================================================================================
                                    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, 1998

                                       or

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

For the transition period from _____________ to _______________

Commission File Number 333-29031

                                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 September 10, 1998 was $8,624,701.

The  number of shares of the  Registrant's  Common  Stock,  without  par  value,
outstanding as of September 10, 1998, was 1,058,000 shares.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Annual Report to Shareholders  for the year ended June 30, 1998,
are  incorporated by reference into Part II. Portions of the Proxy Statement for
the 1998 Annual Meeting of Shareholders are incorporated in Part III.


                            Exhibit Index on Page E-1
                               Page 1 of 30 Pages
================================================================================

<PAGE>


                                CITIZENS BANCORP
                                    Form 10-K
                                      INDEX
                                                                          Page
PART I
     Item 1     Business.................................................... 3
     Item 2.    Properties..................................................25
     Item 3.    Legal Proceedings...........................................26
     Item 4.    Submission of Matters to a Vote of Security Holders.........26
     Item 4.5.  Executive Officers of the Registrant........................26
PART II
     Item 5.    Market for Registrant's Common Equity and Related
                    Stockholder Matters.....................................27

     Item 6.    Selected Financial Data.....................................27
     Item 7.    Management's Discussion and Analysis of Financial
                    Condition and Results of Operations.....................27
     Item 7A.   Quantitative and Qualitative Disclosures About Market Risk..27
     Item 8.    Financial Statements and Supplementary Data.................27
     Item 9.    Changes in and Disagreements with Accountants on
                    Accounting and Financial Disclosure.....................27

PART III
     Item 10.   Directors and Executive Officers of Registrant..............27
     Item 11.   Executive Compensation......................................27

     Item 12.   Security Ownership of Certain Beneficial
                    Owners and Management...................................27

     Item 13.   Certain Relationships and Related Transactions..............27

PART IV

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

SIGNATURES          ........................................................29


<PAGE>

Item 1.    Business

General

         Citizens Bancorp, an Indiana  corporation (the "Holding Company"),  was
organized in June, 1997. On September 18, 1997, the Holding Company 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  residential 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,
                                           --------------------------------------------------------------
                                                  1998                  1997                  1996
                                           ------------------     -----------------     -----------------
                                                      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..........................   $35,928     76.54%    $29,888    77.77%      $26,240   76.30%
   Non-residential......................     1,770      3.77         824     2.14           695    2.02
   Multi-family.........................     1,887      4.02       1,551     4.04         1,596    4.64
Construction loans:.....................       611      1.30       1,420     3.69           870    2.53
Consumer loans:
   Single pay...........................     2,815      6.00       1,854     4.82         2,110    6.14
   Installment .........................     2,219      4.73       1,696     4.41         1,288    3.74
   Share ...............................       ---       ---          15      .04            63     .18
   Home equity..........................     2,176      4.64       2,095     5.45         1,949    5.67
   Home improvement.....................         5       .01           8      .02            11     .03
                                           -------    ------     -------   ------       -------  ------ 
       Gross loans receivable...........   $47,411    101.01%    $39,351   102.38%      $34,822  101.25%
                                           =======    ======     =======   ======       =======  ====== 

TYPE OF SECURITY
Residential real estate ................   $40,612     86.53%    $35,153    91.45%      $30,860   89.73%
Non-residential real estate.............     2,143      4.57       1,037     2.70         1,072    3.12
Multi-family real estate................     2,267      4.83       1,551     4.04         1,596    4.64
Deposits................................       150       .32         193      .50           165     .48
Auto   .................................     1,415      3.01       1,176     3.06           832    2.42
Other security..........................       405       .86         111      .29           214     .62
Unsecured ..............................       419       .89         130      .34            83     .24
                                           -------    ------     -------   ------       -------  ------ 
     Gross loans receivable.............    47,411    101.01      39,351   102.38        34,822  101.25

