Congress is considering  legislation  that would require
all  federal  savings  associations,  such as the Bank,  to either  convert to a
national bank or a state-chartered  financial institution by a specified date to
be determined.  In addition,  under the legislation,  the Holding Company likely
would not be  regulated  as a savings and loan  holding  company but rather as a
bank  holding  company.  This  proposed  legislation  would  abolish the OTS and
transfer its  functions  among the other  federal  banking  regulators.  Certain
aspects of the legislation  remain to be resolved and,  therefore,  no assurance
can be given as to  whether or in what form the  legislation  will be enacted or
its effect on the Holding Company and the Bank.

Savings and Loan Holding Company Regulation

      As the holding company for the Bank, the Holding Company is regulated as a
"non-diversified  savings and loan  holding  company"  within the meaning of the
Home Owners' Loan Act, as amended ("HOLA"),  and subject to regulatory oversight
by the Director of the OTS. As such, the Holding  Company is registered with the
OTS and  thereby  subject  to OTS  regulations,  examinations,  supervision  and
reporting  requirements.  As a subsidiary of a savings and loan holding company,
the Bank is subject to certain  restrictions  in its  dealings  with the Holding
Company and with other companies affiliated with the Holding Company.

      In general, the HOLA prohibits a savings and loan holding company, without
prior  approval of the Director of the OTS,  from  acquiring  control of another
savings  association or savings and loan holding  company or retaining more than
5% of the voting shares of a savings  association or of another  holding company
which is not a subsidiary.  The HOLA also restricts the ability of a director or
officer  of the  Holding  Company,  or any  person who owns more than 25% of the
Holding Company's stock,  from acquiring control of another savings  association
or savings and loan holding company without  obtaining the prior approval of the
Director of the OTS.

      The Holding Company's Board of Directors  presently intends to continue to
operate the Holding Company as a unitary savings and loan holding  company.  OTS
regulations  generally do not restrict the permissible  business activities of a
unitary savings and loan holding company.

      Notwithstanding  the above rules as to permissible  business activities of
unitary  savings  and  loan  holding  companies,   if  the  savings  association
subsidiary of such a holding  company fails to meet the Qualified  Thrift Lender
("QTL") test,  then such unitary  holding  company  would become  subject to the
activities  restrictions  applicable to multiple holding companies.  (Additional
restrictions  on securing  advances  from the FHLB also  apply.) At December 31,
1998, the Bank's asset  composition was in excess of that required to qualify as
a Qualified Thrift Lender.

      If the  Holding  Company  were  to  acquire  control  of  another  savings
association  other than through a merger or other business  combination with the
Bank, the Holding  Company would  thereupon  become a multiple  savings and loan
holding  company.  Except where such acquisition is pursuant to the authority to
approve  emergency  thrift   acquisitions  and  where  each  subsidiary  savings
association meets the QTL test, the activities of the Holding Company and any of
its subsidiaries (other than the Bank or other subsidiary savings  associations)
would  thereafter be subject to further  restrictions.  The HOLA provides  that,
among other things,  no multiple  savings and loan holding company or subsidiary
thereof  which is not a savings  association  shall  commence or continue  for a
limited  period of time  after  becoming  a multiple  savings  and loan  holding
company or subsidiary  thereof,  any business activity other than (i) furnishing
or performing  management  services for a subsidiary savings  association,  (ii)
conducting an insurance agency or escrow business,  (iii) holding,  managing, or
liquidating assets owned by or acquired from a subsidiary  savings  association,
(iv) holding or managing  properties  used or occupied by a  subsidiary  savings
association,  (v) acting as trustee under deeds of trust,  (vi) those activities
previously  directly  authorized by the FSLIC by regulation as of March 5, 1987,
to be  engaged in by  multiple  holding  companies,  or (vii)  those  activities
authorized  by the Federal  Reserve  Board (the "FRB") as  permissible  for bank
holding  companies,  unless the Director of the OTS by  regulation  prohibits or
limits such activities for savings and loan holding companies.  Those activities
described in (vii) above must also be approved by the Director of the OTS before
a multiple holding company may engage in such activities.



                                     - 17 -
<PAGE>

      The  Director of the OTS may also  approve  acquisitions  resulting in the
formation of a multiple  savings and loan holding company which controls savings
associations  in more than one state,  if the multiple  savings and loan holding
company involved controls a savings  association which operated a home or branch
office in the state of the association to be acquired as of March 5, 1987, or if
the  laws of the  state in which  the  association  to be  acquired  is  located
specifically permit associations to be acquired by state-chartered  associations
or savings and loan holding  companies  located in the state where the acquiring
entity is located (or by a holding  company that controls  such  state-chartered
savings associations).  Also, the Director of the OTS may approve an acquisition
resulting in a multiple  savings and loan holding  company  controlling  savings
associations  in more than one  state in the case of  certain  emergency  thrift
acquisitions.

      Indiana  law  permits  federal  and  state  savings   association  holding
companies with their home offices  located outside of Indiana to acquire savings
associations  whose home offices are located in Indiana and savings  association
holding  companies with their principal  place of business in Indiana  ("Indiana
Savings  Association Holding Companies") upon receipt of approval by the Indiana
Department of Financial  Institutions.  Moreover,  Indiana  Savings  Association
Holding  Companies  may acquire  savings  associations  with their home  offices
located outside of Indiana and savings  association holding companies with their
principal place of business  located outside of Indiana upon receipt of approval
by the Indiana Department of Financial Institutions.

      No subsidiary  savings  association of a savings and loan holding  company
may declare or pay a dividend on its permanent or  nonwithdrawable  stock unless
it  first  gives  the  Director  of the  OTS 30  days  advance  notice  of  such
declaration  and payment.  Any dividend  declared  during such period or without
giving notice shall be invalid.

Federal Home Loan Bank System

      The  Bank is a  member  of the  FHLB of  Indianapolis,  which is one of 12
regional  FHLBs.  Each FHLB serves as a reserve or central  bank for its members
within its  assigned  region.  It is funded  primarily  from funds  deposited by
savings  associations  and  proceeds  derived  from  the  sale  of  consolidated
obligations of the FHLB system.  It makes loans to members  (i.e.,  advances) in
accordance with policies and procedures established by the Board of Directors of
the FHLB.  All FHLB advances  must be fully secured by sufficient  collateral as
determined  by  the  FHLB.  The  Federal  Housing  Finance  Board  ("FHFB"),  an
independent   agency,   controls  the  FHLB  System,   including   the  FHLB  of
Indianapolis.

