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 June 30, 1997

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 ____________

                                CITIZENS BANCORP
             (Exact name of registrant as specified in its charter)

              INDIANA                                35-2017500
   (State or other Jurisdiction            (I.R.S. Employer Identification
 of Incorporation or Organization)                     Number)


          60 South Main Street
              P.O. Box 635
           Frankfort, Indiana                             46041
(Address of Principal Executive Offices)               (Zip Code)

Registrant's telephone number including area code:    (765) 654-8533

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

           Securities Registered Pursuant to Section 12(g) of the Act:
                                      None
                                (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 X    NO ____

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K 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. [ ] (N/A)

The aggregate market value of the issuer's voting stock held by  non-affiliates,
as of October 20, 1997 was $12,251,240.

The  number of shares of the  Registrant's  Common  Stock,  without  par  value,
outstanding as of October 20, 1997, was 1,058,000 shares.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None.


                            Exhibit Index on Page ___
                               Page 1 of ___ Pages

<PAGE>


                                CITIZENS BANCORP
                                    Form 10-K
                                      INDEX
                                                                          Page
                                     PART I
     Item 1     Business..................................................
     Item 2.    Properties................................................
     Item 3.    Legal Proceedings.........................................
     Item 4.    Submission of Matters to a Vote of Security Holders.......
     Item 4.5.  Executive Officers of the Registrant......................
PART II
     Item 5.    Market for Registrant's Common Equity and Related
                    Stockholder Matters...................................

     Item 6.    Selected Financial Data...................................
     Item 7.    Management's Discussion and Analysis of Financial
                    Condition and Results of Operations...................
     Item 8.    Financial Statements and Supplementary Data...............
     Item 9.    Changes in and Disagreements with Accountants on
                    Accounting and Financial Disclosure...................

PART III
     Item 10.   Directors and Executive Officers of Registrant............
     Item 11.   Executive Compensation....................................

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

     Item 13.   Certain Relationships and Related Transactions............

PART IV

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

SIGNATURES ...............................................................


<PAGE>

Item 1.    Business

General

         Citizens Bancorp, an Indiana  corporation (the "Holding Company"),  was
organized in June,  1997. On September 18, 1997, it acquired the common stock of
Citizens Savings Bank of Frankfort  ("Citizens") upon the conversion of Citizens
from a federal mutual savings bank to a federal stock savings bank.

         Citizens  was  organized  as  a   state-chartered   building  and  loan
association  in 1916 and currently  conducts its business from one  full-service
office located in Frankfort,  Indiana.  Citizens' principal business consists of
attracting  deposits  from the general  public and  originating  fixed-rate  and
adjustable-rate  loans  secured  primarily  by first  mortgage  liens on one- to
four-family real estate. Citizens' deposit accounts are insured up to applicable
limits by the Savings Association Insurance Fund ("SAIF") of the Federal Deposit
Insurance  Corporation  ("FDIC").  Citizens  offers a  number  of  consumer  and
commercial  financial  services.  These services  include:  (i) residential real
estate  loans;  (ii)  multi-family   loans;  (iii)   construction   loans;  (iv)
nonresidential  real estate loans; (v) home equity loans (vi) single-pay  loans;
(vii) installment loans;  (viii) automobile loans; (ix) NOW accounts;  (x) money
market  demand  accounts   ("MMDAs")  (xi)  passbook  savings  accounts;   (xii)
certificates of deposit and (xiii) individual retirement accounts.

         Loan Portfolio  Data. The following table sets forth the composition of
Citizens'  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 June 30,
                                                       --------------------------------------------------------------
                                                              1997                  1996                  1995
                                                       ------------------     -----------------     -----------------
                                                                  Percent               Percent               Percent
                                                       Amount    of Total     Amount   of Total     Amount   of Total
                                                       ------    --------     ------   --------     ------   --------
                                                                           (Dollars in thousands)

TYPE OF LOAN Real estate mortgage loans:
<S>                                                    <C>         <C>       <C>        <C>         <C>       <C>   
   Residential..................................       $29,888     77.77%    $26,240    76.30%      $22,287   76.13%
   Non-residential..............................           824      2.14         695     2.02           635    2.17
   Multi-family.................................         1,551      4.04       1,596     4.64         1,680    5.74
Construction loans:.............................         1,420      3.69         870     2.53           356    1.22
Consumer loans:
   Single pay...................................         1,854      4.82       2,110     6.14         1,795    6.13
   Installment .................................         1,696      4.41       1,288     3.74         1,068    3.65
   Share .......................................            15       .04          63      .18             7     .02
   Home equity..................................         2,095      5.45       1,949     5.67         1,973    6.74
   Home improvement.............................             8       .02          11      .03            14     .04
                                                       -------    ------     -------   ------       -------  ------ 
       Gross loans receivable...................       $39,351    102.38%    $34,822   101.25%      $29,815  101.84%
                                                       =======    ======     =======   ======       =======  ====== 

TYPE OF SECURITY
Residential real estate ........................        35,153     91.45     $30,860    89.73%      $26,043   88.96%
Non-residential.................................         1,037      2.70       1,072     3.12         1,116    3.81
Multi-family real estate........................         1,551      4.04       1,596     4.64         1,681    5.74
Deposits........................................           193       .50         165      .48            82     .28
Auto   .........................................         1,176      3.06         832     2.42           691    2.36
Other security..................................           111       .29         214      .62           121     .41
Unsecured ......................................           130       .34          83      .24            81     .28
                                                       -------    ------     -------   ------       -------  ------ 
     Gross loans receivable.....................        39,351    102.38      34,822   101.25        29,815  101.84
Deduct:
Deferred loan fees..............................           101       .26          95      .28            86     .29
Allowance for loan losses.......................           212       .55         138      .40            46     .16
Loans in process................................           603      1.57         197      .57           407    1.39
                                                       -------    ------     -------   ------       -------  ------ 
   Net loans receivable.........................       $38,435    100.00%    $34,392   100.00%      $29,276  100.00%
                                                       =======    ======     =======   ======       =======  ====== 
Mortgage Loans (1):
   Adjustable-rate..............................         9,595     29.68%   $  9,241    32.30%     $  9,319   37.68%
   Fixed-rate...................................        22,734     70.32      19,368    67.70        15,410   62.32
     Total......................................       $32,329    100.00%    $28,609   100.00%      $24,729  100.00%
                                                       =======    ======     =======   ======       =======  ====== 

</TABLE>

(1)      Balances in this category  include escrows and reserves for uncollected
         interest.
<PAGE>

         The following  table sets forth certain  information  at June 30, 1997,
regarding the dollar amount of loans maturing in Citizens' loan portfolio  based
on the contractual terms to maturity.  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 Ended June 30,
                                    Outstanding at                                           2001       2003      2008       2013
                                       June 30,                                               to         to        to         and
                                         1997                 1998       1999       2000     2002       2007      2012     following
                                         ----                 ----       ----       ----     ----       ----      ----     ---------
                                                                                    (In thousands)
Real estate mortgage loans:
<S>                                     <C>               <C>           <C>        <C>        <C>      <C>       <C>        <C>    
   Residential loans..................  $29,888           $      5      $  38      $  94      $389     $3,760    $13,890    $11,712
Multi-family loans....................    1,551                ---        ---        ---       ---      1,394        157        ---
   Non-residential loans..............      824                ---        ---         14         8        278        524        ---
Construction loans....................    1,420              1,420        ---        ---       ---        ---        ---        ---
Installment  loans....................    1,696                 74        249        409       867         97        ---        ---
Single pay loans......................    1,854              1,690         77         86         1        ---        ---        ---
Loans secured by deposits.............       15                 15        ---        ---       ---        ---        ---        ---
Home equity loans.....................    2,095                ---        ---        ---       ---        ---        ---      2,095
Home improvement loans................        8                ---          2        ---         6        ---        ---        ---
                                        -------             ------       ----      -----    ------     ------    -------    -------
     Total............................  $39,351             $3,204       $366      $ 603    $1,271     $5,529    $14,571    $13,807
                                        =======             ======       ====      =====    ======     ======    =======    =======
</TABLE>

      The following  table sets forth, as of June 30, 1997, the dollar amount of
all loans due after one year that have  fixed  interest  rates and  floating  or
adjustable interest rates.

<TABLE>
<CAPTION>

                                                       Due After June 30, 1998
                                   ---------------------------------------------------------------
                                   Fixed Rates             Variable Rates                  Total
                                   -----------             --------------                  -----
                                                           (In thousands)
Real estate mortgage loans:
<S>                                   <C>                     <C>                         <C>    
   Residential loans...........       $22,624                 $  7,259                    $29,883
   Multi-family loans..........           ---                    1,551                      1,551
   Non-residential loans.......            39                      785                        824
Construction loans.............           ---                      ---                        ---
Installment loans..............         1,622                      ---                      1,622
Single pay loans...............            22                      142                        164
Loans secured by deposits......           ---                      ---                        ---
Home equity loans..............           ---                    2,095                      2,095
Home improvement loans.........             8                      ---                          8
                                      -------                  -------                    -------
   Total.......................       $24,315                  $11,832                    $36,147
                                      =======                  =======                    =======
</TABLE>


      One- to Four-Family  Residential Loans. Citizens' primary lending activity
consists of originating one- to four-family  residential  mortgage loans secured
by property located in its primary market area.  Citizens  generally  originates
one- to  four-family  residential  mortgage  loans in  amounts  up to 95% of the
lesser of the appraised value or purchase price, with private mortgage insurance
required on loans with a loan-to-value  ratio in excess of 80%. The cost of such
insurance is factored into the annual  percentage  rate on such loans.  Citizens
originates  and  retains  fixed  rate loans  which  provide  for the  payment of
principal  and interest  over a 15- or 20-year  period,  or balloon loans having
terms of up to 20 years with principal and interest payments  calculated using a
30-year amortization period.


<PAGE>

      Citizens also offers adjustable-rate  mortgage ("ARM") loans. The interest
rate on ARM loans is indexed to the one-year  U.S.  Treasury  securities  yields
adjusted to a constant maturity.  Citizens may offer discounted initial interest
rates on ARM loans,  but requires that the borrower  qualify for the ARM loan at
the fully-indexed rate (the index rate plus the margin).  A substantial  portion
of the ARM loans in  Citizens'  portfolio  at June 30, 1997  provide for maximum
rate  adjustments  per  year  and  over  the  life  of the  loan  of 1% and  6%,
respectively. Citizens' residential ARMs are amortized for terms up to 25 years.

      ARM loans decrease the risk  associated  with changes in interest rates by
periodically  repricing,  but  involve  other risks  because as  interest  rates
increase, the underlying payments by the borrower increase,  thus increasing the
potential for default by the borrower.  At the same time, the  marketability  of
the underlying  collateral may be adversely  affected by higher  interest rates.
Upward  adjustment  of the  contractual  interest  rate is also  limited  by the
maximum  periodic and lifetime  interest rate  adjustment  permitted by the loan
documents,  and,  therefore,  is  potentially  limited in  effectiveness  during
periods of rapidly rising interest rates. At June 30, 1997, approximately 24% of
Citizens'  one-  to  four-family  residential  loans  had  adjustable  rates  of
interest.

      All of the one- to  four-family  residential  mortgage loans that Citizens
originates  include  "due-on-sale"  clauses,  which give  Citizens  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. However,  Citizens occasionally permits
assumptions of existing residential mortgage loans on a case-by-case basis.

    At June 30,  1997,  approximately  $29.9  million,  or  77.8%  of  Citizens'
portfolio  of  loans,  consisted  of  one-  to  four-family  residential  loans.
Approximately  $130,000,  or .44% of total  residential  loans, were included in
non-performing  assets  as of  that  date.  See  "--Non-Performing  and  Problem
Assets."

      Multi-Family Loans. At June 30, 1997,  approximately $1.6 million, or 4.0%
of  Citizens'  total loan  portfolio,  consisted  of mortgage  loans  secured by
multi-family  dwellings  (those  consisting of more than four units).  Citizens'
multi-family  loans are  generally  written as  one-year  adjustable  rate loans
indexed to the one-year U.S. Treasury rate or to its internal loan rate which is
established from time-to-time.  Citizens writes  multi-family loans with maximum
Loan-to-Value  ratios of 80%. Citizens' largest multi-family loan as of June 30,
1997 was $837,000 and was secured by an apartment  complex in Frankfort.  On the
same date, there were no multi-family loans included in non-performing assets.

      Multi-family  loans,  like  nonresidential  real estate  loans,  involve a
greater  risk than do  residential  loans.  See "--  Nonresidential  Real Estate
Loans" below.

      Construction  Loans.  Citizens offers  construction  loans with respect to
residential and nonresidential real estate and, in certain cases, to builders or
developers constructing such properties on a speculative basis (i.e., before the
builder/developer  obtains  a  commitment  from a  buyer).  At  June  30,  1997,
approximately $1.4 million, or 3.7% of Citizens' total loan portfolio, consisted
of construction loans. The largest  construction loan at June 30, 1997, totaling
$180,000, was secured by a single-family residence near Frankfort.  Citizens had
no construction loans included in non-performing assets on that date.

      Construction  loans are generally  written as six-month,  fixed-rate loans
with  interest  calculated  on the amount  disbursed  under the loan and payable
monthly.  Citizens  generally  requires  an  80%  Loan-to-Value  Ratio  for  its
construction  loans.  Inspections  are made  prior to any  disbursement  under a
construction  loan, and Citizens does not normally  charge  commitment  fees for
construction loans.

      While  providing  Citizens  with a  comparable,  and in some cases higher,
yield than a  conventional  mortgage loan,  construction  loans involve a higher
level of risk.  For  example,  if a project is not  completed  and the  borrower
defaults,  Citizens may have to hire another  contractor to complete the project
at a higher  cost.  Also,  a project may be  completed,  but may not be salable,
resulting in the borrower defaulting and Citizens taking title to the project.
<PAGE>

      Nonresidential  Real Estate Loans.  Citizens'  nonresidential  real estate
loans  are  secured  by  churches,   office  buildings,   and  other  commercial
properties.  Citizens generally originates  non-residential real estate loans as
one-year  adjustable rate loans indexed to the one-year U.S. Treasury securities
yield adjusted to a constant  maturity,  and which are written for maximum terms
of 20  years  with  maximum  Loan-to-Value  ratios  of 75%.  At June  30,  1997,
Citizens'  largest  nonresidential  loan  was  $157,000  and  was  secured  by a
manufacturing facility in Frankfort.  At June 30, 1997,  approximately $824,000,
or 2.1% of its total loan  portfolio,  consisted of  nonresidential  real estate
loans. On the same date, there were no nonresidential real estate loans included
in non-performing assets.

      Loans secured by nonresidential real estate generally are larger than one-
to  four-family  residential  loans  and  involve  a  greater  degree  of  risk.
Nonresidential  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.

      Consumer Loans.  Citizens'  consumer loans,  consisting  primarily of home
equity  loans,  personal  installment  loans and "single  pay" loans  aggregated
approximately  $5.7  million  at June  30,  1997,  or 14.7%  of its  total  loan
portfolio.  Citizens consistently originates consumer loans to meet the needs of
its customers and to assist in meeting its asset/liability management goals. All
of Citizens'  consumer loans,  except loans secured by deposits,  are fixed-rate
loans with terms that vary from six months (for unsecured  installment loans) to
60 months (for home improvement loans and loans secured by new automobiles).  At
June 30, 1997,  97.7% of Citizens'  consumer  loans were secured by  collateral.
Citizens'  loans secured by deposits are made up to 90% of the original  account
balance and, at June 30, 1997,  accrued at a rate of 8.5%.  This rate may change
but will always be at least 1% over the  underlying  passbook or  certificate of
deposit rate. Interest on loans secured by deposits is paid semi-annually.

      Citizens  also  offers home  equity  lines of credit and home  improvement
loans secured by real estate.  The interest rate on a home equity line of credit
is  ordinarily  tied to the  prime  rate with a margin  of  positive  2.0% and a
maximum interest rate of 18%.  Citizens does not always hold a first mortgage on
its home equity  lines of credit,  although it does hold a first  mortgage  with
respect to approximately 90% of such loans in its portfolio. Citizens ordinarily
offers  fixed-rate home improvement loans secured by real estate with a term not
to exceed five years.  Citizens  restricts the amount that a customer may borrow
under an equity line of credit to $100,000,  subject to the general  restriction
applicable to all second  mortgage loans that limits the amount it may loan to a
borrower to an amount that, when added to any existing  mortgage loans, does not
exceed 80% of the appraised value of the collateral property.

         At June 30, 1997,  Citizens had outstanding  approximately $2.1 million
of home equity loans,  with unused lines of credit totaling  approximately  $2.5
million.   Home  equity  loans  in  the  amount  of  $52,000  were  included  in
non-performing assets on that date.

         Consumer loans may entail greater risk than residential mortgage loans,
particularly in the case of consumer loans which are unsecured or are secured by
rapidly  depreciable  assets,  such as  automobiles.  Further,  any  repossessed
collateral for a defaulted  consumer loan may not provide an adequate  source of
repayment  of  the  outstanding  loan  balance.   In  addition,   consumer  loan
collections depend on the borrower's  continuing financial  stability,  and thus
are more likely to be affected by adverse personal  circumstances.  Furthermore,
the  application  of various  federal and state laws,  including  bankruptcy and
insolvency  laws, may limit the amount which can be recovered on such loans.  At
June  30,  1997,   consumer  loans   amounting  to  $173,000  were  included  in
non-performing assets. See "-- Non-Performing and Problem Assets."

         Single-Pay  Loans.   Citizens  offers   single-pay  loans,   which  are
short-term  loans  secured  by  real  estate,  automobiles  or  other  types  of
collateral  that are payable with a single payment  rather than by  installment.
Typically, single-pay loans secured by real estate are written with terms of one
year or less,  while  single-pay  loans secured by other types of collateral are
written for terms of 90 days to six months. Of the approximately $1.9 million of
single-pay loans in Citizens' portfolio as of June 30, 1997,  approximately $1.1
million were secured by residential mortgages and $158,000 were secured by land.
The  remaining  approximately  $640,000 of loans in this  category were consumer
loans,  typically secured by automobiles or subordinate liens on real estate. At
June 30, 1997,  Citizens  had one  delinquent  single-pay  loan in the amount of
$84,000 in its portfolio.

<PAGE>

         Origination,  Purchase  and Sale of Loans.  Citizens  historically  has
originated its mortgage loans pursuant to its own  underwriting  standards which
do not conform  with the  standard  criteria of the Federal  Home Loan  Mortgage
Corporation  ("FHLMC") or the Federal  National  Mortgage  Association  ("FNMA")
because  Citizens  does not  require  current  property  surveys in most  cases.
Citizens may begin originating fixed-rate residential mortgage loans for sale to
the  FHLMC  on a  servicing-retained  basis in the  future.  In the  event  that
Citizens  originates loans for sale to the FHLMC in the secondary  market,  such
loans will be originated in accordance  with the  guidelines  established by the
FHLMC and will be sold promptly after they are originated.

      Citizens  confines its loan  origination  activities  primarily to Clinton
County. At June 30, 1997, Citizens had one loan totaling  approximately  $71,000
secured by property located outside of Indiana.  Citizens loan  originations are
generated from  referrals  from existing  customers,  real estate  brokers,  and
newspaper and periodical  advertising.  Loan  applications  are underwritten and
processed at Citizens' office.