Deduct:
Deferred loan fees......................       110       .23         101      .26            95     .28
Allowance for loan losses...............       269       .57         212      .55           138     .40
Loans in process........................        96       .21         603     1.57           197     .57
                                           -------    ------     -------   ------       -------  ------ 
   Net loans receivable.................   $46,936    100.00%    $38,435   100.00%      $34,392  100.00%
                                           =======    ======     =======   ======       =======  ====== 
Mortgage Loans (1):
   Adjustable-rate......................   $11,502     28.99%   $  9,595    29.68%     $  9,241   32.30%
   Fixed-rate...........................    28,178     71.01      22,734    70.32        19,368   67.70
                                           -------    ------     -------   ------       -------  ------ 
     Total..............................   $39,680    100.00%    $32,329   100.00%      $28,609  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, 1998,
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                                        2002       2004      2009       2014
                                       June 30,                                            to         to        to         and
                                         1998              1999       2000       2001     2003       2008      2013     following
                                        -------          ------       ----      -----    ------     ------    -------    -------
                                                                                 (In thousands)
Real estate mortgage loans:
<S>                                     <C>            <C>           <C>       <C>      <C>         <C>       <C>        <C>    
   Residential loans..................  $35,928        $     10      $  47     $   51   $   235     $3,864    $15,180    $16,541
   Multi-family loans.................    1,887             ---        ---        ---       ---        239      1,648        ---
   Non-residential loans..............    1,770             ---          9        ---       ---        307        464        990
Construction loans....................      611             611        ---        ---       ---        ---        ---        ---
Installment  loans....................    2,219              84        280        450     1,116        284        ---          5
Single pay loans......................    2,815           2,709        105          1       ---        ---        ---        ---
Home equity loans.....................    2,176             ---        ---        ---       ---        ---        ---      2,176
Home improvement loans................        5               1        ---          4       ---        ---        ---        ---
                                        -------          ------       ----      -----    ------     ------    -------    -------
     Total............................  $47,411          $3,415       $441      $ 506    $1,351     $4,694    $17,292    $19,712
                                        =======          ======       ====      =====    ======     ======    =======    =======
</TABLE>

      The following  table sets forth, as of June 30, 1998, 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, 1999
                                     -------------------------------------------------------------
                                     Fixed Rates             Variable Rates                  Total
                                     -----------             --------------                  -----
                                                             (In thousands)
Real estate mortgage loans:
<S>                                     <C>                     <C>                         <C>    
   Residential loans.............       $28,052                 $  7,866                    $35,918
   Multi-family loans............           ---                    1,887                      1,887
   Non-residential loans.........            38                    1,732                      1,770
Construction loans...............           ---                      ---                        ---
Installment loans................         2,135                      ---                      2,135
Single pay loans.................            42                       64                        106
Share loans......................           ---                      ---                        ---
Home equity loans................           ---                    2,176                      2,176
Home improvement loans...........             4                      ---                          4
                                        -------                  -------                    -------
   Total.........................       $30,271                  $13,725                    $43,996
                                        =======                  =======                    =======
</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.

      Citizens also offers adjustable-rate  mortgage ("ARM") loans. The interest
rate on ARM loans is indexed to the  one-year  U.S.  Treasury  securities  yield
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, 1998  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, 1998, approximately 21% 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,  1998,  approximately  $35.9  million,  or 76.5% of  Citizens'
portfolio  of  loans,  consisted  of  one-  to  four-family  residential  loans.
Approximately  $84,000,  or .23% 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, 1998,  approximately $1.9 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,
1998 was $1.3 million 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,  1998,
approximately $611,000, or 1.3% of Citizens' total loan portfolio,  consisted of
construction  loans. The largest  construction  loan at June 30, 1998,  totaling
$210,000, 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.

      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,  1998,
Citizens'  largest  nonresidential  loan  was  $990,000  and was  secured  by an
extended stay motel in Columbus,  Indiana. At June 30, 1998,  approximately $1.8
million, or 3.8% of Citizens' total loan portfolio,  consisted of nonresidential
real estate loans.  On the same date,  approximately  $37,000 in  nonresidential
real estate loans were 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  $7.2  million  at June  30,  1998,  or 15.4%  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 and home equity
loans,  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,  1998,  94.2% 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, 1998,  accrued at a rate of 8.50%.
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, 1998,  Citizens had outstanding  approximately $2.2 million
of home equity loans, with unused lines of credit totaling  approximately  $2.65
million.   Home  equity  loans  in  the  amount  of  $5,000  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,  1998,   consumer   loans   amounting  to  $48,000  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  $2.8 million of single-pay loans in
Citizens' portfolio as of June 30, 1998, approximately $1.3 million were secured
by  residential  mortgages  and  $271,000  were secured by land.  The  remaining
approximately  $1.2  million  of loans in this  category  were  consumer  loans,
typically  secured by automobiles or subordinate  liens on real estate.  At June
30, 1998, Citizens had one delinquent single-pay loan in the amount of $1,500 in
its portfolio.