      As a member,  the Bank is required to purchase and  maintain  stock in the
FHLB of Indianapolis  in an amount equal to at least 1% of its aggregate  unpaid
residential  mortgage loans, home purchase contracts,  or similar obligations at
the beginning of each year. At December 31, 1998, the Bank's investment in stock
of the FHLB of Indianapolis was $568,000.  The FHLB imposes various  limitations
on advances such as limiting the amount of certain types of real  estate-related
collateral to 30% of a member's capital and limiting total advances to a member.
Interest rates charged for advances vary  depending  upon maturity,  the cost of
funds to the FHLB of Indianapolis and the purpose of the borrowing.

      The FHLBs are  required to provide  funds for the  resolution  of troubled
savings  associations  and to contribute to affordable  housing programs through
direct loans or interest subsidies on advances targeted for community investment
and  low-  and  moderate-income  housing  projects.   These  contributions  have
adversely  affected the level of FHLB dividends paid and could continue to do so
in the future.  For the fiscal year ended  December 31, 1998,  dividends paid by
the FHLB of  Indianapolis  to the Bank  totaled  approximately  $44,000,  for an
annual rate of 8.01%.

Insurance of Deposits

      Deposit Insurance.  The FDIC is an independent federal agency that insures
the  deposits,  up to  prescribed  statutory  limits,  of banks and  thrifts and
safeguards  the safety and soundness of the banking and thrift  industries.  The
FDIC  administers  two separate  insurance  funds,  the Bank Insurance Fund (the
"BIF") for  commercial  banks and state  savings  banks and the SAIF for savings
associations such as the Bank and banks that have acquired deposits from savings
associations.  The FDIC is required to maintain designated levels of reserves in


                                     - 18 -
<PAGE>

each fund.  As of September  30,  1996,  the reserves of the SAIF were below the
level  required  by  law,  primarily  because  a  significant   portion  of  the
assessments  paid into the SAIF  have been used to pay the cost of prior  thrift
failures,  while the  reserves of the BIF met the level  required by law in May,
1996.  However,  on September 30, 1996,  provisions designed to recapitalize the
SAIF and  eliminate the premium  disparity  between the BIF and SAIF were signed
into law. See "-- Assessments" below.

      Assessments.   The  FDIC  is  authorized  to  establish   separate  annual
assessment rates for deposit insurance for members of the BIF and members of the
SAIF.  The FDIC may  increase  assessment  rates for either fund if necessary to
restore the fund's  ratio of reserves  to insured  deposits to the target  level
within a reasonable  time and may  decrease  these rates if the target level has
been met. The FDIC has established a risk-based  assessment system for both SAIF
and BIF members.  Under this system,  assessments vary depending on the risk the
institution poses to its deposit insurance fund. An institution's  risk level is
determined  based on its  capital  level  and the  FDIC's  level of  supervisory
concern about the institution.

      On September 30, 1996, President Clinton signed into law legislation which
included  provisions  designed  to  recapitalize  the  SAIF  and  eliminate  the
significant  premium  disparity between the BIF and the SAIF. Under the new law,
the Bank was charged a one-time  special  assessment  equal to $.657 per $100 in
assessable deposits at March 31, 1996. The Bank paid this one-time assessment of
$335,000 in November  1996.  This  special  assessment  significantly  increased
noninterest  expense and  adversely  affected the Holding  Company's  results of
Operations  for the three months ended  September 30, 1996.  The  assessment was
fully  deductible  for both  federal and state  income tax  purposes.  Beginning
January 1, 1997,  the Bank's annual deposit  insurance  premium was reduced from
 .23% to  .0644%  of  total  assessable  deposits.  BIF  institutions  pay  lower
assessments than comparable SAIF institutions  because BIF institutions pay only
20% of the rate being paid by SAIF  institutions  on their deposits with respect
to obligations issued by the federally-chartered corporation which provided some
of the  financing to resolve the thrift crisis in the 1980s  ("FICO").  The 1996
law also provides for the merger of the SAIF and the BIF by 1999,  but not until
such time as bank and thrift  charters  are  combined.  Until the  charters  are
combined, savings associations with SAIF deposits may not transfer deposits into
the BIF  system  without  paying  various  exit  and  entrance  fees,  and  SAIF
institutions  will  continue  to pay  higher  FICO  assessments.  Such  exit and
entrance fees need not be paid if a SAIF institution  converts to a bank charter
or merges with a bank, as long as the resulting bank continues to pay applicable
insurance  assessments to the SAIF, and as long as certain other  conditions are
met.

Savings Association Regulatory Capital

      Currently,  savings  associations  are subject to three  separate  minimum
capital-to-assets  requirements:  (i) a leverage limit,  (ii) a tangible capital
requirement,  and (iii) a risk-based  capital  requirement.  The leverage  limit
requires that savings  associations  maintain  "core  capital" of at least 3% of
total assets. Core capital is generally defined as common  shareholders'  equity
(including retained income), noncumulative perpetual preferred stock and related
surplus,   certain  minority  equity   interests  in  subsidiaries,   qualifying
supervisory  goodwill,  purchased mortgage servicing rights and purchased credit
card relationships  (subject to certain limits) less nonqualifying  intangibles.
Under the tangible  capital  requirement,  a savings  association  must maintain
tangible  capital (core  capital less all  intangible  assets  except  purchased
mortgage  servicing  rights which may be included  after making the  above-noted
adjustment  in an amount up to 100% of  tangible  capital)  of at least  1.5% of


                                     - 19 -
<PAGE>

total assets.  Under the risk-based  capital  requirements,  a minimum amount of
capital must be maintained by a savings  association to account for the relative
risks inherent in the type and amount of assets held by the savings association.
The risk-based capital  requirement  requires a savings  association to maintain
capital  (defined  generally  for these  purposes as core  capital  plus general
valuation  allowances  and  permanent or maturing  capital  instruments  such as
preferred stock and subordinated debt less assets required to be deducted) equal
to 8.0% of  risk-weighted  assets.  Assets  are ranked as to risk in one of four
categories  (0-100%).  A  credit  risk-free  asset,  such as cash,  requires  no
risk-based  capital,  while an asset with a significant  credit risk,  such as a
non-accrual  loan,  requires  a  risk  factor  of  100%.   Moreover,  a  savings
association must deduct from capital,  for purposes of meeting the core capital,
tangible capital and risk-based capital  requirements,  its entire investment in
and loans to a subsidiary  engaged in activities not  permissible for a national
bank (other than  exclusively  agency  activities  for its customers or mortgage
banking subsidiaries). At December 31, 1998, the Bank was in compliance with all
capital requirements imposed by law.