      Citizens'  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,  Citizens  studies  the  employment  and credit  history  and
information  on  the  historical  and  projected  income  and  expenses  of  its
mortgagors.  All  mortgage  loans are  approved  by  Citizens'  Loan  Committee.
Consumer  loans up to $15,000 may be approved by a Loan Officer.  Consumer loans
for more than  $15,000  must be  approved  by the  senior  loan  officer  or the
President.

      Citizens generally  requires  appraisals on all real property securing its
loans and requires an attorney's  opinion and a valid lien on the mortgaged real
estate.  Appraisals for all real property  securing mortgage loans are performed
by independent  appraisers who are  state-licensed.  Citizens  requires fire and
extended coverage insurance in amounts at least equal to the principal amount of
the loan and also require flood  insurance to protect the property  securing its
interest if the property is in a flood plain.  Citizens also generally  requires
private mortgage insurance for all residential mortgage loans with Loan-to-Value
Ratios of greater than 80%.  Citizens  requires  escrow  accounts for  insurance
premiums and taxes for loans that require private mortgage insurance.

      Citizens'  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 following  table shows  Citizens'  loan  origination  and repayment
activity during the periods indicated:

<TABLE>
<CAPTION>
                                                                   Year Ended June 30,
                                                  ----------------------------------------------------
                                                    1997                  1996                  1995
                                                  --------              --------              --------
                                                                     (In thousands)
Loans Originated:
     Real estate mortgage loans:
<S>                                                 <C>                 <C>                   <C>     
       Residential loans........................    $9,253              $  8,738              $  5,748
       Nonresidential loans.....................       202                   175                    19
       Multi-family loans.......................       102                   ---                    56
     Construction loans.........................     2,503                 1,603                   356
     Installment loans..........................     1,434                 1,076                   961
     Single pay loans...........................     2,818                 2,834                 3,063
     Loans secured by deposits..................         5                    63                     6
     Home equity loans..........................     1,156                   930                 1,054
     Home improvement loans.....................       ---                   ---                   ---
                                                  --------              --------              --------
         Total originations.....................    17,473                15,419                11,434
     Loans purchased............................       ---                    64                   ---
Reductions:
     Principal loan repayments..................   (13,251)              (10,279)               (8,263)
     Loans sold.................................       (91)                  ---                   ---
     Transfers from loans to real estate owned..       ---                   ---                   ---
                                                  --------              --------              --------
         Total reductions.......................   (13,342)              (10,279)               (8,263)
     Decrease in other items (1)................       (88)                  (88)                  (37)
                                                  --------              --------              --------
     Net increase (decrease) ...................  $  4,043              $  5,116              $  3,134
                                                  ========              ========              ========
</TABLE>


(1)   Other items consist of amortization of deferred loan origination costs and
      the provision for losses on loans.


<PAGE>

      Citizens'  residential  loan  originations  during the year ended June 30,
1997  totaled  $9.3  million,  compared to $8.7  million and $5.7 million in the
years ended June 30, 1996 and 1995, respectively.

      Origination  and Other Fees.  Citizens  realizes income from late charges,
checking account service  charges,  and fees for other  miscellaneous  services.
Citizens  currently charges  origination fees on its mortgage loans of 1% of the
loan  amount,  up to  $100,000,  and .5% of the amount of the loan that  exceeds
$100,000.  Citizens also may charge  points on a mortgage loan as  consideration
for a lower interest rate,  although it does so  infrequently.  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

      After a  mortgage  loan  becomes  15 days past due,  Citizens  delivers  a
delinquency  notice to the  borrower.  When loans are 30 to 60 days in  default,
Citizens sends  additional  delinquency  notices and makes  personal  contact by
telephone with the borrower to establish acceptable  repayment  schedules.  When
loans become 60 days in default, Citizens again contacts the borrower, this time
in person, to establish acceptable repayment schedules.  When a mortgage loan is
90 days  delinquent,  Citizens will have either entered into a workout plan with
the borrower or referred the matter to its attorney for  collection.  Management
is authorized  to commence  foreclosure  proceedings  for any loan upon making a
determination that it is prudent to do so.

      Citizens  reviews  mortgage loans on a regular basis and places such loans
on a non-accrual  status when they become 90 days  delinquent.  Generally,  when
loans are placed on a non-accrual  status,  unpaid  accrued  interest is written
off, and further income is recognized only to the extent received.

      Non-performing  Assets.  At June  30,  1997,  $344,000,  or .74% of  total
assets,  were  non-performing  (non-performing  loans  and  non-accruing  loans)
compared to $222,000,  or .50%,  of total  assets at June 30, 1996.  At June 30,
1997,  residential loans and consumer loans accounted for $130,000 and $173,000,
respectively,  of  non-performing  assets.  Citizens  had no Real  Estate  Owned
("REO") properties as of June 30, 1997.

      The table  below  sets  forth the  amounts  and  categories  of  Citizens'
non-performing assets (non-performing loans, foreclosed real estate and troubled
debt  restructurings)  for the last three years. It is Citizens' policy 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.  Delinquent  loans  that are 90 days or more past due are
considered non-performing assets.

                                                      At June 30,
                                            --------------------------------
                                            1997         1997           1995
                                            ----         ----           ----
                                                (Dollars in thousands)
Non-performing assets:
   Non-performing loans.................     $303         $181          $ 98
   Troubled debt restructurings.........       41           41            42
     Total non-performing loans.........      344          222           140
   Foreclosed real estate...............      ---          ---           ---
                                             ----         ----          ----
     Total non-performing assets........     $344         $222          $140
                                             ====         ====          ====

Non-performing loans to total loans.....     0.89%        0.64%         0.48%

Non-performing assets to total assets...     0.74%        0.50%         0.35%

      Interest on loans was $8,000, $4,000, and $2,000 less than would have been
reported for the years ended June 30, 1997, 1996 and 1995, respectively,  if the
non-performing  loans summarized above had been current in accordance with their
original terms.  Citizens  received $9,000 in interest on  non-performing  loans
during the year ended June 30, 1997.

      At June  30,  1997,  Citizens  held  loans  delinquent  from 30 to 59 days
totaling approximately $596,000. Other than these loans and the other delinquent
loans disclosed  elsewhere in this section,  Citizens was not aware of any other
loans, the borrowers of which were experiencing financial difficulties.

<PAGE>

     Delinquent  Loans.  The following  table sets forth certain  information at
June  30,  1997,  1996,  and  1995,  relating  to  delinquencies  in  Citizens's
portfolio.  Delinquent  loans  that are 90 days or more past due are  considered
non-performing assets.



                                       At June 30, 1997                    
                          -------------------------------------------------
                                60-89 Days             90 Days or More     
                          ----------------------- -------------------------
                                        Principal                Principal 
                            Balance     Number      Balance         Number   
                           of Loans     of Loans    of Loans      of Loans   
---------------------------------------------------------------------------
                                                                           
Residential
   mortgage loans..........     1        $10           5          $130     
Nonresidential
   mortgage loans..........     1         24         ---           ---     
Multi-family
   mortgage loans..........   ---        ---         ---           ---     
Installment loans..........     2         16           6            37     
Single pay loans...........   ---        ---           1            84     
Loans secured
   by deposit..............   ---        ---         ---           ---     
Home equity loans..........   ---        ---           5            52     
Home improvement loans.....   ---        ---         ---           ---     
                             ----       ----        ----          ----     
   Total...................     4        $50          17          $303     
                              ===        ===          ==          ====     
Delinquent loans to
   total loans.............                                        .92%    
                                                                   ===     


<TABLE>
<CAPTION>

                                      At June 30, 1996                               At June 30, 1995                   
                           ---------------------------------------------   -------------------------------------------  
                              60-89 Days            90 Days or More            60-89 Days        90 Days or More      
                           ---------------------  ----------------------  -------------------- ----------------------- 
                                       Principal                Principal            Principal               Principal
                           Balance       Number    Balance        Number    Balance    Number    Balance      Number        
                            of Loans   of Loans  of Loans      of Loans   of Loans  of Loans    of Loans     of Loans  
--------------------------------------------------------------------------------------------------------------------  
                                                               (Dollars in thousands)     
Residential                                                                                                           
<S>                              <C>     <C>          <C>        <C>         <C>     <C>           <C>        <C>   
   mortgage loans.........       7       $158         8          $  89         6       $133          3          $41   
Nonresidential                                                                                                        
   mortgage loans.........     ---        ---       ---            ---       ---        ---        ---          ---   
Multi-family                                                                                                          
   mortgage loans.........     ---        ---       ---            ---       ---        ---        ---          ---   
Installment loans.........       6         16         8             35         5         25          3            9   
Single pay loans..........       4         24         2             12         1          2          3           27   
Loans secured                                                                                                         
   by deposit.............     ---        ---       ---            ---       ---        ---        ---          ---   
Home equity loans.........       1          6         3             45         1         10          2           21   
Home improvement loans....     ---        ---       ---            ---       ---        ---        ---          ---   
                                --       ----        --           ----        --       ----         --        -----   
   Total..................      18       $204        21           $181        13       $170         11        $  98   
                                ==       ====        ==           ====        ==       ====         ==        =====   
Delinquent loans to                                                                                                   
   total loans............                                        1.12%                                         .91%  
                                                                  ====                                          ===   
</TABLE>

<PAGE>

      Classified assets.  Federal regulations and Citizens' Asset Classification
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 institution  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.

      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.

      At June 30, 1997, the aggregate amount of Citizens' classified assets, and
of its general and specific loss allowances were as follows:
                                                               At June 30, 1997
                                                                (In thousands)

Substandard assets...............................................      $190
Doubtful assets..................................................       ---
Loss assets......................................................       ---
                                                                       ----
    Total classified assets......................................      $190
                                                                       ====
General loss allowances..........................................      $212
Specific loss allowances.........................................       ---
                                                                       ----
    Total allowances.............................................      $212
                                                                       ====

      Citizens  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  Citizens'  review and  evaluation  of current
economic  conditions  (including  those of its  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 the  opinion  of
management,  Citizens'  allowance for loan losses is adequate to absorb probable
losses inherent in the loan portfolio at June 30, 1997. However, there can be no
assurance  that  regulators,  when  reviewing  Citizens'  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 its loan portfolio.


<PAGE>

      Summary of Loan Loss  Experience.  The following table analyzes changes in
the allowance during the past three fiscal years ended June 30, 1997.

<TABLE>
<CAPTION>

                                                                        Year Ended June 30,
                                                            1997                1996                    1995
                                                            ----                ----                    ----
                                                                     (Dollars in thousands)
<S>                                                          <C>                <C>                    <C>  
Balance at beginning of period.........................      $138               $  46                  $  49
Charge-offs:
   Residential mortgage loans..........................       ---                 ---                    ---
   Nonresidential mortgage loans.......................       ---                 ---                    ---
   Multi-family loans..................................       ---                 ---                    ---
   Construction loans..................................       ---                 ---                    ---
   Installment loans...................................       (11)                ---                    (11)
   Single pay loans....................................       ---                 ---                    (26)
   Loans secured by deposits...........................       ---                 ---                    ---
   Home equity loans...................................       ---                 ---                    ---
   Home improvement loans..............................       ---                 ---                    ---
                                                             ----                ----                  -----
     Total charge-offs.................................       (11)                ---                    (37)
                                                             ----                ----                  -----
Recoveries:
   Residential mortgage................................       ---                   2                    ---
   Single pay..........................................         2                   1                    ---
   Installment.........................................       ---                   9                      2
                                                             ----                ----                  -----
     Total recoveries..................................         2                  12                      2
                                                             ----                ----                  -----
Net (charge-offs) recoveries...........................        (9)                 12                    (35)
Provision for losses on loans..........................        83                  80                     32
                                                             ----                ----                  -----
Balance end of period..................................      $212                $138                  $  46
                                                             ====                ====                  =====
Allowance for loan losses as a percent of
total loans outstanding................................      0.55%               0.40%                  0.16%
Ratio of net (charge-offs) recoveries
to average loans outstanding...........................      (.03)                .04                   (.12)
</TABLE>

      Allocation of Allowance for Loan Losses.  The following  table presents an
analysis of the  allocation of Citizens'  allowance for loan losses at the dates
indicated.  The allocation of the allowance to each category is not  necessarily
indicative  of future  loss in any  particular  category  and does not  restrict
Citizens' use of the allowance to absorb losses in other categories.

<TABLE>
<CAPTION>


                                                                            At June 30,
                                                 1997                          1996                           1995
                                        -----------------------        ----------------------         ---------------------
                                                       Percent                       Percent                        Percent
                                                      of loans                      of loans                       of loans
                                                       in each                       in each                        in each
                                                      category                      category                       category
                                                      to total                      to total                       to total
                                         Amount         loans           Amount        loans            Amount        loans
                                         ------         -----           ------        -----            ------        -----
                                                                       (Dollars in thousands)
Balance at end of
period applicable to:
   Real estate mortgage loans:
<S>                                          <C>      <C>                  <C>      <C>                    <C>       <C>   
     Residential......................       $81      75.96%               $49      75.35%                 $15       74.75%
     Nonresidential...................         3       2.09                  1       2.00                  ---        2.13
     Multi-family.....................         4       3.94                  3       4.58                    1        5.64
   Construction loans.................        27       3.61                 11       2.50                    2        1.19
   Installment loans..................        53       4.31                 41       3.70                   11        3.58
   Loans secured by deposits..........       ---        .04                ---        .18                  ---         .02
   Home equity loans..................         8       5.32                  6       5.60                    6        6.62
   Home improvement loans.............       ---        .02                ---        .03                  ---         .05
   Single pay loans...................        36       4.71                 27       6.06                   11        6.02
                                            ----     ------               ----     ------                  ---      ------ 
   Total..............................      $212     100.00%              $138     100.00%                 $46      100.00%
                                            ====     ======               ====     ======                  ===      ====== 
</TABLE>

<PAGE>

Investments

     Investments. Citizens' investment portfolio consists of equity interests in
pooled investment trusts, and Federal Home Loan Bank ("FHLB") stock. At June 30,
1997,  approximately  $493,000,  or 1.1%, of Citizens' total assets consisted of
such investments.
Citizens also had $3.3 million in interest-earning deposits as of that date.

      The following  table sets forth the amortized cost and the market value of
Citizens' investment portfolio at the dates indicated.

<TABLE>
<CAPTION>
                                                                             At June 30,
                                                  1997                          1996                          1995
                                        ---------------------          ---------------------          ---------------------
                                        Amortized      Market          Amortized     Market           Amortized     Market
                                          Cost          Value            Cost         Value             Cost         Value
                                                                              (In thousands)
Available for Sale:
   Equity interests in pooled
<S>                                        <C>          <C>               <C>          <C>              <C>          <C>   
     investment trusts................     $161         $161              $3,087       $3,003           $2,913       $2,832
FHLB stock............................      332          332                 332          332              332          332
                                           ----         ----              ------       ------           ------       ------
     Total investments................     $493         $493              $3,419       $3,335           $3,245       $3,164
                                           ====         ====              ======       ======           ======       ======
</TABLE>

     The  following  table  sets  forth  the  amount  of  investment  securities
(excluding FHLB stock) which mature during each of the periods indicated and the
weighted average yields for each range of maturities at June 30, 1997.

<TABLE>
<CAPTION>
                                                                          Amount at June 30, 1997 which matures in
                                                      One Year             One Year              Five Years             After
                                                       or Less           to Five Years          to Ten Years           Ten Years
                                                       -------           -------------          ------------           ---------
                                                 Amortized   Average   Amoritzed  Average    Amortized  Average   Amortized  Average
                                                   Cost       Yield      Cost      Yield       Cost      Yield      Cost      Yield
                                                   ----       -----      ----      -----       ----      -----      ----      -----
                                                                             (Dollars in thousands)

<S>                                                <C>       <C>         <C>      <C>            <C>       <C>        <C>     <C>   
Equity interests in pooled investment trusts....   $161      5.99%       $---       ---%         $---        ---%     $---     ---%
</TABLE>

Sources of Funds

      General.  Deposits have  traditionally  been  Citizens'  primary source of
funds for use in lending and  investment  activities.  In addition to  deposits,
Citizens derives funds from scheduled loan payments, investment maturities, loan
prepayments,  retained earnings, income on earning assets and borrowings.  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.  The deposits  shown below  include  approximately  $3.4 million in
public funds deposited by various state,  county and local governments which may
fluctuate  depending  upon  prevailing  interest  rates and the rates offered by
Citizens'  competitors.  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.

      Deposits.  Citizens  attracts  deposits  principally  from within  Clinton
County  through  the  offering  of a broad  selection  of  deposit  instruments,
including fixed-rate passbook accounts, NOW accounts, variable rate money market
accounts, fixed-term certificates of deposit, individual retirement accounts and
savings  accounts.  Citizens does not actively solicit or advertise for deposits
outside of Clinton County, and substantially all of its 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.  Citizens  does not pay  broker  fees for any  deposits  it
receives.


<PAGE>

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

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

      An analysis of Citizens' deposit accounts by type,  maturity,  and rate at
June 30, 1997, is as follows:

<TABLE>
<CAPTION>
                                               Minimum        Balance at                          Weighted
                                               Opening         June 30,            % of            Average
Type of Account                                Balance           1997            Deposits           Rate
--------------------------------------------------------------------------------------------------------
                                                                  (Dollars in thousands)
Withdrawable:
<S>                                        <C>                    <C>              <C>               <C>  
   Fixed rate, passbook accounts.......... $      50              $6,905           18.99%            3.22%
   Variable rate, money market............     2,500               3,170            8.72             3.30
   NOW accounts...........................        50               4,072           11.20             2.09
                                                                 -------          ------ 
     Total withdrawable...................                        14,147           38.91             2.91

Certificates (original terms):
   3 months or less.......................     1,000               1,074            2.95             5.37
   6 months...............................     1,000               4,134           11.37             5.04
   12 months..............................     1.000                 966            2.66             4.81
   13 months..............................     5,000               2,370            6.52             5.42
   18 months..............................     1,000                 587            1.61             4.93
   23 months..............................     5,000               4,154           11.43             5.79
   30 months .............................     1,000               1,146            3.15             5.27
   36 months..............................     1,000                 947            2.61             5.22
   Other certificates.....................     1,000               3,566            9.81             6.00
                                                                 -------          ------ 
Total certificates........................                        18,944           52.11             5.46
IRA's:
   Variable rate, money market............        50                 184            0.51             3.25
   6 months...............................     1,000                  34            0.09             4.53
   12 months..............................     1.000                 151            0.42             4.74
   18 months..............................     1,000                  19            0.05             4.91
   23 months..............................     1,000               1,578            4.34             5.78
   36 months..............................     1,000               1,157            3.18             5.23
   Other certificates.....................     1,000                 141            0.39             5.99
                                                                 -------          ------ 
Total IRA's...............................                         3,264            8.98             5.39
                                                                 -------          ------ 
Total deposits............................                       $36,355          100.00%            4.49%
                                                                 =======          ======       
</TABLE>

      The following  table sets forth by various  interest rate  categories  the
composition of Citizens' time deposits at the dates indicated:

                                             At June 30,
                           1997                  1996                  1995
                           ------------------------------------------------
(In thousands)
3.00 to 3.99%........  $      ---          $       ---            $      219
4.00 to 4.99%........       3,593                5,173                 6,588
5.00 to 5.99%........      15,702               10,629                 7,000
6.00 to 6.99%........       2,604                5,283                 4,349
7.00 to 7.99%........         120                  484                   866
8.00 to 8.99%........           5                    5                   587
                          -------              -------               -------
   Total.............     $22,024              $21,574               $19,609
                          =======              =======               =======


<PAGE>

     The average  amount of and  average  interest  rate paid on, the  following
deposits  categories  which  were in  excess of ten  percent  of  average  total
deposits are as follows:

<TABLE>
<CAPTION>
                                                      Years ended June 30,
                                 1997                         1996                        1995
                          --------------------         ---------------------     -----------------------
                          Average      Average         Average      Average        Average      Average
                          Balance     Rate Paid        Balance     Rate Paid       Balance     Rate Paid
                          -------     ---------        -------     ---------       -------     ---------
<S>                       <C>            <C>         <C>             <C>        <C>               <C>  
Passbook accounts         $6,679         3.24%       $  6,867        3.25%      $   7,523         3.24%
NOW accounts               4,081         2.12           3,843        2.06           3,773         2.37
Money market accounts      3,303         3.30           3,233        3.30           3,389         3.30
Time deposit accounts     22,374         5.49          20,513        5.47          17,920         5.45
</TABLE>

     The following table  represents,  by various interest rate categories,  the
amounts of time deposits  maturing during each of the three years following June
30, 1997. Matured certificates, which have not been renewed as of June 30, 1997,
have been allocated based upon certain rollover assumptions.