      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, 1998, Citizens had one loan totaling  approximately  $66,000
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 requires 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,
                                                  -------------------------------------------------
                                                   1998                  1997                  1996
                                                  -------              --------              --------
                                                                    (In thousands)
Loans Originated:
     Real estate mortgage loans:
<S>                                               <C>                    <C>                 <C>     
       Residential loans......................    $14,353                $9,253              $  8,738
       Nonresidential loans...................        122                   202                   175
       Multi-family loans.....................      1,563                   102                   ---
     Construction loans.......................      2,385                 2,503                 1,603
     Installment loans........................      1,993                 1,434                 1,076
     Single pay loans.........................      4,082                 2,818                 2,834
     Share loans..............................        ---                     5                    63
     Home equity loans........................      1,265                 1,156                   930
     Home improvement loans...................        ---                   ---                   ---
                                                  -------              --------              --------
         Total originations...................     25,763                17,473                15,419
     Loans purchased..........................      2,494                   ---                    64
Reductions:
     Principal loan repayments................    (19,696)              (13,251)              (10,279)
     Loans sold...............................        ---                   (91)                  ---
     Transfers from loans to real estate owned        ---                   ---                   ---
                                                  -------              --------              --------
         Total reductions.....................    (19,696)              (13,342)              (10,279)
     Decrease in other items (1)..............        (60)                  (88)                  (88)
                                                  -------              --------              --------
     Net increase (decrease) .................    $ 8,501              $  4,043              $  5,116
                                                  =======              ========              ========

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

      Citizens'  residential  loan  originations  during the year ended June 30,
1998  totaled  $14.4  million,  compared to $9.3 million and $8.7 million in the
years ended June 30, 1997 and 1996, 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,  1998,  $170,000,  or .32% of  total
assets,  were  non-performing  (non-performing  loans  and  non-accruing  loans)
compared to  $344,000,  or .74% of total  assets at June 30,  1997.  At June 30,
1998,  residential  loans and consumer loans  accounted for $84,000 and $48,000,
respectively,  of  non-performing  assets.  Citizens  had no Real  Estate  Owned
("REO") properties as of June 30, 1998.

      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.

<TABLE>
<CAPTION>
                                                            At June 30,
                                            --------------------------------------------
                                            1998                1997                1996
                                                       (Dollars in thousands)
Non-performing assets:
<S>                                          <C>                 <C>                <C> 
   Non-performing loans................      $131                $303               $181
   Troubled debt restructurings........        39                  41                 41
                                             ----                ----               ----
     Total non-performing loans........       170                 344                222
   Foreclosed real estate..............       ---                 ---                ---
                                             ----                ----               ----
     Total non-performing assets.......      $170                $344               $222
                                             ====                ====               ====

Non-performing loans to total loans....      0.36%               0.89%              0.64%

Non-performing assets to total assets..      0.32%               0.74%              0.50%
</TABLE>

      Interest on loans was $4,000, $8,000, and $4,000 less than would have been
reported for the years ended June 30, 1998, 1997 and 1996, respectively,  if the
non-performing  loans summarized above had been current in accordance with their
original terms.  Citizens  received $3,000 in interest on  non-performing  loans
during the year ended June 30, 1998.

      At June  30,  1998,  Citizens  held  loans  delinquent  from 30 to 59 days
totaling approximately $817,000. 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,  1998,  1997,  and  1996,  relating  to  delinquencies  in  Citizens's
portfolio.  Delinquent  loans  that are 90 days or more past due are  considered
non-performing assets.


<TABLE>
<CAPTION>

                                       At June 30, 1998                                At June 30, 1997                    
                           -----------------------------------------------   ----------------------------------------------
                                60-89 Days             90 Days or More           60-89 Days            90 Days or More       
                           ----------------------- -----------------------   ---------------------  -----------------------
                                        Principal                Principal              Principal                Principal 
                             Number     Balance of  Number      Balance of    Number    Balance of   Number     Balance of     
                           of Loans       Loans    of Loans        Loans     of Loans     Loans     of Loans       Loans   
                           --------     ---------  --------     ----------   --------   ---------   --------    -----------
                                                                                           (Dollars in thousands)
Residential
<S>                             <C>     <C>            <C>         <C>            <C>      <C>         <C>         <C>     
   mortgage loans..........     8       $244           6           $84            1        $10         5           $130    
Nonresidential
   mortgage loans..........   ---        ---         ---           ---            1         24       ---            ---    
Installment loans..........     7         35           8            40            2         16         6             37    
Single pay loans...........   ---        ---           1             2          ---        ---         1             84    
Home equity loans..........     3         40           1             5          ---        ---         5             52    
Home improvement loans.....   ---        ---         ---           ---          ---        ---       ---            ---    
                               --       ----          --          ----            -        ---        --           ----    
   Total...................    18       $319          16          $131            4        $50        17           $303    
                               ==       ====          ==          ====            =        ===        ==           ====    
Delinquent loans to
   total loans.............                                        .96%                                            1.92%   
                                                                   ===                                             ====    
</TABLE>
 


