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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   ----------

                                   FORM 10-KSB

[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934 [Fee Required]

                     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 [No Fee Required]

                For the transition period from _______ to _______

     Commission file number 0-25484

                              AMTRUST CAPITAL CORP.
        (Exact Name of Small Business Issuer as Specified in its Charter)

        Delaware                                                   35-1940250
(State or other jurisdiction of                                 (I.R.S. Employer
 incorporation or organization)                              Identification No.)


20 West Fifth Street, Peru, Indiana                                     46970
(Address of principal executive offices)                              (Zip Code)

Issuer's telephone number, including area code: (765) 472-1991

           Securities Registered Pursuant to Section 12(b) of the Act:

                                      None

           Securities Registered Pursuant to Section 12(g) of the Act:

                     Common Stock, par value $.01 per share
                                (Title of Class)

     Check  whether  the Issuer (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past twelve  months (or for
such shorter period that the Issuer was required to file such reports),  and (2)
has been subject to such requirements for the past 90 days. YES [X] NO [ ]

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of  Regulation  S-B  contained  in  this  form,  and no  disclosure  will be
contained, to the best of Issuer's knowledge, in definitive proxy or information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. [X]

     The  Issuer had $5.4  million  in gross  income for the year ended June 30,
1998.

     As of September 14, 1998, there were issued and outstanding  497,454 shares
of the Issuer's  Common Stock.  The  aggregate  market value of the voting stock
held by  non-affiliates  of the Issuer,  computed by reference to the average of
the  closing bid and asked  price of such stock on the OTC  Electronic  Bulletin
Board as of September 14, 1998 was  approximately  $5.9 million.  (The exclusion
from such amount of the market value of the shares owned by any person shall not
be deemed an  admission  by the Issuer that such person is an  affiliate  of the
Issuer.)

                       DOCUMENTS INCORPORATED BY REFERENCE

PART II of Form 10-KSB--Annual  Report to Stockholders for the fiscal year ended
June 30, 1998.
PART III of Form 10-KSB--Proxy  Statement for the Annual Meeting of Stockholders
for the fiscal year ended June 30, 1998.

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<PAGE>


                                     PART I

Item 1.    Business

Forward-Looking Statements

     When used in this  filing  and in future  filings by the  Company  with the
Securities  and Exchange  Commission,  in the Company's  press releases or other
public  or  shareholder  communications,  or in oral  statements  made  with the
approval of an authorized  executive  officer,  the words or phrases "would be,"
"will  allow,"  "intends  to," "will likely  result,"  "are  expected to," "will
continue," "is anticipated,"  "estimate,"  "project" or similar  expressions are
intended  to  identify  "forward-looking  statements"  within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements are subject to
risks and  uncertainties,  including  but not  limited to  changes  in  economic
conditions  in the  Company's  market  area,  changes in policies by  regulatory
agencies,  fluctuations  in interest  rates,  demand for loans in the  Company's
market area and competition,  all or some of which could cause actual results to
differ  materially from historical  earnings and those presently  anticipated or
projected.

     The Company  wishes to caution  readers not to place undue  reliance on any
such  forward-looking  statements,  which  speak only as of the date  made,  and
advises readers that various factors,  including  regional and national economic
conditions,  substantial  changes in levels of market interest rates, credit and
other risks of lending and investment  activities and competitive and regulatory
factors,  could affect the Company's  financial  performance and could cause the
Company's  actual  results for future  periods to differ  materially  from those
anticipated or projected.

     The Company does not undertake,  and specifically disclaims any obligation,
to update any forward-looking statements to reflect occurrences or unanticipated
events or circumstances after the date of such statements.

General

     AmTrust   Capital  Corp.   ("AmTrust"  or  the  "Company")  is  a  Delaware
corporation  which was organized in 1994 by  AmericanTrust  Federal Savings Bank
("AmericanTrust" or the "Bank") for the purpose of becoming the savings and loan
holding  company of the Bank. The Company owns all of the  outstanding  stock of
the Bank issued on March 28, 1995 in connection with the Bank's  conversion from
the  mutual to the stock form of  organization  (the  "Conversion").  Unless the
context  otherwise  requires,  all references  herein to the Bank or the Company
include the Company and the Bank on a consolidated basis.

     At June 30, 1998, the Company had total assets of $58.1  million,  deposits
of $46.9 million and stockholders' equity of $7.4 million. The executive offices
of the Company are located at 20 West Fifth Street,  Peru, Indiana 46970 and its
telephone number is (765) 472-1991.

     The Bank, the Company's only operating subsidiary, was originally chartered
under  the  laws of the  state  of  Indiana  in 1886 as Peru  Building  and Loan
Association  and  converted  to a federally  chartered  mutual  savings and loan
association in 1936.


                                       2

<PAGE>


     AmericanTrust is principally engaged in the business of attracting deposits
from the general public and using such deposits,  together with funds  generated
from  operations and  borrowings,  to originate one- to four-family  residential
loans.  The Bank  also  originates  consumer  loans  and,  to a  lesser  extent,
construction  loans.  The Bank has in the past  originated  a limited  number of
multi-family and commercial real estate loans.  See " - Lending  Activities." In
addition, the Bank also invests in mortgage-backed  securities,  the majority of
which are insured or guaranteed by federal agencies,  and other securities.  See
" - Investment   Activities  -   Mortgage-Backed   Securities"  and  "Investment
Activities - Securities and Other Interest-Earning Assets."

     Through  its  main  office  and  three  branch  offices,  the  Bank  serves
communities located in Howard and Miami Counties, Indiana.

     The Bank's  operations  are  regulated by the Office of Thrift  Supervision
(the "OTS").  The Bank is a member of the Federal  Home Loan Bank System  ("FHLB
System")  and  a  stockholder   in  the  Federal  Home  Loan  Bank  ("FHLB")  of
Indianapolis.  The Bank is also a member of the  Savings  Association  Insurance
Fund ("SAIF") and its deposit  accounts are insured up to  applicable  limits by
the Federal Deposit Insurance Corporation ("FDIC").

Lending Activities

     General.  Historically,  the Bank originated  primarily  fixed-rate one- to
four-family   mortgage  loans.  In  the  mid  1980s,  the  Bank  introduced  the
origination of balloon  mortgage  loans for retention in its portfolio,  and the
Bank securitized a portion of its fixed-rate loan portfolio and exchanged it for
adjustable-rate  securities in order to increase the percentage of assets in its
portfolio with more frequent  repricing or shorter  maturities than  traditional
long-term, fixed-rate mortgage loans. Thereafter, the Bank began originating ARM
loans and converted some of the balloon  mortgages to  adjustable-rate  mortgage
("ARM")  loans  when  they  matured.  Nevertheless,  the Bank has  continued  to
originate  fixed-rate  mortgage loans in response to customer demand,  which are
typically sold in the secondary market with servicing  retained.  Such loans are
primarily  for  terms of up to 30 years.  The Bank  still  originates  a limited
number of balloon  loans and has  purchased a small amount of leases on business
equipment.  See "Management's Discussion and Analysis of Financial Condition and
Results of  Operations -  Assets/Liability  Management"  in the Annual Report to
Stockholders  for the fiscal year ended June 30, 1998 attached hereto as Exhibit
13 (the "Annual Report").

     While the Bank primarily focuses its lending  activities on the origination
of loans  secured  by first  mortgages  on  owner-occupied  one- to  four-family
residences, it also originates consumer loans (including mobile home loans), and
to a lesser extent,  construction  loans. The Bank had in the past purchased and
originated a limited number of  multi-family  and commercial  real estate loans.
See " - Multi-Family  and Commercial Real Estate Lending." With the exception of
consumer loans and lease  contracts,  substantially  all of the Bank's loans are
originated in its market area. At June 30, 1998, the Bank's loans, net and loans
held for sale totaled  $44.5  million,  a decrease of $6.2 million or 12.2% from
$50.7 million at June 30, 1997.


                                       3
<PAGE>


     The President has authority to approve loans up to $214,000(the  FHLMC loan
limit). All loans in excess of $214,000 require the approval of the entire Board
of Directors.

     Under OTS regulations,  the Bank's loans-to-one-borrower limit is generally
limited to the greater of 15% of unimpaired capital and surplus or $500,000. See
"Regulation - Federal Regulation of Savings Associations." At June 30, 1998, the
maximum  amount  which  the Bank  could  have lent to any one  borrower  and the
borrower's related entities was $1.1 million.



                                        4

<PAGE>



     Loan  Portfolio  Composition.  The following  table sets forth  information
concerning the  composition of the Bank's loan portfolio  (including  loans held
for sale) in dollar amounts and in percentages  (before  deductions for loans in
process,  deferred fees and discounts and allowances for losses) as of the dates
indicated.

<TABLE>
<CAPTION>
                                                                                      June 30,
                                                   ---------------------------------------------------------------------------------
                                                           1998                         1997                        1996
                                                   -----------------------      -----------------------     ------------------------
                                                    Amount       Percent        Amount        Percent       Amount         Percent
                                                   --------     ----------      --------     ----------     --------      ----------
                                                                                 (Dollars in Thousands)
<S>                                                <C>              <C>         <C>              <C>        <C>              <C>   
Real Estate Loans:
  One- to four-family(1) ......................    $ 24,688          55.42%     $ 25,542          50.24%    $ 29,476          57.58%
  Multi-family ................................       1,239           2.78         1,352           2.66        1,387           2.71
  Commercial ..................................         717           1.61           955           1.88        1,045           2.04
  Construction ................................         179            .40           919           1.81          690           1.35
                                                   --------     ----------      --------     ----------     --------     ----------
        Total real estate loans ...............      26,823          60.21        28,768          56.59       32,598          63.68
                                                   --------     ----------      --------     ----------     --------     ----------

Other Loans:
   Consumer Loans
     Deposit account ..........................         162            .36           159            .31          107            .21
     Automobile ...............................       1,088           2.44           890           1.75        1,118           2.18
     Home equity ..............................         368            .83           315            .62          258            .50
     Home improvement .........................       1,049           2.35         1,035           2.04        1,521           2.97
     Mobile homes/RVs .........................      13,808          31.00        17,827          35.07       13,861          27.08
     Other ....................................         120            .27           351            .69          238            .47
                                                   --------     ----------      --------     ----------     --------     ----------
        Total consumer loans ..................      16,595          37.25        20,577          40.48       17,103          33.41

   Lease Contracts(2) .........................       1,132           2.54         1,491           2.93        1,491           2.91
                                                   --------     ----------      --------     ----------     --------     ----------
        Total other loans .....................      17,727          39.79        22,068          43.41       18,594          36.32
                                                   --------     ----------      --------     ----------     --------     ----------
        Total loans ...........................      44,550         100.00%       50,836         100.00%      51,192         100.00%
                                                                                             ==========     ========     ==========

Less:
 Loans in process .............................         439                          857                         540
 Deferred fees (costs) and discounts ..........        (925)                      (1,270)                     (1,151)
 Allowance for losses .........................         518                          523                         494
                                                   --------                     --------                    --------
        Total loans, net ......................    $ 44,518                     $ 50,726                    $ 51,309
                                                   ========                     ========                    ========
</TABLE>

----------

(1)  Includes $1.9 million, $1.1 million and $1.5 million of loans held for sale
     at June 30, 1998, 1997 and 1996, respectively.
(2)  Represents a pool of leases on office equipment.


                                        5

<PAGE>


     The  following  table shows the  composition  of the Bank's loan  portfolio
(including  loans  held for sale) by  fixed-  and  adjustable-rate  at the dates
indicated.

<TABLE>
<CAPTION>
                                                                             June 30,
                                           ------------------------------------------------------------------------
                                                     1998                      1997                 1996
                                           ------------------------------------------------------------------------
                                            Amount         Percent      Amount      Percent    Amount     Percent
                                            ------         -------      ------      -------    ------     -------
                                                                  (Dollars in Thousands)
<S>                                        <C>             <C>        <C>            <C>        <C>       <C>   
Fixed-Rate Loans:
 Real estate:
  One- to four-family(1) ...............   $ 10,034         22.53%    $  9,008       17.72%     $9,523     18.60%
  Multi-family .........................        825          1.85          644        1.27         653      1.28
  Commercial ...........................        491          1.10          721        1.41         369       .72
                                           --------        --------   --------      --------   --------   --------       
     Total real estate loans ...........     11,350         25.48       10,373       20.40      10,545     20.60
                                           --------        --------   --------      --------   --------   --------       
                                            
 Consumer ..............................     16,227         36.42       20,262       39.86      16,845     32.91
 Lease contracts(2) ....................      1,132          2.54        1,491        2.93       1,491      2.91
                                           --------        --------   --------      --------   --------   --------       
     Total other loans .................     17,359         38.96       21,753       42.79      18,336     35.82
                                           --------        --------   --------      --------   --------   --------     
        Total fixed-rate loans .........     28,709         64.44       32,126       63.19      28,881     56.42
                                           --------        --------   --------      --------   --------   --------     

Adjustable-Rate Loans:
 Real estate:
  One- to four-family(1) ...............     14,654         32.89       16,534       32.53      19,953     38.98
  Multi-family .........................        414           .93          708        1.39         734      1.43
  Commercial ...........................        226           .51          234         .46         676      1.32
  Construction .........................        179           .40          919        1.81         690      1.35
                                           --------        --------   --------      --------   --------   --------     
        Total real estate loans ........     15,473         34.73       18,395       36.19      22,053     43.08

  Consumer .............................        368           .83          315         .62         258       .50
                                           --------        --------   --------      --------   --------   --------     
        Total adjustable-rate loans ....     15,841         35.56       18,710       36.81      22,311     43.58
                                           --------        --------   --------      --------   --------   --------     
            Total loans ................     44,550        100.00%      50,836      100.00%     51,192    100.00%
                                                           ========                 ========              ======== 
                                                                                    

Less:
 Loans in process ......................        439                        857                     540
 Deferred fees (costs) and discounts ...       (925)                     1,270)                 (1,151)
 Allowance for losses on loans .........        518                        523                     494
                                           --------                   --------                 --------
     Total loans, net ..................   $ 44,518                    $50,726                 $51,309
                                           ========                   ========                 ========
</TABLE>

----------
(1)  Includes  $1.9  million,  $1.1  million  and $1.5  million  of  fixed-  and
     adjustable-rate  loans  held  for  sale at June 30,  1998,  1997 and  1996,
     respectively.