<TABLE>
<CAPTION>
                                                  Amounts at June 30, 1997
                        One Year                 Two                  Three             Greater Than
                         or Less                Years                 Years              Three Years
                         -------                -----                 -----              -----------
                                                       (In thousands)
<C>                 <C>                    <C>                   <C>                   <C>      
3.00 to 3.99%......  $       ---            $     ---             $     ---             $     ---
4.00 to 4.99%......        3,540                   53                   ---                    --
5.00 to 5.99%......        8,979                5,089                 1,284                   350
6.00 to 6.99%......          735                  245                   272                 1,352
7.00 to 7.99%......           20                  ---                   ---                   100
8.00 to 8.99%......          ---                  ---                   ---                     5
                         -------               ------                ------                ------
   Total...........      $13,274               $5,387                $1,556                $1,807
                         =======               ======                ======                ======
</TABLE>


      The following table  indicates the amount of Citizens' other  certificates
of deposit of $100,000 or more by time  remaining  until maturity as of June 30,
1997.

                                                       At June 30, 1997
   Maturity Period                                      (In thousands)
   Three months or less..............................        $3,300
   Greater than three months through six months......           200
   Greater than six months through twelve months.....           617
   Over twelve months................................           612
                                                             ------
        Total........................................        $4,729
                                                             ======


<PAGE>

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

<TABLE>
<CAPTION>

                                                                                    DEPOSIT ACTIVITY
                                                    Balance                     Increase        Balance                   Increase
                                                      at                       (Decrease)         at                     (Decrease)
                                                   June 30,          % of         from         June 30,        % of         from
                                                     1997          Deposits       1996           1996        Deposits       1995
                                                     ---------------------------------------------------------------------------
                                                                                (Dollars in thousands)
Withdrawable:
<S>                                                   <C>            <C>       <C>               <C>         <C>            <C>   
   Fixed rate, passbook accounts.................     $6,905         18.99%    $    207          $6,698      18.82%         $(195)
   Variable rate, money market...................      3,170          8.72          139           3,031       8.51            263
   NOW accounts..................................      4,072         11.20           (2)          4,074      11.44            488
     Total withdrawable..........................     14,147         38.91          344          13,803      38.77            556
Certificates (original terms):
   3 months......................................      1,074          2.95       (1,788)          2,862       8.04          1,300
   6 months......................................      4,134         11.37        1,591           2,543       7.14            395
   12 months.....................................        966          2.66           23             943       2.65            (29)
   13 months.....................................      2,370          6.52          360           2,010       5.65             36
   18 months.....................................        587          1.61          286             301       0.85             63
   23 months.....................................      4,154         11.43          470           3,684      10.35          1,189
   30 months ....................................      1,146          3.15         (184)          1,330       3.74           (466)
   36 months.....................................        947          2.61         (292)          1,239       3.48           (265)
   Other certificates............................      3,566          9.81         (189)          3,755      10.54           (328)
                                                     -------        ------        -----         -------     ------         ------
Total certificates...............................     18,944         52.11          277          18,667      52.44          1,895
IRA's
   Variable rate, money market...................        184          0.51          (40)            224       0.63            (95)
   6 months......................................         34          0.09           (2)             36       0.10              1
   12 months.....................................        151          0.42          (12)            163       0.46            (91)
   18 months.....................................         19          0.05           19             ---       0.00            ---
   23 months.....................................      1,578          4.34          632             946       2.66            523
   30 months.....................................        ---            ---         ---             ---        ---             (6)
   36 months ....................................      1,157          3.18         (472)          1,629       4.58           (326)
   Other certificates............................        141          0.39            9             132       0.36            (32)
                                                     -------        ------        -----         -------     ------         ------
   Total IRA's...................................      3,264          8.98          134           3,130       8.79            (26)
                                                     -------        ------        -----         -------     ------         ------
Total deposits...................................    $36,355        100.00%       $ 755         $35,600     100.00%        $2,425
                                                     =======        ======        =====         =======     ======         ======
</TABLE>

      Total deposits at June 30, 1997 were approximately $36.3 million, compared
to approximately $35.6 million at June 30, 1996.  Citizens' deposit base depends
somewhat upon the  manufacturing  sector of Clinton County's  economy.  Although
Clinton  County's   manufacturing  sector  is  relatively  diversified  and  not
significantly  dependent upon any industry,  a loss of a material portion of the
manufacturing  workforce could  adversely  affect  Citizens'  ability to attract
deposits  due  to  the  loss  of  personal  income   attributable  to  the  lost
manufacturing jobs and the attendant loss in service industry jobs.

      In the unlikely event of Citizens'  liquidation after the Conversion,  all
claims of creditors  (including those of deposit account holders,  to the extent
of their deposit  balances)  would be paid first followed by distribution of the
liquidation  account  to  certain  deposit  account  holders,  with  any  assets
remaining thereafter  distributed to the Holding Company as the sole shareholder
of Citizens.

      Borrowings.  Citizens'  focuses on generating  high quality loans and then
seeking the best source of funding from deposits,  investments or borrowings. At
June 30, 1997,  Citizens had  borrowings  in the amount of $4.0 million from the
FHLB of Indianapolis which bear fixed and variable interest rates and are due at
various dates through October,  1998.  Citizens is required to maintain eligible
loans in its  portfolio of at least 170% of  outstanding  advances as collateral
for advances from the FHLB of  Indianapolis.  Citizens does not  anticipate  any
difficulty in obtaining  advances  appropriate to meet its  requirements  in the
future.


<PAGE>

      The following  table presents  certain  information  relating to Citizens'
borrowings at or for the years ended June 30, 1997, 1996 and 1995.

<TABLE>
<CAPTION>
                                                          At or for the Year
                                                            Ended June 30,
                                             1997                1996               1995
                                             -------------------------------------------
                                                   (Dollars in thousands)
FHLB Advances:
<S>                                          <C>                 <C>               <C>   
   Outstanding at end of period............  $4,000              $3,000            $1,500
   Average balance outstanding for period..   3,212               1,923               462
   Maximum amount outstanding at any
     month-end during the period...........   5,000               3,000             1,500
   Weighted average interest rate
     during the period.....................    5.41%               5.94%             6.24%
   Weighted average interest rate
     at end of period......................    6.51                5.82              5.87
</TABLE>


Service Corporation Subsidiaries

      OTS  regulations  permit  federal  savings  associations  to invest in the
capital  stock,   obligations  or  other   specified   types  of  securities  of
subsidiaries  (referred to as "service  corporations") and to make loans to such
subsidiaries  and joint ventures in which such  subsidiaries are participants in
an  aggregate  amount not  exceeding  2% of the  association's  assets,  plus an
additional 1% of assets if the amount over 2% is used for specified community or
inner-city  development  purposes.  In  addition,   federal  regulations  permit
associations to make specified types of loans to such  subsidiaries  (other than
special purpose finance  subsidiaries)  in which the association  owns more than
10% of the stock, in an aggregate amount not exceeding 50% of the  association's
regulatory capital if the association's regulatory capital is in compliance with
applicable  regulations.  A savings  association  that  acquires  a  non-savings
association  subsidiary,  or that  elects  to  conduct a new  activity  within a
subsidiary,  must  give the FDIC  and the OTS at least 30 days  advance  written
notice.  The FDIC  may,  after  consultation  with the OTS,  prohibit  specified
activities if it determines  such  activities pose a serious threat to the SAIF.
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).

      Citizens  currently  owns  one  subsidiary,   Citizens  Loan  and  Service
Corporation ("CLSC"), which primarily engages in the purchase and development of
tracts of  undeveloped  land.  Because CLSC engages in  activities  that are not
permissible  for  a  national  bank,  OTS  regulations  prohibit  Citizens  from
including its investment in CLSC in its calculation of regulatory capital.  CLSC
purchases  undeveloped land,  constructs  improvements and infrastructure on the
land,  and  then  sells  lots to  builders,  who  construct  homes  for  sale to
homebuyers. CLSC ordinarily receives payment when title is transferred.

      CLSC owns a 104-acre  tract of  contiguous  land on which it is  presently
developing 59 acres.  CLSC intends to complete the  development of the remainder
of the  property in  approximately  ten years.  The 59 acres that are  presently
being developed will include 64 building lots known as the Southridge  Addition,
and 89 building lots known as the Meadow Brook Addition. Both of these Additions
have been annexed into the Town of Frankfort.  Citizens  purchased  this land in
1989 intending to develop these housing additions.  However, following enactment
of the Financial  Institutions  Reform Recovery and Enforcement Act of 1989, the
FDIC directed  Citizens to transfer its interest in these  developments to CLSC,
which Citizens did, effective June 30, 1994. Phase I of the development includes
33 completed  lots in the Southridge  Addition,  of which 22 lots have been sold
and on which 21 houses  have been  completed,  and 26 lots in the  Meadow  Brook
Addition,   of  which  3  lots  have  been  sold  with  houses  presently  under
construction on those lots, one of which is a "speculative  house" that Citizens
financed.  The Southridge lots have been priced  generally at $19,000 to $22,000
each,  with completed homes selling  generally for $90,000 to $120,000,  and the
Meadow  Brook  lots have been  priced  generally  at  $23,000  to  $26,000  with
completed  homes  expected to sell  generally  for  $100,000 to  $150,000.  CLSC
intends to develop the remaining 31 lots in the Southridge Addition beginning in
1998.  Phase II and Phase III of the Meadow  Brook  development,  consisting  of
approximately  63 lots,  are still in the  design  stage.  CLSC also  intends to
develop a 25-acre tract located in Frankfort,  with homes generally  selling for
$175,000 to $300,000. This project is in the early stages of development.


<PAGE>

      CLSC intends  ultimately to develop the remaining  20-acre parcel of land,
known as the Mann tract,  that it presently  owns. The development of this land,
which  is part  of the  104-acre  tract  discussed  above,  likely  will  not be
completed for  approximately  10 years. The Mann tract is presently being leased
for farming purposes.  CLSC has no present intentions to acquire additional land
for development purposes.

      CLSC  earned a profit of $11,000  for the year ended  June 30,  1997,  and
$24,000  for the year ended June 30, 1996 and $2,000 for the year ended June 30,
1995. At June 30, 1997, Citizens had an investment in CLSC of $469,000 and loans
outstanding to CLSC of  approximately  $524,000 with an interest rate set at the
prime rate plus 1 percent.  Citizens' consolidated statements of income included
elsewhere herein include the operations of CLSC. All  intercompany  balances and
transactions have been eliminated in the consolidation.

Employees

      As of June 30, 1997, Citizens employed 12 persons on a full-time basis and
five persons on a part-time basis. None of Citizens' employees is represented by
a collective bargaining group and management considers its employee relations to
be good.

      Citizens' employee benefits for full-time  employees include,  among other
things,  a Pentegra Group (formerly known as Financial  Institutions  Retirement
Fund)  defined  benefit  pension  plan,  a  noncontributory,   multiple-employer
comprehensive  pension  plan  (the"Pension  Plan"),  and   hospitalization/major
medical, long-term disability insurance and life insurance.

      Management  considers its employee  benefits to be competitive  with those
offered by other financial institutions and major employers in its area.

                                   COMPETITION

      Citizens  originates most of its loans to and accepts most of its deposits
from residents of Clinton  County,  Indiana.  Citizens is subject to competition
from various financial  institutions,  including state and national banks, state
and federal savings associations, credit unions, and certain nonbanking consumer
lenders  that  provide  similar  services in Clinton  County with  significantly
larger resources than are available to Citizens.  In total, there are five other
financial  institutions  located in Clinton County.  Citizens also competes with
money market funds with respect to deposit accounts and with insurance companies
with respect to individual retirement accounts.

      The primary  factors  influencing  competition  for  deposits are interest
rates,  service and convenience of office locations.  Citizens competes for loan
originations  primarily  through the efficiency and quality of the services that
it  provides  borrowers  and  through  interest  rates  and loan  fees  charged.
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 that Citizens cannot readily predict.

                                   REGULATION

General

      As a federally chartered,  SAIF-insured  savings association,  Citizens is
subject to extensive  regulation by the OTS and the FDIC. For example,  Citizens
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  Citizens' 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  federal  deposit   insurance  funds.   Citizens'  semi-  annual
assessment  owed to the OTS,  which  is based  upon a  specified  percentage  of
assets, is approximately $7,800.


<PAGE>

      Citizens  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,  Citizens'  activities  and  operations  are  subject  to a number  of
additional  detailed,  complex and sometimes  overlapping federal and state laws
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  Citizens,  to either  convert to a
national bank or a state-chartered bank 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 Citizens.

Savings and Loan Holding Company Regulation

      As the holding company for Citizens, the Holding Company is regulated as a
"non-diversified  savings and loan  holding  company"  within the meaning of the
Home Owners' Loan Act of 1933,  as amended  ("HOLA"),  and subject to regulatory
oversight of 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,  Citizens 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 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 June 30, 1997,
Citizens'  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
Citizens, 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 Citizens 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.


<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

      Citizens is a member of the FHLB of  Indianapolis,  which is one of twelve
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,  Citizens 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 June 30, 1997,  Citizens'  investment in stock of
the FHLB of Indianapolis was $332,000.  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 June 30, 1997,  dividends  paid by the
FHLB of Indianapolis to Citizens totaled  approximately  $26,000,  for an annual
rate of 7.84%.

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 Citizens and banks that have acquired deposits from savings
associations.  The FDIC is required to maintain designated levels of reserves in
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,
1995.  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.


<PAGE>

      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,
Citizens was charged a one-time  special  assessment  equal to $.657 per $100 in
assessable  deposits  at March  31,  1995.  Citizens  recognized  this  one-time
assessment as a non-recurring operating expense of $211,000 ($127,000 after tax)
during the three-month  period ending September 30, 1996, and Citizens paid this
assessment on November 27, 1996. The  assessment  was fully  deductible for both
federal and state  income tax  purposes.  Beginning  January 1, 1997,  Citizens'
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 1980's  ("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
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 June 30, 1997,  Citizens 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,
Citizens  would be  exempt  from its  provisions  because  it has less than $300
million  in assets  and its  risk-based  capital  ratio  exceeds  12%.  Citizens
nevertheless  measures  its  interest  rate  risk  in  conformity  with  the OTS
regulation and, as of June 30, 1997,  Citizens'  interest rate risk was slightly
outside the parameters set forth in the regulation.


<PAGE>

      If an association is not in compliance with the capital requirements,  the
OTS is required to prohibit asset growth and to impose a capital  directive that
may  restrict,  among other  things,  the  payment of  dividends  and  officers'
compensation. In addition, the OTS and the FDIC generally are authorized to take
enforcement actions against a savings association that fails to meet its capital
requirements. These actions may include restricting the operations activities of
the association,  imposing a capital directive, cease and desist order, or civil
money  penalties,  or imposing harsher measures such as appointing a receiver or
conservator or forcing the association to merge into another institution.

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 June 30,
1997,  Citizens was  categorized as "well  capitalized,"  meaning that its total
risk-based  capital  ratio  exceeded  10%, its Tier I risk-based  capital  ratio
exceeded  6%,  its  leverage  ratio  exceeded  5%,  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

      An OTS regulation imposes limitations upon all "capital  distributions" by
savings  associations,  including cash dividends,  payments by an association to
repurchase or otherwise acquire its shares,  payments to shareholders of another
institution  in a  cash-out  merger  and  other  distributions  charged  against
capital.  The regulation  establishes a three-tiered system of regulation,  with
the greatest  flexibility  being afforded to  well-capitalized  associations.  A
savings  association  which has total  capital  (immediately  prior to and after
giving effect to the capital  distribution)  that is at least equal to its fully
phased-in  capital   requirements  would  be  a  Tier  1  institution  ("Tier  1
Institution").  An  association  that has total  capital  at least  equal to its
minimum  capital  requirements,  but  less  than  its  fully  phased-in  capital
requirements,  would  be  a  Tier  2  institution  ("Tier  2  Institution").  An
institution  having  total  capital  that  is  less  than  its  minimum  capital
requirements would be a Tier 3 institution ("Tier 3 Institution").  However,  an
institution which otherwise  qualifies as a Tier 1 Institution may be designated
by the OTS as a Tier 2 or Tier 3  Institution  if the OTS  determines  that  the
institution is "in need of more than normal supervision."  Citizens is currently
a Tier 1 Institution.

      A Tier 1 Institution  may,  after prior notice but without the approval of
the OTS, make capital  distributions during a calendar year up to the greater of
(a) 100% of its net income to date during the calendar year plus the amount that
would  reduce by one-half its "surplus  capital  ratio" at the  beginning of the
calendar year (the smallest excess over its capital requirements), or (b) 75% of
its net income over the most recent  four-quarter  period. Any additional amount
of capital  distributions would require prior regulatory approval.  Accordingly,
at  June  30,  1997,  Citizens  had  available   approximately   $1,489,000  for
distribution, without consideration of any capital infusion from the Conversion.

      The OTS has  proposed  revisions to these  regulations  which would permit
savings  associations  to declare  dividends in amounts  which would assure that
they remain adequately  capitalized following the dividend declaration.  Savings
associations  in a holding company system which are rated Camel 1 or 2 and which
are not in  troubled  condition  would need to file a prior  notice with the OTS
concerning such dividend declaration.


<PAGE>

      Pursuant to the Plan of Conversion,  Citizens will establish a liquidation
account for the benefit of Eligible  Account Holders and  Supplemental  Eligible
Account  Holders.  See "The  Conversion  --  Principal  Effects of  Conversion."
Citizens  will not be permitted to pay  dividends to the Holding  Company if its
net  worth  would be  reduced  below the  amount  required  for the  liquidation
account.  Citizens  must  also must  file a notice  with the OTS 30 days  before
declaring a dividend to the Holding Company.

Limitations on Rates Paid for Deposits

      Regulations  promulgated by the FDIC pursuant to FedICIA place limitations
on 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.  Citizens 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
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,  Citizens 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 June 30, 1997,  Citizens did not have any
loans or  extensions  of credit to a single or  related  group of  borrowers  in
excess  of  its   lending   limits.   Citizens   does  not   believe   that  the
loans-to-one-borrower  limits  will have a  significant  impact on its  business
operations or earnings following the Conversion.