      The OTS has  promulgated  a rule  which  sets  forth the  methodology  for
calculating an interest rate risk  component to be used by savings  associations
in calculating  regulatory  capital.  The OTS has delayed the  implementation of
this rule, however.  The rule requires savings  associations with "above normal"
interest rate risk  (institutions  whose portfolio equity would decline in value
by more than 2% of assets in the event of a hypothetical 200-basis-point move in
interest rates) to maintain  additional capital for interest rate risk under the
risk-based capital framework. If the OTS were to implement this regulation,  the
Bank would not be required to maintain  additional  capital at December 31, 1998
under the terms of the OTS proposed  interest  rate risk rule.  The OTS recently
updated its  standards  regarding  management  of interest  rate risk to include
summary guidelines to assist savings associations in determining their exposures
to interest rate risk.

Prompt Corrective Regulatory Action

      The  Federal  Deposit  Insurance  Corporation   Improvement  Act  of  1991
("FedICIA")   requires,   among  other  things,  that  federal  bank  regulatory
authorities take "prompt corrective action" with respect to institutions that do
not meet minimum capital requirements.  For these purposes,  FedICIA establishes
five capital tiers: well capitalized, adequately capitalized,  undercapitalized,
significantly undercapitalized, and critically undercapitalized. At December 31,
1998, the Bank was  categorized as  "adequately  capitalized,"  meaning that its
total risk-based  capital ratio exceeded 8%, its Tier I risk-based capital ratio
exceeded  4%,  its  leverage  ratio  exceeded  4%,  and it was not  subject to a
regulatory order, agreement or directive to meet and maintain a specific capital
level for any capital measure.

      The FDIC may order savings associations which have insufficient capital to
take corrective actions. For example, a savings association which is categorized
as  "undercapitalized"  would be  subject  to  growth  limitations  and would be
required  to submit a capital  restoration  plan,  and a  holding  company  that
controls  such a savings  association  would be required to  guarantee  that the
savings   association   complies  with  the  restoration  plan.   "Significantly
undercapitalized"   savings   associations   would  be  subject  to   additional
restrictions.  Savings  associations  deemed  by  the  FDIC  to  be  "critically
undercapitalized"  would  be  subject  to  the  appointment  of  a  receiver  or
conservator.

Dividend Limitations

      The OTS recently adopted a regulation, which becomes effective on April 1,
1999,   that   revises   the  current   restrictions   that  apply  to  "capital
distributions" by savings associations. The amended regulation defines a capital
distribution  as  a  distribution  of  cash  or  other  property  to  a  savings
association's  owners,  made on  account  of their  ownership.  This  definition
includes a savings association's  payment of cash dividends to shareholders,  or
any payment by a savings association to repurchase, redeem, retire, or otherwise
acquire  any of its  shares  or debt  instruments  that  are  included  in total
capital,  and any extension of credit to finance an  affiliate's  acquisition of
those shares or interests.  The amended  regulation  does not apply to dividends
consisting  only of a savings  association's  shares or rights to purchase  such
shares.

      The amended  regulation  exempts  certain  savings  associations  from the
current  requirement  that all savings  associations  file either a notice or an
application with the OTS before making any capital distribution. As revised, the
regulation requires a savings association to file an application for approval of
a proposed capital  distribution with the OTS if the association is not eligible
for expedited  treatment under OTS's application  processing rules, or the total
amount  of  all  capital   distributions,   including   the   proposed   capital
distribution,  for the applicable  calendar year would exceed an amount equal to
the  savings  association's  net income  for that year to date plus the  savings
association's retained net income for the preceding two years (the "retained net
income  standard").  Based on the Bank's retained net income standard,  the Bank
would be required to file a notice or application with the OTS before making any
capital  distribution.  A savings  association must also file an application for
approval  of  a  proposed  capital   distribution  if,  following  the  proposed
distribution, the association would not be at least adequately capitalized under
the OTS prompt corrective action  regulations,  or if the proposed  distribution
would violate a prohibition contained in any applicable statute,  regulation, or
agreement between the association and the OTS or the FDIC.



                                     - 20 -
<PAGE>

      The amended regulation  requires a savings association to file a notice of
a proposed capital  distribution in lieu of an application if the association or
the proposed  capital  distribution do not meet the conditions  described above,
and:  (1) the  savings  association  will not be at least well  capitalized  (as
defined  under the OTS  prompt  corrective  action  regulations)  following  the
capital  distribution;  (2) the capital distribution would reduce the amount of,
or retire any part of the savings  association's  common or preferred  stock, or
retire any part of debt instruments such as notes or debentures  included in the
association's  capital  under the OTS  capital  regulation;  or (3) the  savings
association is a subsidiary of a savings and loan holding  company.  Because the
Bank is a  subsidiary  of a  savings  and  loan  holding  company,  this  latter
provision will require,  at a minimum,  that the Bank file a notice with the OTS
30 days before making any capital distributions to the Holding Company.

      In  addition  to  these  regulatory  restrictions,   the  Bank's  plan  of
conversion imposes additional limitations on the amount of capital distributions
it may make to the Holding  Company.  The plan of  conversion  by which the Bank
converted  from  the  mutual  to the  stock  form of  ownership  (the  "Plan  of
Conversion")  requires the Bank to establish and maintain a liquidation  account
for the benefit of Eligible  Account Holders and  Supplemental  Eligible Account
Holders (as those terms are defined in the Plan of Conversion) and prohibits the
Bank from making capital  distributions  to the Holding Company if its net worth
would be reduced below the amount required for the liquidation account.

Liquidity

      Federal law requires that savings  associations  maintain an average daily
balance of liquid assets in an amount not less than 4% or more than 10% of their
withdrawable  accounts plus short-term  borrowings.  Liquid assets include cash,
certain time deposits, certain bankers' acceptances,  specified U.S. government,
state  or  federal  agency  obligations,   certain  corporate  debt  securities,
commercial paper, certain mutual funds, certain mortgage-related securities, and
certain  first-lien  residential  mortgage loans.  The OTS recently  amended its
regulation that implements  this statutory  liquidity  requirement to reduce the
amount  of  liquid  assets  a  savings  association  must  hold  from  5% of net
withdrawable  accounts and short-term  borrowings to 4%. The OTS also eliminated
the requirement  that savings  associations  maintain  short-term  liquid assets
constituting  at least 1% of their  average  daily  balance of net  withdrawable
deposit  accounts  and current  borrowings.  The  revised OTS rule also  permits
savings  associations  to calculate  compliance  with the liquidity  requirement
based upon their  average  daily  balance of liquid  assets  during each quarter
rather than during each month, as was required under the prior rule. The OTS may
impose  monetary  penalties  on  savings  associations  that fail to meet  these
liquidity  requirements.  As of December 31, 1998, the Bank had liquid assets of
$16.3 million, and a regulatory liquidity ratio of 33.42%.