                                               At June 30, 1996                 
                                     -------------------------------------------
                                        60-89 Days        90 Days or More      
                                     -------------------- ----------------------
                                               Principal              Principal
                                     Number    Balance of  Number     Balance of
                                    of Loans    Loans     of Loans      Loans  
                                    --------    -----     --------      -----  
                                                                               
Residential                                                                    
   mortgage loans..................     7       $158          8        $  89   
Nonresidential                                                                 
   mortgage loans..................   ---        ---        ---          ---   
Installment loans..................     6         16          8           35   
Single pay loans...................     4         24          2           12   
Home equity loans..................     1          6          3           45   
Home improvement loans.............   ---        ---        ---          ---
                                     ----       ----       ----         ----   
   Total...........................    18       $204         21         $181   
                                     ====       ====       ====         ====   
Delinquent loans to                                                            
   total loans.....................                                     1.12%  



<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, 1998, the aggregate amount of Citizens' classified assets, and
of its general and specific loss allowances were as follows:

                                                        At June 30, 1998
                                                        ----------------
                                                         (In thousands)

   Substandard assets.....................................      $125
   Doubtful assets........................................       ---
   Loss assets............................................       ---
                                                                ----
       Total classified assets............................      $125
                                                                ====
   General loss allowances................................      $269
   Specific loss allowances...............................       ---
                                                                ----
       Total allowances...................................      $269
                                                                ====

      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, 1998. 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.

      Summary of Loan Loss  Experience.  The following table analyzes changes in
the allowance during the past three fiscal years ended June 30, 1998.

<TABLE>
<CAPTION>
                                                             Year Ended June 30,
                                                 ------------------------------------------------
                                                 1998                1997                    1996
                                                 ----                ----                    ----
                                                          (Dollars in thousands)
<S>                                               <C>                 <C>                   <C>  
Balance at beginning of period.................   $212                $138                  $  46
Charge-offs:
   Residential mortgage loans..................    ---                 ---                    ---
   Nonresidential mortgage loans...............    ---                 ---                    ---
   Multi-family loans..........................    ---                 ---                    ---
   Construction loans..........................    ---                 ---                    ---
   Installment loans...........................    (12)                (11)                   ---
   Single pay loans............................     (5)                ---                    ---
   Share loans.................................    ---                 ---                    ---
   Home equity loans...........................    ---                 ---                    ---
   Home improvement loans......................    ---                 ---                    ---
                                                  ----                ----                   ----
     Total charge-offs.........................    (17)                (11)                   ---
                                                  ----                ----                   ----
Recoveries:
   Residential mortgage........................    ---                 ---                      2
   Single pay..................................    ---                   2                      1
   Installment.................................      2                 ---                      9
                                                  ----                ----                   ----
     Total recoveries..........................      2                   2                     12
                                                  ----                ----                   ----
Net (charge-offs) recoveries...................    (15)                 (9)                    12
Provision for losses on loans..................     72                  83                     80
                                                  ----                ----                   ----
Balance at end of period.......................   $269                $212                   $138
                                                  ====                ====                   ====
Allowance for loan losses as a percent of
total loans outstanding........................    0.57%              0.55%                  0.40%
Ratio of net (charge-offs) recoveries
to average loans outstanding...................    (.03)              (.03)                    .04
</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,
                                         ----------------------------------------------------------------------------------
                                                 1998                          1997                           1996
                                         ---------------------         ---------------------          ---------------------
                                                       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......................      $105      75.78%               $81      75.96%                $49       75.35%
     Nonresidential...................         4       3.73                  3       2.09                   1        2.00
     Multi-family.....................         6       3.98                  4       3.94                   3        4.58
   Construction loans.................        14       1.29                 27       3.61                  11        2.50
   Installment loans..................        66       4.68                 53       4.31                  41        3.70
   Share loans........................       ---        ---                ---        .04                 ---         .18
   Home equity loans..................         9       4.59                  8       5.32                   6        5.60
   Home improvement loans.............       ---        .01                ---        .02                 ---         .03
   Single pay loans...................        65       5.94                 36       4.71                  27        6.06
                                            ----     ------               ----     ------                ----      ------ 
   Total..............................      $269     100.00%              $212     100.00%               $138      100.00%
                                            ====     ======               ====     ======                ====      ====== 

</TABLE>

Investments

     Investments.  Citizens'  investment portfolio consists of equity securities
and Federal  Home Loan Bank  ("FHLB")  stock.  At June 30,  1998,  approximately
$667,000,  or 1.2%,  of Citizens'  total assets  consisted of such  investments.
Citizens also had $2.2 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,
                                        ----------------------------------------------------------------------------------
                                                  1998                          1997                          1996
                                        ---------------------          --------------------           --------------------
                                        Amortized      Market          Amortized     Market           Amortized     Market
                                          Cost          Value            Cost         Value             Cost         Value
                                        ---------      ------          ---------     ------           ---------     ------
                                                                              (In thousands)
Available for Sale:
<S>                                        <C>          <C>                 <C>          <C>            <C>          <C>   
   Equity securities..................     $309         $315                $161         $161           $3,087       $3,003
FHLB stock............................      352          352                 332          332              332          332
                                           ----         ----                ----         ----           ------       ------
     Total investments................     $661         $667                $493         $493           $3,419       $3,335
                                           ====         ====                ====         ====           ======       ======
</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  $800,000 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,   Indiana   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.