<PAGE>

Qualified Thrift Lender

      Savings  associations  must  meet a QTL test.  If  Citizens  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,  Citizens  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 June 30, 1997, Citizens was in compliance with
its QTL requirement, with approximately 88% 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
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.


<PAGE>

Transactions with Affiliates

      Citizens is 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 will be registered with
the SEC under the  Securities  Exchange Act of 1934, as amended (the "1934 Act")
as soon as practicable  following the  Conversion.  The Holding  Company will be
subject to the information, proxy solicitation, insider trading restrictions and
other  requirements of the 1934 Act and the rules of the SEC  thereunder.  After
three years following Citizens' conversion to stock form, if the Holding Company
has fewer than 300 shareholders, it may deregister its shares under the 1934 Act
and cease to be subject to the foregoing requirements.

      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 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)  would 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  Citizens'  record of meeting  community  credit
needs as outstanding, which is the highest available designation.

                                    TAXATION

Federal Taxation

      Historically,  savings associations, such as Citizens, 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, no savings association may use the percentage of taxable income method
of computing  its allowable bad debt  deduction for tax purposes.  Instead,  all
savings associations are required to compute their allowable 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  associations   meeting  a
residential   mortgage  loan   origination   test.   Citizens   will   recapture
approximately  $60,000 over a six-year  period  beginning with the June 30, 1997
federal tax return.  In addition,  the pre-1988  reserve,  for which no deferred
taxes have been  recorded,  need not be  recaptured  into income  unless (i) the
savings  association  no longer  qualifies as a bank under the Code, or (ii) the
savings association pays out excess dividends or distributions.


<PAGE>

      Depending on the composition of its items of income and expense, a savings
association may be subject to the alternative minimum tax. A savings association
must pay an  alternative  minimum  tax on the  amount  (if any) by 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 can be  credited  against
regular tax due in later years.

      For federal  income tax purposes,  Citizens has been  reporting its income
and expenses on the accrual method of accounting.  Citizens'  federal income tax
returns have not been audited in recent years.

State Taxation

      Citizens 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.  Other applicable state taxes include
generally applicable sales and use taxes plus real and personal property taxes.

      Citizens' state income tax returns have not been audited in recent years.

Current Accounting Issues

      In November 1993, the American  Institute of Certified Public  Accountants
issued Statement of Position ("SOP") 93-6,  "Employer's  Accounting for Employee
Stock  Ownership  Plans." The SOP,  among other  things,  changed the measure of
compensation  expense  recorded by  employers  from the cost of  employee  stock
ownership plan shares allocated to employees during the period to the fair value
of employee stock ownership plan shares  allocated.  Assuming the acquisition of
shares of stock by the ESOP, the  application of SOP 93-6 is likely to result in
fluctuations  in  compensation  expense  due to changes in the fair value of the
stock.

      In October,  1995, the FASB issued SFAS No. 123 entitled  "Accounting  for
Stock-Based Compensation." SFAS No. 123 establishes a fair value based method of
accounting  and  disclosing  the  amount  of  stock-based  compensation  paid to
employees.  Historically,  Accounting  Principles  Board ("APB")  Opinion No. 25
"Accounting for Stock Issued to Employees" has measured  compensation cost using
the method based on the award's  intrinsic value.  Those electing to remain with
the  accounting  in APB  Opinion No. 25 must make pro forma  disclosures  of net
income  and,  when  presented,  earnings  per share,  as if the fair value based
method  of  accounting  defined  in SFAS 123 had been  applied.  The  disclosure
provisions  of SFAS No. 123 have been adopted by Citizens.  Management  does not
believe that adoption of SFAS No. 123 disclosure provisions will have a material
adverse  effect on  Citizens'  consolidated  financial  position  or  results of
operations.

      In June, 1996, the FASB issued SFAS No. 125,  "Accounting for Transfers of
Financial  Assets,  Servicing Rights and  Extinguishment  of Liabilities,"  that
provides  accounting  guidance on transfers of  financial  assets,  servicing of
financial assets,  and  extinguishment  of liabilities.  SFAS No. 125 superseded
portions of SFAS No. 122. SFAS No. 125  introduces an approach to accounting for
transfers of financial assets that provides a means of dealing with more complex
transactions  in which the seller  disposes  of only a partial  interest  in the
assets, retains rights or obligations,  makes use of special purpose entities in
the  transaction,  or otherwise has continuing  involvement with the transferred
assets.  The new  accounting  method  provides  that the carrying  amount of the
financial assets transferred be allocated to components of the transaction based
on their  relative fair values.  Transactions  subject to the provisions of SFAS
No. 125  include,  among  others,  transfers  involving  repurchase  agreements,
securitizations  of  financial  assets,  loan  participations  and  transfers of
receivables  with recourse.  An entity that  undertakes an obligation to service
financial  assets  recognizes  either a  servicing  asset or  liability  for the
servicing contract.  A servicing asset or liability that is purchased or assumed
is initially recognized at its fair value.  Servicing assets and liabilities are
amortized in proportion to and over the period of estimated net servicing income
or net servicing loss and are subject to subsequent  assessments  for impairment
based on fair value.  SFAS No. 125 provides that a liability is removed from the
balance sheet only if the debtor either pays the creditor and is relieved of its
obligation  for the  liability  or is legally  released  from being the  primary
obligor. SFAS No. 125 is effective for applicable  transactions  occurring after
December 31, 1996, and is to be applied prospectively.  Retroactive  application
is not permitted. Management does not believe that adoption of SFAS No. 125 will
have a material  adverse  effect on Citizens'  financial  position or results of
operations.


<PAGE>

Item 2.   Properties.

         The  following  table  provides  certain  information  with  respect to
Citizens' office as of June 30, 1997:

<TABLE>
<CAPTION>
                                                                           Net Book
                                                                           Value of
                                                                           Property,            Approximate
    Description        Owned or           Year            Total           Furniture &             Square
    and Address         leased           Opened         Deposits           Fixtures               Footage
    -----------         ------           ------         --------           --------               -------
                                                 (Dollars in thousands)
<C>                     <C>              <C>            <C>                 <C>                  <C>   
60 South Main Street     Owned            1977           $36,355             $578                 13,924
Frankfort, IN 46041
</TABLE>

      Citizens owns  computer and data  processing  equipment  which it uses for
transaction processing, loan origination,  and accounting. The net book value of
Citizens' electronic data processing equipment was approximately $21,000 at June
30, 1997.

      Citizens  operates one automated teller machine ("ATM"),  which is located
in the vestibule of its office.  Citizens' ATM participates in the Cirrus(R) and
MagicLine(R) networks.

      Citizens  has  also  contracted  for the  data  processing  and  reporting
services of BISYS,  Inc. in Houston,  Texas.  The cost of these data  processing
services is approximately $8,500 per month.

      Citizens has contracted with the FHLB of Indianapolis  for item processing
for a fee of approximately $3,000 per month.

Item 3.  Legal Proceedings.

         Neither  the  Holding  Company  nor  Citizens is a party to any pending
legal  proceedings,  other than  routine  litigation  incidental  to the Holding
Company's or Citizens' 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 June 30, 1997.

Item 4.5.  Executive Officers of the Registrant.

         The executive officers of the Holding Company are identified below. The
executive  officers of the Holding  Company are elected  annually by the Holding
Company's Board of Directors.

         Name                     Position with Holding Company
         Fred W. Carter           Chairman of the Board, President and 
                                        Chief Executive Officer
         Stephen D. Davis         Treasurer
         Cindy S. Chambers        Secretary

      Fred W.  Carter  (age 65) has  served as  President  and  Chief  Executive
Officer of Citizens and CLSC since 1972, and of the Holding  Company since 1997.
Mr.  Carter has been an  employee  of  Citizens  since 1966 and is the father of
Cindy S. Chambers, Citizens' Secretary and Customer Service Manager.

      Cindy S.  Chambers  (age 43) has served as Citizens'  Corporate  Secretary
since 1988 and as Citizens'  Customer Service Manager since 1982. She has served
as the Holding  Company's  secretary  since 1997 and is the  daughter of Fred W.
Carter, Citizens' President and Chief Executive Officer.

      Stephen D. Davis (age 41) has served as  Citizens'  Controller  since 1989
and as the Holding Company's Treasurer since 1997.

<PAGE>

                                     PART II

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

         The Holding Company's common stock, without par value ("Common Stock"),
is listed over-the-counter through the OTC "Electronic Bulletin Board" under the
symbol "CIBC." The Holding  Company shares began to trade on September 18, 1997.
The high and low bid prices for the period  September  18,  1997 to October  20,
1997, were $15 1/2 and $13 3/4,  respectively.  Since the Holding Company has no
independent  operation or other  subsidiaries to generate income, its ability to
accumulate  earnings for the payment of cash  dividends to its  shareholders  is
directly  dependent upon the ability of Citizens to pay dividends to the Holding
Company and upon the earnings on its investment securities.

         Under current  federal income tax law,  dividend  distributions  to the
Holding Company,  to the extent that such dividends paid are from the current or
accumulated  earnings and profits of Citizens (as  calculated for federal income
tax  purposes),  will be taxable as ordinary  income to the Holding  Company and
will not be deductible by Citizens.  Because the Holding Company and Citizens do
not file a consolidated federal income tax return however, the dividends will be
eligible for a 100%  dividends-received  deduction by the Holding  Company.  Any
dividend  distributions in excess of current or accumulated earnings and profits
will be treated for federal income tax purposes as a distribution from Citizens'
accumulated  bad debt reserves,  which could result in increased  federal income
tax  liability  for  Citizens.  Moreover,  Citizens may not pay dividends to the
Holding  Company  if  such  dividends  would  result  in the  impairment  of the
liquidation account established in connection with the Conversion.

         Generally,  there is no OTS  regulatory  restriction  on the payment of
dividends by the Holding Company unless there is a determination by the Director
of the OTS that  there  is  reasonable  cause to  believe  that the  payment  of
dividends  constitutes  a serious  risk to the  financial  safety,  soundness or
stability of Citizens. The FDIC also has authority under current law to prohibit
a financial institution from paying dividends if, in its opinion, the payment of
dividends  would  constitute  an  unsafe  or  unsound  practice  in light of the
financial condition of the financial  institution.  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.

         The Holding Company paid no dividends to its shareholders in the fiscal
year ended June 30, 1997.

Item 6.  Selected Financial Data.

         The  following  selected  financial  data  of the  Holding  Company  is
qualified  in its  entirety,  and  should  be  read  in  conjunction  with,  the
consolidated financial statements,  including notes thereto,  included elsewhere
in this Form 10-K.

<TABLE>
<CAPTION>
                                                                                            AT JUNE 30,
                                                                              1997             1996              1995
                                                                              ----             ----              ----
                                                                                          (In thousands)
Summary of Selected Consolidated Financial Condition Data:
<S>                                                                         <C>               <C>              <C>    
Total assets......................................................          $46,353           $44,235          $39,727
Loans receivable, net (1).........................................           38,435            34,391           29,275
Cash on hand and in other institutions (2)........................            4,125             3,308            4,310
Investment securities available for sale..........................              161             3,003            2,832
Cash surrender value of life insurance contract...................            1,076             1,035               99
FHLB advances.....................................................            4,000             3,000            1,500
Deposits..........................................................           36,355            35,600           33,175
Retained income...................................................            5,691             5,320            4,841
Unrealized loss on investment securities
   available for sale.............................................              ---              (51)             (49)
</TABLE>


<PAGE>

<TABLE>
<CAPTION>
                                                                                        YEAR ENDED JUNE 30,
                                                                              1997             1996              1995
                                                                            -------           -------          -------
                                                                                          (In thousands)
Summary of Selected Consolidated Operating Data:
<S>                                                                          <C>               <C>              <C>   
Total interest income.............................................           $3,509            $3,186           $2,742
Total interest expense............................................            1,814             1,653            1,370
                                                                            -------           -------          -------
   Net interest income............................................            1,695             1,533            1,372
Provision for loan losses.........................................               83                80               32
   Net interest income after
     provision for loan losses....................................            1,612             1,453            1,340
Other income:
   Fees and service charges.......................................              138               152              151
   Other..........................................................               21                94               70
                                                                            -------           -------          -------
     Total other income...........................................              159               246              221
Other expense:
   Salaries and employee benefits.................................              485               415              387
   Occupancy expense..............................................              114               118              109
   Data processing expense........................................              108               101              105
   Federal insurance premiums.....................................              259                77               75
   Other..........................................................              251               256              248
                                                                            -------           -------          -------
   Total  other expense...........................................            1,217               967              924
                                                                            -------           -------          -------
Income before income taxes........................................              554               732              637
Income taxes......................................................              183               253              231
                                                                            -------           -------          -------
Income before cumulative effect of
   change in accounting principle.................................              371               479              406
Cumulative effect of change in
   accounting for income taxes....................................              ---               ---              ---
                                                                            -------           -------          -------
   Net income.....................................................          $   371           $   479          $   406
                                                                            =======           =======          =======
Supplemental Data:
Interest rate spread during period................................             3.75%              3.75%            3.69%
Net yield on interest-earning assets (3)..........................             4.02              3.99             3.92
Return on assets (4)..............................................              .82              1.15             1.07
Return on equity (5)..............................................             6.81              9.52             8.89
Equity to assets (6)..............................................            12.28             11.91            12.06
Average interest-earning assets to average
   interest-bearing liabilities...................................           106.31            105.61           105.84
Non-performing assets to total assets (6).........................              .74               .50              .35
Allowance for loan losses to total loans
   outstanding (6)................................................              .55               .40              .16
Allowance for loan losses to
   non-performing loans (6).......................................            61.57             62.51            33.19
Net (charge-offs) recoveries to average
   total loans outstanding .......................................            (.03)               .04            (.12)
Other expenses to  average assets (7).............................             2.67              2.32             2.44
Number of full service offices (6)................................                1                 1                1
</TABLE>

(1) Net of allowance for loan losses, deferred fees and escrow.

(2) Includes certificates of deposit in other financial institutions.

(3) Net interest income divided by average interest-earning assets.

(4) Net income divided by average total assets.

(5) Net income divided by average total equity.

(6) At end of period.

(7) Other expenses divided by average total assets.



<PAGE>

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

General

         The Holding Company was  incorporated  for the purpose of owning all of
the  outstanding  shares of Citizens.  As a result,  the discussion that follows
focuses on Citizens'  financial  condition  and results of  operations  prior to
September 18, 1997,  the date of the  Conversion.  The following  discussion and
analysis of the financial condition as of June 30, 1997 and Citizens' results of
operations for periods prior to that date should be read in conjunction with and
with reference to the  consolidated  financial  statements and the notes thereto
included herein.

         In  addition  to  the  historical  information  contained  herein,  the
following discussion contains forward-looking  statements that involve risks and
uncertainties.  The Holding Company's operations and actual results could differ
significantly from those discussed in the  forward-looking  statements.  Some of
the factors that could cause or  contribute  to such  differences  are discussed
herein but also include  changes in the economy and interest rates in the nation
and the Holding  Company's general market area. The  forward-looking  statements
contained  herein  include,  but are not limited to,  those with  respect to the
following matters:

      1.    Management's determination of the amount of loan loss allowance;

      2.    The effect of changes in interest rates;

      3.    Changes in deposit insurance premiums; and

      4.    Proposed legislation that would eliminate the federal thrift charter
            and the separate federal regulation of thrifts.

Asset/Liability Management

         Citizens  is  subject  to  interest  rate risk to the  degree  that its
interest-bearing  liabilities,  primarily  deposits with short- and  medium-term
maturities,  mature or reprice  at  different  rates  than its  interest-earning
assets.  Management  believes it is critical to manage the relationship  between
interest  rates and the effect on net  portfolio  value  ("NPV").  This approach
calculates the difference  between the present value of expected cash flows from
assets and the present value of expected cash flows from liabilities, as well as
cash  flows  from  off-balance  sheet  contracts.  Citizens  manages  assets and
liabilities  within the context of the marketplace,  regulatory  limitations and
within limits  established  by its Board of Directors on the amount of change in
NPV which is acceptable given certain interest rate changes.

         Interest  risk  exposure  is  monitored  monthly by an  Asset/Liability
Management  Committee which considers  various factors such as current local and
national economic conditions and interest rate outlook as well as Citizens' loan
and deposit demand, pricing and maturity structure.  This Committee periodically
updates Citizens' interest rate risk strategy which primarily involves modifying
asset/liability terms and mix as considered  appropriate.  An increased emphasis
on  consumer  loans,  which  generally  have  shorter  terms  to  maturity  than
residential  mortgage  loans,  in  addition  to an  increase  in the  volume  of
adjustable-rate loans, including multi-family and non-residential mortgage loans
and home  equity  lines of  credit,  have  been the major  strategies  for asset
management.  Citizens has also attempted to lengthen the average maturity of its
liabilities by offering  special rates on longer term  certificates  of deposit.
Long term advances from the FHLB of Indianapolis are also an available source of
funds which could help Citizens with future liability management.

      The OTS issued a regulation,  which uses a net market value methodology to
measure the interest rate risk exposure of savings associations.  Under this OTS
regulation,  an institution's  "normal" level of interest rate risk in the event
of an assumed change in interest rates is a decrease in the institution's NPV in
an  amount  not  exceeding  2% of  the  present  value  of its  assets.  Savings
associations  with over  $300  million  in assets or less than a 12%  risk-based
capital  ratio are required to file OTS Schedule  CMR. Data from Schedule CMR is
used by the OTS to calculate  changes in NPV (and the related  "normal" level of
interest rate risk) based upon certain interest rate changes  (discussed below).
Associations  which  do not  meet  either  of the  filing  requirements  are not
required to file OTS Schedule CMR, but may do so  voluntarily.  As Citizens does
not meet either of these requirements,  it is not required to file Schedule CMR,
although it does so voluntarily.  Under the regulation,  associations which must
file are required to take a deduction (the interest rate risk capital component)
from their  total  capital  available  to  calculate  their  risk based  capital
requirement if their interest rate exposure is greater than "normal." The amount
of that  deduction is one-half of the difference  between (a) the  institution's
actual  calculated  exposure  to a 200 basis  point  interest  rate  increase or
decrease  (whichever  results in the greater pro forma  decrease in NPV) and (b)
its "normal" level of exposure which is 2% of the present value of its assets.


<PAGE>

      Presented below, as of June 30, 1997, is an analysis  performed by the OTS
of Citizens'  interest rate risk as measured by changes in NPV for instantaneous
and sustained parallel shifts in the yield curve, in 100 basis point increments,
up and down 400 basis  points.  At June 30,  1997,  2% of the  present  value of
Citizens' assets was approximately $961,000. Because the interest rate risk of a
200 basis point  increase in market  rates  (which was greater than the interest
rate risk of a 200 basis  point  decrease)  was $1.1  million at June 30,  1997,
Citizens  would have been  required  to deduct  $64,000  from its total  capital
available to calculate its risk based capital  requirement  if Citizens had been
subject to the OTS' reporting  requirements  under this  methodology.  Citizens'
exposure to interest  rate risk  results  from the  concentration  of fixed rate
mortgage loans in its portfolio.