(2)  Represents a pool of leases on office equipment.


                                        6

<PAGE>


         The following schedule illustrates the interest rate sensitivity of the
Bank's loan  portfolio  at June 30, 1998.  Mortgages  which have  adjustable  or
renegotiable interest rates are shown as maturing in the period during which the
contract  is due.  The  schedule  does  not  reflect  the  effects  of  possible
prepayments or enforcement of due-on-sale clauses.

<TABLE>
<CAPTION>
                                                                                         Real Estate
                                                  ----------------------------------------------------------------------------------
                                                                                      Multi-family and
                                                      One- to Four-Family(1)            Commercial                  Construction    
                                                  ---------------------------    -------------------------      --------------------
                                                                  Weighted                        Weighted                  Weighted
                                                                   Average                         Average                   Average
                                                    Amount            Rate        Amount              Rate      Amount          Rate
                                                    ------            ----        ------              ----      ------          ----
                                                                                  (Dollars in Thousands)
       Due During Years
         Ending June 30,
---------------------------------------                                                                                             
<S>                                               <C>                <C>         <C>                 <C>        <C>             <C> 
1999(2) ................................          $    58             7.9%       $   806             8.6%       $  179          6.8%
2000 ...................................               21             9.1             --              --            --           -- 
2001 ...................................               45             9.3             --              --            --           -- 
2002 and 2003 ..........................              302             8.8            492             8.9            --           -- 
2004 to 2008 ...........................            3,261             8.1            379             8.7            --           -- 
2009 to 2023 ...........................           10,726             7.5            279             9.7            --           -- 
2024 and following .....................           10,275             7.5             --              --            --           -- 
                                                  -------             ---        -------             ---        ------          ---
                                                  $24,688             7.6        $ 1,956             8.9        $  179          6.8
                                                  =======             ===        =======             ===        ======          ===
                                                                                                  
<CAPTION>
                                                       Consumer                      Lease Contracts                   Total        
                                                  -----------------------        -------------------------     ---------------------
                                                                   Weighted                       Weighted                Weighted
                                                                    Average                        Average                 Average
                                                   Amount            Rate        Amount           Rate (3)    Amount        Rate
                                                  -------          --------     -------           --------    ------       --------
      Due During Years                                                                                                             
         Ending June 30,                                                                                                            
---------------------------------------                                                                                             
<S>                                               <C>                 <C>        <C>                  <C>      <C>              <C> 
1999(2) ...............................           $   489             7.5%       $   572              --%      $ 2,104          5.9%
2000 ..................................               329            10.4            560              --           910          4.0
2001 ..................................               506             9.8             --              --           551          9.8
2002 and 2003 .........................             1,390             9.4             --              --         2,184          9.2
2004 to 2008 ..........................             4,525            10.1             --              --         8,165          9.2
2009 to 2023 ..........................             9,350             9.6             --              --        20,355          8.5
2024 and following ....................                 6             8.7             --              --        10,281          7.5
                                                  -------                        --------                      -------              
                                                  $16,595             9.7        $ 1,132              --       $44,550          8.2
                                                  =======                        ========                      =======             
</TABLE>
 

----------
(1)  Includes loans held for sale.
(2)  Includes demand loans, loans having no stated maturity and overdraft loans.
(3)  Lease contracts were all on non-accrual status.


                                        7

<PAGE>


     At June 30,  1998,  the total amount of loans due after June 30, 1999 which
have fixed  interest  rates is $28.1  million,  while  loans due after such date
which have floating or adjustable interest rates is $14.3 million.

     All of the Bank's lending is subject to its written underwriting  standards
and loan origination procedures.  Decisions on loan applications are made on the
basis of detailed applications and property valuations. Properties securing real
estate loans made by  AmericanTrust  are generally  appraised by  Board-approved
independent appraisers. In the loan approval process, AmericanTrust assesses the
borrower's ability to repay the loan, the adequacy of the proposed security, the
employment stability of the borrower and the credit-worthiness of the borrower.

     The Bank  requires  evidence  of  marketable  title  and lien  position  or
appropriate  title insurance  (except on certain home equity loans) on all loans
secured by real  property.  The Bank also  requires  fire and extended  coverage
casualty  insurance  in  amounts at least  equal to the lesser of the  principal
amount of the loan or the value of  improvements  on the property,  depending on
the type of loan.  As required by federal  regulations,  the Bank also  requires
flood  insurance to protect the property  securing its interest if such property
is located in a designated flood area.

     Management  reserves  the right to change  the amount or type of lending in
which it engages to adjust to market or other factors.

     One-  to  Four-Family   Residential  Mortgage  Lending.   Residential  loan
originations  are  generated  by  the  Bank's  marketing  efforts,  its  present
customers,  walk-in  customers and referrals from real estate brokers.  The Bank
has focused its lending efforts primarily on the origination of loans secured by
first mortgages on owner-occupied,  single-family residences in its market area.
At June 30, 1998,  the Bank's one- to  four-family  residential  mortgage  loans
totaled $24.7  million,  or 55.4%,  of the Bank's gross loan  portfolio.  In the
future, the Bank intends to utilize third-party originations as a source of one-
to  four-family  loan  originations  subject to  compliance  with all  customary
underwriting  procedures  of the Bank.  The loans  purchased  may include  loans
secured by modular housing units that qualify as one- to four-family loans.

     The Bank currently offers  fixed-rate and  adjustable-rate  mortgage loans.
For the year  ended  June  30,  1998,  the  Bank  originated  $14.0  million  of
adjustable-rate  one-to  four-family real estate loans.  During the same period,
the Bank originated  $4.4 million of fixed-rate one- to four-family  real estate
loans.  Substantially all of the Bank's one- to four-family residential mortgage
originations are secured by properties located in its market area.

     The Bank has offered  adjustable-rate  mortgage loans at rates and on terms
determined in accordance with market and competitive factors. The Bank currently
originates adjustable-rate mortgage loans with terms of 15 to 30 years. The Bank
currently offers one-year  adjustable-rate mortgage loans with a stated interest
rate margin over the one-year  Constant  Maturity  Treasury Index.  The Bank has
utilized other indices in prior years, such as the Eleventh FHLB District's Cost
of Funds Index.  The majority of these loans  provided for a 1.0% maximum annual
cap and a lifetime  cap of 5.0% over the  initial  rate.  Currently,  the Bank's
one-year adjustable-rate mortgages generally provide for a 2.0% annual cap and a
lifetime cap of 6.0% over the initial rate. As a consequence  of using caps, the
interest rates on these loans may not be as rate sensitive as is the


                                       8

<PAGE>


Bank's cost of funds. Currently,  all adjustable-rate  mortgage loans originated
do not provide for a minimum interest rate.

     From time to time, AmericanTrust originates adjustable-rate mortgages which
may have an initial  interest  rate that is lower than the sum of the  specified
index  plus the  margin.  Borrowers  with  adjustable-rate  mortgage  loans  are
qualified at 2% over the initial rate.  Adjustable-rate  loans decrease the risk
to the Bank  associated  with changes in interest rates but involve other risks,
primarily  because as interest  rates rise, the payment by the borrower may rise
to the  extent  permitted  by the  terms of the  loan,  thereby  increasing  the
potential  for default.  At the same time,  the market  value of the  underlying
property may be adversely affected by higher interest rates.

     The Bank currently offers fixed-rate mortgage loans with maturities from 15
to 30 years.  The Bank also  offers a balloon  loan with a term of seven  years.
Interest rates charged on these  fixed-rate  loans are priced on a regular basis
according to market  conditions.  See "-  Originations,  Purchases  and Sales of
Loans and Mortgage-Backed Securities."

     The Bank also  originates  loans with terms of 15 or 30 years  pursuant  to
programs sponsored by the Veteran's Administration ("VA") or the Federal Housing
Administration  ("FHA").  Such loans  generally carry a guarantee from the VA or
are insured by the FHA. These loans are typically  sold in the secondary  market
with  servicing  released.  The Bank also offers loans for the  Guaranteed  Loan
Program with Rural Development (formerly Farmers Home Administration).

     Currently,  AmericanTrust  will  lend up to 95% of the  lesser of the sales
price or appraised  value of the  security  property on owner  occupied  one- to
four-family  loans,  provided that private mortgage  insurance is obtained in an
amount  sufficient  to reduce  the Bank's  exposure  to not more than 80% of the
appraised  value or sales  price,  as  applicable.  The  loan-to-value  ratio on
non-owner  occupied one- to four-family  loans is generally 75% of the lesser of
the sales price or appraised value of the security  property.  Residential loans
do  not   include   prepayment   penalties,   are   non-assumable   (other  than
government-insured   or  guaranteed   loans),   and  do  not  produce   negative
amortization.  Real estate loans  originated by the Bank contain a "due on sale"
clause allowing the Bank to declare the unpaid principal balance due and payable
upon the sale of the security property.

     The loans currently  originated by the Bank are typically  underwritten and
documented  pursuant to the guidelines of the FHLMC. The Bank's decision to hold
or sell these loans is based on its asset liability  management policy and goals
and the market  conditions  for  mortgages at any period in time.  Under current
policy,  the  Bank  typically  originates  for  sale  all  conforming  fixed-and
adjustable-rate  mortgage  loans  originated.  The Bank  currently  retains  the
servicing of the conventional loans it sells. See "- Originations, Purchases and
Sales of Loans and  Mortgage-Backed  Securities" for information  regarding fees
received by the Bank in connection  with loans serviced for others.  At June 30,
1998, the Bank had $2.0 million of fixed-rate  residential  loans with remaining
terms of less than 10 years and $8.0 million of fixed-rate  loans with remaining
terms of 10 years or more in its loan portfolio.

     Residential Construction Lending. The Bank makes construction loans for the
construction  of  residences  (including  modular  homes).  At June 30, 1998 the
Bank's construction loan portfolio


                                       9

<PAGE>


totaled  $179,000 or .40% of its gross loan  portfolio.  As of that date, all of
these loans were secured by property located within the Bank's market area.

     Construction loans to individuals for their residences are structured to be
converted  to  permanent  loans  at the  end of the  construction  phase,  which
typically runs from four to six months.  These construction loans have rates and
terms comparable to one- to four-family  loans then offered by the Bank,  except
that during the construction phase, the borrower pays interest only. The maximum
loan-to-value  ratio of owner occupied single family  construction loans is 95%.
Residential  construction loans are generally  underwritten pursuant to the same
guidelines used for originating permanent residential loans.

     Construction  loans are  obtained  primarily  from walk-in  customers.  The
application  process  includes  submission to the Bank of plans and costs of the
project to be  constructed.  These  items are used as a basis to  determine  the
appraised  value of the  subject  property.  Loans  are  based on the  lesser of
current appraised value or the cost of construction (land plus building).

     The  Bank's  construction  loan  agreements  generally  provide  that  loan
proceeds are  disbursed  in  increments  as  construction  progresses.  The Bank
reviews the progress of the  construction  of the dwelling and requires that the
dwelling be inspected by an independent appraiser before disbursements are made.

     Consumer  Lending.  AmericanTrust  currently  offers a variety  of  secured
consumer loans,  including  mobile home and RV loans,  home improvement and home
equity loans,  automobile loans and loans secured by savings deposits.  The Bank
also  offers  unsecured  consumer  loans.  Except for mobile  home and RV loans,
AmericanTrust  currently  originates  substantially all of its consumer loans in
its market area.  AmericanTrust  originates  consumer loans by extending  credit
directly to the borrower. Mobile home and RV loans are originated on an indirect
basis through the  acquisition of installment  payment  contracts from retailers
who have extended  credit to their customers for the purchase of mobile homes or
RVs. At June 30, 1998, the Bank's consumer loans totaled $16.6 million, or 37.3%
of the Bank's gross loan portfolio.

     The largest component of  AmericanTrust's  consumer loan portfolio consists
of mobile home and RV loans.  At June 30, 1998,  mobile home loans  totaled $3.6
million, or approximately 8.1% of the Bank's gross loan portfolio,  and RV loans
totalled $10.2 million,  or 22.9% of the Bank's gross loan  portfolio.  In 1984,
the Bank began offering mobile home loans in order to provide affordable housing
to individuals.  AmericanTrust  typically indirectly originates loans secured by
new and used  mobile  homes  purchased  by  individuals  from  dealers  who meet
AmericanTrust's  qualifications.  Pursuant to agreements  with two  corporations
specializing  in financing and  originating  mobile home loans,  these companies
solicit  loan  opportunities  from  dealers,  receive  and  process  all  credit
applications,  submit applications to AmericanTrust and assist in the collection
of delinquent accounts and resale of repossessed collateral.  When the completed
loan application  package is received by AmericanTrust,  the Bank  independently
underwrites  the loan and  determines  whether to accept  the loan.  At June 30,
1998,  mobile home loans  originated  pursuant to these  agreements  amounted to
substantially all mobile home loans outstanding.