      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, 1998, is as follows:
<TABLE>
<CAPTION>

                                            Minimum        Balance at                          Weighted
                                            Opening         June 30,            % of            Average
Type of Account                             Balance           1998            Deposits           Rate
-----------------------------------------------------------------------------------------------------
                                                     (Dollars in thousands)
Withdrawable:
<S>                                     <C>                    <C>              <C>               <C>  
   Fixed rate, passbook accounts......  $      50              $6,421           18.85%            3.28%
   Variable rate, money market........      2,500               2,919            8.57             3.29
   NOW accounts.......................         50               4,570           13.41             2.22
                                                              -------          ------   
     Total withdrawable...............                         13,910           40.83             2.93

Certificates (original terms):
   3 months or less...................      1,000                 698            2.05             5.31
   6 months...........................      1,000               1,734            5.09             4.71
   12 months..........................      1.000                 576            1.69             4.79
   13 months..........................      5,000               2,517            7.39             5.48
   18 months..........................      1,000                 417            1.22             4.96
   23 months..........................      5,000               4,422           12.98             5.82
   30 months .........................      1,000                 876            2.57             5.11
   36 months..........................      1,000                 924            2.71             5.22
   Other certificates.................      1,000               4,711           13.83             6.15
                                                              -------          ------   
Total certificates....................                         16,875           49.53             5.60
IRA's:
   Variable rate, money market........         50                 163            0.48             3.39
   6 months...........................      1,000                  30            0.09             4.49
   12 months..........................      1.000                 121            0.36             4.76
   18 months..........................      1,000                  16            0.05             4.89
   23 months..........................      1,000               1,918            5.63             5.82
   36 months..........................      1,000                 887            2.60             5.18
   Other certificates.................      1,000                 147            0.43             5.99
                                                              -------          ------           
Total IRA's...........................                          3,282            9.64             5.48
                                                              -------          ------         
Total deposits........................                        $34,067          100.00%            4.50%
                                                              =======          ======    
</TABLE>

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

                                            At June 30,
                          1998                  1997                  1996
                          ------------------------------------------------
(In thousands)
4.00 to 4.99%......     $  2,483            $   3,593             $   5,173
5.00 to 5.99%......       13,961               15,702                10,629
6.00 to 6.99%......        3,440                2,604                 5,283
7.00 to 7.99%......          105                  120                   484
8.00 to 8.99%......            5                    5                     5
                         -------              -------               -------
   Total...........      $19,994              $22,024               $21,574
                         =======              =======               =======

     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,
                          ------------------------------------------------------------------------------
                                 1998                         1997                        1996
                          ----------------------       ---------------------     -----------------------
                          Average      Average         Average      Average        Average      Average
                          Balance     Rate Paid        Balance     Rate Paid       Balance     Rate Paid
                          -------     ---------        -------     ---------       -------     ---------
<S>                       <C>            <C>           <C>           <C>         <C>              <C>  
Passbook accounts         $6,687         3.23%         $6,679        3.24%       $  6,867         3.25%
NOW accounts               4,433         2.17           4,081        2.12           3,843         2.06
Money market accounts      3,217         3.30           3,303        3.30           3,233         3.30
Time deposit accounts     21,799         5.58          22,374        5.49          20,513         5.47
</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, 1998. Matured certificates, which have not been renewed as of June 30, 1998,
have been allocated based upon certain rollover assumptions.

                                        Amounts at June 30, 1998
                       -------------------------------------------------------
                       One Year        Two             Three      Greater Than
                        or Less       Years            Years       Three Years
                        -------      ------           ------      ------------
                                           (In thousands)
4.00 to 4.99%.....       $2,229    $    216        $      38      $     ---
5.00 to 5.99%.....        8,114       4,678              678            491
6.00 to 6.99%.....          241         281              877          2,041
7.00 to 7.99%.....          ---           5              100            ---
8.00 to 8.99%.....          ---         ---              ---              5
                        -------      ------           ------         ------
   Total..........      $10,584      $5,180           $1,693         $2,537
                        =======      ======           ======         ======

      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,
1998.