Limitations on Rates Paid for Deposits

      Regulations  promulgated by the FDIC pursuant to FedICIA limit the ability
of insured  depository  institutions  to accept,  renew or roll over deposits by
offering  rates of interest which are  significantly  higher than the prevailing
rates of interest on deposits offered by other insured  depository  institutions
having the same type of charter in the  institution's  normal market area. Under
these regulations,  "well-capitalized" depository institutions may accept, renew
or  roll  such  deposits  over  without  restriction,  "adequately  capitalized"
depository  institutions  may accept,  renew or roll such  deposits  over with a
waiver from the FDIC (subject to certain  restrictions on payments of rates) and
"undercapitalized"  depository  institutions may not accept,  renew or roll such
deposits  over.  The  regulations  contemplate  that  the  definitions  of "well
capitalized,"  "adequately  capitalized" and "undercapitalized" will be the same
as the  definition  adopted by the agencies to implement the  corrective  action
provisions  of FedICIA.  The Bank does not believe that these  regulations  will
have a materially adverse effect on its current operations.

Safety and Soundness Standards

      On February 2, 1995, the federal banking agencies adopted final safety and
soundness  standards for all insured  depository  institutions.  The  standards,
which were issued in the form of guidelines rather than  regulations,  relate to
internal   controls,   information   systems,   internal  audit  systems,   loan
underwriting  and  documentation,  compensation  and interest rate exposure.  In
general,  the standards are designed to assist the federal  banking  agencies in
identifying and addressing  problems at insured depository  institutions  before


                                     - 21 -
<PAGE>

capital becomes impaired.  If an institution fails to meet these standards,  the
appropriate  federal  banking  agency may  require the  institution  to submit a
compliance  plan.  Failure to submit a compliance plan may result in enforcement
proceedings.  On August 27,  1996,  the  federal  banking  agencies  added asset
quality and earning standards to the safety and soundness guidelines.

Real Estate Lending Standards

      OTS  regulations  require  savings  associations to establish and maintain
written  internal  real estate  lending  policies.  Each  association's  lending
policies  must  be  consistent  with  safe  and  sound  banking   practices  and
appropriate  to the size of the  association  and the  nature  and  scope of its
operations.   The  policies  must  establish   loan  portfolio   diversification
standards;  establish prudent underwriting  standards,  including  loan-to-value
limits, that are clear and measurable;  establish loan administration procedures
for the  association's  real  estate  portfolio;  and  establish  documentation,
approval,   and  reporting   requirements   to  monitor   compliance   with  the
association's  real estate  lending  policies.  The  association's  written real
estate lending policies must be reviewed and approved by the association's Board
of Directors at least annually. Further, each association is expected to monitor
conditions  in its real  estate  market  to  ensure  that its  lending  policies
continue to be appropriate for current market conditions.

Loans to One Borrower

      Under OTS regulations,  the Bank may not make a loan or extend credit to a
single or related group of borrowers in excess of 15% of its unimpaired  capital
and surplus.  Additional amounts may be lent, not in excess of 10% of unimpaired
capital and surplus,  if such loans or extensions of credit are fully secured by
readily marketable collateral,  including certain debt and equity securities but
not including real estate.  In some cases, a savings  association may lend up to
30 percent of  unimpaired  capital and surplus to one  borrower  for purposes of
developing domestic residential housing, provided that the association meets its
regulatory  capital  requirements  and the OTS authorizes the association to use
this expanded lending authority. At December 31, 1998, the Bank did not have any
loans or  extensions  of credit to a single or  related  group of  borrowers  in
excess of its lending limits.

Qualified Thrift Lender

      Savings  associations  must  meet a QTL  test.  If the Bank  maintains  an
appropriate   level  of  qualified  thrift   investments   ("QTIs")   (primarily
residential    mortgages   and   related    investments,    including    certain
mortgage-related  securities)  and  otherwise  qualify  as a QTL,  the Bank will
continue to enjoy full borrowing  privileges from the FHLB of Indianapolis.  The
required  percentage of QTIs is 65% of portfolio  assets  (defined as all assets
minus  intangible  assets,  property used by the  association  in conducting its
business and liquid  assets equal to 10% of total  assets).  Certain  assets are
subject to a  percentage  limitation  of 20% of portfolio  assets.  In addition,
savings  associations may include shares of stock of the FHLBs,  FNMA, and FHLMC
as QTIs.  Compliance  with the QTL test is determined on a monthly basis in nine
out of every twelve months.  As of December 31, 1998, the Bank was in compliance
with its QTL requirement,  with  approximately  90.23% of its assets invested in
QTIs.

      A savings association which fails to meet the QTL test must either convert
to a bank (but its deposit  insurance  assessments and payments will be those of
and paid to the SAIF) or be subject to the following  penalties:  (i) it may not
enter into any new activity except for those permissible for a national bank and
for a savings  association;  (ii) its branching  activities  shall be limited to
those  of a  national  bank;  (iii) it shall  not be  eligible  for any new FHLB
advances; and (iv) it shall be bound by regulations applicable to national banks
respecting  payment of  dividends.  Three years  after  failing the QTL test the
association must (i) dispose of any investment or activity not permissible for a
national  bank and a savings  association  and (ii) repay all  outstanding  FHLB
advances.  If such a savings  association  is  controlled  by a savings and loan
holding  company,  then such holding  company  must,  within a  prescribed  time
period,  become  registered as a bank holding  company and become subject to all
rules  and  regulations   applicable  to  bank  holding   companies   (including
restrictions as to the scope of permissible business activities).

Acquisitions or Dispositions and Branching

      The Bank  Holding  Company  Act  specifically  authorizes  a bank  holding
company, upon receipt of appropriate regulatory approvals, to acquire control of
any savings association or holding company thereof wherever located.  Similarly,
a savings and loan  holding  company may  acquire  control of a bank.  Moreover,
federal  savings  associations  may  acquire  or  be  acquired  by  any  insured
depository  institution.   Regulations  promulgated  by  the  FRB  restrict  the


                                     - 22 -
<PAGE>

branching authority of savings associations  acquired by bank holding companies.
Savings  associations  acquired by bank  holding  companies  may be converted to
banks if they continue to pay SAIF premiums,  but as such they become subject to
branching and activity restrictions applicable to banks.