                                       10

<PAGE>


     Mobile homes securing such loans are located  primarily in Indiana.  Mobile
home loans are typically made at a higher yield and for a shorter  maturity than
one- to four-family  residential  mortgage loans. Most of the Bank's mobile home
loans have been  originated  with fixed rates of interest and are generally made
in amounts of up to a maximum of the lesser of 125% of the net invoice or 90% of
the appraised  value or buyer's cost. The buyer's cost can include such items as
freight,  itemized set-up  charges,  physical  damage  insurance,  sales tax and
filing and  recording  fees.  AmericanTrust  is permitted by  regulation to make
mobile  home  loans  for terms of up to 20 years,  although  most of the  Bank's
mobile home loans are for terms of 15 years or less.  At June 30,  1998,  mobile
home loans totaling $60,000,  or .13% of the Bank's gross loan portfolio were 60
days or more delinquent.

     In  January  1994,  the  Bank  began  indirectly  originating  RV  loans to
individuals who meet the Bank's underwriting  standards,  pursuant to agreements
with financing  companies which are similar to the mobile home loan  origination
agreements described above. At June 30, 1998, RV loans totaling $197,000 or .44%
were 60 days or more delinquent.

     The underwriting  standards employed by the Bank for consumer loans include
a  determination  of the  applicant's  payment  history  on other  debts  and an
assessment  of the  ability to meet  existing  obligations  and  payments on the
proposed  loan.  Although   creditworthiness  of  the  applicant  is  a  primary
consideration,  the underwriting process also includes a comparison of the value
of the security, if any, in relation to the proposed loan amount.

     Management  considers consumer lending to be an important  component of its
asset/liability  management strategy.  Consumer loans, in particular mobile home
and RV loans,  generally  have  intermediate  terms to  maturity  as compared to
single family  mortgage  loans.  See  "Management's  Discussion  and Analysis of
Financial  Condition and Results of Operations - Asset/Liability  Management" in
the Annual Report. As a result, AmericanTrust has increased its consumer lending
in recent periods.

     Consumer loans may entail greater risk than do residential  mortgage loans,
particularly  in the case of consumer loans which are unsecured,  or are secured
by rapidly  depreciable  assets,  such as automobiles  or mobile homes.  In such
cases, any repossessed  collateral for a defaulted consumer loan may not provide
an adequate source of repayment of the  outstanding  loan balance as a result of
the  greater   likelihood  of  damage,   loss  or   depreciation.   Furthermore,
repossession  of mobile  homes and RVs can be  difficult  and time  consuming as
compared  to  the  repossessing  other  property.  In  addition,  consumer  loan
collections are dependent 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.  Although the level of  delinquencies  in the Bank's  consumer  loan
portfolio has generally been low  (approximately  $225,000 or approximately 1.4%
of the  Bank's  consumer  loan  portfolio  at June 30,  1998 was 90 days or more
delinquent),  there can be no assurance that  delinquencies will not increase in
the future, particularly since many such credits,  particularly loans secured by
RVs, are new and unseasoned. See "- Asset Quality - Non- Performing Assets."


                                       11

<PAGE>


     Multi-Family  and  Commercial  Real  Estate  Lending.   AmericanTrust   has
originated  and  purchased  a limited  amount of real  estate  loans  secured by
multi-family and  non-residential  properties.  Properties  securing these loans
included  office  buildings,  strip  malls,  apartment  buildings,  churches and
nursing homes. At June 30, 1998, $2.0 million,  or 4.4% of the Bank's gross loan
portfolio, consisted of multi-family and commercial real estate loans.

     Multi-family and commercial real estate loans typically  involve large loan
balances  to single  borrowers  or  groups of  related  borrowers.  The  payment
experience on such loans is typically  dependent on the successful  operation of
the real  estate  project  and as such may be subject to a greater  extent  than
residential loans to adverse conditions in the economy generally.

     Appraisals on properties  securing  multi-family and commercial real estate
property loans originated by the Bank generally are performed by independent fee
appraisers  at the  time  the  loan is  made.  Appraisals  on  multi-family  and
commercial  real estate  loans are  generally  reviewed  by the Bank's  Board of
Directors.  In addition,  the Bank's underwriting  procedures  generally require
verification of the borrower's credit history,  income and financial statements,
banking  relationships  and  income  projections  for  the  property.   Personal
guarantees are often required for the Bank's  multi-family  and commercial  real
estate loans.

     Loans secured by commercial  real estate and  multi-family  properties  are
generally  larger  and  involve  a greater  degree  of credit  risk than one- to
four-family  residential  mortgage  loans.  At June 30, 1998, none of the Bank's
loans secured by multi-family and commercial real estate were non-accruing.  See
"- Asset Quality."

     In  the  future,   the  Bank  may  continue  to  consider   originating  or
participating in multi-family  and commercial real estate lending  especially in
low- and moderate-income projects in the communities it serves. Such lending may
entail additional credit risk not present in other lending ventures.

     Lease  Contracts.  In fiscal  1993,  the Bank began  purchasing  commercial
leases covering  business  equipment  located  principally in the various states
located  throughout the Midwest and along the East Coast.  At June 30, 1998, the
book value of the Bank's lease  contracts  totaled $1.1 million,  or 2.5% of the
Bank's gross loan  portfolio.  In general,  the leases are  full-payout  finance
leases in which the lease payments effectively repay the lessor for the purchase
price of the equipment, plus an acceptable yield. The leases were purchased from
a commercial lease  origination firm with expertise in originating and acquiring
such leases.  The Bank  purchased  these leases  because they were  available at
relatively  high yields at a time when investment  alternatives  were generating
lower yields and because  such leases have  relatively  short terms,  consistent
with the  Bank's  asset/liability  management  strategy.  Although,  like  other
commercial  business  financings,  commercial  leases  involve  higher risk than
residential mortgage loans, management believes that the purchase of such leases
is  consistent  with  the  Bank's  asset/liability  strategy,  in  light  of the
comparatively  higher yields, and the additional credit recourse provided by the
seller.  The leases are currently on non-accrual status due to the bankruptcy of
Bennett Funding Group, Inc. ("BFGI"), the servicer of the leases. BFGI continues
to service the lease contracts and has initially  remitted  $350,000 during June
1998  under  the  leadership  of  the  court-appointed   Trustee.   See  "-Asset
Quality-Bennett Funding."


                                       12

<PAGE>

Originations, Purchases and Sales of Loans and Mortgage-Backed Securities

     Loan  originations  are developed from continuing  business with depositors
and borrowers,  soliciting realtors, builders, walk-in customers and third-party
sources.

     While the Bank originates both  adjustable-rate  and fixed-rate  loans, its
ability to originate  loans to a certain  extent is dependent  upon the relative
customer demand for loans in its market,  which is affected by the interest rate
environment,  among other factors.  For the fiscal year ended June 30, 1998, the
Bank originated $14.0 million in fixed-rate loans and $4.4 million in adjustable
rate loans, all of which were secured by one-to-four family real estate.

     The Bank currently holds in its portfolio certain non-conforming fixed- and
adjustable-rate   loans  that  it   originates.   The   conforming   fixed-  and
adjustable-rate loans originated by the Bank are generally sold in the secondary
market,  primarily to the FHLMC with servicing  retained.  From time to time, in
order to reduce the interest  rate risk  associated  with these loans,  the Bank
obtains forward  delivery  commitments  from investors on loans in process.  See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations - Liquidity and Capital  Resources" in the Annual Report.  FHA and VA
loans are sold with  servicing  released.  During the fiscal year ended June 30,
1998, the Bank sold $9.6 million of one- to  four-family  loans in the secondary
market with servicing retained, and $2.7 million servicing released.

     Typically,  when loans are sold,  AmericanTrust retains  responsibility for
collecting  and  remitting  loan  payments,  making  certain  insurance  and tax
payments on behalf of borrowers and otherwise  servicing the loans, and receives
a fee for  performing  this service.  Sales of whole loans  generate  income (or
loss) at the time of sale, produce future servicing income and provide funds for
additional  lending and other  purposes.  At June 30,  1998,  AmericanTrust  was
servicing mortgage loans for others in the amount of $31.8 million.

     The contractual  right to service  mortgage loans that have been originated
and sold has an economic value that results from the future income stream of the
servicing  fees, the  availability  of the cash balances  associated with escrow
funds collected monthly for real estate taxes and insurance, the availability of
the cash from monthly  principal and interest  payments from the collection date
to the  remittance  date,  and the ability of the servicer to  cross-sell  other
products and  services.  The actual value of a servicing  portfolio is dependent
upon such factors as the age, maturity,  and prepayment rate of the loans in the
portfolio,  the  average  dollar  balance  of the  loans,  the  location  of the
collateral property, the average amount of escrow funds held, the interest rates
and delinquency experience on the loans, the types of loans and other factors.

     Gains or losses on the sale of mortgage  loans are  recorded at the time of
the cash sale in an amount  reflecting  the difference  between the  contractual
interest  rate of the loans sold and the current  market rate of  interest.  The
Bank receives a servicing fee from FHLMC on each loan sold.

     The Bank has  from  time to time  purchased  loans  or  interests  in loans
secured  predominantly  by one- to  four-family  real estate from other lenders.
Purchased loans must comply with the Bank's underwriting  standards. At June 30,
1998, the Bank had $1.1 million of lease contracts.  See "- Lease Contracts." In
addition, the Bank has invested funds in mortgage-backed securities. During


                                       13

<PAGE>


the  fiscal  year ended  June 30,  1998,  the Bank  neither  purchased  nor sold
mortgage-backed  securities.  See the Notes to Consolidated Financial Statements
in the Annual Report. See "- Investment Securities."

     The  following  table  shows  the  loan  origination,  purchase,  sale  and
repayment activities of the Bank for the periods indicated.

<TABLE>
<CAPTION>
                                                                                    Year Ended June 30,
                                                                 -------------------------------------------------------------
                                                                    1998                    1997                    1996
                                                                 ------------            ------------            ------------ 

                                                                                      (In Thousands)
<S>                                                              <C>                     <C>                     <C>     
Originations:
  One- to four-family .......................................    $ 18,422                $  8,397                $ 15,328
  Consumer ..................................................         862                   8,927                   7,358
                                                                 --------                --------                --------
         Total loans originated .............................      19,284                  17,324                  22,686
                                                                 --------                --------                --------

Purchases:
  Lease contracts ...........................................        --                      --                     1,147
  Multi-family and commercial ...............................        --                      --                       490
  Mortgage-backed securities ................................        --                      --                      --
                                                                 --------                --------                --------
         Total purchased ....................................        --                      --                     1,637
                                                                 --------                --------                --------

Sales:
  One- to four-family .......................................      12,271                   6,319                  12,948
  Mortgage-backed securities ................................        --                     ---                      --
                                                                 --------                --------                --------
         Total sales ........................................      12,271                   6,319                  12,948
                                                                 --------                --------                --------

Principal repayments and other:
  Loans .....................................................      13,299                  11,361                   9,608
  Mortgage-backed securities ................................         319                     358                     822
                                                                 --------                --------                --------
         Total principal payments ...........................      13,618                  11,719                  10,430
                                                                 --------                --------                --------

         Net increase (decrease) ............................    $ (6,605)               $   (714)               $    945
                                                                 ========                ========                ========
</TABLE>


Asset Quality

     General.  When a borrower  fails to make a required  payment on a loan, the
Bank attempts to cause the  delinquency  to be cured by contacting the borrower.
In the case of loans  secured by real estate,  a reminder  notice is sent to the
borrower  on all loans over five days  delinquent.  When a loan  becomes 15 days
delinquent,  late  charges are  assessed and a notice of late charges is sent to
the  borrower.  An  additional  late  notice  is  sent  to the  borrower  if the
delinquency  is not cured within 30 days of the required  payment  date.  If the
loan becomes 60 days  delinquent  and the borrower has not  attempted to contact
the Bank to arrange an acceptable  plan to bring the loan current,  the borrower
is contacted by telephone.  If the borrower  contacts the Bank with a reasonable
explanation  for the  delinquency,  the Bank  generally  will  attempt  to reach
workable  accommodations  with the  borrower  to bring  the  loan  current.  All
proposed workout  arrangements  are evaluated on a case by case basis,  based on
the best judgement of the Bank's  management,  considering,  among other things,
the borrower's past credit history,  current financial status,  cooperativeness,
future prospects and the reason for the delinquency. If the loan is in excess of
90 days  delinquent,  the loan will be referred to the Bank's legal  counsel for
collection.  In all cases,  if the Bank believes that its  collateral is at risk


                                       14

<PAGE>


and added  delay would  place the  collectibility  of the balance of the loan in
further question, management may refer loans for collection even sooner than the
90 days described above.

     When a loan  becomes  delinquent  90 days or more,  the Bank will place the
loan on non-accrual status and previously accrued interest income on the loan is
charged against current income.  The loan will remain on a non-accrual status as
long as the loan is 90 days delinquent.

     Delinquent  consumer  loans are  handled  in a  similar  manner as to those
described  above;  however,  shorter  time frames for each step apply due to the
type of  collateral  generally  associated  with such  types of  loans.  See " -
Lending  Activities - Consumer  Lending." The Bank's procedures for repossession
and sale of  consumer  collateral  are  subject  to various  requirements  under
Indiana consumer protection laws.

     The following  table sets forth the Bank's loan  delinquencies  by type, by
amount and by percentage of type at June 30, 1998. The amounts  presented in the
table  below  represent  the total  remaining  principal  balances of the loans,
rather than the actual payment amounts which are overdue.