                                                               At June 30, 1998
                                                               ----------------
    Maturity Period                                             (In thousands)
    Three months or less...................................          $1,080
    Greater than three months through six months...........             304
    Greater than six months through twelve months..........             202
    Over twelve months.....................................             728
                                                                     ------
         Total.............................................          $2,314
                                                                     ======

      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
                                                     1998          Deposits       1997           1997        Deposits       1996
                                                     ---------------------------------------------------------------------------
                                                                                (Dollars in thousands)
Withdrawable:
<S>                                                   <C>            <C>          <C>            <C>         <C>         <C>     
   Fixed rate, passbook accounts.................     $6,421         18.85%       $(484)         $6,905      18.99%      $    207
   Variable rate, money market...................      2,919          8.57         (251)          3,170       8.72            139
   NOW accounts..................................      4,570         13.41          498           4,072      11.20             (2)
                                                     -------        ------      -------         -------     ------          -----
     Total withdrawable..........................     13,910         40.83         (237)         14,147      38.91            344
Certificates (original terms):
   3 months......................................        698          2.05         (376)          1,074       2.95         (1,788)
   6 months......................................      1,734          5.09       (2,400)          4,134      11.37          1,591
   12 months.....................................        576          1.69         (390)            966       2.66             23
   13 months.....................................      2,517          7.39          147           2,370       6.52            360
   18 months.....................................        417          1.22         (170)            587       1.61            286
   23 months.....................................      4,422         12.98          268           4,154      11.43            470
   30 months ....................................        876          2.57         (270)          1,146       3.15           (184)
   36 months.....................................        924          2.71          (23)            947       2.61           (292)
   Other certificates............................      4,711         13.83        1,145           3,566       9.81           (189)
                                                     -------        ------      -------         -------     ------          -----
Total certificates...............................     16,875         49.53       (2,069)         18,944      52.11            277
IRA's
   Variable rate, money market...................        163          0.48          (21)            184       0.51            (40)
   6 months......................................         30          0.09           (4)             34       0.09             (2)
   12 months.....................................        121          0.36          (30)            151       0.42            (12)
   18 months.....................................         16          0.05           (3)             19       0.05             19
   23 months.....................................      1,918          5.63          340           1,578       4.34            632
   36 months ....................................        887          2.60         (270)          1,157       3.18           (472)
   Other certificates............................        147          0.43            6             141       0.39              9
                                                     -------        ------      -------         -------     ------          -----
   Total IRA's...................................      3,282          9.64           18           3,264       8.98            134
                                                     -------        ------      -------         -------     ------          -----
Total deposits...................................    $34,067        100.00%     $(2,288)        $36,355     100.00%         $ 755
                                                     =======        ======      =======         =======     ======          =====
</TABLE>

      Total deposits at June 30, 1998 were approximately $34.1 million, compared
to approximately $36.4 million at June 30, 1997.  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, 1998,  Citizens had  borrowings  in the amount of $3.5 million from the
FHLB of Indianapolis which bear fixed and variable interest rates and are due at
various dates through December,  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.

      The following  table presents  certain  information  relating to Citizens'
borrowings at or for the years ended June 30, 1998, 1997 and 1996.

<TABLE>
<CAPTION>
                                                             At or for the Year
                                                               Ended June 30,
                                                1998                1997               1996
                                                -------------------------------------------
                                                             (Dollars in thousands)
FHLB Advances:
<S>                                             <C>                 <C>               <C>   
   Outstanding at end of period.............    $3,500              $4,000            $3,000
   Average balance outstanding for period...     1,731               3,212             1,923
   Maximum amount outstanding at any
     month-end during the period............     3,500               5,000             3,000
   Weighted average interest rate
     during the period......................      4.96%               5.41%             5.94%
   Weighted average interest rate
     at end of period.......................      6.21                6.51              5.82
</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 22 houses  have been  completed,  and 26 lots in the  Meadow  Brook
Addition,  of which 5 lots  have  been  sold and on  which 5  houses  have  been
completed.  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
1999.  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.

      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.

      During the year ended June 30,  1998,  a plot of land not  included in the
above development was sold for proceeds equaling  $177,000,  resulting in a gain
from the sale of $172,000.

      CLSC earned a profit of $164,000 for the year ended June 30, 1998, $11,000
for the year ended June 30, 1997 and  $24,000 for the year ended June 30,  1996.
At June 30,  1998,  Citizens  had an  investment  in CLSC of $633,000  and loans
outstanding to CLSC of  approximately  $320,000 with an interest rate set at the
prime rate plus 1 percent.  The Holding  Company's  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, 1998, Citizens employed 12 persons on a full-time basis and
four 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 $9,200.