      Subject  to  certain  exceptions,  commonly-controlled  banks and  savings
associations  must reimburse the FDIC for any losses suffered in connection with
a failed  bank or  savings  association  affiliate.  Institutions  are  commonly
controlled  if one is owned by another or if both are owned by the same  holding
company.  Such claims by the FDIC under this provision are subordinate to claims
of depositors,  secured creditors,  and holders of subordinated debt, other than
affiliates.

      The OTS has adopted  regulations which permit nationwide  branching to the
extent  permitted by federal  statute.  Federal  statutes permit federal savings
associations to branch outside of their home state if the association  meets the
domestic  building  and loan  test in  ss.7701(a)(19)  of the Code or the  asset
composition  test of ss.7701(c) of the Code.  Branching that would result in the
formation of a multiple  savings and loan holding  company  controlling  savings
associations  in more  than one  state is  permitted  if the law of the state in
which the savings association to be acquired is located specifically  authorizes
acquisitions of its state-chartered associations by state-chartered associations
or their  holding  companies  in the state where the  acquiring  association  or
holding company is located. Moreover, Indiana banks and savings associations are
permitted  to  acquire  other  Indiana  banks and  savings  associations  and to
establish branches throughout Indiana.

      Finally,  The Riegle-Neal  Interstate Banking and Branching Efficiency Act
of 1994 (the "Riegle-Neal  Act") permits bank holding companies to acquire banks
in other  states and,  with state  consent  and subject to certain  limitations,
allows banks to acquire  out-of-state  branches either through merger or de novo
expansion.  The State of Indiana  enacted  legislation  establishing  interstate
branching  provisions for Indiana  state-chartered  banks  consistent with those
established by the Riegle-Neal Act (the "Indiana  Branching  Law").  The Indiana
Branching Law authorizes Indiana banks to branch interstate by merger or de novo
expansion,  provided that such  transactions  are not permitted to  out-of-state
banks  unless the laws of their home  states  permit  Indiana  banks to merge or
establish de novo banks on a reciprocial basis. The Indiana Branching Law became
effective March 15, 1996.

Federal Reserve System

         Under  FRB  regulations,  the Bank is  required  to  maintain  reserves
against its  transaction  accounts  (primarily  checking and NOW  accounts)  and
non-personal  money  market  deposit  accounts.  The  effect  of  these  reserve
requirements is to increase the Bank's cost of funds.  The Bank is in compliance
with its  reserve  requirements.  A  federal  savings  association,  like  other
depository  institutions  maintaining  reservable accounts,  may borrow from the
Federal Reserve Bank "discount  window," but the FRB's  regulations  require the
savings association to exhaust other reasonable  alternative sources,  including
borrowing from its regional  FHLB,  before  borrowing  from the Federal  Reserve
Bank. Current law imposes certain limitations on the ability of undercapitalized
depository institutions to borrow from Federal Reserve Banks.

Limitations on Repurchase of Common Stock of Holding Company

         OTS  regulations   currently   provide  that  the  Holding  Company  is
prohibited  from  repurchasing  any  of  its  shares  within  one  year  of  the
Conversion,  which  occured on June 13, 1995.  So long as the Bank  continues to
meet certain  capitalization  requirements,  the Holding  Company may repurchase
shares in an  open-market  repurchase  program  (which  cannot  exceed 5% of its
outstanding  shares in a twelve-month  period) during the second and third years
following its Conversion by giving  appropriate prior notice to the OTS. The OTS
has the  authority  to waive these  restrictions  under  certain  circumstances.
Unless  repurchases are permitted under the foregoing  regulations,  the Holding
Company may not,  for a period of three  years from the date of the  Conversion,
repurchase  any of its capital stock from any person,  except in the event of an
offer to  purchase  by the  Holding  Company on a pro rata basis from all of its
shareholders  which is approved  in advance by the OTS or except in  exceptional
circumstances established to the satisfaction of the OTS.



                                     - 23 -
<PAGE>

         Under  Indiana  law,  the  Holding   Company  will  be  precluded  from
repurchasing  its equity  securities if, after giving effect to such repurchase,
the Holding  Company  would be unable to pay its debts as they become due or the
Holding  Company's  assets would be less than its liabilities and obligations to
preferential shareholders.

Transactions with Affiliates

      The Bank and the Holding  Company are subject to Sections  22(h),  23A and
23B of the Federal Reserve Act, which restrict  financial  transactions  between
banks and affiliated companies. The statute limits credit transactions between a
bank or savings  association  and its  executive  officers  and its  affiliates,
prescribes  terms and conditions for bank  affiliate  transactions  deemed to be
consistent  with safe and sound  banking  practices,  and restricts the types of
collateral security permitted in connection with a bank's extension of credit to
an affiliate.

Federal Securities Law

      The shares of Common Stock of the Holding  Company are registered with the
Securities  and Exchange  Commission  (the  "Commission")  under the  Securities
Exchange  Act of 1934,  as amended  (the "1934  Act").  The  Holding  Company is
subject to the information, proxy solicitation, insider trading restrictions and
other requirements of the 1934 Act and the rules of the Commission thereunder.

      Shares of Common Stock held by persons who are  affiliates  of the Holding
Company may not be resold without  registration  unless sold in accordance  with
the resale restrictions of Rule 144 under the Securities Act of 1933, as amended
(the "1933 Act").  If the Holding  Company meets the current public  information
requirements  under Rule 144, each affiliate of the Holding Company who complies
with the  other  conditions  of Rule  144  (including  those  that  require  the
affiliate's  sale to be aggregated  with those of certain other persons) will be
able to sell in the public market, without registration,  a number of shares not
to exceed, in any three-month  period,  the greater of (i) 1% of the outstanding
shares of the Holding  Company or (ii) the average  weekly  volume of trading in
such shares during the preceding four calendar weeks.

Community Reinvestment Act Matters

      Federal law requires  that ratings of  depository  institutions  under the
Community Reinvestment Act of 1977 ("CRA") be disclosed. The disclosure includes
both a  four-unit  descriptive  rating --  outstanding,  satisfactory,  needs to
improve,  and  substantial  noncompliance  --  and a  written  evaluation  of an
institution's  performance.  Each FHLB is required  to  establish  standards  of
community  investment  or service that its members must  maintain for  continued
access to long-term  advances from the FHLBs.  The standards take into account a
member's  performance under the CRA and its record of lending to first-time home
buyers.  The OTS has  designated the Bank's record of meeting  community  credit
needs as satisfactory.