<TABLE>
<CAPTION>
                                                              Loans Delinquent For:
                                          -----------------------------------------------------------
                                                      60-89 Days               90 Days and Over            Total Delinquent Loans
                                          -----------------------------  -----------------------------  ----------------------------
                                                               Percent                        Percent                       Percent
                                                               of Total                       of Total                      of Total
                                          Number     Amount     Loans    Number     Amount     Loans     Number     Amount    Loans
                                          ------     ------    --------  ------     ------    --------   ------     ------  --------
                                                                             (Dollars in Thousands)
<S>                                           <C>    <C>         <C>        <C>     <C>        <C>          <C>     <C>        <C>  
One- to four-family .................          2     $   58      .13%         6     $  151      .34%          8     $  209      .47%
Consumer ............................          6         44      .10         11        225      .50          17        269      .60
Lease contracts .....................         --         --       --        305      1,132     2.54         305      1,132     2.54
                                          ------     ------     ----     ------     ------     ----      ------     ------     ----
     Total ..........................          8     $  102      .23%       322     $1,508     3.40%        330     $1,610     3.61%
                                          ======     ======     ====     ======     ======     ====      ======     ======     ====
</TABLE>


     Real estate acquired by AmericanTrust as a result of foreclosure or by deed
in lieu of foreclosure is classified as real estate owned until it is sold. When
property is  acquired,  it is recorded  at the lower of cost or  estimated  fair
value at the date of  acquisition,  and any  write-down  resulting  therefrom is
charged to the  allowance  for  losses on loans.  After  acquisition,  all costs
incurred in maintaining  the property are expensed.  However,  costs relating to
the development and improvement of the property are capitalized to the extent of
fair value.

     Bennett Funding Group,  Inc. The Company has a business  relationship  with
Bennett  Funding  Group,  Inc.  ("BFGI")  which  recently  filed for  Chapter 11
bankruptcy  protection  on  March  29,  1996.  From  1992 to 1995,  the  Company
purchased  commercial lease contracts covering business equipment from BFGI, for
which  BFGI  acts as the  servicer.  At June 30,  1998,  the  book  value of the
Company's  lease  contracts  totaled  $449,000.  In  addition,  the  Company and
$674,000 in Short Term Dealer Contracts with Bennett Leasing Corporation ("BLC")
which was later included in the bankruptcy  proceedings.  Newspaper reports have
indicated that BFGI may have utilized  fictitious leases in some of its business
activities.  The SEC has filed a criminal  and civil suit  against an officer of
BFGI which alleges  various  fraudulent  actions  including the sale of the same
leases  to two or more  buyers.  Reserves  of  $67,000  have been  recorded  for
probable  losses as a result of lease  prepayments.  In  addition,  reserves  of
$149,000 have been allocated to the leases for potential losses.


                                       15

<PAGE>


     The Company is continuing to evaluate the allegations  against BFGI and BLC
and the  effect  that the  bankruptcy  filing  will have on its  leases  and its
security. Until the evaluation is complete, management is unable to predict with
any certainty the effects of the bankruptcy on the Company.

     Non-Performing  Assets.  The  following  table sets forth the  amounts  and
categories of  non-performing  assets.  Interest income on loans is accrued over
the term of the loans based upon the principal  outstanding except where serious
doubt exists as to the  collectibility  of a loan,  in which case the accrual of
interest is  discontinued.  For all years  presented,  the Bank's  troubled debt
restructurings  (which  involve  forgiving a portion of interest or principal on
any loans or making loans at a rate or with a maturity less than that  customary
in the Bank's market) are included in the table below. Foreclosed assets include
assets acquired in full or partial settlement of loans. The amounts shown do not
reflect  reserves  set up against such  assets.  See "- Allowance  for Losses on
Loans."


                                                             June 30,
                                                 -------------------------------
                                                  1998         1997         1996
                                                  ----         ----         ----
                                                     (Dollars in Thousands)
Non-accruing loans:
  One- to four-family ......................     $  151      $   66      $   66
  Consumer .................................        484         239          23
  Leases ...................................      1,132       1,491       1,491
                                                 ------      ------      ------
     Total .................................      1,767       1,796       1,580

Restructured loans:
  Commercial real estate ...................        637         644         809

Foreclosed assets:
  One- to four-family ......................         --          --          43
  Consumer .................................        272         186          --
                                                 ------      ------      ------
Total non-performing assets ................     $2,676      $2,626      $2,432
                                                 ======      ======      ======
Total as a percentage of total assets ......       4.61%       3.64%       3.38%
                                                 ======      ======      ======


     For the fiscal year ended June 30, 1998,  gross interest income which would
have been recorded had the non-accruing  and restructured  loans been current in
accordance  with their  original  terms  amounted to $230,000.  Interest  income
received  or accrued  included  $59,000  for the year ended June 30, 1998 on the
non-accruing loans and restructured loans.

     At June 30,  1998,  the Bank's  non-accruing  loans  consisted of six loans
secured by  residential  real estate  totaling  $151,000  and 47 consumer  loans
totaling  $484,000.  As discussed in more detail below,  the Bank's  interest in
restructured loans at June 30, 1998 totaled $637,000.  Such loans are secured by
apartment  complexes  located in Indiana which were  restructured in fiscal 1991
and 1992.  At June 30,  1998,  borrowers  on each of these  loans,  of which the
Bank's interest had aggregate  balances of $359,000 and $278,000,  respectively,
had made all required  payments in accordance with the terms of the restructured
loan agreements. A description of these restructured loans is set forth below.

     In 1983, the Bank purchased a 50% interest in a $711,000 loan secured by an
apartment complex located in Rochester,  Indiana. In fiscal 1992, due to chronic
delinquencies on the part of


                                       16

<PAGE>


the  borrower,  the Bank and the lead lender agreed to  restructure  the loan to
extend the  initial  term  until  1997.  Subsequent  to the  restructuring,  the
borrowers continued to make payments approximately 30 days late. The loan was 30
days delinquent at June 30, 1998. The Bank is accruing  interest on this loan at
the restructured interest rate. In addition,  the borrowers have not established
any reserve for repairs on the property  should they become  necessary.  At June
30, 1998, the Bank's interest in this loan totalled $359,000.

     In 1983,  the Bank  originated  a $724,000  loan  secured  by an  apartment
complex  located in  Logansport,  Indiana of which it retained 40% interest.  In
fiscal 1992, due to chronic delinquencies on the part of the borrowers, the Bank
agreed to restructure  the loan to extend the repayment term until 1999. At June
30, 1998, the Bank's interest in this loan totalled $278,000.  On the same date,
the borrowers had made all required payments in accordance with the terms of the
modified  loan  agreement.  The Bank is  accruing  interest  on this loan at the
restructured interest rate.

     Other Loans of Concern. In addition to the non-performing  assets set forth
in the table above as of June 30,  1998,  there were no other loans with respect
to which known  information  about the possible credit problems of the borrowers
or the cash flows of the  security  properties  have caused  management  to have
concerns  as to the  ability  of the  borrowers  to  comply  with  present  loan
repayment  terms and which may  result in the future  inclusion  of items in the
non-performing asset categories.

     Classified Assets.  Federal  regulations  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." An asset is
considered  "substandard"  if it is  inadequately  protected  by the current net
worth and paying  capacity of the  obligor or the  collateral  pledged,  if any.
"Substandard"  assets include those characterized by the "distinct  possibility"
that the insured  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.

     When an insured institution classifies problem assets as either substandard
or doubtful,  it may establish general allowances for losses in an amount deemed
prudent by management.  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 that portion 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
regulatory authorities, who may order the establishment of additional general or
specific loss allowances.

     In connection  with the filing of its periodic  reports with the OTS and in
accordance with its  classification of assets policy, the Bank regularly reviews
problem loans and real estate acquired through  foreclosure to determine whether
such assets require classification in accordance with


                                       17

<PAGE>


applicable  regulations.  On the basis of management's  review of its assets, at
June 30, 1998,  the Bank had classified a total of $2.6 million of its assets as
substandard,  $23,000 as doubtful, and $114,000 as loss. At June 30, 1998, total
classified  assets  comprised $2.8 million,  or 39.5% of the Bank's capital,  or
4.8% of the Bank's total assets.

     Allowance  for  Losses  on  Loans.  The  allowance  for  losses on loans is
established through a provision for loan losses based on management's evaluation
of the risk inherent in its loan  portfolio and changes in the nature and volume
of its loan  activity,  including  those  loans  which  are  being  specifically
monitored by management.  Such evaluation,  which includes a review of loans for
which full collectibility may not be reasonably  assured,  considers among other
matters, the loan  classifications  discussed above, the estimated fair value of
the underlying collateral, economic conditions, historical loan loss experience,
the amount of loans  outstanding  and other factors that warrant  recognition in
providing for an adequate loan loss allowance.

     Real estate  properties  acquired  through  foreclosure are recorded at the
lower of cost or fair value minus  estimated  cost to sell. If fair value at the
date of  foreclosure  is  lower  than  the  balance  of the  related  loan,  the
difference  will be charged-off to the allowance for losses on loans at the time
of transfer.  Valuations are periodically updated by management and if the value
declines,  a specific  provision for losses on such property is established by a
charge to operations.

     Although  management  believes  that it uses the  information  available to
determine  the  allowance,   unforeseen   market   conditions  could  result  in
adjustments and net earnings could be  significantly  affected if  circumstances
differ   substantially   from  the   assumptions   used  in  making   the  final
determination. Future additions to the Bank's allowance for losses on loans will
be the result of periodic loan,  property and collateral reviews and thus cannot
be  predicted  in advance.  In  addition,  federal  regulatory  agencies,  as an
integral  part  of the  examination  process,  periodically  review  the  Bank's
allowance  for losses on loans.  Such  agencies may require the Bank to increase
the allowance based upon their judgment of the information  available to them at
the time of their examination.  At June 30, 1998, the Bank had a total allowance
for  losses on loans of  $518,000,  representing  21.5% of total  non-performing
loans and 1.2% of the Bank's  loans,  net. See Notes to  Consolidated  Financial
Statements in the Annual Report.

     The  following  table sets forth an  analysis of the Bank's  allowance  for
losses on loans.


                                                           Year Ended June 30,
                                                         ----------------------
                                                          1998    1997     1996
                                                              (In Thousands)
Balance at beginning of period ......................    $523     $494     $400
                                                         ----     ----     ----
Charge-offs:
   One- to four-family ..............................       7       --       --
   Consumer .........................................      90        4       31
                                                         ----     ----     ----
Net charge-offs .....................................      97        4       31
Provision for losses on loans .......................      92       33      125
                                                         ----     ----     ----
Balance at end of period ............................    $518     $523     $494
                                                         ====     ====     ====

Ratio of net charge-offs during the period to
 average loans outstanding during the period ........     .20%     .01%     .06%
                                                         ====     ====     ====


                                       18

<PAGE>


Ratio of net charge-offs during the period to
 average non-performing assets ......................    4.00%     .40%    2.28%
                                                         ====     ====     ====


     The  distribution of the Bank's  allowance for losses on loans at the dates
indicated is summarized as follows:

<TABLE>
<CAPTION>

                                                                                           June 30,
                                                        ----------------------------------------------------------------------------
                                                                1998                         1997                     1996
                                                        ----------------------------------------------------------------------------
                                                                    Percent                       Percent                   Percent
                                                                    of Loans                      of Loans                  of Loans
                                                                    in Each                       in Each                   in Each
                                                        Amount of   Category        Amount of     Category      Amount of   Category
                                                        Loan Loss   to Total        Loan Loss     to Total      Loan Loss   to Total
                                                        Allowance    Loans          Allowance      Loans        Allowance    Loans
                                                                                      (Dollars in Thousands)
<S>                                                        <C>         <C>            <C>         <C>            <C>         <C>    
One- to four-family ...............................        $ 23         55.42%        $ 31         50.24%        $ 35         57.58%
Multi-family and commercial real estate ...........          63          4.39           63          4.54           77          4.75
Construction ......................................          --           .40           --          1.81           --          1.35
Consumer ..........................................         135         37.25          155         40.48          131         33.41
Lease contracts ...................................         216          2.54          216          2.93          171          2.91
Unallocated .......................................          81            --           58            --           80            --
                                                           ----        ------         ----        ------         ----        ------
     Total ........................................        $518        100.00%        $523        100.00%        $494        100.00%
                                                           ====        ======         ====        ======         ====        ======
</TABLE>


Investment Activities

     General.  AmericanTrust  must maintain  minimum levels of investments  that
qualify as liquid  assets  under OTS  regulations.  Liquidity  may  increase  or
decrease  depending upon the  availability  of funds and  comparative  yields on
investments  in  relation  to the  return on loans.  Historically,  the Bank has
generally  maintained  liquid  assets at levels  above the minimum  requirements
imposed  by the OTS  regulations  and at levels  believed  adequate  to meet the
requirements  of normal  operations,  including  repayments of maturing debt and
potential  deposit  outflows.  Cash flow projections are regularly  reviewed and
updated to assure that adequate  liquidity is maintained.  At June 30, 1998, the
Bank's  liquidity  ratio  (liquid  assets as a  percentage  of net  withdrawable
savings deposits and current borrowings) was 8.83%. See "Management's Discussion
and Analysis of Financial  Condition  and Results of  Operations - Liquidity and
Capital Resources" in the Annual Report and "Regulation - Liquidity."

     Federally  chartered  savings  institutions have the authority to invest in
various types of liquid assets,  including  United States Treasury  obligations,
securities  of various  federal  agencies,  certain  certificates  of deposit of
insured banks and savings institutions, certain bankers' acceptances, repurchase
agreements  and  federal  funds.  Subject  to  various  restrictions,  federally
chartered savings institutions may also invest their assets in commercial paper,
investment grade corporate debt securities and mutual funds whose assets conform
to the investments that a federally  chartered savings  institution is otherwise
authorized to make directly.