      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, 1998,
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.

      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, 1998,  Citizens'  investment in stock of
the FHLB of Indianapolis was $352,000.  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, 1998,  dividends  paid by the
FHLB of Indianapolis to Citizens totaled  approximately  $27,000,  for an annual
rate of 8.07%.

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.

      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, 1998,  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, 1998,  Citizens'  interest rate risk was slightly
outside the parameters set forth in the regulation.

      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,
1998,  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,  1998,  Citizens  had  available   approximately   $4,012,000  for
distribution.

      The OTS has proposed  revisions to these  regulations which would permit a
savings association,  without filing a prior notice or application with the OTS,
to make a capital distribution to its shareholders in a maximum amount that does
not exceed the  association's  undistributed  net income for the prior two years
plus the amount of its undistributed income from the current year. This proposed
rule would require a savings association, such as Citizens, that is a subsidiary
of a savings  and loan  holding  company  to file a notice  with the OTS  before
making a capital  distribution up to the "maximum  amount"  described above. The
proposed  rule would also  require all  savings  associations,  whether  under a
holding company or not, to file an application  with the OTS prior to making any
capital  distribution  where the  association  is not  eligible  for  "expedited
processing"  under  the OTS  "Expedited  Processing  Regulation,"  or where  the
proposed  distribution,  together with any other  distributions made in the same
year, would exceed the "maximum amount" described above.

      Pursuant to the Plan of  Conversion,  Citizens  established  a liquidation
account for the benefit of Eligible  Account Holders and  Supplemental  Eligible
Account  Holders.  Citizens may not pay dividends to the Holding  Company if its
net  worth  would be  reduced  below the  amount  required  for the  liquidation
account.  Citizens must also 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, 1998,  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.

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  qualifies 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, 1998, Citizens was in compliance with
its QTL requirement, with approximately 90% 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.

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  have been  registered
with the SEC under the  Securities  Exchange Act of 1934,  as amended (the "1934
Act").  The Holding Company is subject to the information,  proxy  solicitation,
insider  trading  restrictions  and other  requirements  of the 1934 Act and the
rules of the 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  $3,000  with each tax  return  filed  through  the June 30,  2002
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.

      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 June 1997, the Financial Accounting Standards Board issued Statement
No.  130,  "Reporting   Comprehensive   Income"  ("SFAS  130").  This  Statement
establishes standards for reporting and displaying  comprehensive income and its
components in the financial statements. Comprehensive income consists of the net
income or loss of the  entity,  plus or minus the change in equity of the entity
during the period from transactions,  other events, and circumstances  resulting
from nonowner sources.  SFAS 130 is effective for years beginning after December
15, 1997,  and will require  financial  statements  of earlier  periods that are
presented for comparative purposes to be reclassified.  The adoption of SFAS 130
is not expected to have a material effect on the Company's financial condition.

         In June 1997, the Financial Accounting Standards Board issued Statement
of Financial  Accounting  Standards No. 131,  "Disclosures  about Segments of an
Enterprise  and  Related   Information"   ("SFAS  131").  SFAS  131  established
information about operating  segments of their business in both their annual and
interim  financial  reports provided to shareholders.  SFAS 131 is effective for
financial  statement  periods  beginning after December 15, 1997. In the initial
year  of  application,  comparative  information  for  earlier  years  is  to be
restated, unless impracticable. In addition, the provisions of SFAS 131 need not
be  applied  to  interim  financial  statements  issued in the  initial  year of
application.  The adoption of SFAS 131 is not expected to have a material effect
on the Company's financial condition.

Item 2.   Properties.

         The  following  table  provides  certain  information  with  respect to
Citizens' office as of June 30, 1998:

<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           $34,067             $565                 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 $35,000 at June
30, 1998.

      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 $9,700 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.

      On  March  24,  1998,   Citizens   Bancorp  held  its  Annual  Meeting  of
Shareholders.  Two  directors  were  elected  to terms  expiring  in 1998 by the
following votes:

      Perry W. Lewis        For:       863,603         Withheld:        1,700
      John J. Miller        For:       864,103         Withheld:        1,200

      Two  directors  were  elected to terms  expiring in 1999 by the  following
votes:

         Robert F. Ayres       For:       864,103         Withheld:        1,200
         Billy J. Wray         For:       864,103         Withheld:        1,200

      One  director  was  elected to a term  expiring  in 2000 by the  following
votes:

         Fred W. Carter        For:       864,103         Withheld:        1,200

      Two  other  matters  were  submitted  to the  shareholders,  for which the
following votes were cast:

      1)    Approval and ratification of Citizens Bancorp Stock Option Plan.