<TABLE>
<CAPTION>

      Change                     Net Portfolio Value                                       NPV as % of Present Value of Assets
     In Rates              $ Amount              $ Change              % Change              NPV Ratio              Change
--------------------------------------------------------------------------------------------------------------------------
                                          (Dollars in thousands)
<S>                          <C>               <C>                    <C>                     <C>                  <C>     
        + 400 bp *            $4,933            $(2,387)               (33)%                   11.02%               (422) bp
        + 300 bp               5,588             (1,732)               (24)%                   12.24%               (300) bp
        + 200 bp               6,232             (1,088)               (15)%                   13.40%               (184) bp
        + 100 bp               6,827               (493)                (7)%                   14.43%                (81) bp
            0 bp               7,320                ---                ---  %                  15.24%                ---  bp
        - 100 bp               7,575                255                  3  %                  15.61%                  37 bp
        - 200 bp               7,504                184                  3  %                  15.40%                  16 bp
        - 300 bp               7,424                104                  1  %                  15.18%                  (6)bp
        - 400 bp               7,543                223                  3  %                  15.30%                   6 bp
</TABLE>

*  Basis points.

      As with any  method of  measuring  interest  rate  risk,  the  methods  of
analysis  presented  above have  certain  shortcomings.  For  example,  although
certain  assets  and  liabilities  may have  similar  maturities  or  periods to
repricing,  they may react in  different  degrees to changes in market  interest
rates.  Also, the interest rates on certain types of assets and  liabilities may
fluctuate in advance of changes in market interest  rates,  while interest rates
on other types may lag behind  changes in market  rates.  Additionally,  certain
assets,  such as adjustable-rate  loans, have features which restrict changes in
interest rates on a short-term basis and over the life of the asset. Further, in
the event of a change in interest rates,  expected rates of prepayments on loans
and early withdrawals from certificates could likely deviate  significantly from
those assumed in calculating the table.

Average Balances and Interest Rates and Yields

         The following  tables  present at the fiscal years ended June 30, 1997,
1996 and  1995,  the  average  daily  balances  of each  category  of  Citizens'
interest-earning  assets  and  interest-bearing  liabilities,  and the  interest
earned or paid on such amounts.


<PAGE>

<TABLE>
<CAPTION>
                                                                             Year Ended June 30,
                                                    1997                            1996                          1995
                                         ----------------------------    ----------------------------   ----------------------------
                                         Average             Average     Average              Average   Average             Average
                                         Balance  Interest Yield/Cost    Balance  Interest  Yield/Cost  Balance Interest  Yield/Cost
                                         -------  -------- ----------    -------  --------  ----------  ------- --------  ----------
                                                                            (Dollars in thousands)
Interest-earning assets:
<S>                                     <C>      <C>          <C>     <C>        <C>          <C>     <C>       <C>         <C>  
   Interest-bearing deposits............$  3,446 $   179      5.21%   $  3,109   $   182      5.85%   $  3,713  $   181     4.89%
   FHLB stock...........................    332       26      7.84         332        26      7.91         332       23     7.06
   Investment securities
     available for sale (1).............  1,527       94      6.14       3,001       174      5.81       2,832      154     5.43
   Loans receivable (2)................. 36,843    3,210      8.71      31,980     2,804      8.77      28,121    2,384     8.48
                                         ------    -----                ------     -----                ------    ----- 
     Total interest-earning assets...... 42,148    3,509      8.33      38,422     3,186      8.29      34,998    2,742     7.84
                                        =======                        =======                        ========
Interest-bearing liabilities:
   Deposits............................. 36,436    1,641      4.50      34,456     1,539      4.47      32,605    1,341     4.12
   FHLB advances........................  3,212      173      5.41       1,923       114      5.94         462       29     6.24
                                         ------    -----                ------     -----                ------    ----- 
     Total interest-bearing liabilities. 39,648    1,814      4.58      36,379     1,653      4.54      33,067    1,370     4.15
                                         ------    -----                ------     -----                ------    ----- 
Net interest-earning assets.............$ 2,500                        $ 2,043                        $  1,931
                                        =======                        =======                        ========
Net interest income.....................          $1,695                          $1,533                         $1,372
                                                  ======                          ======                         ======
Interest rate spread (3)................                      3.75%                           3.75%                         3.69%
                                                              ====                            ====                          ==== 
Net yield on weighted average
   interest-earning assets (4)..........                      4.02%                           3.99%                         3.92%
                                                              ====                            ====                          ==== 
Average interest-earning assets
   to average interest-bearing 
   liabilities..........................  106.31%                       105.61%                         105.84%
                                          ======                        ======                          ====== 
</TABLE>

(1)   Includes securities available for sale at amortized cost prior to SFAS No.
      115 adjustments.

(2)   Total loans less loans in process.  Average balances  include  non-accrual
      loans.

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

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

Interest Rate Spread

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


<PAGE>

      The following  table sets forth the weighted  average  effective  interest
rate that Citizens  earned on its loan and investment  portfolios,  the weighted
average  effective cost of its deposits and advances,  the interest rate spread,
and net yield on weighted average interest-earning assets for the periods and as
of the dates  shown.  Average  balances are based on average  monthly  balances.
Management  believes that the use of month-end average balances instead of daily
average  balances  has not caused any  material  difference  in the  information
presented.

<TABLE>
<CAPTION>
                                                             Year Ended June 30,
                                                    1997            1996             1995
                                                    -------------------------------------
Weighted average interest rate earned on:
<S>                                                 <C>              <C>             <C>  
   Interest-bearing deposits....................... 5.21%            5.85%           4.89%
   FHLB stock...................................... 7.84             7.91            7.06
   Investment securities........................... 6.14             5.81            5.43
   Loans receivable................................ 8.71             8.77            8.48
     Total interest-earning assets................. 8.33             8.29            7.84
Weighted average interest rate cost of:
   Deposits........................................ 4.50             4.47            4.12
   FHLB advances................................... 5.41             5.94            6.24
     Total interest-bearing liabilities............ 4.58             4.54            4.15
Interest rate spread (1)........................... 3.75%            3.75%           3.69%
                                                    ====             ====            ==== 
Net yield on weighted average
   interest-earning assets (2)..................... 4.02%            3.99%           3.92%
                                                    ====             ====            ==== 
</TABLE>

(1)    Interest  rate spread is  calculated  by  subtracting  combined  weighted
       average  interest rate cost from combined  weighted average interest rate
       earned for the period  indicated.  Interest  rate spread  figures must be
       considered  in  light  of  the   relationship   between  the  amounts  of
       interest-earning assets and interest-bearing liabilities.

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


<PAGE>

         The following  table  describes the extent to which changes in interest
rates and  changes in volume of  interest-related  assets and  liabilities  have
affected Citizens' interest income and expense during the periods indicated. For
each  category  of  interest-earning   asset  and  interest-bearing   liability,
information is provided on changes  attributable to (1) changes in rate (changes
in rate  multiplied by old volume) and (2) changes in volume  (changes in volume
multiplied  by old rate).  Changes  attributable  to both rate and volume  which
cannot be segregated  have been  allocated  proportionally  to the change due to
volume and the change due to rate.

<TABLE>
<CAPTION>
                                                     Increase (Decrease) in Net Interest Income
                                                 ---------------------------------------------------
                                                                                              Total
                                                 Due to                Due to                  Net
                                                  Rate                 Volume                Change
                                                 -------               -------               -------
                                                                   (In thousands)
Year ended June 30, 1997 compared
to year ended June 30, 1996
   Interest-earning assets:
<S>                                               <C>                   <C>                   <C>    
     Interest-bearing deposits...............     $ (21)                $   19                $   (2)
     FHLB stock..............................        (1)                   ---                    (1)
     Investment securities...................        10                    (90)                  (80)
     Loans receivable........................       (19)                   425                   406
                                                -------                   ----                  ----
       Total.................................       (31)                   354                   323
                                                -------                   ----                  ----
   Interest-bearing liabilities:
     Deposits................................        10                     92                   102
     FHLB advances...........................       (11)                    70                    59
                                                -------                   ----                  ----
       Total.................................        (1)                   162                   161
                                                -------                   ----                  ----
   Net change in net interest income.........   $   (30)                  $192                  $162
                                                =======                   ====                  ====
Year ended June 30, 1996 compared
to year ended June 30, 1995
   Interest-earning assets:
     Interest-bearing deposits...............    $   32                 $  (32)              $   ---
     FHLB stock..............................         3                    ---                     3
     Investment securities...................        11                     10                    21
     Loans receivable........................        84                    336                   420
                                                -------                   ----                  ----
       Total.................................       130                    314                   444
                                                -------                   ----                  ----
   Interest-bearing liabilities:
     Deposits................................       118                     79                   197
     FHLB advances...........................        (2)                    87                    85
                                                -------                   ----                  ----
       Total.................................       116                    166                   282
                                                -------                   ----                  ----
   Net change in net interest income.........    $   14                  $ 148                 $ 162
                                                =======                   ====                  ====
Year ended June 30, 1995 compared
to year ended June 30, 1994
   Interest-earning assets:
     Interest-bearing deposits...............    $   60                 $ (130)               $  (70)
     FHLB stock..............................         4                    ---                     4
     Investment securities...................        29                     17                    46
     Loans receivable........................        38                    300                   338
                                                -------                   ----                  ----
       Total.................................       131                    187                   318
                                                -------                   ----                  ----
   Interest-bearing liabilities:
     Deposits................................        42                     27                    69
     FHLB advances...........................       ---                     28                    28
                                                -------                   ----                  ----
       Total.................................        42                     55                    97
                                                -------                   ----                  ----
   Net change in net interest income.........    $   89                 $  132                 $ 221
                                                =======                   ====                  ====
</TABLE>



<PAGE>

Financial Condition at June 30, 1997 Compared to Financial Condition at June 30,
1996

      Citizens' total consolidated assets increased by $2.2 million, or 4.8%, to
$46.4  million at June 30, 1997 from $44.2  million at June 30, 1996.  Net loans
receivable  increased  $4.0  million,  or  11.8%,  while  investment  securities
decreased $2.8 million and FHLB advances increased $1.0 million. Citizens funded
the increased loans primarily with the increase in interest-bearing  deposits of
$755,000,  the  sale of  investment  securities  and with  the  additional  FHLB
advance.  Capital increased $371,000, or 7.0%, to $5.7 million in 1997 from $5.3
million in 1996.

Financial Condition at June 30, 1996 Compared to Financial Condition at June 30,
1995

      Total  consolidated  assets increased by $4.5 million,  or 11.4%, to $44.2
million at June 30, 1996 from $39.7  million at June 30,  1995.  The increase in
assets for the period was primarily attributable to the growth in Citizens' loan
portfolio of $5.1  million.  This  increase in loan volume was  primarily due to
increased loan demand generated by economic growth in Citizens' market area, and
a more aggressive loan origination  program.  Loan growth was funded mainly from
an increase in deposits of approximately $2.4 million and an increase in Federal
Home Loan Bank advances of $1.5 million.

      The increase in the loan  portfolio  was  comprised  primarily of mortgage
loans which increased approximately $4.0 million.

Comparison of Operating Results For Years Ended June 30, 1997 and 1996

      Net Income. Net income decreased  $108,000,  or 22.5%, to $371,000 in 1997
from  $479,000  for  1996.  This  decrease  primarily  resulted  from  Citizens'
recognition of the one-time, non-recurring SAIF special assessment in the amount
of $211,000,  ($127,000  net of tax) and the sale of an  investment at a loss of
approximately $60,000. Citizens chose to sell the investment in order to use the
proceeds to pay down FHLB  advances  and to increase  overall  liquidity.  These
expenses  were offset by an increase of $162,000 in net interest  income to $1.7
million for 1997 from $1.5 million for 1996.  Excluding the SAIF  assessment and
the loss on the sale of investments, net income would have increased $55,000, or
11.5%,  to $534,000 for the twelve  months ended June 30, 1997 from  $479,000 in
1996.

      Net Interest Income. Net interest income increased $162,000,  or 10.6%, to
$1.7 million in 1997 from $1.5 million in 1996. This increase primarily resulted
from the growth in net loans  receivable  of $4.0  million,  or 11.6%,  to $38.4
million in 1997 from $34.4 million in 1996.

      Provisions  for Loan Losses.  Provisions for loan losses for 1997 and 1996
were $83,000 and $80,000,  respectively.  Citizens  increased  its provision for
1997 to recognize  the increase in consumer  loan losses  being  experienced  by
financial institutions  nationally,  regionally and locally as well as the risks
associated with individually large  multi-family and nonresidential  real estate
loans. Citizens had no chargeoffs in fiscal year 1996 and experienced $12,000 in
recoveries.  Citizens  had  chargeoffs  of $12,000  in fiscal  year 1997 and its
allowance for loan loss as of June 30, 1997 was $212,000.

      Other Income. Other income decreased  approximately  $87,000, or 35.4%, in
1997 as compared to 1996. This decrease  resulted from the sale of an investment
security  at a loss of  approximately  $60,000,  a decrease  in fees and service
charges and decreases in other miscellaneous income.

      Other Expense.  Other expenses increased $250,000 or 25.9% to $1.2 million
in 1997 from  $967,000 in 1996.  The increase was primarily  attributable  to an
increase of $47,000 in salaries  and  benefits,  an increase of $196,000 in SAIF
insurance  premiums and a $9,000 increase in occupancy  expense  relating to the
installation  of new computers,  a "Loan Doc Prep" software  package and a Local
Area Network (LAN).

      Income Tax Expense.  Income tax expense  decreased  $70,000,  or 27.7%, to
$183,000 in 1997 from $253,000 in 1996.  The decrease  resulted  primarily  from
Citizens  reduced  profits  in  1997  caused  by  recognition  of the  one-time,
non-recurring SAIF special assessment in the amount of $211,000 ($127,000 net of
tax) and the sale of an investment at a loss of approximately $60,000.


<PAGE>

Comparison of Operating Results For Fiscal Years Ended June 30, 1996 and 1995

      Net Income. Net income increased  $73,000,  or 18.0%, to $479,000 for 1996
from  $406,000 for 1995.  The increase was  primarily due to the increase in the
size of Citizens' loan portfolio and the increase in its net interest income.

      Net Interest Income. Net interest income increased $161,000,  or 11.7%, to
$1.5 million in 1996 from $1.4 million in 1995.  This increase was due primarily
to the growth of average  interest  earning assets to $38.4 million in 1996 from
$35.0 million in 1995. In addition,  Citizens' interest rate spread increased to
3.75% in 1996 from 3.7% in 1995 and net  interest  margin  increased  to 4.0% in
1996 from 3.9% in 1995.

      The increase in average  interest-earning  assets of $3.4 million reflects
an increase of $3.9  million in average  loans,  an increase in  investments  of
$169,000 and a decrease in interest-bearing deposits of $604,000.

      Interest rate spread and net interest margin increased in 1996 compared to
1995.  This was due to the  increase  in the yield on  average  interest-earning
assets  to 8.3% in 1996 from 7.8% in 1995,  while  interest-bearing  liabilities
increased to 4.5% in 1996 from 4.2% in 1995.

      The yield on average  interest-earning  assets increased in 1996 due to an
increase in the yield of both loans and investments. Generally positive economic
conditions  resulted in sustained loan demand,  which resulted in an increase in
the yield on average interest-earning assets.

      The increase in the cost of average  interest-bearing  liabilities was due
primarily to increases in the cost of interest-bearing deposits, to 4.5% in 1996
from 4.1% in 1995.  This was  partially  offset by the  decrease  in the cost of
short-term borrowings to 5.9% in 1996 from 6.2% in 1995.

      Provisions  for Loan Losses.  Provisions for loan losses for 1996 and 1995
were $80,000 and $32,000, respectively. The increase of $48,000 in 1996 was made
to increase  Citizens'  allowance  commensurate  with an increase in residential
mortgage,  construction  and consumer  lending and the inherent risk  associated
with each type of lending.  Citizens did not charge off any amounts  during 1996
and experienced a $12,000 recovery during that period. The $37,000 charge off in
1995 was partially offset by a $2,000 recovery.
Allowances   for  loan  loss  for  1996  and  1995  were  $138,000  and  $46,000
respectively.

      Other Income. Other income increased  approximately  $25,000, or 11.3%, in
1996 as compared to 1995.  This increase was primarily the result of a profit of
$24,000 in 1996 from CLSC, Citizens' wholly-owned service corporation.

      Other Expense.  Other expense increased  $43,000,  or 4.7%, to $967,000 in
1996 from  $924,000 in 1995.  The  increase  was  primarily  attributable  to an
increase  of  $28,000  in  salaries  and  benefits,  primarily  due to hiring an
additional  loan  officer,  and  a  $9,000  increase  in  occupancy  expense  in
connection with the  installation  of new computers,  a "Loan Doc Prep" software
package and a Local Area Network (LAN).

      Income Tax Expense.  Income tax expense  increased  $22,000,  or 9.5%,  to
$253,000  in 1996 from  $231,000  in 1995.  The  increase  was the result of the
increased net income earned in 1996.

Liquidity and Capital Resources

      Citizens'  primary  sources  of funds  are  deposits,  borrowings  and the
proceeds from  principal and interest  payments on loans.  While  maturities and
scheduled amortization of loans are a predictable source of funds, deposit flows
and mortgage  prepayments  are greatly  influenced  by general  interest  rates,
economic conditions and competition.

      Citizens' primary investing  activity is the origination of loans.  During
the years ended June 30, 1997,  1996 and 1995, it originated  total loans in the
amounts  of $17.5  million,  $15.4  million  and  $11.4  million,  respectively.
Citizens  purchased  loans  totaling  $64,000 in the fiscal  year ended June 30,
1996. Loan principal  repayments  totaled $13.3 million,  $10.3 million and $8.3
million during the respective periods.


<PAGE>

      During the years ended June 30, 1997, 1996, and 1995,  Citizens  purchased
securities  in the  amounts of $65,000,  $169,000  and  $154,000,  respectively.
Citizens did not receive any proceeds for the sale of securities  during 1996 or
1995. During the year ended June 30, 1997, however,  Citizens sold approximately
$2.9 million of securities for a loss of approximately $60,000.

      Citizens had outstanding  loan commitments of $592,000 and unused lines of
credit  of  approximately  $2.5  million  at June 30,  1997.  The  unused  lines
represent  available  borrowings  under  existing  home equity  lines of credit.
Citizens anticipates that it will have sufficient funds from loan repayments and
from its ability to borrow  additional  funds from the FHLB of  Indianapolis  to
meet its current commitments. Certificates of deposit scheduled to mature in one
year or less at June 30, 1997 totaled $3.3 million.  Management  believes that a
significant  portion of such  deposits  will  remain  with  Citizens  based upon
historical  deposit flow data and  Citizens'  competitive  pricing in its market
area.

      Liquidity  management is both a daily and long-term  function of Citizens'
management strategy.  In the event that Citizens should require funds beyond its
ability to generate them internally,  additional funds are available through the
use of FHLB advances.  Citizens had  outstanding  FHLB advances in the amount of
$4.0 million at June 30, 1997.

      The  following  is a summary of Citizens'  cash flows,  which are of three
major  types.  Cash flows from  operating  activities  consist  primarily of net
income generated by cash.  Investing  activities generate cash flows through the
origination and principal  collection on loans as well as purchases and sales of
securities.  Investing  activities will generally  result in negative cash flows
when Citizens  experiences  loan growth.  Cash flows from  financing  activities
include savings deposits,  withdrawals and maturities and changes in borrowings.
The following table summarizes cash flows for each year in the three-year period
ended June 30, 1997.