     Generally, the investment policy of the Company and Bank, as established by
the  Board  of  Directors,  is to  invest  funds  among  various  categories  of
investments  and  maturities   based  upon  liquidity   needs,   asset/liability
management   policies,   investment   quality,   marketability  and  performance
objectives. Subject to the policies established by the Board of Directors,


                                       19

<PAGE>


President  Borst and Treasurer and Chief  Financial  Officer  Cornish manage and
oversee the  investments  and  objectives  for the  investment  portfolio.  Such
individuals are authorized to purchase, sell and trade securities subject to the
guidelines set forth in the investment policy.  All securities  transactions are
disclosed to the Board of Directors at their next regular meeting.

     Securities  and  Other  Interest-Earning  Assets.  At June  30,  1998,  the
Company's  interest-bearing  deposits with other financial  institutions totaled
$1.1 million, or 1.9% of total assets, and its securities, consisting of federal
agency obligations,  mutual funds which invest in adjustable-rate  mortgages and
asset-backed  securities,  totaled $5.5  million,  or 9.5% of total  assets.  In
addition,  as of such date,  the Company had a $1.1 million  investment  in FHLB
stock, satisfying its requirement for membership in the FHLB of Indianapolis. It
is the Company's general policy to purchase securities which are U.S. Government
securities  or  federal  agency  obligations  or other  issues  that  are  rated
investment grade. At June 30, 1998, the average term to maturity or repricing of
the securities portfolio (excluding FHLB stock) was 14.1 years.

     The Company's securities, except for mortgage-backed securities,  portfolio
at June 30, 1998 contained neither  tax-exempt  securities nor securities of any
issuer  with  an  aggregate  book  value  in  excess  of 10%  of  the  Company's
stockholders' equity,  excluding those issued by the United States Government or
its agencies.

     The Company has  investment  securities  of $77,000 that are backed by auto
receivables in four Auto Receivables Trusts. The auto receivables were purchased
between  1992 and 1994.  In December  1995,  Duff & Phelps  Rating Co.  ("Duff &
Phelps")  placed  the  Trusts  on  "rating   watch-down"  due  to  high  vehicle
repossessions  and issues  concerning  the  charge-off  of certain loan balances
against  available cash reserves.  On February 14, 1996 Duff & Phelps  announced
the downgrade to BBB-. At June 30, 1998 all of the auto  receivable  pools owned
by the Company were paying as agreed.

     OTS guidelines regarding investment portfolio policy and accounting require
insured  institutions to categorize  securities and certain other assets as held
for  "investment,"  "sale," or "trading." In addition,  effective June 30, 1993,
the Company adopted SFAS 115 which states that securities available for sale are
accounted for at fair value and securities  which  management has the intent and
the  Company  has the  ability  to  hold to  maturity  are  accounted  for on an
amortized cost basis.  The  investment  policy of the Company has strategies for
each type of security. See the Notes to the Consolidated Financial Statements in
the Annual Report.


                                       20
 
<PAGE>


     The following table sets forth the composition of the Company's  securities
portfolio and other interest earning assets at the dates indicated.

<TABLE>
<CAPTION>
                                                                                              June 30,
                                                                    ----------------------------------------------------------------
                                                                            1998                1997                    1996
                                                                    -----------------    ---------------------    ------------------
                                                                    Carrying     % of     Carrying    % of       Carrying      % of
                                                                     Value       Total      Value     Total        Value       Total
                                                                     -----       -----      -----     -----        -----       -----
                                                                                        Dollars in Thousands)
<S>                                                                 <C>         <C>        <C>         <C>        <C>         <C>   
Securities
  Available for sale:
     Federal agency obligations ...............................     $   499       7.6%     $ 8,309      54.4%     $ 8,117      52.1%
     Mortgage-backed securities ...............................       2,726      41.7        2,724      17.9        2,737      17.6
     Mutual funds .............................................       1,125      17.2        1,116       7.3        1,065       6.8
                                                                    -------     -----      -------     -----      -------     -----
         Subtotal .............................................       4,350      66.5       12,149      79.6       11,919      76.5
                                                                    -------     -----      -------     -----      -------     -----

  Held to maturity:
     Federal agency obligations ...............................          --        --          500       3.3          500       3.2
     Mortgage-backed securities ...............................       1,063      16.3        1,384       9.0        1,729      11.1
     Other asset-backed securities ............................          77       1.2          183       1.2          384       2.5
                                                                    -------     -----      -------     -----      -------     -----
         Subtotal .............................................       1,140      17.5        2,067      13.5        2,613      16.8
                                                                    -------     -----      -------     -----      -------     -----

FHLB stock ....................................................       1,050      16.0        1,050       6.9        1,050       6.7
                                                                    -------     -----      -------     -----      -------     -----

     Total securities and FHLB stock ..........................     $ 6,540     100.0%     $15,266     100.0%     $15,582     100.0%
                                                                    =======     =====      =======     =====      =======     =====

Average remaining life of securities and mortgage-
    backed securities (excluding FHLB stock) ..................      14.1 years             12.3 years             11.8 years

Other interest-earning assets
  Interest-bearing deposits with banks ........................     $ 1,099     100.0%     $ 1,093     100.0%     $   618     100.0%
                                                                    =======     =====      =======     =====      =======     =====
</TABLE>


                                       21

<PAGE>


     The composition and maturities of the securities portfolio,  excluding FHLB
stock, are indicated in the following table.

<TABLE>
<CAPTION>
                                                                                         June 30, 1998
                                                           -------------------------------------------------------------------------
                                                           Less Than        5 to 10        Over 10
                                                            1 Year            Years          Years              Total Securities
                                                           ---------        ---------      ---------       -------------------------
                                                           Amortized        Amortized      Amortized       Amortized
                                                            Cost             Cost            Cost            Cost      Market Value
                                                           ---------        ---------      ---------       ---------   -------------
                                                                                      (Dollars in Thousands)
<S>                                                          <C>             <C>             <C>             <C>             <C>   
Available for sale:
    Federal agency obligations .....................         $   --        $   500          $   --          $  500          $  499
    Mortgage-backed securities .....................             --              --           2,717           2,717           2,726
    Asset management fund ..........................          1,071              --              --           1,071           1,125
                                                             ------          ------          ------          ------          ------
                                                              1,071             500           2,717           4,288           4,350
                                                             ------          ------          ------          ------          ------
Held to maturity:
     Mortgage-backed securities ....................             --              --           1,063           1,063           1,053
     Asset-backed securities .......................             77              --              --              77              42
                                                             ------          ------          ------          ------          ------
                                                                 77              --           1,063           1,140           1,095
                                                             ------          ------          ------          ------          ------
Total securities ...................................         $1,148          $  500          $3,780          $5,428          $5,445
                                                             ======          ======          ======          ======          ======

Weighted average yield .............................           6.55%           6.57%           7.10%           7.03%           7.03%
</TABLE>


     Mortgage-Backed  Securities.  The Bank has a portfolio  of  mortgage-backed
securities and has utilized such  investments to complement its mortgage lending
activities.   Mortgage-backed  securities  can  also  serve  as  collateral  for
borrowings and as a source of liquidity.  At June 30, 1998, the  mortgage-backed
securities  totaled  $3.8  million,  or 6.5% of total  assets.  For  information
regarding  the  carrying  and  market  values  of  the  Bank's   mortgage-backed
securities portfolio,  see the Notes to Consolidated Financial Statements in the
Annual Report.

     Historically, most of the Bank's mortgage-backed securities were long-term,
fixed-rate  securities.  In more  recent  years,  the Bank has begun to purchase
other types of mortgage-backed  securities  consistent with its  asset/liability
management  objectives.  In this  regard,  the Bank  emphasizes  the purchase of
adjustable-rate   mortgage-backed   securities  for  asset/liability  management
purposes and in order to supplement the Bank's  origination  of  adjustable-rate
mortgage   loans.   At  June  30,  1998,   $330,000,   or  8.7%  of  the  Bank's
mortgage-backed securities, carried adjustable rates of interest.


                                       22

<PAGE>


The following  table sets forth the  composition  of the Bank's  mortgage-backed
securities portfolio at the dates indicated.

<TABLE>
<CAPTION>
                                                                                            June 30,
                                                            ------------------------------------------------------------------------
                                                                     1998                    1997                        1996
                                                            --------------------    ----------------------     ---------------------
                                                            Carrying      % of       Carrying       % of       Carrying       % of
                                                              Value       Total        Value        Total        Value        Total
                                                            --------      ------     --------       -----      --------       -----
                                                                                       (Dollars in Thousands)
<S>                                                          <C>          <C>          <C>          <C>          <C>          <C>   
Available for sale:
   Government National Mortgage Association ..........       $2,726        71.9%       $2,724        66.3%       $2,737        61.3%
                                                             ------       -----        ------       -----        ------       -----

Held to maturity:
   Federal National Mortgage Association .............          330         8.7           354         8.6           369         8.3
   ASMC Acceptance Corporation .......................          164         4.4           256         6.2           352         7.9
   Statewide Acceptance Corporation ..................          569        15.0           774        18.9         1,008        22.5
                                                             ------       -----        ------       -----        ------       -----
        Subtotal .....................................        1,063        28.1         1,384        33.7         1,729        38.7
                                                             ------       -----        ------       -----        ------       -----
   Total mortgage-backed securities ..................       $3,789       100.0%       $4,108       100.0%       $4,466       100.0%
                                                             ======       =====        ======       =====        ======       =====
</TABLE>


                                       23

<PAGE>


     The  following  table sets forth the  contractual  maturities of the Bank's
mortgage-backed securities at June 30, 1998.


                                                             Over 10
                                                              Years

Available for sale:
    Government National Mortgage Association ................ $2,726
                                                              ------

Held to maturity:
    Federal National Mortgage Association ...................    330
    ASMC Acceptance Corporation .............................    164
    Statewide Acceptance Corporation ........................    569
                                                              ------
           Subtotal .........................................  1,063
                                                              ------
     Total .................................................. $3,789
                                                              ======


     At June 30, 1998, the Bank's  portfolio of  mortgage-backed  securities did
not contain  securities of any issuer with an aggregate  book value in excess of
10% of the Company's stockholders' equity.

     Under the OTS risk-based capital requirements, Government National Mortgage
Association  ("GNMA")  mortgage-backed  securities  have  a  zero  percent  risk
weighting and Federal National Mortgage Association ("FNMA"),  FHLMC and "AA" or
higher rated mortgage-backed  securities have a 20% risk weighting,  in contrast
to the 50% risk weighting carried by one- to four-family  performing residential
mortgage loans. At June 30, 1998, all of the Bank's  mortgage-backed  securities
are backed by federal agencies except for  mortgage-backed  securities  totaling
$733,000.

     In  addition,  from  time to time,  the Bank has  purchased  collateralized
mortgage  obligations  ("CMOs")  and real estate  mortgage  investment  conduits
("REMICs").  CMOs and REMICs are  securities  derived by  reallocating  the cash
flows from  mortgage-backed  securities  or pools of mortgage  loans in order to
create multiple  classes or tranches of securities with coupon rates and average
lives that differ from the underlying collateral as a whole. The Bank invests in
these  securities  as  an  alternative  to  mortgage  loans  or  mortgage-backed
securities generally to satisfy the short- to  intermediate-term  portion of its
asset/liability  management  strategy.  At June 30, 1998, the Bank had no REMICs
and CMOs.

Sources of Funds

     General.  The  Bank's  primary  sources of funds are  deposits,  payment of
principal   and  interest  on  loans,   interest   earned  on   securities   and
mortgage-backed  securities,  interest earned on interest-bearing  deposits with
other banks, FHLB advances, and other funds provided from operations,  including
asset sales.

     FHLB advances are used to support  lending  activities and to assist in the
Bank's  asset/liability  management strategy.  Typically,  the Bank does not use
other forms of borrowings.


                                       24

<PAGE>


At June  30,  1998,  the Bank had  total  FHLB  advances  of $3.1  million.  See
" - Borrowings" and the Notes to Consolidated Financial Statements in the Annual
Report.

     Deposits.  AmericanTrust offers a variety of deposit accounts having a wide
range of interest  rates and terms.  The Bank's  deposits  consist of  passbook,
savings,  NOW,  checking,  money market deposit and  certificate  accounts.  The
certificate accounts currently range in terms from 91 days to six years.

     The Bank relies primarily on advertising (including  television,  radio and
newspaper),  competitive  pricing  policies and customer  service to attract and
retain these  deposits.  Currently,  AmericanTrust  solicits  deposits  from its
market area only,  does not use brokers to obtain  deposits and currently,  does
not  engage in any type of  premium,  gift or  promotional  programs  beyond the
advertising  vehicles  mentioned  above.  The  flow of  deposits  is  influenced
significantly  by  general  economic  conditions,  changes  in money  market and
prevailing interest rates and competition.

     The  Bank  also  serves  as a  depository  for  public  funds  for  various
municipalities  and related  entities.  At June 30,  1998,  the amount of public
funds on deposit with the Bank was $9.1 million.  These  accounts are subject to
volatility  depending on  governmental  funding  needs and the Bank's  desire to
attract such funds.

     The Bank has become more susceptible to short-term  fluctuations in deposit
flows as customers have become more interest rate conscious.  The Bank endeavors
to manage  the  pricing of its  deposits  in  keeping  with its  asset/liability
management and profitability objectives.  The ability of the Bank to attract and
maintain  savings  accounts and  certificates of deposit,  and the rates paid on
these  deposits,  has been and will  continue  to be  significantly  affected by
market conditions.

     The  following  table sets forth the  savings  flows at the Bank during the
periods indicated.