                                    TAXATION

Federal Taxation

         Historically,  savings  associations,  such  as  the  Bank,  have  been
permitted to compute bad debt deductions using either the bank experience method
or the percentage of taxable income method.  However,  for years beginning after
December 31, 1995,  the Bank is no longer able to use the  percentage of taxable
income method of computing its  allocable  tax bad debt  deduction.  The Bank is
required to compute its allocable  deduction using the experience  method.  As a
result of the repeal of the percentage of taxable income method,  reserves taken
after 1987 using the  percentage  of taxable  income  method  generally  must be
included in future  taxable income over a six-year  period,  although a two-year
delay may be permitted  for  institutions  meeting a  residential  mortgage loan
origination test. In addition,  the pre-1988 reserve, in which no deferred taxes
have been  recorded,  will not have to be recaptured  into income unless (i) the
Bank no longer  qualifies as a bank under the Code, or (ii) excess dividends are
paid out by the Bank.

         Depending  on the  composition  of its items of income and  expense,  a
savings  institution  may be subject to the  alternative  minimum tax. A savings
institution must pay an alternative  minimum tax equal to the amount (if any) by


                                     - 24 -
<PAGE>

which 20% of  alternative  minimum  taxable  income  ("AMTI"),  as reduced by an
exemption  varying with AMTI,  exceeds the regular tax due. AMTI equals  regular
taxable  income   increased  or  decreased  by  certain  tax   preferences   and
adjustments,  including depreciation  deductions in excess of that allowable for
alternative  minimum tax purposes,  tax-exempt interest on most private activity
bonds  issued  after  August 7, 1986  (reduced by any related  interest  expense
disallowed  for  regular  tax  purposes),  the  amount  of the bad debt  reserve
deduction  claimed in excess of the deduction based on the experience method and
75% of the excess of adjusted current earnings over AMTI (before this adjustment
and before any alternative tax net operating loss).  AMTI may be reduced only up
to 90% by net operating loss carryovers,  but alternative  minimum tax paid that
is  attributable  to most  preferences  (although  not to  post-August  7,  1986
tax-exempt interest) can be credited against regular tax due in later years.

State Taxation

         The Bank is subject to Indiana's  Financial  Institutions  Tax ("FIT"),
which is imposed at a flat rate of 8.5% on "adjusted  gross  income."  "Adjusted
gross  income,"  for purposes of FIT,  begins with taxable  income as defined by
Section 63 of the Code and,  thus,  incorporates  federal  tax law to the extent
that it affects the  computation of taxable  income.  Federal  taxable income is
then adjusted by several Indiana modifications, the most notable of which is the
required  addback of interest that is tax-free for federal  income tax purposes.
Other  applicable state taxes include  generally  applicable sales and use taxes
plus real and personal property taxes.

Item 2.  Properties.

         At  December  31,  1998,  the Bank and the  Holding  Company  conducted
business from a single office at 723 East  Broadway,  Logansport,  Indiana.  The
following  table  provides  certain  information  with respect to the  Company's
office as of December 31, 1998:
<TABLE>
<CAPTION>

                                                                         Total Deposits   Net Book Value
                                                                               at          of Property,
                                        Owned or            Year          December 31,      Furniture &       Approximate
     Description and Address             Leased            Opened             1998           Fixtures       Square Footage
     ---------------------------------------------------------------------------------------------------------------------
                                                                             (Dollars in thousands)

<S>                                       <C>               <C>              <C>              <C>                <C>  
     723 East Broadway                    Owned             1962             $70,011          $1,528             4,200
</TABLE>

     Logansport, Indiana  46947

The  Company  owns  computer  and data  processing  equipment  which is used for
transaction  processing and  accounting.  The net book value of electronic  data
processing equipment owned by the Company was $16,500 at December 31, 1998.

         The Bank also has  contracted  for the data  processing  and  reporting
services of the Intrieve Data Center in Cincinnati, Ohio. The cost of these data
processing services is approximately $10,000 per month.

Item 3.       Legal Proceedings.

         Neither  the  Holding  Company  nor the Bank is a party to any  pending
legal proceedings, other than routine litigation incidental to its business.

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

         No matter was submitted to a vote of the Holding Company's shareholders
during the quarter ended December 31, 1998.

Item 4.5.     Executive Officers of the Registrant.

         Presented below is certain information regarding the executive officers
of the Holding Company:

           Name                          Position
           ------------------            -------------------------------------
           Thomas G. Williams            President and Chief Executive Officer
           Charles J. Evans              Vice President
           Dottye Robeson                Secretary/Treasurer



                                     - 25 -
<PAGE>

         Thomas G.  Williams  (age 66) has served as President of the Bank since
1971 and as President and Chief  Executive  Officer of the Holding Company since
its organization.

         Charles J. Evans (age 53) has served as Vice  President and Senior Loan
Officer of the Bank  since 1980 and as Vice  President  of the  Holding  Company
since its organization.

         Dottye  Robeson (age 49) has served as Chief  Financial  Officer of the
Bank since 1994 and as  Secretary/Treasurer  of the  Holding  Company  since its
organization. From 1990 to 1994, she served as Cashier, Vice President and Chief
Financial Officer of Bright National Bank in Flora,  Indiana.  From 1984 to 1990
she was  employed by Smith,  Thompson & Wihebrink  (Logansport).  She has been a
certified public accountant since 1987.

                                     PART II

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

         Logansport  Savings Bank, FSB converted from a mutual savings bank to a
stock form federal savings bank effective June 13, 1995 (the  "Conversion")  and
simultaneously  formed a savings and loan holding company,  Logansport Financial
Corp. The Holding Company's common stock, without par value ("Common Stock"), is
quoted on the National  Association of Securities  Dealers  Automated  Quotation
System  ("NASDAQ"),  Small Cap Market,  under the symbol  "LOGN." The  following
table sets forth the high and low bid  prices  and  dividends  paid per share of
Common  Stock  for the  quarters  indicated.  Such  over-the-counter  quotations
reflect  inter-dealer prices,  without retail mark-up,  mark-down or commission,
and may not necessarily represent actual transactions.