                                                  Year Ended June 30,
                                          1997           1996          1995
                                        -------         -------      ------- 
                                                    (In thousands)
Operating activities...................    $266           $ 518        $ 494
Investing activities:
   Purchases of
     investment securities.............     (65)           (169)        (154)
   Sales of investment securities......   2,932             ---          ---
   Principal collected on loans........  13,251          10,279        8,263
   Loans originated.................... (17,474)        (15,419)     (11,434)
   Loans sold..........................      91             ---          ---
   Loans purchased.....................     ---             (64)         ---
   Change in land held
     for development...................      77              (3)        (682)
   Purchases of equipment..............     (16)            (69)         (25)
                                        -------         -------      ------- 
Total from investing activities........    (938)         (4,927)      (3,538)
Financing activities:
   Increase/(decrease) in NOW,
     MMDA and passbook deposits........     305             460       (1,991)
   Increase in certificates
     of deposit........................     450           1,965        1,129
   Advances from FHLB..................  14,500           4,500        6,000
   Payments to FHLB.................... (13,500)         (3,000)      (4,500)
                                        -------         -------      ------- 
Total from financing activities........   1,755           3,925          638
                                        -------         -------      ------- 
Net increase/(decrease) in cash
   and cash equivalents................ $   817         $(1,002)     $(2,900)
                                        =======         =======      ======= 


<PAGE>

      Federal regulations  require FHLB-member savings  associations to maintain
an average daily balance of liquid assets equal to a monthly average of not less
than a specified  percentage  of their net  withdrawable  savings  deposits 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.  This liquidity  requirement may be changed from time-to-time by
the OTS to any  amount  within  the  range of 4% to 10%,  and is  currently  5%,
although  the OTS has  proposed a reduction  of the  percentage  to 4%.  Also, a
savings   association   currently   must  maintain   short-term   liquid  assets
constituting  at least  1% of its  average  daily  balance  of net  withdrawable
deposit  accounts  and  current  borrowings,   although  the  OTS  has  proposed
eliminating this requirement.  Monetary  penalties may be imposed for failure to
meet these  liquidity  requirements.  As of June 30,  1997,  Citizens had liquid
assets of $2.6 million,  and a regulatory  liquidity ratio of 6.7%, all of which
constituted short-term investments.

      Pursuant to OTS capital  regulations,  savings associations must currently
meet a 1.5% tangible capital requirement,  a 3% leverage ratio (or core capital)
requirement, and a total risk-based capital to risk-weighted assets ratio of 8%.
At June 30, 1997,  Citizens'  tangible capital ratio was 10.3%, its core capital
ratio was 10.3%, and its risk-based  capital to  risk-weighted  assets ratio was
18.1%.  Therefore,  at June 30,  1997,  Citizens'  capital  levels  exceeded all
applicable  regulatory capital  requirements  currently in effect. The following
table provides the minimum regulatory capital requirements and Citizens' capital
ratios as of June 30, 1997: 

<TABLE>
<CAPTION>

                                                            At June 30, 1997
                                 ------------------------------------------------------------------------------
                                      OTS Requirement                         Citizens' Capital Level
                                 ------------------------          --------------------------------------------
                                  % of                               % of                              Amount
Capital Standard                 Assets            Amount          Assets(1)          Amount          of Excess
                                                            (Dollars in thousands)
<S>                                <C>              <C>             <C>                <C>               <C>   
Tangible capital...........        1.5%             $  683          10.3%              $4,698            $4,015
Core capital (2)...........        3.0               1,365          10.3                4,698             3,333
Risk-based capital.........        8.0               2,174          18.1                4,910             2,736
</TABLE>

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

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

     As of June 30, 1997, management is not aware of any current recommendations
by regulatory authorities which, if they were to be implemented,  would have, or
are reasonably likely to have, a material adverse effect on Citizens' liquidity,
capital resources or results of operations.

Impact of Inflation

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


<PAGE>

     Citizens'  primary  assets and  liabilities  are  monetary in nature.  As a
result,  interest rates have a more significant impact on Citizens'  performance
than the effects of general levels of inflation. Interest rates, however, do not
necessarily  move in the same  direction or with the same magnitude as the price
of goods and services,  since such prices are affected by inflation. In a period
of rapidly rising  interest  rates,  the liquidity and maturities  structures of
Citizens'  assets and  liabilities are critical to the maintenance of acceptable
performance levels.

     The  principal  effect of  inflation,  as distinct  from levels of interest
rates, on earnings is in the area of noninterest expense.  Such expense items as
employee  compensation,  employee benefits and occupancy and equipment costs may
be  subject to  increases  as a result of  inflation.  An  additional  effect of
inflation  is the  possible  increase  in the  dollar  value  of the  collateral
securing  loans that  Citizens has made.  Management  is unable to determine the
extent, if any, to which properties securing Citizens' loans have appreciated in
dollar value due to inflation.

<PAGE>

Item 8.  Financial Statements and Supplementary Data.

                           [ERNST & YOUNG LETTERHEAD]


                         Report of Independent Auditors


Board of Directors
Citizens Savings Bank of Frankfort


We have  audited  the  accompanying  consolidated  statements  of  condition  of
Citizens  Savings Bank of Frankfort and subsidiary as of June 30, 1997 and 1996,
and the related consolidated statements of income and changes in retained income
and cash flows for each of the three  years in the period  ended June 30,  1997.
These financial statements are the responsibility of the Bank's management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the consolidated  financial position of Citizens Savings
Bank of Frankfort and subsidiary at June 30, 1997 and 1996, and the consolidated
results of their  operations and their cash flows for each of the three years in
the period ended June 30, 1997, in conformity with generally accepted accounting
principles.

/s/ Ernst & Young LLP
Indianapolis, Indiana
August 22, 1997
<PAGE>


                Citizens Savings Bank of Frankfort and Subsidiary
                      Consolidated Statements of Condition

<TABLE>
<CAPTION>
                                                                         June 30
                                                            1997                        1996
                                                          -------------------------------------
<S>                                                       <C>                      <C>         
Assets                                                                                              
Cash on
hand and in other institutions                            $    861,360             $    655,488
Interest-bearing deposits                                    3,263,687                2,652,686
Investment securities available for sale                       160,995                3,003,242
Stock in Federal Home Loan Bank of Indianapolis                331,600                  331,600
Loans receivable                                            38,435,416               34,391,405
Land held for development                                      995,908                1,072,800
Cash surrender value of life insurance contract              1,075,840                1,034,553
Property and equipment                                         578,343                  603,464
Other assets                                                   650,161                  490,058
                                                          -------------------------------------
Total assets                                               $46,353,310              $44,235,296
                                                          =====================================
Liabilities and Retained Income
Deposits                                                   $36,355,213              $35,600,140
Federal Home Loan Bank advances                              4,000,000                3,000,000
Other liabilities                                              307,303                  366,157
Total liabilities                                           40,662,516               38,966,297

Retained income - substantially restricted                   5,690,794                5,319,852
Unrealized loss on investment securities available
for sale, net of tax                                              ---                   (50,853)
                                                          -------------------------------------
                                                             5,690,794                5,268,999
                                                          -------------------------------------
Total liabilities and retained income                      $46,353,310              $44,235,296
                                                          =====================================
</TABLE>

See accompanying notes.

<PAGE>


                Citizens Savings Bank of Frankfort and Subsidiary
                        Consolidated Statements of Income
<TABLE>
<CAPTION>


                                                                    Years ended June 30
                                                      1997                  1996                  1995
                                                    ------------------------------------------------------
Interest income:
<S>                                                 <C>                   <C>                   <C>       
Interest on loans                                   $3,210,018            $2,803,774            $2,383,591
   Other interest income                               299,370               382,453               358,661
                                                    ------------------------------------------------------
                                                     3,509,388             3,186,227             2,742,252
Interest expense:
Interest on deposits                                 1,640,868             1,538,886             1,341,925
   Interest on borrowings                              173,668               114,253                28,812
                                                    ------------------------------------------------------
                                                     1,814,536             1,653,139             1,370,737
                                                    ------------------------------------------------------
Net interest income                                  1,694,852             1,533,088             1,371,515
Provision for loan losses                               83,000                80,000                32,000
                                                    ------------------------------------------------------
Net interest income after provision
for loan losses                                      1,611,852             1,453,088             1,339,515
Other income:
Fees and service charges                               138,342               152,379               151,726
   Loss on sale of investments                         (60,243)                  ---                  ---
   Other                                                80,733                94,097                69,731
                                                    ------------------------------------------------------
                                                       158,832               246,476               221,457
Other expense:
Salaries and employee benefits                         485,151               414,730               387,245
   Occupancy expense                                   114,449               117,967               109,842
   Data processing expense                             107,764               101,675               104,619
   Federal insurance premium                           258,685                76,868                75,078
   Other                                               250,468               256,137               247,470
                                                    ------------------------------------------------------
                                                     1,216,517               967,377               924,254
                                                    ------------------------------------------------------
Income before income taxes                             554,167               732,187               636,718

Income taxes                                           183,225               253,257               230,549
                                                    ------------------------------------------------------
Net income                                          $  370,942            $  478,930            $  406,169
                                                    ======================================================
</TABLE>

See accompanying notes.

<PAGE>

                Citizens Savings Bank of Frankfort and Subsidiary
              Consolidated Statements of Changes in Retained Income

<TABLE>
<CAPTION>

                                                                               Unrealized Loss on
                                                      Retained Income        Investment Securities
                                                       Substantially          Available for Sale,           Total Retained
                                                         Restricted                Net of Tax                   Income
                                                      ---------------------------------------------------------------------
<S>                                                     <C>                        <C>                        <C>       
Balance as of June 30, 1994                              $4,434,753                 $ (49,697)                 $4,385,056
Net income                                                  406,169                      ---                      406,169
Net change in unrealized loss on
   investment securities available
   for sale, net of tax                                        ---                        735                         735
                                                      ---------------------------------------------------------------------
Balance as of June 30, 1995                               4,840,922                   (48,962)                  4,791,960
Net income                                                  478,930                      ---                      478,930
Net change in unrealized loss on
   investment securities available
   for sale, net of tax                                        ---                     (1,891)                     (1,891)
                                                      ---------------------------------------------------------------------
Balance as of June 30, 1996                               5,319,852                   (50,853)                  5,268,999
Net income                                                  370,942                       ---                     370,942
Net change in unrealized loss on
   investment securities available for
   sale, net of tax                                            ---                     50,853                      50,853
                                                      ---------------------------------------------------------------------
Balance as of June 30, 1997                              $5,690,794             $        ---                   $5,690,794
                                                      =====================================================================
</TABLE>

See accompanying notes.

<PAGE>

                Citizens Savings Bank of Frankfort and Subsidiary
                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>

                                                                                  Years ended June 30
                                                                    1997                 1996                   1995
                                                              ----------------------------------------------------------
Operating activities
<S>                                                           <C>                    <C>                    <C>        
Net income                                                    $     370,942          $    478,930           $   406,169
Adjustments to reconcile net income to net
cash provided by operating activities:
Loss on sale of investments                                          60,243                   ---                  ---
     Provision for loan losses                                       83,000                80,000                32,000
     Depreciation and amortization                                   45,587                48,055                39,148
     Deferred federal income tax credit                             (76,326)              (74,473)              (21,753)
     Increase in other assets and cash surrender
         value of life insurance contract                          (158,418)             (140,525)              (78,522)
     Increase (decrease) in other liabilities                       (58,854)              126,311               116,650
                                                              ----------------------------------------------------------
Net cash provided by operating activities                           266,174               518,298               493,692

Investing activities
Purchases of investment securities                                  (65,481)             (169,304)             (153,930)
Proceeds from sale of investment securities                       2,931,693                   ---                  ---
Principal collected on loans                                     13,251,130            10,279,567             8,262,649
Loans originated                                                (17,473,565)          (15,419,000)          (11,433,731)
Loans purchased                                                        ---                (64,000)                  ---
Proceeds from sale of loans                                          91,455                   ---                   ---
(Increase) decrease in land held for development                     76,892                (3,342)             (681,907)
Purchases of equipment                                              (16,498)              (69,117)              (24,516)
                                                              ----------------------------------------------------------
Net cash provided (used) by investing activities                 (1,204,374)           (5,445,196)           (4,031,435)

Financing activities
Increase (decrease) in NOW, MMDA and
passbook deposits                                                   304,545               460,126            (1,990,873)
Increase in certificates of deposit                                 450,528             1,965,007             1,128,535
Advances from Federal Home Loan Bank                             14,500,000             4,500,000             6,000,000
Payments to Federal Home Loan Bank                              (13,500,000)           (3,000,000)           (4,500,000)
                                                              ----------------------------------------------------------
Net cash provided by financing activities                         1,755,073             3,925,133               637,662
                                                              ----------------------------------------------------------
Increase (decrease) in cash and cash equivalents                    816,873            (1,001,765)           (2,900,081)

Cash and cash equivalents at beginning of year                    3,308,174             4,309,939             7,210,020
                                                              ----------------------------------------------------------
Cash and cash equivalents at end of year                       $  4,125,047          $  3,308,174          $  4,309,939
                                                              ==========================================================
</TABLE>


See accompanying notes.

<PAGE>

                Citizens Savings Bank of Frankfort and Subsidiary
                   Notes to Consolidated Financial Statements
                                  June 30, 1997

1. Significant Accounting Policies

Principles of Consolidation

The consolidated  financial  statements include the accounts of Citizens Savings
Bank ("Bank") of Frankfort,  Indiana, and its wholly owned subsidiary,  Citizens
Loan  and  Service  Corporation  ("Service  Corp.").  The  Bank  operates  as  a
traditional  savings bank in Clinton County. The Service Corp. develops land for
residential housing. All significant intercompany accounts and transactions have
been eliminated.

Cash and Cash Equivalents

Cash and cash equivalents  consist of cash on hand and in other institutions and
interest-bearing deposits. Interest-bearing deposits are available on demand.

Investment Securities

At June 30,  1997 and  1996,  investment  securities,  which  consist  of equity
interests in pooled investment trusts, are classified as available-for-sale  and
carried at fair  value  with the  unrealized  loss as a  separate  component  of
equity,  net of tax.  At June 30,  1997,  1996,  and  1995,  the  cost  basis of
investment securities was $160,995, $3,087,450 and $2,913,124,  respectively and
the gross unrealized loss was $0, $84,208, and $81,077  respectively.  Gains and
losses on the sale of these  securities  are based on the  specific  cost of the
individual security being sold.

Management determines the appropriate classification of investment securities at
the time of purchase.  Securities classified as held to maturity are those which
management  has the  positive  intent and  ability  to hold until the  scheduled
maturity.  Securities  classified  as held to maturity  are stated at  amortized
cost.  Securities  classified  as available for sale are those which may be sold
for liquidity purposes, or other reasons, prior to reaching scheduled maturity.

Stock in Federal Home Loan Bank of Indianapolis

Stock in the Federal  Home Loan Bank of  Indianapolis  is stated at cost and the
amount of stock held is determined by regulation.

Loans Receivable

The Bank has a first mortgage lien on all property  securing loans classified as
residential and commercial real estate  mortgage  loans.  Further,  a portion of
certain  mortgage  loan  balances is insured by private or  government  guaranty
insurance policies. Interest income is computed monthly based upon the principal
amount of the loans  outstanding.  The Bank discontinues the accrual of interest
on loans when, in  management's  opinion,  the collection of all or a portion of
interest has become  doubtful.  Mortgage loans are placed on non-accrual  status
when they become 90 days  delinquent.  When a loan is placed on nonaccrual,  the
Bank charges all previously  accrued and unpaid interest  against  income.  Loan
origination  and commitment fees and certain direct loan  origination  costs are
deferred and amortized as an adjustment  of yield over the  contractual  life of
the related loans.

Allowance for Loan Losses

The  allowance for loan losses is  maintained  at a level  believed  adequate by
management to absorb losses in the loan portfolio. Management's determination of
the  adequacy  of the  allowance  is based  on an  evaluation  of the  portfolio
including   consideration  of  past  loan  loss  experience,   current  economic
conditions,  volume,  growth and  composition of the loan  portfolio,  and other
relevant  factors.  The  allowance is increased  by  provisions  for loan losses
charged against income and reduced by net charge-offs.


<PAGE>

                Citizens Savings Bank of Frankfort and Subsidiary

             Notes to Consolidated Financial Statements (Continued)


1.  Significant Accounting Policies (continued)

In 1995,  Statement of Financial  Accounting  Standards No. 114,  "Accounting by
Creditors  for  Impairment  of a Loan" ("SFAS  114") and  Statement of Financial
Accounting  Standards No. 118, "Accounting by Creditors for Impairment of a Loan
- Income  Recognition and  Disclosures"  ("SFAS 118"), an amendment to SFAS 114,
were adopted. Any allowance for loan losses related to troubled loans identified
for evaluation in accordance with SFAS 114 is based on estimated discounted cash
flows using the loan's initial effective  interest rate or the fair value of the
collateral  for  certain   collateral   dependent  loans.   Consumer  loans  and
one-to-four family  residential loans are collectively  evaluated for impairment
as  homogeneous  loan groups which are outside the scope of SFAS 114. Under SFAS
118, no interest income on loans determined to be impaired is accrued.  Interest
income on such loans is recognized only upon cash receipt. SFAS 114 and SFAS 118
have not had a  significant  impact on results of  operations  in 1997,  1996 or
1995.

Property and Equipment

Property  and  equipment  is  stated  at  cost  less  accumulated  depreciation.
Depreciation  is  computed  principally  by the  straight-line  method  over the
estimated useful lives (5 to 40 years) of the related assets.

Income Taxes

Deferred tax assets and liabilities  are  established for temporary  differences
between the financial  reporting basis and tax basis of assets and  liabilities,
at the enacted tax rates expected to be in effect when the temporary differences
reverse . The effect of a tax rate change is  recognized in income in the period
of enactment.

Use of Estimates

Preparation of financial  statements  requires  management to make estimates and
assumptions  that affect the amounts  reported in the financial  statements  and
accompanying notes. Actual results could differ from those estimates.

Reclassifications

Certain  elements of the 1996 and 1995  consolidated  financial  statements have
been reclassified to conform with the 1997 presentation herein.

2. Loans Receivable

Loans receivable consist of the following:
                                                       June 30
                                               1997               1996
                                             ------------------------------
Real estate mortgage loans:
     One-to-four family residential          $29,887,850        $26,239,965
     Commercial                                2,375,245          2,290,739
Construction loans                             1,419,800            870,000
Installment loans                              5,475,168          5,358,258
Loans secured by deposits                        193,111             62,559
                                             ------------------------------
                                              39,351,174         34,821,521
Less:
     Allowance for loan losses                   211,635            138,606
     Deferred loan fees                          101,140             94,665
     Undisbursed portion of loan proceeds        602,983            196,845
                                             ------------------------------
                                                 915,758            430,116
                                             ------------------------------
                                             $38,435,416        $34,391,405
                                             ==============================
<PAGE>

                Citizens Savings Bank of Frankfort and Subsidiary

             Notes to Consolidated Financial Statements (Continued)


2. Loans Receivable (continued)

Changes in the allowance for loan losses are as follows:

                                          Year Ended June 30
                                   1997          1996        1995
                                 -----------------------------------
Balance at beginning of year     $138,606       $46,416     $ 49,267
     Provision for losses          83,000        80,000       32,000
     Charge-offs                  (11,597)            -      (36,721)
     Recoveries                     1,626        12,190        1,870
                                 -----------------------------------
Balance at end of year           $211,635      $138,606     $ 46,416
                                 ===================================

At June 30, 1997 the Bank had loan commitments of approximately $592,000. Of the
$592,000 loan commitments, $488,000 are fixed rate commitments at 8.65%.