                                                   Year Ended June 30,
                                         ---------------------------------------
                                            1998          1997           1996
                                         ---------      ---------     ----------
                                                     (In Thousands)
Opening balance ....................     $ 53,523       $ 44,562      $ 50,514
Deposits (withdrawals), net ........       (8,442)         6,704        (3,120)
Deposits sold ......................           --             --        (5,146)
Interest credited ..................        1,800          2,257         2,314
                                         --------       --------      --------
Ending balance .....................       46,881         53,523        44,562
                                         --------       --------      --------
Net increase (decrease) ............     $  6,641       $  8,961      ($ 5,952)
                                         ========       ========      ========
Percent increase (decrease) ........         12.4%          20.1%        (11.8)%
                                         ========       ========      ========


                                       25

<PAGE>


     The following table sets forth the dollar amount of savings deposits in the
various types of deposit programs offered by the Bank for the periods indicated.

<TABLE>
<CAPTION>
                                                                               Year Ended June 30,
                                                    --------------------------------------------------------------------------------
                                                                1998                           1997                    1996
                                                    ---------------------------------  ----------------------  ---------------------
                                                                             Weighted
                                                                  Percent    Average                 Percent               Percent
                                                      Amount      of Total    Rate     Amount        of Total  Amount      of Total
                                                      ------      --------    ----     ------        --------  ------      --------
                                                                            (Dollars in Thousands)
<S>                                                 <C>            <C>          <C>   <C>            <C>      <C>           <C>   
Transactions and Savings Deposits:
NOW accounts(1).................................    $ 7,733         16.5%       2.0%  $ 7,300         13.6% $   6,590        14.8%
Statement savings...............................      1,653          3.5        2.8     1,871          3.5      1,986         4.5
Regular passbook................................      3,805          8.1        2.8     3,917          7.3      3,775         8.5
90-day passbook accounts........................        748          1.6        2.9     1,104          2.1      1,251         2.8
Money Market Accounts...........................      3,883          8.3        3.5     4,700          8.8      4,785        10.7
                                                    -------        ------             -------        ----- ----------      ------

Total Non-Certificates..........................     17,822         38.0                8,892         35.3     18,387        41.3
                                                    -------        -----              -------        -----  ---------      ------

Certificates:

 2.50 -  3.49%..................................          --          --                   54           .1         58          .1
 3.50 -  4.49%..................................          --          --                  314           .6        905         2.0
 4.50 -  5.49%..................................      8,195         17.5               12,176         22.7      8,689        19.5
 5.50 -  6.49%..................................     19,364         41.3               20,216         37.8     13,937        31.3
 6.50 -  7.49%..................................      1,320          2.8                1,671          3.1      2,163         4.9
 7.50 -  8.49%..................................        200           .4                  200           .4        423         1.0
                                                    --------       ------             --------       ------   --------     -------

Total Certificates..............................     29,059         62.0        5.6    34,631         64.7     26,175        58.7
                                                    --------       ------             --------       ------  ---------       -----

Total Deposits..................................    $46,881        100.0%       4.5%  $53,523        100.0%   $44,562       100.0%
                                                    =======        =====              =======        =====    =======       =====
</TABLE>

----------
(1)  Includes business checking accounts.


                                       26

<PAGE>


     The  following  table shows rate and  maturity  information  for the Bank's
certificates of deposit as of June 30, 1998.

<TABLE>

                                                                 4.00-            6.00-        8.00-                        Percent
                                                                 5.99%            7.99%        9.99%           Total        of Total
                                                                 -----            -----        -----           -----        --------
Certificate accounts maturing in
quarter ending
--------------------------------
<S>                                                            <C>              <C>             <C>           <C>             <C>   

September 30, 1998 ...................................         $13,012          $   201          $---         $13,213          45.5%
December 31, 1998 ....................................           2,344               82            --           2,426           8.3
March 31, 1999 .......................................           1,854              283            --           2,137           7.3
June 30, 1999 ........................................           1,030              652            --           1,682           5.8
September 30, 1999 ...................................             874              303            --           1,177           4.0
December 31, 1999 ....................................           1,086              288            --           1,374           4.7
March 31, 2000 .......................................             614              220           200           1,034           3.6
June 30, 2000 ........................................             420              264            --             684           2.4
September 30, 2000 ...................................             475              207            --             682           2.4
December 31, 2000 ....................................             202              127            --             329           1.1
March 31, 2001 .......................................              90              256            --             346           1.2
June 30, 2001 ........................................             135              667            --             802           2.8
Thereafter ...........................................             523            2,650            --           3,173          10.9
                                                               -------          -------         -----         -------         -----

   Total .............................................         $22,659          $ 6,200         $ 200         $29,059         100.0%
                                                               =======          =======         =====         =======         =====

   Percent of total ..................................            78.0%            21.4 %         . 6%
                                                               =======          =======         =====
</TABLE>


     The  following  table  indicates the amount of the Bank's  certificates  of
deposit and other deposits by time remaining until maturity as of June 30, 1998.

<TABLE>
<CAPTION>

                                                                                              Maturity
                                                                 -------------------------------------------------------------------
                                                                                 Over           Over
                                                                 3 Months       3 to 6         6 to 12         Over
                                                                 or Less        Months         Months        12 Months        Total
                                                                 -------        ------         ------        ---------        -----
                                                                                           (In Thousands)

<S>                                                              <C>            <C>            <C>            <C>            <C>    
Certificates of deposit less than $100,000 ..............        $ 3,653        $ 2,323        $ 3,719        $ 8,782        $18,477
Certificates of deposit of $100,000 or more .............            461            103            100            818          1,482
Public funds (1) ........................................          9,100             --             --             --          9,100
                                                                 -------        -------        -------        -------        -------
Total certificates of deposit ...........................        $13,214        $ 2,426        $ 3,819        $ 9,600        $29,059
                                                                 =======        =======        =======        =======        =======
</TABLE>

----------
(1)  Deposits from governmental and other public entities.


     Borrowings.  Although  deposits are the Bank's primary source of funds, the
Bank's policy has been to utilize  borrowings to support lending  activities and
to assist the Bank's  asset/liability  management  strategy when they are a less
costly  source of funds,  can be invested at a positive  interest rate spread or
when the Bank desires additional capacity to fund loan demand.

     AmericanTrust's borrowings historically have consisted of advances from the
FHLB of  Indianapolis.  Such advances may be made pursuant to several  different
credit  programs,  each  of  which  has its  own  interest  rate  and  range  of
maturities.  Federal law limits an institution's  borrowings from the FHLB to 20
times the amount  paid for  capital  stock in the FHLB,  subject  to  regulatory
collateral requirements.  At June 30, 1998, the Bank had $1.1 million of FHLB of
Indianapolis stock.


                                       27

<PAGE>


The Bank has the ability to purchase  additional capital stock from the FHLB. As
a policy matter,  however, the FHLB of Indianapolis  typically limits the amount
of  borrowings  from the  FHLB to 50% of  adjusted  assets  (total  assets  less
borrowings).  For  additional  information  regarding  the term to maturity  and
average  rate paid on FHLB  advances,  see the Notes to  Consolidated  Financial
Statements in the Annual Report.

     The  following  table sets forth the maximum  month end balance and average
balance of FHLB advances and other borrowings for the periods indicated.


                                                    Year Ended June 30,
                                         ---------------------------------------
                                           1998            1997           1996
                                         ---------       ---------       -------
                                                   (Dollars in Thousands)
Maximum Balance:
  FHLB advances ................         $14,412         $19,015         $20,450

Average Balance:
  FHLB advances ................         $10,586         $14,618         $12,771


     The  following  table  sets  forth  certain  information  as to the  Bank's
borrowings at the dates indicated.


                                              June 30,
                            --------------------------------------
                                  1998        1997          1996
                            -----------    ---------     ---------
                                       (Dollars in Thousands)

FHLB advances ............. $    3,070     $ 10,902      $ 19,500
Weighted average interest..       6.41%        6.13%         5.85%
rate of FHLB advances 

Service Corporation Activities

     As a federally  chartered  savings bank,  AmericanTrust is permitted by OTS
regulations to invest up to 2% of its assets,  or approximately  $1.2 million at
June 30, 1998, in the stock of, or loans to, service  corporation  subsidiaries.
As of such date, the net book value of AmericanTrust's investment in its service
corporation,  Indiana Financial Service Corporation  ("IFSCO") was approximately
$485,000.  AmericanTrust  may invest an  additional  1% of its assets in service
corporations  where such  additional  funds are used for inner-city or community
development  purposes and up to 50% of its total capital in conforming  loans to
service  corporations  in which it owns more than 10% of the capital  stock.  In
addition  to  investments  in service  corporations,  federal  associations  are
permitted to invest an unlimited amount in operating subsidiaries engaged solely
in activities in which a federal association may engage.

     AmericanTrust's  service  corporation,  IFSCO,  is an  Indiana  corporation
located in Peru,  Indiana.  IFSCO was organized by the Bank in 1972 and provides
mortgage  banking,  annuity sales,  credit life and other insurance  services to
customers in the Bank's primary market area. In December,  1995, IFSCO purchased
the assets of U.S. Title, Inc. Following the acquisition,  IFSCO, doing business
as U.S. Title, has continued to provide the title insurance  services offered by
the


                                       28

<PAGE>


former U.S. Title, Inc. For the fiscal year ended June 30, 1998, IFSCO had a net
loss of approximately $4,000.

Competition

     AmericanTrust  faces strong  competition,  both in originating  real estate
loans and in attracting  deposits.  Competition in originating real estate loans
comes primarily from commercial banks,  savings  institutions,  mortgage bankers
and credit unions located in the Bank's market area.  Commercial banks,  savings
institutions and credit unions provide vigorous competition in consumer lending.
The Bank  competes for real estate and other loans  principally  on the basis of
the quality of services it provides to  borrowers,  the interest  rates and loan
fees  it  charges,  and  the  types  of  loans  it  originates.  See "-  Lending
Activities."

     The Bank attracts all of its deposits  through its retail banking  offices,
primarily  from the  communities  in which  those  retail  banking  offices  are
located.   Therefore,   competition  for  those  deposits  is  principally  from
commercial  banks,  savings banks,  brokerage firms and credit unions located in
these communities. The Bank competes for these deposits by offering a variety of
account  alternatives at competitive rates and by providing  convenient business
hours, branch locations and interbranch deposit and withdrawal privileges.

     The Bank primarily  serves Howard and Miami  Counties,  Indiana.  There are
four commercial banks, one savings  institution,  other than AmericanTrust,  and
three credit unions which  compete for deposits and loans in Miami  County.  The
Bank  estimates  that its  share  of the  savings  market  in  Miami  County  is
approximately seven percent and its share of the residential  mortgage market is
approximately  15%. The Bank competes with seven commercial  banks, four savings
institutions and two credit unions in Howard County. The Bank's estimated market
share of  deposits  and  residential  mortgages  in this county is less than one
percent.

Employees

     At June 30, 1998,  the Bank had a total of 26 full-time and four  part-time
employees. The Bank's employees are not represented by any collective bargaining
group. Management considers its employee relations to be good.

Regulation

     General.  AmericanTrust is a federally chartered savings bank, the deposits
of which are  federally  insured  and backed by the full faith and credit of the
United  States  Government.  Accordingly,  the Bank is subject to broad  federal
regulation and oversight  extending to all its operations.  The Bank is a member
of the FHLB of Indianapolis and is subject to certain limited  regulation by the
Board of Governors of the Federal Reserve System (the "Federal  Reserve Board").
As the savings and loan holding company of the Bank, the Company also is subject
to federal  regulation  and  oversight.  The  purpose of the  regulation  of the
Company  and  other  holding   companies  is  to  protect   subsidiary   savings
associations.  The Bank is a member of the SAIF and the deposits of the Bank are
insured by the SAIF of the FDIC.  As a result,  the FDIC has certain  regulatory
and examination authority over the Bank.


                                       29

<PAGE>


     Certain of these  regulatory  requirements  and  restrictions are discussed
below or elsewhere in this document.

     Federal Regulation of Savings Associations. The OTS has extensive authority
over the operations of savings associations. As part of this authority, the Bank
is required  to file  periodic  reports  with the OTS and is subject to periodic
examinations  by the OTS and the FDIC.  The last regular OTS  examination of the
Bank was as of March 31, 1997. Under agency scheduling guidelines,  it is likely
that  another  examination  will be  initiated  in the near  future.  When these
examinations  are  conducted by the OTS and the FDIC,  the examiners may require
the Bank to provide  for higher  general or  specific  loan loss  reserves.  All
savings  associations  are subject to a semi-annual  assessment,  based upon the
savings  association's  total  assets,  to fund the  operations  of the OTS. The
Bank's OTS assessment for the fiscal year ended June 30, 1998, was approximately
$25,000.

     The  OTS  also  has  extensive   enforcement  authority  over  all  savings
institutions  and their holding  companies,  including the Bank and the Company.
This enforcement  authority includes,  among other things, the ability to assess
civil  money  penalties,  to issue  cease-and-desist  or  removal  orders and to
initiate  injunctive  actions.  In  general,  these  enforcement  actions may be
initiated  for  violations  of  laws  and  regulations  and  unsafe  or  unsound
practices.  Other  actions or  inactions  may provide the basis for  enforcement
action,  including  misleading or untimely  reports  filed with the OTS.  Except
under certain  circumstances,  public disclosure of final enforcement actions by
the OTS is required.

     In addition, the investment, lending and branching authority of the Bank is
prescribed by federal laws, and it is prohibited from engaging in any activities
not permitted by such laws. For instance,  no savings  institution may invest in
non-investment  grade corporate debt  securities.  In addition,  the permissible
level of investment by federal  associations in loans secured by non-residential
real property may not exceed 400% of total capital,  except with approval of the
OTS.  Federal  savings  associations  are also  generally  authorized  to branch
nationwide. The Bank is in compliance with the noted restrictions.