            For:  780,385      Against:   41,702      Abstain:  15,450

      2)    Approval and  ratification of Citizens  Savings Bank Recognition and
            Retention Plan and Trust.

            For:  676,785      Against:   43,792      Abstain:  13,950

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 66) 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 44) 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 42) has served as  Citizens'  Controller  since 1989
and as the Holding Company's Treasurer since 1997. 

                                    PART II

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

      The information  required by this item is incorporated by reference to the
material under the heading "Shareholder Information--Market Information" on page
41 of the Holding  Company's  Annual Report to  Shareholders  for the year ended
June 30, 1998 (the "Shareholder Annual Report").

Item 6.  Selected Financial Data.

      The information  required by this item is incorporated by reference to the
material under the heading "Summary of Selected Consolidated  Financial Data" on
page 2 of the Shareholder Annual Report.

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

      The  information  required by this item is  incorporated  by  reference on
pages 3 to 13 of the Shareholder Annual Report.

Item 7A.  Quantitative  and  Qualitative  Analysis of  Financial  Condition  and
          Results of Operations.

      The  information  required by this item is  incorporated  by  reference on
pages 13 to 15 of the Shareholder Annual Report.

Item 8.       Financial Statements and Supplementary Data.

      The Holding Company's  Consolidated Financial Statements and Notes thereto
contained on pages 16 to 38 of the  Shareholder  Annual Report are  incorporated
herein by reference.

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  required  by this  item with  respect  to  directors  is
incorporated  by  reference  to  pages  2 to 4 of the  Holding  Company's  Proxy
Statement for its 1998 annual shareholder  meeting (the "1998 Proxy Statement").
Information concerning the Holding Company's executive officers who are not also
directors is included in Item 4.5 in Part I of this report.

      The  information  required  by  this  item  with  respect  to the  Holding
Company's  compliance with Section 16(a) of the Securities  Exchange Act of 1934
is incorporated by reference to page 8 of the 1998 Proxy Statement.

Item 11.      Executive Compensation.

      The   information   required  by  this  item  with  respect  to  executive
compensation  is  incorporated  by  reference  to pages 5 to 6 of the 1998 Proxy
Statement.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

         The  information  required by this item is incorporated by reference to
pages 1 to 4 of the 1998 Proxy Statement.

Item 13.  Certain Relationships and Related Transactions.

         The  information  required by this item is incorporated by reference to
pages 7 to 8 of the 1998 Proxy Statement.

                                     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:

                                                                    Page in 1998
                                                                    Shareholder
      Financial Statements                                         Annual Report
      Consolidated Balance Sheets as of June 30, 1998 and 1997           17
      Consolidated Statements of Income for each of the years
           in the three year period ended June 30, 1998                  18
      Consolidated Statements of Shareholders' Equity
           for the years in the three year period ended June 30, 1998    19
      Consolidated Statements of Cash Flows for each
           of the years in the three year period ended June 30, 1998     20
      Notes to Consolidated Financial Statements                         21

      Report of Ernst & Young LLP Independent Auditors                   16

(b)   Reports on Form 8-K.

      The Holding  Company filed no reports on Form 8-K during the quarter ended
June 30, 1998.

(c)   The exhibits filed herewith or  incorporated  by reference  herein are set
      forth on the Exhibit Index on page E-1.

(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:  September 18, 1998                       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 18th day of September,
1998.

     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                                        )
                                                             )
                                                             )September 18, 1998
                                                             )
(3)  The Board of Directors:                                 )
                                                             )
                                                             )
     /s/ Robert F. Ayres              Director               )
     --------------------------                              )
     Robert F. Ayres                                         )
                                                             )
                                                             )
                                      Director               )
     --------------------------                              )
     Fred W. Carter                                          )
                                                             )
                                                             )
     /s/ Perry W. Lewis               Director               )
     --------------------------                              )
     Perry W. Lewis                                          )
                                                             )
                                                             )
      /s/ John J. Miller                                     )
     --------------------------                              )
     John J. Miller                   Director               )
                                                             )September 18, 1998
                                                             )
     /s/ Billy J. Wray                Director               )
     --------------------------                              )
     Billy J. Wray                                           )

<PAGE>

                                  EXHIBIT INDEX

Exhibit No.                                              Description

        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 is  incorporated  by reference to Exhibit  10(4) to the
               Registrant's  Form 10-K for the period  ended June 30,  1997 (the
               "1997 Form 10-K")

        (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 is  incorporated  by reference to
               Exhibit 10(10) of the 1997 Form 10-K

        13     Registrant's  Annual Report to  Shareholders  for its 1998 annual
               shareholders meeting

        21     Subsidiaries of the Registrant

        23     Consent of Independent Auditor

        27     Financial Data Schedule