         Quarter Ended              High Bid     Low Bid    Dividends Declared
         ---------------------------------------------------------------------
         March 31, 1997             $ 15        $ 11 1/8        $  .10
         June 30, 1997                14          12 1/2           .10
         September 30, 1997           16          13 1/4           .10
         December 31, 1997            18          15               .10
         March 31, 1998               18 1/8      16               .10
         June 30, 1998                19 5/8      16 1/2           .11
         September 30, 1998           17 1/4      13               .11
         December 31, 1998            16 3/8      13 3/8           .11

         As of February 12, 1999,  there were 832 record  holders of the Holding
Company's  Common Stock.  The Holding Company has established a policy of paying
regular periodic cash dividends,  and the Board of Directors intends to continue
this  policy,  subject to the Holding  Company's  operating  results,  financial
condition,  capital,  income tax considerations,  regulatory  restrictions,  and
other relevant factors.

         Since the Holding  Company  has no  independent  operations  other than
investment-related  activities or other  subsidiaries  to generate  income,  its
ability  to  accumulate  earnings  for  the  payment  of cash  dividends  to its
shareholders  will be  directly  dependent  upon the  ability of the Bank to pay
dividends to the Holding Company.

         Under OTS regulations,  a converted savings institution may not declare
or pay a cash  dividend if the effect would be to reduce its net worth below the
amount required for the liquidation account created at the time it converted. In
addition,  under OTS regulations,  the extent to which a savings institution may
make  a  "capital  distribution,"  which  includes,  among  other  things,  cash
dividends, will depend upon in which one of three categories,  based upon levels
of capital, that savings institution is classified.  The Bank is now and expects
to continue to be a "tier one  institution"  and therefore  would be able to pay
cash dividends to the Holding Company during any calendar year up to 100% of its
net income  during that  calendar  year plus the amount that would reduce by one
half its "surplus  capital ratio" (the excess over its fully  phased-in  capital
requirements)  at the beginning of the calendar year. See "Regulation -- Capital
Distributions  Regulation."  Prior notice of any dividend to be paid by the Bank
to the Holding Company will have to be given to the OTS.



                                     - 26 -
<PAGE>

         Income of the Bank  appropriated  to bad debt reserves and deducted for
federal  income tax purposes is not available  for payment of cash  dividends or
other distributions to the Holding Company without the payment of federal income
taxes by the Bank on the amount of such income deemed  removed from the reserves
at the then-current  income tax rate. At December 31, 1998,  approximately  $1.7
million of the Bank's retained income  represented bad debt deductions for which
no federal income tax provision had been made.
See "Taxation--Federal Taxation."

         Unlike the Bank,  generally  there is no regulatory  restriction on the
payment of  dividends  by the  Holding  Company.  Indiana  law,  however,  would
prohibit the Holding  Company from paying a dividend if, after giving  effect to
the payment of that dividend,  the Holding  Company would not be able to pay its
debts  as they  become  due in the  usual  course  of  business  or the  Holding
Company's total assets would be less than the sum of its total  liabilities plus
preferential rights of holders of preferred stock, if any.

Item 6.       Selected Financial Data.

         The  information  required by this item is incorporated by reference to
the  material  under  the  heading  "Selected  Consolidated  Financial  Data  of
Logansport  Financial  Corp.  and  Subsidiary"  on pages 4 and 5 of the  Holding
Company's 1998 Shareholder Annual Report (the "Shareholder Annual Report").

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

         The  information  required by this item is incorporated by reference to
pages 6 through 20 of the Shareholder Annual Report.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

         The  information  required by this item is incorporated by reference to
pages 14 through 15 of the Shareholder Annual Report.

Item 8.       Financial Statements and Supplementary Data.

         The  Holding  Company's  Consolidated  Financial  Statements  and Notes
thereto  contained on pages 23 through 52 in the  Shareholder  Annual Report are
incorporated  herein by reference.  The Company's unaudited quarterly results of
operations   contained  on  page  52  in  the  Shareholder   Annual  Report  are
incorporated herein by reference.

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

         Not applicable.

                                    PART III

Item 10. Directors and Executive Officers of the Registrant.

         The  information  required by this item with  respect to  directors  is
incorporated  by reference to pages 2 through 4 of the Holding  Company's  Proxy
Statement for its 1999 Annual Shareholder  Meeting (the "1999 Proxy Statement").
Information  concerning the Holding Company's  executive officers is included in
Item 4.5 in Part I of this report.

Item 11. Executive Compensation.

         The  information  required  by this  item  with  respect  to  executive
compensation  is  incorporated  by  reference  to  pages  5 to 8 of the  Holding
Company's 1999 Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

         The  information  required by this item is incorporated by reference to
pages 2 and 3 of the 1999 Proxy Statement.

Item 13.      Certain Relationships and Related Transactions.

         The  information  required by this item is incorporated by reference to
page 8 of the 1999 Proxy Statement.



                                     - 27 -
<PAGE>

                                     PART IV

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

<TABLE>
<CAPTION>
         (a)      List the following documents filed as part of the report:
<S>                                                                 <C> 

                  Financial Statements
                  Independent Auditor's Report (Grant Thornton LLP)............   See Shareholder Annual Report
                                                                                    Page 22
               
                  Consolidated Statements of Financial Condition
                      at December 31, 1998, and 1997...........................   See Shareholder Annual Report
                                                                                    Page 23
                  Consolidated Statements of Earnings 
                      for the Years Ended
                      December 31, 1998, 1997, and 1996........................   See Shareholder Annual Report
                                                                                    Page 24
                  Consolidated Statements of Comprehensive Income
                      for the Years Ended December 31, 1998, 1997 and 1996.....   See Shareholder Annual Report
                                                                                    Page 25
               
                  Consolidated Statements of Changes 
                      in Shareholders' Equity
                      for the Years Ended December 31, 1998, 1997 and 1996.....   See Shareholder Annual Report
                                                                                    Page 26
                  Consolidated Statements of Cash Flows for the Years Ended
                      December 31, 1998, 1997, and 1996........................   See Shareholder Annual Report
                                                                                    Page 27
                  Notes to Consolidated Financial Statements...................   See Shareholder Annual Report
                                                                                    Page 29
        
</TABLE>

         (b)      Reports on Form 8-K.

                  The  Holding  Company  filed no reports on Form 8-K during the
                  fourth quarter of its 1998 fiscal year.

         (c)      The  exhibits  filed  herewith or  incorporated  by  reference
                  herein  are set  forth  on the  Exhibit  Index  on  page  E-1.
                  Included in those  exhibits are Executive  Compensation  Plans
                  and  Arrangements  which  are  identified  as  Exhibits  10(1)
                  through 10(12).

         (d)      All schedules are omitted as the required  information  either
                  is not applicable or is included in the Consolidated Financial
                  Statements or related notes.