     The Bank's general permissible lending limit for  loans-to-one-borrower  is
equal to the  greater of  $500,000  or 15% of  unimpaired  capital  and  surplus
(except for loans fully secured by certain  readily  marketable  collateral,  in
which case this limit is increased to 25% of unimpaired capital and surplus). At
June 30, 1998, the Bank's lending limit under this restriction was $1.1 million.
The Bank is in compliance with the loans-to-one-borrower limitation.

     The  OTS,  as well as the  other  federal  banking  agencies,  has  adopted
guidelines  establishing  safety and soundness standards on such matters as loan
underwriting and  documentation,  internal controls and audit systems,  interest
rate risk exposure and compensation and other employee benefits. Any institution
which fails to comply with these  standards  must submit a  compliance  plan.  A
failure to submit a plan or to comply  with an  approved  plan will  subject the
institution to further enforcement action. The OTS and the other federal banking
agencies have also proposed additional  guidelines on asset quality and earnings
standards.  No assurance can be given as to whether or in what form the proposed
regulations will be adopted.


                                       30

<PAGE>


     Insurance of Accounts and Regulation by the FDIC. AmericanTrust is a member
of the SAIF,  which is  administered  by the FDIC.  Deposits  are  insured up to
applicable limits by the FDIC and such insurance is backed by the full faith and
credit of the United States  Government.  As insurer,  the FDIC imposes  deposit
insurance  premiums and is authorized to conduct  examinations of and to require
reporting by FDIC-insured  institutions.  It also may prohibit any  FDIC-insured
institution  from engaging in any activity the FDIC  determines by regulation or
order to pose a serious  risk to the FDIC.  The FDIC also has the  authority  to
initiate enforcement actions against savings associations,  after giving the OTS
an opportunity to take such action,  and may terminate the deposit  insurance if
it determines that the institution has engaged in unsafe or unsound practices or
is in an unsafe or unsound condition.

     The FDIC's  deposit  insurance  premiums are assessed  through a risk-based
system under which all insured  depository  institutions  are placed into one of
nine  categories  and  assessed  insurance  premiums  based upon their  level of
capital and supervisory evaluation. Under the system, institutions classified as
well  capitalized  (i.e., a core capital ratio of at least 5%, a ratio of Tier 1
or core capital to  risk-weighted  assets  ("Tier 1  risk-based  capital") of at
least 6% and a risk-based  capital ratio of at least 10%) and considered healthy
pay the  lowest  premium  while  institutions  that  are  less  than  adequately
capitalized (i.e., core or Tier 1 risk-based capital ratios of less than 4% or a
risk-based  capital  ratio  of less  than  8%)  and  considered  of  substantial
supervisory concern pay the highest premium.  Risk classification of all insured
institutions will be made by the FDIC for each semi-annual assessment period.

     In order to equalize the deposit  insurance  premium  schedules for BIF and
SAIF insured institutions, the FDIC imposed a one-time special assessment on all
SAIF-assessable deposits pursuant to federal legislation passed on September 30,
1996. The Company's special assessment, which was $295,000, was paid in November
1996, and expensed in the fiscal year ended June 30, 1997.  Effective January 1,
1997, the premium schedule for BIF and SAIF insured  institutions  ranged from 0
to 27 basis points.  However,  SAIF-insured  institutions  are required to pay a
Financing Corporation (FICO) assessment,  in order to fund the interest on bonds
issued to resolve thrift  failures in the 1980s,  equal to 6.48 basis points for
each $100 in domestic deposits, while BIF-insured institutions pay an assessment
equal to 1.52 basis points for each $100 in domestic deposits. The assessment is
expected to be reduced to 2.43 no later than  January 1, 2000,  when BIF insured
institutions fully participate in the assessment.  These assessments,  which may
be revised based upon the level of BIF and SAIF deposits will continue until the
bonds mature in the year 2017.

     Regulatory Capital  Requirements.  Federally insured savings  associations,
such as the  Bank,  are  required  to  maintain  a minimum  level of  regulatory
capital. The OTS has established capital standards, including a tangible capital
requirement,  a leverage  ratio (or core capital)  requirement  and a risk-based
capital  requirement  applicable  to such savings  associations.  These  capital
requirements   must  be  generally  as  stringent  as  the  comparable   capital
requirements  for national  banks.  The OTS is also authorized to impose capital
requirements  in excess  of these  standards  on  individual  associations  on a
case-by-case basis.

     The  capital  regulations  require  tangible  capital  of at least  1.5% of
adjusted total assets (as defined by  regulation).  Tangible  capital  generally
includes  common   stockholders'   equity  and  retained  income,   and  certain
noncumulative perpetual preferred stock and related income. In


                                       31

<PAGE>


addition,  all  intangible  assets,  other  than a limited  amount of  purchased
mortgage   servicing  rights,   must  be  deducted  from  tangible  capital  for
calculating compliance with the requirement.  At June 30, 1998, the Bank did not
include any intangible assets in the capital calculation.

     The OTS  regulations  establish  special  capitalization  requirements  for
savings associations that own subsidiaries.  In determining  compliance with the
capital requirements,  all subsidiaries engaged solely in activities permissible
for national  banks or engaged in certain other  activities  solely as agent for
its customers are  "includable"  subsidiaries  that are consolidated for capital
purposes in proportion to the association's  level of ownership.  For excludable
subsidiaries the debt and equity  investments in such  subsidiaries are deducted
from assets and capital.

     At June 30, 1998, the Bank had tangible  capital of $7.0 million,  or 12.0%
of adjusted total assets,  which is approximately $6.1 million above the minimum
requirement of 1.5% of adjusted total assets in effect on that date.

     The capital  standards  also require  core capital  equal to at least 3% of
adjusted total assets.  Core capital generally consists of tangible capital plus
certain intangible  assets,  including a limited amount of purchased credit card
relationships.  As a result of the prompt corrective action provisions discussed
below,  however, a savings  association must maintain a core capital ratio of at
least  4%  to  be  considered  adequately  capitalized  unless  its  supervisory
condition is such to allow it to maintain a 3% ratio. At June 30, 1998, the Bank
did not include any intangible assets which were subject to these tests.

     At June 30, 1998, the Bank had core capital equal to $7.0 million, or 12.0%
of adjusted total assets, which is $5.3 million above the minimum leverage ratio
requirement of 4% as in effect on that date.

     The OTS risk-based  requirement requires savings associations to have total
capital of at least 8% of risk-weighted  assets.  Total capital consists of core
capital,  as defined above, and  supplementary  capital.  Supplementary  capital
consists of certain  permanent  and  maturing  capital  instruments  that do not
qualify as core capital and general  valuation loan and lease loss allowances up
to a maximum of 1.25% of risk-weighted assets. Supplementary capital may be used
to satisfy the risk-based  requirement  only to the extent of core capital.  The
OTS is  also  authorized  to  require  a  savings  association  to  maintain  an
additional  amount of total capital to account for  concentration of credit risk
and the risk of  non-traditional  activities.  At June 30, 1998, the Bank had no
capital  instruments  that  qualify as  supplementary  capital  and  $381,000 of
general loss reserves, which was less than 1.25% of risk-weighted assets.

     Certain  exclusions from capital and assets are required to be made for the
purpose  of  calculating  total  capital.  Such  exclusions  consist  of  equity
investments  (as  defined  by  regulation)  and that  portion  of land loans and
nonresidential  construction  loans in excess of an 80% loan-to-value  ratio and
reciprocal holdings of qualifying capital instruments. AmericanTrust had no such
exclusions from capital and assets at June 30, 1998.

     In determining the amount of risk-weighted  assets,  all assets,  including
certain  off-balance sheet items,  will be multiplied by a risk weight,  ranging
from 0% to 100%,  based on the risk inherent in the type of asset.  For example,
the OTS has assigned a risk weight of 50% for prudently


                                       32

<PAGE>


underwritten  permanent one- to  four-family  first lien mortgage loans not more
than 90 days delinquent and having a loan to value ratio of not more than 80% at
origination  unless insured to such ratio by an insurer  approved by the FNMA or
FHLMC.

     The OTS has adopted a final rule that requires  every  savings  association
with more than  normal  interest  rate risk  exposure  to deduct  from its total
capital, for purposes of determining compliance with such requirement, an amount
equal to 50% of its interest-rate risk exposure  multiplied by the present value
of its assets.  This exposure is a measure of the  potential  decline in the net
portfolio value of a savings  association,  greater than 2% of the present value
of its assets, based upon a hypothetical 200 basis point increase or decrease in
interest rates (whichever results in a greater decline).  Net portfolio value is
the  present  value  of  expected  cash  flows  from  assets,   liabilities  and
off-balance  sheet  contracts.  The rule  provides for a two quarter lag between
calculating  interest rate risk and recognizing any deduction from capital.  The
OTS  announced  that it will  delay  the  effectiveness  of the  rule  until  it
evaluates the  implementation  of the process by which savings  associations may
appeal an interest rate risk deduction determination. It is uncertain as to when
this evaluation will be completed.  Any savings  association with less than $300
million in assets and a total capital ratio in excess of 12% is exempt from this
requirement unless the OTS determines otherwise.

     On June 30,  1998,  the Bank had total  risk-based  capital of $7.4 million
(including $7.0 million in core capital and $381,000 in qualifying supplementary
capital) and risk-weighted  assets of $39.0 million (with no covered off-balance
sheet assets);  or total capital of 19.0% of risk-weighted  assets.  This amount
was $4.3 million above the 8% requirement in effect on that date.

     The OTS and the  FDIC  are  authorized  and,  under  certain  circumstances
required, to take certain actions against savings associations that fail to meet
their  capital  requirements.  The OTS is  generally  required to take action to
restrict the activities of an "undercapitalized  association" (generally defined
to be  one  with  less  than  either  a 4%  core  capital  ratio,  a 4%  Tier  1
risked-based  capital  ratio  or an  8%  risk-based  capital  ratio).  Any  such
association  must  submit a  capital  restoration  plan and  until  such plan is
approved by the OTS may not increase its assets,  acquire  another  institution,
establish a branch or engage in any new  activities,  and generally may not make
capital   distributions.   The  OTS  is  authorized  to  impose  the  additional
restrictions that are applicable to significantly undercapitalized associations.

     As a condition to the approval of the capital restoration plan, any company
controlling an undercapitalized association must agree that it will enter into a
limited  capital  maintenance   guarantee  with  respect  to  the  institution's
achievement of its capital requirements.

     Any savings  association  that fails to comply with its capital  plan or is
"significantly undercapitalized" (i.e., Tier 1 risk-based or core capital ratios
of less  than 3% or a  risk-based  capital  ratio of less  than 6%) must be made
subject  to  one  or  more  of  additional   specified   actions  and  operating
restrictions  which may cover all aspects of its operations and include a forced
merger  or  acquisition  of  the   association.   An  association  that  becomes
"critically  undercapitalized" (i.e., a tangible capital ratio of 2% or less) is
subject to further mandatory restrictions on its activities in addition to those
applicable to significantly  undercapitalized associations. In addition, the OTS
must appoint a receiver (or conservator  with the concurrence of the FDIC) for a
savings  association,  with 


                                       33

<PAGE>


certain  limited  exceptions,   within  90  days  after  it  becomes  critically
undercapitalized.  Any  undercapitalized  association  is  also  subject  to the
general enforcement authority of the OTS and the FDIC, including the appointment
of a conservator or a receiver.

     The OTS is also generally  authorized to reclassify an  association  into a
lower capital category and impose the  restrictions  applicable to such category
if the institution is engaged in unsafe or unsound  practices or is in an unsafe
or unsound condition.

     The  imposition  by the OTS or the  FDIC of any of  these  measures  on the
Company  or the Bank may have a  substantial  adverse  effect  on the  Company's
operations  and  profitability.  Company  shareholders  do not  have  preemptive
rights,  and  therefore,  if the  Company is  directed by the OTS or the FDIC to
issue  additional  shares of  Common  Stock,  such  issuance  may  result in the
dilution in the percentage of ownership of the Company.

     Limitations on Dividends and Other Capital  Distributions.  OTS regulations
impose various  restrictions or  requirements  on  associations  with respect to
their  ability to pay  dividends  or make other  distributions  of capital.  OTS
regulations  prohibit an  association  from declaring or paying any dividends or
from  repurchasing any of its stock if, as a result,  the regulatory  capital of
the association  would be reduced below the amount required to be maintained for
the  liquidation  account  established  in  connection  with its mutual to stock
conversion.

     The OTS utilizes a three-tiered  approach to permit associations,  based on
their capital level and  supervisory  condition,  to make capital  distributions
which include dividends, stock redemptions or repurchases,  cash-out mergers and
other  transactions  charged to the capital account.  See "- Regulatory  Capital
Requirements."

     Generally,  Tier 1  associations,  which are  associations  that before and
after the proposed distribution meet their fully phased-in capital requirements,
may make capital  distributions during any calendar year equal to the greater of
100% of net  income  for the  year-to-date  plus 50% of the  amount by which the
lesser of the  association's  tangible,  core or risk-based  capital exceeds its
fully phased-in capital  requirement for such capital component,  as measured at
the  beginning  of the  calendar  year,  or the amount  authorized  for a Tier 2
association.  However,  a Tier 1  association  deemed to be in need of more than
normal  supervision  by  the  OTS  may  be  downgraded  to a  Tier  2 or  Tier 3
association as a result of such a determination. The Bank meets the requirements
for a Tier 1  association  and has not been  notified  of a need  for more  than
normal supervision. Tier 2 associations,  which are associations that before and
after the proposed distribution meet their current minimum capital requirements,
may make capital  distributions  of up to 75% of net income over the most recent
four quarter period.