The  Bank's  loan  portfolio  consists  primarily  of  loans  originated  in its
principal market area of Frankfort,  Indiana,  Clinton County and its contiguous
counties.  The  economy  of the  Bank's  market  area  primarily  includes  some
diversified industries and agriculture.  At June 30, 1997 and June 30, 1996, and
for the years then ended,  the Bank had no loans considered to be impaired under
SFAS 114.  Advances from the Federal Home Loan Bank of Indianapolis  are secured
by a floating lien on the Bank's one-to-four  family residential  mortgage loans
(see Note 7).

3. Loans to Related Parties

The Bank has  granted  loans to certain  of its  directors,  officers  and their
associates.  Related  party  loans  are made on  substantially  the same  terms,
including  interest rates and  collateral,  as those  prevailing at the time for
comparable  transactions  with  unrelated  parties and do not involve  more than
normal risk of collectibility.  The aggregate dollar amounts of these loans were
$2,211,000  and $1,644,000 at June 30, 1997 and 1996,  respectively.  During the
year ended June 30, 1997,  related party loans were  increased  $890,000 by loan
advances and reduced  $323,000 by loan  repayments.  During 1996,  related party
loans were  increased  $535,000 by loan  advances  and reduced  $416,000 by loan
repayments.

4. Land Held for Development

The Bank, through its Service Corp., holds  approximately 59 acres of land for a
three phase residential housing addition in Frankfort, Indiana. In January 1992,
the Bank received regulatory approval of a plan to develop this land. During the
years ended June 30, 1997, 1996, and 1995, approximately $68,000,  $240,000, and
$654,000  was  expended to create the  infrastructure  for the  development  and
provide  further  improvements  to the first and  second  phase of the  project.
During  the  years  ended  June 30,  1997 and 1996  approximately  $166,000  and
$270,000  respectively,  was received  from the sale of lots in the  development
resulting in gains from sale of these lots of $17,000 and $33,000, respectively.
The Service Corp. owns an additional 45 acres of land for future development.

<PAGE>

                Citizens Savings Bank of Frankfort and Subsidiary

             Notes to Consolidated Financial Statements (Continued)


5. Property and Equipment

Property and equipment consists of the following:

                                                     June 30
                                             1997                 1996
                                           -------------------------------
Land                                        $137,307              $137,307
Office building                              647,154               647,154
Furniture, fixtures and equipment            255,327               295,158
                                           -------------------------------
                                           1,039,788             1,079,619
Less accumulated depreciation                461,445               476,155
                                           -------------------------------
                                            $578,343              $603,464
                                           ===============================
6. Deposits

Deposits consist of the following:
                                                        June 30
                                                1997                 1996
                                           ----------------------------------
Savings accounts:
     Fixed rate, passbook                   $  6,904,561         $  6,698,172
     Variable rate, money market               3,354,231            3,252,183
                                           ----------------------------------
                                              10,258,792            9,950,355
Negotiable order of withdrawal (NOW)
     accounts                                  4,072,240            4,076,132
Certificates                                  22,024,181           21,573,653
                                           ----------------------------------
                                             $36,355,213          $35,600,140
                                           ==================================


<PAGE>



                Citizens Savings Bank of Frankfort and Subsidiary
             Notes to Consolidated Financial Statements (Continued)


6.  Deposits (continued)

The following  table presents  interest  expense on deposits for the years ended
June 30, 1997, 1996 and 1995.

                                         For the Year Ended June 30
                                   1997           1996           1995
                                 ----------------------------------------
Fixed rate, passbooks              $216,388       $224,314       $230,077
Variable rate, money markets        108,991        107,232        105,566
NOWs                                 86,551         79,569         84,406
Certificates                      1,228,938      1,127,771        921,876
                                 ----------------------------------------
Total interest on deposits       $1,640,868     $1,538,886     $1,341,925
                                 ========================================

The average  interest  rates  represent the weighted  average  interest rates in
effect  at  June  30 of each  year.  Accrued  interest  payable,  which  relates
primarily to certificate accounts,  totaled $69,000 and $39,000 at June 30, 1997
and 1996,  respectively,  and is  included in other  liabilities.  Cash paid for
interest was $1,611,000, $1,539,000, and $1,341,000 for the years ended June 30,
1997, 1996, and 1995, respectively.  Deposit accounts with balances in excess of
$100,000 totaled $6,654,000 with a weighted average interest rate of 4.88% as of
June 30, 1997. Deposits over $100,000 are not federally insured.

Contractual maturities of certificates of deposit at June 30, 1997 were:

                       Certificates over     All other
 Year ended June 30,       $100,000        Certificates         Total
--------------------------------------------------------------------------
         1998              $4,117,330          $9,157,050      $13,274,380
         1999                 200,000           5,187,390        5,387,390
         2000                 100,246           1,455,255        1,555,501
         2001                 200,000             784,608          984,608
         2002                 111,114             661,012          772,126
     Thereafter                   ---              50,176           50,176
                           -----------------------------------------------
                           $4,728,690         $17,295,491      $22,024,181
                           ===============================================

7. Advances from Federal Home Loan Bank of Indianapolis

Advances from the Federal Home Loan Bank of Indianapolis  totaling $4,000,000 at
June 30,  1997 bear  fixed and  variable  interest  rates and are due at various
dates through October 1998 . The Bank is required to maintain  eligible loans in
its  portfolio  of at least  170% of  outstanding  advances  as  collateral  for
advances from the Federal Home Loan Bank of Indianapolis.  Advances  outstanding
as of June 30, 1997 are scheduled to mature as follows:

                   Year ended June 30,                Amount
                   -------------------             ----------
                           1998                    $3,000,000
                           1999                     1,000,000



<PAGE>



                Citizens Savings Bank of Frankfort and Subsidiary
             Notes to Consolidated Financial Statements (Continued)


7. Advances from Federal Home Loan Bank of Indianapolis (continued)

The following table presents certain information  relating to advances at or for
the years ended June 30, 1997, 1996 and 1995.

<TABLE>
<CAPTION>
                                                                         For the Year Ended June 30
                                                              1997                  1996                  1995
                                                             ------------------------------------------------------
FHLB Advances:
<S>                                                          <C>                   <C>                   <C>       
     Outstanding at end of period                            $4,000,000            $3,000,000            $1,500,000
     Average balance outstanding for period                   3,212,000             1,923,000               462,000
     Maximum amount outstanding at
         any month-end during the period:                     5,000,000             3,000,000             1,500,000
     Weighted average interest rate during the period              5.41%                 5.94%                 6.24%
     Weighted average interest rate at end of period               6.51                  5.82                  5.87
</TABLE>

8.  Income Taxes

Income tax expense is summarized as follows:

                                  For the Year Ended June 30
                             1997          1996           1995
                             -------------------------------------
Federal:
     Current                 $204,275      $255,830       $196,285
     Deferred                 (62,054)      (58,491)       (17,119)
                             -------------------------------------
                              142,221       197,339        179,166
State:
     Current                   55,276        71,900         56,017
     Deferred                 (14,272)      (15,982)        (4,634)
                             -------------------------------------
                               41,004        55,918         51,383
                             -------------------------------------
Income tax expense           $183,225      $253,257       $230,549
                             =====================================

Federal income taxes vary from the amount computed using the corporate statutory
rate due  principally to income on the cash surrender  value of a life insurance
policy (see Note 10).

The  reconciliation  of income tax computed at the federal statutory rate to the
Bank's effective income tax is as follows:

<TABLE>
<CAPTION>

                                                                        Year ended June 30
                                                                    1997       1996        1995
                                                                    ------------------------------
<S>                                                                  <C>          <C>         <C>  
Tax rate of federal statutory rate                                   34.0       %34.0       %34.0%
State franchise tax, net of federal benefit                           4.9         5.0         5.3
Income on cash surrender value of life insurance policy              (7.5)       (5.9)       (5.0)
Other                                                                 1.7         1.5         1.9
                                                                    ------------------------------
Effective tax rate                                                   33.1%       34.6%       36.2%
                                                                    ==============================
</TABLE>



<PAGE>



                Citizens Savings Bank of Frankfort and Subsidiary
             Notes to Consolidated Financial Statements (Continued)


8.  Income Taxes (continued)

 The components of the Bank's net deferred tax asset included in other assets as
of June 30 are as follows:

<TABLE>
<CAPTION>
                                                        1997                1996                 1995
                                                      -----------------------------------------------------
Deferred tax assets:
<S>                                                   <C>                   <C>                  <C>      
     Deferred loan origination fees                   $124,563              $118,904             $ 111,442
     Unrealized loss on investment                         ---                35,698                34,458
     Officer supplemental retirement plan               99,263                67,681                38,347
     Allowance for loan losses                          89,945                58,908                19,727
     Other                                              21,484                15,621                 7,747
                                                      -----------------------------------------------------
                                                       335,255               296,812               211,721
Deferred tax liabilities:
     FHLB stock dividend                               (27,132)              (27,132)              (27,132)
     Deferred loan origination costs                   (81,579)              (78,680)              (74,826)
     Percentage bad debt deduction                     (49,107)              (58,915)              (58,915)
     Other                                             (15,669)              (13,116)               (7,592)
                                                      -----------------------------------------------------
                                                      (173,487)             (177,843)             (168,465)
                                                      -----------------------------------------------------
         Net deferred tax asset                       $161,768              $118,969               $43,256
                                                      =====================================================
</TABLE>

The Bank and its wholly owned subsidiary file a consolidated  federal income tax
return.  The Bank paid  $431,009,  $248,646  and  $168,539  of federal and state
income taxes in 1997, 1996 and 1995, respectively.

9. Retained Income

The Bank is subject to various regulatory capital  requirements  administered by
the federal banking agencies.  Failure to meet minimum capital  requirements can
initiate certain mandatory--and  possibly additional  discretionary--actions  by
regulators  that,  if  undertaken,  could have a direct  material  effect on the
Bank's  financial   statements.   Under  capital  adequacy  guidelines  and  the
regulatory  framework for prompt corrective  action, the Bank must meet specific
capital  guidelines  that involve  quantitative  measures of the Bank's  assets,
liabilities,  and certain off-balance-sheet items as calculated under regulatory
accounting  practices.  The Bank's capital amounts and  classification  are also
subject to  qualitative  judgments  by the  regulators  about  components,  risk
weightings,  and other  factors.  Management  believes  that the Bank  meets all
capital adequacy requirements to which it is subject.

Pursuant to the Financial  Institutions  Reform  Recovery and Enforcement Act of
1989  (FIRREA),  as  implemented  by a rule  promulgated by the Office of Thrift
Supervision  ("OTS"),  savings  institutions  must meet three  separate  minimum
capital-to-assets  requirements:  (i) a risk-based capital  requirement of 8% of
risk-weighted  assets,  (ii) a leverage ratio of 3% core capital to total assets
and (iii) a tangible capital  requirement of 1.5% tangible core capital to total
assets.  The following table summarizes,  the Bank's capital  requirements under
FIRREA and its actual capital and capital ratios at June 30.


<PAGE>



                Citizens Savings Bank of Frankfort and Subsidiary
             Notes to Consolidated Financial Statements (Continued)


9. Retained Income  (continued)

<TABLE>
<CAPTION>

                    Capital Requirements                   Actual Capital                 Amount
                      %                $                 %                $              of Excess
                   --------------------------------------------------------------------------------
June 30, 1997:
<S>                 <C>            <C>                     <C>         <C>               <C>       
   Risk-based       8.0%           $2,174,000              18.1%       $4,910,000        $2,736,000
   Leverage         3.0             1,365,000              10.3         4,698,000         3,333,000
   Tangible         1.5               683,000              10.3         4,698,000         4,015,000

June 30 1996:
   Risk-based       8.0%           $2,072,000              16.8%       $4,343,000        $2,271,000
   Leverage         3.0             1,298,000               9.7         4,204,000         2,906,000
   Tangible         1.5               649,000               9.7         4,204,000         3,555,000
</TABLE>

At June 30, 1997 and 1996, the Bank had  approximately  $993,000 and $1,070,000,
respectively,  invested in its  Service  Corp.,  which  invests in land held for
development.  Since  enactment of FIRREA,  regulatory  capital  rules  require a
reduction of regulatory capital for such an investment. The amount of regulatory
capital  reduction was 100% as of June 30, 1997 and 1996.  The  reductions  were
partially offset by  non-withdrawable  deposits includable in regulatory capital
of $0 and $5,000 at June 30, 1997 and 1996 respectively.

Pursuant to the Federal  Deposit  Insurance  Corporation  Improvement Act Prompt
Corrective Action regulations,  for all periods presented,  the Office of Thrift
Supervision  categorized  the Bank as  "well-capitalized"  under the  regulatory
framework for prompt corrective  action.  To be categorized as  well-capitalized
the Bank must maintain a total  risk-based  capital (as defined) ratio of 10%, a
Tier 1 risk-based  capital (as  defined)  ratio of 6%, and a Tier 1 leverage (as
defined) ratio of 5%. The Bank's ratios were as follows:

                          Capital Requirements           Actual Capital
                           %              $              %              $
                         ------------------------------------------------------
As of June 30, 1997:
   Risk-based            10.0%        $2,717,000       18.1%         $4,910,000
   Tier I risk-based      6.0          1,630,000       17.3           4,698,000
   Tier I leverage        5.0          2,276,000       10.3           4,698,000

As of June 30 1996:
   Risk-based            10.0%        $2,590,000       16.8%         $4,343,000
   Tier I risk-based      6.0          1,554,000       16.2           4,204,000
   Tier I leverage        5.0          2,163,000        9.7           4,204,000

Citizens has  qualified  under  provisions  of the  Internal  Revenue Code which
permit it to deduct from taxable  income a provision for bad debts which differs
from the provision for such losses charged against income. Accordingly, retained
income  includes income of  approximately  $1,349,000 for which no provision for
federal income taxes has been made. If, in the future,  this portion of retained
income is used for any purpose other than to absorb loan losses,  federal income
taxes may be imposed at the then applicable rates.

10. Employee Benefits

Substantially  all full-time  employees are covered by a defined benefit pension
plan  administered  by the  Financial  Institutions  Retirement  Fund (FIRF),  a
multi-employer,  industry  sponsored plan. Plan information is not available for
the Bank as an  individual  entity  within  the  multi-employer  group.  Pension
expense  consisting   primarily  of  plan   administration   costs  amounted  to
approximately   $20,556,   $1,300,   and  $16,400  in  1997,   1996,  and  1995,
respectively.


<PAGE>



                Citizens Savings Bank of Frankfort and Subsidiary
             Notes to Consolidated Financial Statements (Continued)


10. Employee Benefits (continued)

In addition to the above plan,  the Bank sponsors a  supplemental  non-qualified
pension plan that provides  certain  officers with defined  pension  benefits in
excess of those  provided  in the  qualified  plan.  To fund the plan,  the Bank
purchased  single  premium  life  insurance   contracts  on  the   participating
employees.  The  carrying  value  of  this  investment,  representing  the  cash
surrender value of the policies,  was $1,076,000 and $1,035,000 at June 30, 1997
and 1996,  respectively.  During the years ended June 30, 1997,  1996, and 1995,
$74,300, $69,000, and $47,400, respectively,  were charged to expense under this
plan.

11. Fair Value of Financial Instruments

Statement  No. 107,  "Disclosures  About Fair Value of  Financial  Instruments,"
requires  disclosure  of fair value  information  about  financial  instruments,
whether or not recognized in the balance  sheet,  for which it is practicable to
estimate that value. In cases where quoted market prices are not available, fair
values are based on estimates using present value or other valuation techniques.
Those techniques are significantly  affected by the assumptions used,  including
the  discount  rate and  estimates  of future cash flows.  In that  regard,  the
derived  fair  value  estimates   cannot  be   substantiated  by  comparison  to
independent  markets  and,  in many cases,  could not be  realized in  immediate
settlement  of the  instrument.  Statement  No. 107 excludes  certain  financial
instruments and all nonfinancial  instruments from its disclosure  requirements.
Accordingly,  the aggregate  fair value  amounts  presented do not represent the
underlying value of the Bank.

The following  methods and  assumptions  were used by the Bank in estimating its
fair value disclosures for financial instruments:

      Cash and interest bearing  deposits:  The carrying amounts reported in the
      balance  sheet  for  cash and  short-term  investments  approximate  those
      assets' fair values.

      Investment  securities  available  for sale:  Fair  values for  investment
      securities are based on quoted market prices,  where available.  If quoted
      market  prices are not  available,  fair values are based on quoted market
      prices of comparable instruments.

      Stock in Federal Home Loan Bank of Indianapolis:  The amount of stock held
      in the Federal Home Loan Bank is determined by regulation and is stated at
      cost which approximates market.

      Loans receivable:  For variable-rate loans that reprice  frequently,  fair
      values are based on carrying  values.  The fair values for all other loans
      are estimated using  discounted  cash flow analyses,  using interest rates
      currently  being  offered for loans with  similar  terms to  borrowers  of
      similar credit quality.

      Deposit  liabilities:  The fair  values  disclosed  for  demand  deposits,
      including  interest-bearing  and  noninterest-bearing  accounts,  passbook
      savings,  and certain types of money market  accounts are, by  definition,
      equal to the amount payable on demand at the reporting  date (i.e.,  their
      carrying amounts).  Fair values for fixed-rate certificates of deposit are
      estimated using a discounted cash flow  calculation  that applies interest
      rates  currently being offered on certificates to a schedule of aggregated
      expected monthly maturities on time deposits.

      Federal Home Loan Bank advances:  The carrying amounts  approximate  their
      fair values.


<PAGE>



                Citizens Savings Bank of Frankfort and Subsidiary
             Notes to Consolidated Financial Statements (Continued)


11. Fair Value of Financial Instruments (continued)

The estimated fair values of the Bank's  financial  instruments at June 30, 1997
are as follows:

<TABLE>
<CAPTION>

                                                          Carrying           Fair
                                                           Amount            Value
                                                        ------------------------------
Assets:
<S>                                                     <C>              <C>         
     Cash on hand and in other institutions             $    861,360     $    861,360
     Interest bearing deposits                             3,263,687        3,263,687
     Investment securities available for sale                160,995          160,995
     Stock in Federal Home Loan Bank of Indianapolis         331,600          331,600
     Loans receivable                                     38,435,416       37,400,000

Liabilities:
     Deposits                                             36,355,213       36,380,000
     Federal Home Loan Bank advances                       4,000,000        4,000,000
</TABLE>


12. Plan of Conversion

On April 9, 1997, the Board of Directors adopted a Plan of Conversion  ("Plan"),
whereby the Bank will convert from a federally-chartered  mutual savings bank to
a  federally-chartered  capital  stock  savings  bank.  The Plan is  subject  to
approval  by the  regulatory  authorities  and  members  at a  special  meeting.
Pursuant to the Plan, non-transferable subscription rights to purchase shares of
stock of the savings Bank will be offered first to eligible  account  holders of
the Bank, then to an ESOP to be formed,  then to supplemental  eligible  account
holders of the Bank, and then to the extent that stock is available,  to certain
other members as of a specified  date, and then to members of the general public
with preference given to residents of Clinton County.  The capital stock will be
offered at $10.00 per share.  The exact  number of shares to be offered  will be
determined  by the Board of  Directors  based upon an appraisal to be made by an
independent appraisal firm. At least the minimum number of shares offered in the
conversion must be sold.