                                     - 28 -
<PAGE>

                                   SIGNATURES



     Pursuant  to the  requirement  of  Section  13 or 15(d)  of the  Securities
Exchange Act of 1934, as amended,  the Registrant has duly caused this report to
be signed on behalf of the undersigned, thereto duly authorized.



                                        LOGANSPORT FINANCIAL CORP.



Date: March 15, 1999                    By: /s/ Thomas G. Williams
                                            -----------------------------------
                                             Thomas G. Williams, President and
                                                 Chief Executive Officer


     Pursuant to the  requirements  of the  Securities  Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities indicated on this 15th day of March, 1999.



/s/ Thomas G. Williams
--------------------------------------
Thomas G. Williams
President, Chief Executive Officer and Director
(Principal Executive Officer)

/s/ Dottye Robeson
--------------------------------------
Dottye Robeson,
Secretary/Treasurer (Principal Financial and
Accounting Officer)

/s/ Norbert E. Adrian
--------------------------------------
Norbert E. Adrian, Director

/s/ Charles J. Evans
--------------------------------------
Charles J. Evans, Vice President and Director

/s/ Donald G. Pollitt
--------------------------------------
Donald G. Pollitt, Director

/s/ Susanne S. Ridlen
--------------------------------------
Susanne S. Ridlen, Director

/s/ William Tincher, Jr.
--------------------------------------
William Tincher, Jr., Director

/s/ David Wihebrink
--------------------------------------
David Wihebrink, Director


                                     - 29 -
<PAGE>


                                  EXHIBIT INDEX



Exhibit                                                                   Page

         3(1)     The Articles of  Incorporation of the Registrant are
                  incorporated  by  reference  to Exhibit  3(1) to the
                  Registration Statement on Form S-1 (Registration No.
                  33-89788).

         3(2)     The  Code  of   By-Laws   of  the   Registrant   are
                  incorporated by reference to Exhibit 3.2 to the Form
                  10-Q for the period ended June 30, 1997,  filed with
                  the  Commission  on August 13, 1997 and  resolutions
                  dated October 13, 1998, filed herewith.

         10(1)    The  Registrant's  Stock Option Plan is incorporated
                  by reference to Exhibit A to the Registrant's  Proxy
                  Statement for its Annual Shareholder Meeting held on
                  April 9, 1996 and  resolutions  dated July 14, 1998,
                  amending  the  Registrant's  Stock  Option  Plan are
                  incorporated  by  reference  to Exhibit  10.1 to the
                  Form 10-Q for the period ended  September  30, 1998,
                  filed with the Commission on November 12, 1998.

         10(2)    Logansport   Savings  Bank,  FSB   Recognition   and
                  Retention   Plan  and  Trust  is   incorporated   by
                  reference  to  Exhibit B to the  Registrant's  Proxy
                  Statement for its Annual Shareholder Meeting held on
                  April 9, 1996, and resolutions  dated July 14, 1998,
                  amending   the   Logansport    Savings   Bank,   FSB
                  Recognition   and  Retention   Plan  and  Trust  are
                  incorporated  by  reference  to Exhibit  10.2 to the
                  Form 10-Q for the period ended  September  30, 1998,
                  filed with the Commission on November 12, 1998.

         10(3)    Logansport   Savings   Bank,   FSB  Employee   Stock
                  Ownership Plan and Trust  Agreement is  incorporated
                  by  reference to Exhibit  10(4) to the  Registration
                  Statement on Form S-1 (Registration No. 33-89788).

         10(4)    Employment   Agreement  between  Logansport  Savings
                  Bank, FSB and Thomas G. Williams is  incorporated by
                  reference  to  Exhibit  10(5)  to  the  Registration
                  Statement on Form S-1 (Registration No. 33-89788).

         10(5)    Employment   Agreement  between  Logansport  Savings
                  Bank,  FSB and Charles J. Evans is  incorporated  by
                  reference  to  Exhibit  10(6)  to  the  Registration
                  Statement on Form S-1 (Registration No. 33-89788).

         10(6)    Director  Deferred  Compensation  Agreement  between
                  Logansport Savings Bank, FSB and Thomas G. Williams,
                  effective  4/1/92 is  incorporated  by  reference to
                  Exhibit 10(7) to the Registration  Statement on Form
                  S-1 (Registration No. 33-89788).



                                - 30 -
<PAGE>

         10(7)    Director  Deferred  Compensation  Agreement  between
                  Logansport   Savings  Bank,  FSB  and  Don  Pollitt,
                  effective  4/1/92 is  incorporated  by  reference to
                  Exhibit 10(8) to the Registration  Statement on Form
                  S-1 (Registration No. 33-89788).

         10(8)    Director  Deferred  Compensation  Agreement  between
                  Logansport  Savings  Bank,  FSB and Norbert  Adrian,
                  effective  4/1/92 is  incorporated  by  reference to
                  Exhibit 10(9) to the Registration  Statement on Form
                  S-1 (Registration No. 33-89788).

         10(9)    Director  Deferred  Compensation  Agreement  between
                  Logansport  Savings  Bank,  FSB and Susanne  Ridlen,
                  effective  4/1/92 is  incorporated  by  reference to
                  Exhibit 10(10) to the Registration Statement on Form
                  S-1 (Registration No. 33-89788).

         10(10)Director  Deferred   Compensation   Agreement   between
                  Logansport  Savings Bank,  FSB and David  Wihebrink,
                  effective  4/1/92 is  incorporated  by  reference to
                  Exhibit 10(11) to the Registration Statement on Form
                  S-1 (Registration No. 33-89788).

         10(11)   Executive  Supplemental  Retirement Income Agreement
                  between  Logansport  Savings Bank, FSB and Thomas G.
                  Williams,  executed May 7, 1992 is  incorporated  by
                  reference  to  Exhibit  10(12)  to the  Registration
                  Statement on Form S-1 (Registration No. 33-89788).

         10(12)   Executive  Supplemental  Retirement Income Agreement
                  between  Logansport Savings Bank, FSB and Charles J.
                  Evans,  executed  May 7,  1992  is  incorporated  by
                  reference  to  Exhibit  10(13)  to the  Registration
                  Statement on Form S-1 (Registration No. 33-89788).

         13       1998 Shareholder Annual Report                          ______

         21       Subsidiaries  of the Registrant are  incorporated by
                  reference   to  Exhibit   21  to  the   Registration
                  Statement on Form S-1 (Registration No. 33-89788).

         23       Independent  Auditor's  Consent (Grant Thornton LLP)    ______

         27       Financial  Data Schedule for the twelve month period
                  ended December 31, 1998                                 ______