The plan provides that when the conversion is completed, a "liquidation account"
will be established in an amount equal to the regulatory  capital of the Bank as
of the latest  practicable  date prior to consummation  of the  conversion.  The
liquidation  account is established  to provide a limited  priority claim to the
assets of the Bank to qualifying  depositors  ("eligible  account  holders") who
continue to  maintain  deposits in the Bank after  conversion.  In the  unlikely
event of a complete liquidation of the Bank, and only in such an event, eligible
account  holders  would  receive from the  liquidation  account,  a  liquidation
distribution  based  on  their   proportionate  share  of  the  total  remaining
qualifying deposits.

The Bank may pay dividends on its stock after the  conversion if its  regulatory
capital  would not  thereby be reduced  below the amount then  required  for the
aforementioned liquidation account and if such dividends are otherwise permitted
under applicable  regulations.  In general  regulations  permit dividends within
guidelines based on current levels of net income and capital.

The OTS also has authority to prohibit an institution  from paying dividends if,
in its opinion,  the payment of dividends would  constitute an unsafe or unsound
practice in light of the financial condition of the institution.

Costs of the  conversion  will be deducted  from the  proceeds of sale of common
stock and  recorded as a reduction of common  stock.  If the  conversion  is not
completed,  such costs will be charged to expense.  Conversion  costs of $92,000
have been incurred as of June 30, 1997.


<PAGE>

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

         There were no such  changes  or  disagreements  during  the  applicable
period.

                                    PART III

Item 10.      Directors and Executive Officers of the Registrant.

     The  information  concerning the Holding  Company's  executive  officers is
included in Item 4.5 in Part I of this report.  Section 16(a) of the  Securities
Exchange Act of 1934 ("1934 Act") requires that the Holding  Company's  officers
and directors and persons who own more than 10% of the Holding  Company's Common
Stock file reports of ownership and changes in ownership with the Securities and
Exchange  Commission  (the  "SEC").  Officers,  directors  and greater  than 10%
shareholders are required by SEC regulations to furnish the Holding Company with
copies of all Section 16(a) forms that they file.

     Based  solely on its  review of the copies of such  forms  received  by it,
and/or written  representations  from certain  reporting persons that no Forms 5
were required for those persons,  the Holding  Company  believes that during the
fiscal  year ended June 30,  1997,  all filing  requirements  applicable  to its
officers,  directors  and greater  than 10%  beneficial  owners with  respect to
Section 16(a) of the 1934 Act were complied with.

         Presented below is certain information  concerning the directors of the
Holding Company:

<TABLE>
<CAPTION>

                               Director of               Director of                         Position
                             Holding Company              Citizens         Expiration          with
Director                          Since                     Since            of Term         Citizens

<S>                               <C>                       <C>               <C>           <C>       
Robert F. Ayres                   1997                      1979              1999           Director
Fred W. Carter                    1997                   1960-1966;           1997           Director, President and
                                                       1971 to Present                       Chief Executive Officer
Perry W. Lewis                    1997                      1975              1998           Director
John J. Miller                    1997                      1995              1998           Director
Billy J. Wray                     1997                      1992              1999           Director
</TABLE>

      Presented  below  is  certain  information  concerning  the  directors  of
Citizens:

      Robert F. Ayres (age 72) served as  Superintendent of Community Schools of
Frankfort from 1965 until his retirement in 1989. He previously served as a high
school  principal,  teacher  and  coach at  Frankfort  Senior  High  School,  in
Frankfort.

      Fred W.  Carter  (age 65) has  served as  President  and  Chief  Executive
Officer of Citizens  and CLSC since  1972,  and has been an employee of Citizens
since 1966. Mr. Carter is the father of Cindy S. Chambers,  Citizens'  Secretary
and Customer Service Manager.

      Perry W. Lewis (age 76) has served as the  Chairman  of Lewis Ford  Sales,
Inc. in Frankfort since 1984.

      John J. Miller (age 58) has served as President of Goodwin  Funeral  Home,
Inc. in Frankfort since 1979.

      Billy J. Wray (age 66) is part  owner of  Premium  Auto  Center,  Inc.  (a
used-car  dealership),  in Lebanon,  Indiana.  He also owns interests in various
real estate developments around Frankfort.


<PAGE>

      Citizens  also has an  advisory  director  program  pursuant  to which its
former  directors  may  continue to serve as advisors to the Board of  Directors
upon their retirement or resignation from the Board. Currently, Ralph C. Hinshaw
and Rawl V.  Ransom  serve as advisory  directors.  Mr.  Hinshaw and Mr.  Ransom
receive  $500 for each  meeting  that  they  attend.  They  receive  no fees for
meetings  they  do  not  attend.   See  "Executive   Compensation   and  Related
Transactions  of Citizens --  Compensation  of  Directors."  Item 11.  Executive
Compensation.

      No cash compensation is paid directly by the Holding Company to any of its
executive officers. Each of such officers is compensated by Citizens.

      The following  table sets forth  information  as to annual,  long-term and
other  compensation  for services in all  capacities to Citizens'  President and
Chief Executive  Officer for the fiscal year ended June 30, 1997. Other than Mr.
Carter,  no other executive  officers earned over $100,000 in salary and bonuses
during that fiscal year.

<TABLE>
<CAPTION>
                                                                       Summary Compensation Table
                                                              Annual Compensation
     Name and Principal          Fiscal                                           Other Annual            All Other
          Position                Year            Salary             Bonus      Compensation (4)        Compensation
--------------------------------------------------------------------------------------------------------------------
<S>                               <C>            <C>     <C>       <C>              <C>                 <C>  
Fred Carter, President and        1997           $91,000 (1)       $39,600 (2)         --                 $120 (3)
   Chief Executive Officer
</TABLE>

(1)   Includes  $6,000  in fees  received  for  service  on  Citizens  Board  of
      Directors.  Mr.  Carter's  annual  salary  has been  increased  to $95,000
      effective January 1, 1997.

(2)   Beginning  with calendar year 1997,  Mr. Carter  receives a bonus equal to
      10% of the  profits of  Citizens  in excess of  $626,000  after  deducting
      certain expenses incurred by Citizens.

(3)   This column includes amounts paid by Citizens for insurance  premiums with
      respect to a $10,000  term life  insurance  policy for the  benefit of Mr.
      Carter.

(4)   Mr. Carter  received  certain  perquisites,  but the  incremental  cost of
      providing such  perquisites did not exceed the lesser of $50,000 or 10% of
      his salary and bonus.

Employment Contracts

      Citizens  entered into a three-year  employment  contract with Mr. Carter.
The  contract  with  Mr.  Carter,  effective  as of the  effective  date  of the
Conversion,  extends  annually for an  additional  one-year term to maintain its
three-year  term if  Citizens'  Board of Directors  determines  to so extend it,
unless  notice not to extend is properly  given by either party to the contract.
Mr.  Carter  receives an initial  salary under the contract  equal to his salary
with  Citizens  prior to the  Conversion,  subject to increases  approved by the
Board of  Directors.  The  contract  also  provides,  among  other  things,  for
participation  in other fringe benefits and benefit plans available to Citizens'
employees.  Mr. Carter may terminate his employment upon 60 days' written notice
to Citizens.  Citizens  may  discharge  Mr.  Carter for cause (as defined in the
contract) at any time or in certain specified events. If Citizens terminates Mr.
Carter's  employment  for other than cause or if Mr. Carter  terminates  his own
employment for cause (as defined in the  contract),  Mr. Carter will receive his
base  compensation  under the  contract  for an  additional  three  years if the
termination  follows a change of control  in the  Holding  Company,  and for the
balance of the contract if the termination  does not follow a change in control.
In addition,  during such period,  Mr.  Carter will continue to  participate  in
Citizens'  group insurance  plans and retirement  plans,  or receive  comparable
benefits.  Moreover,  within a period of three  months  after  such  termination
following a change of control,  Mr. Carter will have the right to cause Citizens
to  purchase  any stock  options he holds for a price  equal to the fair  market
value (as defined in the  contract) of the shares  subject to such options minus
their option price. If the payments provided for in the contract,  together with
any other payments made to Mr. Carter by Citizens,  are deemed to be payments in
violation of the "golden  parachute"  rules of the Code,  such  payments will be
reduced to the  largest  amount  which  would not cause  Citizens  to lose a tax
deduction for such payments under those rules.  As of the date hereof,  the cash
compensation  which  would be paid  under  the  contract  to Mr.  Carter  if the
contract  were  terminated  either  after a change  of  control  of the  Holding
Company,  without  cause  by  Citizens,  or for  cause by Mr.  Carter,  would be
$255,000.  For purposes of this employment  contract, a change of control of the
Holding  Company  is  generally  an  acquisition  of  control,   as  defined  in
regulations issued under the Change in Bank Control Act and the Savings and Loan
Holding Company Act.


<PAGE>

      The  employment   contract  protects   Citizens'   confidential   business
information  and protects  Citizens  from  competition  by Mr.  Carter should he
voluntarily  terminate his employment without cause or be terminated by Citizens
for cause.

Compensation of Directors

      Citizens pays its directors a monthly  retainer of $300 plus $200 for each
month in which they  attend one or more  meetings.  Rawl V.  Ransom and Ralph C.
Hinshaw receive $500 per monthly meeting attended as advisory  directors.  Total
fees paid to its  directors  and advisory  directors for the year ended June 30,
1997 were approximately $40,400.

      Citizens'  directors and advisory  directors  may,  pursuant to a deferred
compensation  agreement,  defer payment of some or all of their  directors  fees
into a retirement account. Under this agreement,  deferred directors fees are to
be paid to a director  beginning  upon the first day of the month  following the
director's seventieth (70th) birthday, and continuing in equal installments over
a 180-month  period.  A director  may also receive his benefits in a lump sum in
the event of  financial  hardship.  The  agreement  also  provides for death and
disability  benefits.  At  present,  Mr.  Carter  is the only  director  who has
executed a deferred compensation agreement with Citizens.

      Directors  of  the  Holding  Company  and  CLSC  are  not  currently  paid
directors'  fees.  The Holding  Company  may, if it believes it is  necessary to
attract qualified  directors or is otherwise  beneficial to the Holding Company,
adopt a policy of paying directors' fees.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

         The  following  table  sets forth  certain  information  regarding  the
beneficial  ownership of the Common Stock as of October 20, 1997, by each person
who is known by the Holding Company to own beneficially 5% or more of the Common
Stock.  Unless otherwise  indicated,  the named beneficial owner has sole voting
and dispositive power with respect to the shares.

                                      Number of Shares
        Name and Address               of Common Stock      Percent of
     of Beneficial Owner(1)          Beneficially Owned        Class
   ---------------------------------------------------------------------
   The Farmers Bank                       84,640(2)             8.0%
   9 East Clinton Street
   Frankfort, IN   46041

(1)      The  information  in  this  chart  is  based  on  Schedule  13D and 13G
         Report(s) filed by the  above-listed  person(s) with the SEC containing
         information  concerning  shares  held by them.  It does not reflect any
         changes in those  shareholdings  which may have occurred since the date
         of such filings.

(2)      These shares are held by the Trustee of the Citizens  Bancorp ESOP. The
         Employees  participating  in the  ESOP are  entitled  to  instruct  the
         Trustee  how to vote  shares  held in their  accounts  under  the ESOP.
         Unallocated  shares  held in a  suspense  account  under  the  ESOP are
         required to be voted by the Trustee in the same proportion as allocated
         shares are voted.


<PAGE>

         The  following  table  sets forth  certain  information  regarding  the
nominees  for the  position of director of the Holding  Company,  including  the
number and percent of shares of Common Stock  beneficially owned by such persons
as of October  20,  1997.  Unless  otherwise  indicated,  each  nominee has sole
investment  and/or voting power with respect to the shares shown as beneficially
owned by him. The table also sets forth the number of shares of Holding  Company
Common Stock  beneficially  owned by all directors and executive officers of the
Holding Company as a group.

<TABLE>
<CAPTION>
                                                                                  Common Stock
                              Expiration of        Director of the                Beneficially
                                 Term as               Holding                     Owned as of                Percentage
       Name                     Director            Company Since               October 20, 1997              of Class(1)
----------------------------------------            -------------               --------------------------------------   
<S>                               <C>                   <C>                          <C>                      <C>  
Fred W. Carter                    1997                  1997                         22,000  (2)                2.08%
Robert F. Ayres                   1999                  1997                          5,000                      .47
Perry W. Lewis                    1998                  1997                         22,000  (2)                2.08
John J. Miller                    1998                  1997                         37,000  (2) (3)            3.50
Billy J. Wray                     1999                  1997                         30,000  (2)                1.89
All directors and
executive officers
as a group (10 persons)                                                             175,000                    16.54%
</TABLE>

(1)   Based upon  information  furnished by the  respective  director  nominees.
      Under applicable  regulations,  shares are deemed to be beneficially owned
      by a person if he or she directly or indirectly has or shares the power to
      vote or dispose of the shares,  whether or not he or she has any  economic
      power with respect to the shares.  Includes shares  beneficially  owned by
      members of the  immediate  families  of the  directors  residing  in their
      homes.

(2)   Includes shares owned by director and his spouse.

(3)   Includes shares owned by a company deemed to be controlled by Mr. Miller.

Item 13.  Certain Relationships and Related Transactions.

      Citizens has followed a policy of offering to its directors, officers, and
employees  real estate  mortgage loans secured by their  principal  residence as
well as other  loans.  All of  Citizens'  loans to its  directors,  officers and
employees are made on substantially the same terms, including interest rates and
collateral as those prevailing at the time for comparable  transactions,  and do
not  involve  more than  minimal  risk of  collectibility.  Loans to  directors,
executive officers and their associates totaled  approximately $2.2 million,  or
approximately  39% of  consolidated  retained  earnings at June 30,  1997.  This
amount includes two loans to directors Billy J. Wray and John J. Miller, neither
of whom were directors or employees of Citizens when the loans were  originated.
The first loan, in the original  principal amount of approximately $1.5 million,
was  originated in October,  1991 to both Mr. Wray and Mr. Miller and is secured
by the 48-unit Clinton Estates apartment complex located in Frankfort.  Citizens
sold a  $542,000  nonrecourse  participation  in this  loan to  reduce  the loan
balance to within its lending  limit.  At June 30,  1997,  this loan was current
with a balance of approximately  $1,337,000, of which approximately $837,000 was
owed to Citizens. The second loan, dated February, 1994, was a construction line
of credit in the  original  amount of $620,000 to Mr.  Miller,  secured by eight
condominiums and other real estate located in Tipton, Indiana. At June 30, 1997,
this loan was also current with a balance of approximately $395,000. Citizens is
not obligated to advance  additional  funds pursuant to this line of credit.  In
the opinion of Citizens' management, these loans are adequately collateralized.

      Current law  authorizes  Citizens to make loans or extensions of credit to
its executive officers,  directors, and principal shareholders on the same terms
that are  available  with  respect to loans made to its  employees.  At present,
Citizens' loans to executive  officers,  directors,  principal  shareholders and
employees are made on the same terms generally available to the public. Citizens
may in the  future,  however,  adopt a program  under  which it may  waive  loan
application  fees and closing  costs with respect to loans made to such persons.
Loans  made to a  director  or  executive  officer  in excess of the  greater of
$25,000 or 5% of  Citizens'  capital and  surplus (up to a maximum of  $500,000)
must be approved in advance by a majority  of the  disinterested  members of the
Board of  Directors.  Citizens'  policy  regarding  loans to  directors  and all
employees meets the requirements of current law.

<PAGE>

                                     PART IV

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

(a)      List the following documents filed as part of the report:

         Financial Statements
         Consolidated  Statements of Financial  Condition at June 30, 1997,  and
         1996  Consolidated  Statements  of Income for the Years  Ended June 30,
         1997, 1996, and 1995
         Consolidated  Statements  of  Changes in  Stockholders'  Equity for the
         Years Ended June 30, 1997, 1996, and 1995.  Consolidated  Statements of
         Cash Flows for the Years Ended June 30, 1997,  1996,  and 1995 Notes to
         Consolidated Financial Statements

(b)      Reports on Form 8-K.

         The  Holding  Company  filed no reports on Form 8-K during the  quarter
ended June 30, 1997.

(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(5) through 10(9).

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

<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.

         CITIZENS BANCORP


Date:  October 30, 1997                    By: /s/ Fred W. Carter
                                               ---------------------------------
                                            Fred W. Carter, 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 30th day of October,
1997.

     Signatures                         Title                       Date

(1)  Principal Executive Officer:



     /s/ Fred W. Carter                                      )
     ----------------------                                  )
     Fred W. Carter                 President and            )
                                    Chief Executive Officer  )
                                                             )
                                                             )
(2)  Principal Financial and                                 )
     Accounting Officer:                                     )
                                                             )
                                                             )
     /s/ Stephen D. Davis           Treasurer                )
     ----------------------                                  )
     Stephen D. Davis                                        )
                                                             )
                                                             ) October 30, 1997
                                                             )
(3)  The Board of Directors:                                 )
                                                             )
                                                             )
                                    Director                 )
     ----------------------                                  )
     Robert F. Ayres                                         )
                                                             )
                                                             )
     /s/ Fred W. Carter             Director                 )
     ----------------------                                  )
     Fred W. Carter                                          )
                                                             )
                                                             )
     /s/ Perry W. Lewis             Director                 )
     ----------------------                                  )
     Perry W. Lewis                                          )
                                                             )
                                                             )
                                                             )

<PAGE>
     /s/ John J. Miller                                      )
     ----------------------                                  )
     John J. Miller                 Director                 )
                                                             ) October 30, 1997
                                                             )
                                    Director                 )
     ----------------------                                  )
     Billy J. Wray                                           )
                                                             )


<PAGE>

                                  EXHIBIT INDEX

Exhibit No.       Description                                              Page

3(1)  Registrant's Articles of Incorporation are incorporated by reference
      to  Exhibit  3(1)  to  the   Registration   Statement  on  Form  S-1
      (Registration No. 333-29031) (the "Registration Statement")

(2)   Registrant's  Code of  By-Laws  are  incorporated  by  reference  to
      Exhibit 3(2) to the Registration Statement

10(4) Citizens Bancorp Employee Stock Ownership Plan and Trust Agreement

(5)   Employment  Agreement between Citizens Savings Bank of Frankfort and
      Fred W. Carter is  incorporated by reference to Exhibit 10(5) to the
      Registration Statement

(6)   Director  Deferred  Compensation  Agreement  --  Fred W.  Carter  is
      incorporated  by  reference  to  Exhibit  10(6) to the  Registration
      Statement

(7)   Executive  Supplemental  Retirement  Agreement  -- Fred W. Carter is
      incorporated  by  reference  to  Exhibit  10(7) to the  Registration
      Statement

(8)   Executive  Supplemental  Retirement Agreement -- Stephen D. Davis is
      incorporated  by  reference  to  Exhibit  10(8) to the  Registration
      Statement

(9)   Executive Supplemental  Retirement Agreement -- Cindy S. Chambers is
      incorporated  by  reference  to  Exhibit  10(9) to the  Registration
      Statement

(10)  Exempt  Loan  and  Share  Purchase  Agreement  between  Trust  under
      Citizens  Bancorp  Employee Stock Ownership Plan and Trust Agreement
      and Citizens Bancorp

21    Subsidiaries of the Registrant 

27    Financial Data Schedule