     Tier 3  associations  (which  are  associations  that do not  meet  current
minimum capital  requirements) that propose to make any capital distribution and
Tier 2 associations that propose to make a capital distribution in excess of the
noted  safe  harbor  level  must  obtain  OTS  approval  prior  to  making  such
distribution.  Tier 2  associations  proposing  to make a  capital  distribution
within the safe harbor provisions and Tier 1 associations  proposing to make any
capital distribution need only submit written notice to the OTS 30 days prior to
such  distribution.  As a  subsidiary  of the  Company,  the Bank  will  also be
required to give the OTS 30 days' notice prior to declaring  any dividend on its


                                       34

<PAGE>


stock. The OTS may object to the distribution during that 30-day period based on
safety and soundness concerns. See "- Regulatory Capital Requirements."

     The OTS has  proposed  regulations  that would  revise the current  capital
distribution restrictions.  The proposal eliminates the current tiered structure
and the  safe-harbor  percentage  limitations.  Under  the  proposal  a  savings
association may make a capital distribution without notice to the OTS (unless it
is a  subsidiary  of a  holding  company)  provided  that  it has a CAMEL 1 or 2
rating, is not in troubled condition (as defined by regulation) and would remain
adequately   capitalized  (as  defined  in  the  OTS  prompt  corrective  action
regulations)  following the proposed  distribution.  Savings  associations  that
would remain adequately  capitalized  following the proposed distribution but do
not meet the other  noted  requirements  must  notify  the OTS 30 days  prior to
declaring a capital  distribution.  The OTS stated it will  generally  regard as
permissible that amount of capital  distributions  that do not exceed 50% of the
institution's  excess  regulatory  capital  plus net  income to date  during the
calendar year. A savings association may not make a capital distribution without
prior approval of the OTS and the FDIC if it is undercapitalized before, or as a
result of, such a distribution. As under the current rule, the OTS may object to
a capital distribution if it would constitute an unsafe or unsound practice.  No
assurance  may be given as to  whether  or in what form the  regulations  may be
adopted.

     Liquidity.  All savings  associations,  including the Bank, are required to
maintain an average daily balance of liquid assets equal to a certain percentage
of the sum of its average daily balance of net withdrawable deposit accounts and
borrowings  payable  in one  year or  less.  For a  discussion  of what the Bank
includes  in  liquid  assets,  see  "Management's  Discussion  and  Analysis  of
Financial Condition and Results of Operations - Liquidity and Capital Resources"
in the Annual Report.  This liquid asset ratio requirement may vary from time to
time (between 4% and 10%) depending  upon economic  conditions and savings flows
of all savings associations. At the present time, the minimum liquid asset ratio
is 5%.

     In addition,  short-term liquid assets (e.g.,  cash, certain time deposits,
certain bankers  acceptances and short-term United States Treasury  obligations)
currently must constitute at least 1% of the association's average daily balance
of net withdrawable  deposit accounts and current  borrowings.  Penalties may be
imposed  upon   associations   for  violations  of  either  liquid  asset  ratio
requirement.   At  June  30,  1998,  the  Bank  was  in  compliance   with  both
requirements, with an overall liquid asset ratio of 8.8% and a short-term liquid
assets ratio of 4.9%.

     Accounting.  An OTS policy statement applicable to all savings associations
clarifies  and  reemphasizes  that  the  investment   activities  of  a  savings
association  must be in  compliance  with  approved  and  documented  investment
policies and  strategies,  and must be accounted  for in  accordance  with GAAP.
Under the policy  statement,  management must support its  classification of and
accounting for loans and securities (i.e., whether held for investment,  sale or
trading) with  appropriate  documentation.  The Bank is in compliance with these
amended rules.

     The OTS has adopted an amendment to its accounting  regulations,  which may
be made more  stringent  than GAAP by the OTS, to require that  transactions  be
reported in a manner that best reflects their underlying  economic substance and
inherent risk and that financial  reports must  incorporate any other accounting
regulations or orders prescribed by the OTS.


                                       35

<PAGE>


     Qualified Thrift Lender Test. All savings associations, including the Bank,
are required to meet a qualified  thrift  lender  ("QTL") test to avoid  certain
restrictions on their  operations.  This test requires a savings  association to
have at  least  65% of its  portfolio  assets  (as  defined  by  regulation)  in
qualified  thrift  investments  on a  monthly  average  for nine out of every 12
months on a rolling basis. Such assets primarily consist of residential  housing
related loans and  investments.  At June 30, 1998, the Bank met the test and has
always met the test since its effectiveness.

     Any savings  association  that fails to meet the QTL test must convert to a
national bank charter,  unless it requalifies as a QTL and thereafter  remains a
QTL. If an  association  does not  requalify  and  converts  to a national  bank
charter,  it must remain  SAIF-insured  until the FDIC permits it to transfer to
the BIF.  If such an  association  has not yet  requalified  or  converted  to a
national  bank,  its  new  investments  and  activities  are  limited  to  those
permissible  for both a  savings  association  and a  national  bank,  and it is
limited to national bank branching  rights in its home state.  In addition,  the
association is immediately  ineligible to receive any new FHLB borrowings and is
subject to national  bank limits for payment of dividends.  If such  association
has not requalified or converted to a national bank within three years after the
failure,  it must  divest  of all  investments  and  cease  all  activities  not
permissible  for a  national  bank.  In  addition,  it must repay  promptly  any
outstanding FHLB borrowings,  which may result in prepayment  penalties.  If any
association  that fails the QTL test is  controlled by a holding  company,  then
within one year after the failure,  the holding  company must register as a bank
holding  company  and  become  subject  to  all  restrictions  on  bank  holding
companies. See "- Holding Company Regulation."

     Community  Reinvestment Act. Under the Community  Reinvestment Act ("CRA"),
every FDIC insured  institution  has a  continuing  and  affirmative  obligation
consistent  with safe and sound banking  practices to help meet the credit needs
of its entire community,  including low and moderate income  neighborhoods.  The
CRA does not establish  specific lending  requirements or programs for financial
institutions nor does it limit an institution's  discretion to develop the types
of products  and  services  that it believes  are best suited to its  particular
community, consistent with the CRA. The CRA requires the OTS, in connection with
the examination of the Bank, to assess the  institution's  record of meeting the
credit  needs of its  community  and to take such  record  into  account  in its
evaluation of certain  applications,  such as a merger or the establishment of a
branch, by the Bank. An  unsatisfactory  rating may be used as the basis for the
denial of an application by the OTS.

     The federal banking agencies,  including the OTS, have recently revised the
CRA regulations and the methodology for determining an institution's  compliance
with the CRA. Due to the heightened attention being given to the CRA in the past
few years,  the Bank may be required to devote  additional  funds for investment
and lending in its local community.  The Bank was examined for CRA compliance in
September 1996 and received a satisfactory rating.

     Transactions  with Affiliates.  Generally,  transactions  between a savings
association or its  subsidiaries  and its affiliates are required to be on terms
as  favorable  to  the  association  as  transactions  with  non-affiliates.  In
addition,  certain of these  transactions,  such as loans to an  affiliate,  are
restricted to a percentage of the association's capital.  Affiliates of the Bank
include the Company and any company which is under common control with the Bank.
In addition,  a savings  association  may not lend to any  affiliate  engaged in
activities not  permissible for a bank holding company or acquire the securities
of most affiliates. The Bank's subsidiary is not deemed an


                                       36

<PAGE>


affiliate,  however; the OTS has the discretion to treat subsidiaries of savings
associations as affiliates on a case by case basis.

     Certain  transactions with directors,  officers or controlling  persons are
also  subject to  conflict of interest  regulations  enforced by the OTS.  These
conflict of interest  regulations and other statutes also impose restrictions on
loans to such persons and their  related  interests.  Among other  things,  such
loans must be made on terms  substantially the same as for loans to unaffiliated
individuals.

     Holding  Company  Regulation.  The  Company is a unitary  savings  and loan
holding company subject to regulatory oversight by the OTS. As such, the Company
is  registered  with and files reports with the OTS and is subject to regulation
and examination by the OTS. In addition,  the OTS has enforcement authority over
the Company and its non-savings association  subsidiaries which also permits the
OTS to restrict or prohibit  activities that are determined to be a serious risk
to the subsidiary savings association.

     As a unitary savings and loan holding company, the Company generally is not
subject to activity  restrictions.  If the Company  acquires  control of another
savings association as a separate subsidiary, it would become a multiple savings
and loan  holding  company,  and the  activities  of the  Company and any of its
subsidiaries (other than the Bank or any other SAIF-insured savings association)
would become subject to such  restrictions  unless such other  associations each
qualify as a QTL and were acquired in a supervisory acquisition.

     If the Bank fails the QTL test, the Company must obtain the approval of the
OTS prior to  continuing  after such  failure,  directly  or  through  its other
subsidiaries,  any  business  activity  other than those  approved  for multiple
savings and loan holding companies or their  subsidiaries.  In addition,  within
one year of such failure the Company must  register as, and will become  subject
to, the  restrictions  applicable  to bank  holding  companies.  The  activities
authorized  for a bank holding  company are more limited than are the activities
authorized  for a unitary or multiple  savings  and loan  holding  company.  See
" - Qualified Thrift Lender Test."

     The Company must obtain approval from the OTS before  acquiring  control of
any other SAIF-insured  association.  Such acquisitions are generally prohibited
if they  result in a  multiple  savings  and loan  holding  company  controlling
savings  associations  in  more  than  one  state.   However,   such  interstate
acquisitions  are  permitted  based  on  specific  state  authorization  or in a
supervisory acquisition of a failing savings association.

     Federal Securities Law. The stock of the Company is registered with the SEC
under the Securities  Exchange Act of 1934, as amended (the "Exchange Act"). The
Company is subject  to the  information,  proxy  solicitation,  insider  trading
restrictions and other requirements of the SEC under the Exchange Act.

     Company  stock  held by persons  who are  affiliates  (generally  officers,
directors and principal  stockholders)  of the Company may not be resold without
registration or unless sold in accordance with certain resale  restrictions.  If
the Company  meets  specified  current  public  information  requirements,  each
affiliate  of the  Company  is  able  to  sell  in the  public  market,  without
registration, a limited number of shares in any three-month period.


                                       37

<PAGE>


     Federal Reserve  System.  The Federal Reserve Board requires all depository
institutions  to maintain  non-interest  bearing  reserves at  specified  levels
against  their  transaction  accounts  (primarily  checking,  NOW and  Super NOW
checking  accounts).  At June 30, 1998,  the Bank was in  compliance  with these
reserve  requirements.  The balances maintained to meet the reserve requirements
imposed  by  the  Federal  Reserve  Board  may  be  used  to  satisfy  liquidity
requirements that may be imposed by the OTS. See "- Liquidity."

     Savings associations are authorized to borrow from the Federal Reserve Bank
"discount window," but Federal Reserve Board regulations require associations to
exhaust  other  reasonable   alternative   sources  of  funds,   including  FHLB
borrowings, before borrowing from the Federal Reserve Bank.

     Federal  Home  Loan  Bank  System.  The  Bank is a  member  of the  FHLB of
Indianapolis,  which is one of 12  regional  FHLBs,  that  administers  the home
financing credit function of savings associations. Each FHLB serves as a reserve
or  central  bank for its  members  within  its  assigned  region.  It is funded
primarily from 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,
which are subject to the oversight of the Federal  Housing  Finance  Board.  All
advances from the FHLB are required to be fully secured by sufficient collateral
as determined by the FHLB. In addition,  all long-term  advances are required to
provide funds for residential home financing.

     As a member,  the Bank is required to purchase  and  maintain  stock in the
FHLB of Indianapolis. At June 30, 1998, the Bank had $1.1 million of FHLB stock,
which was in  compliance  with this  requirement.  In past  years,  the Bank has
received  substantial  dividends  on its FHLB  stock.  Over the past five fiscal
years such dividends have averaged 7.33% and were 8.06% for fiscal 1998.

     Under  federal  law  the  FHLBs  are  required  to  provide  funds  for the
resolution  of  troubled  savings  associations  and to  contribute  to low- and
moderately priced housing programs through direct loans or interest subsidies on
advances targeted for community investment and low- and moderate-income  housing
projects.  These  contributions  have  affected  adversely  the  level  of  FHLB
dividends  paid and could continue to do so in the future.  These  contributions
could also have an adverse  effect on the value of FHLB stock in the  future.  A
reduction  in value of the  Bank's  FHLB  stock may  result  in a  corresponding
reduction in the Bank's capital.

     For the  fiscal  year ended June 30,  1998,  dividends  paid by the FHLB of
Indianapolis  to the Bank  totaled  approximately  $85,000,  which  constitute a
$2,000  increase over the amount of dividends  received in fiscal year 1997. The
$21,000  dividend  received  for the  quarter  ended June 30,  1998  reflects an
annualized  rate of 8.0%, or 15 basis points more than the rate for fiscal 1997.
No assurance  can be given that such  dividends  will  continue in the future at
such levels.

     Federal  Regulation.  For three years  following  the Bank's  conversion to
stock form, OTS regulations  prohibit any person,  without the prior approval of
the OTS, from  acquiring or making an offer (if opposed by the  institution)  to
acquire more than 10% of the stock of any converted savings  institution if such
person is, or after  consummation of such  acquisition  would be, the beneficial
owner of more than 10% of such stock. In the event that any person,  directly or
indirectly,


                                       38

<PAGE>


violates this regulation,  the securities  beneficially  owned by such person in
excess of 10% shall not be counted as shares  entitled  to vote and shall not be
voted by any person or counted as voting  shares in  connection  with any matter
submitted to a vote of stockholders.

     Federal and State Taxation. Savings associations such as the Bank that meet
certain  definitional  tests  relating  to the  composition  of assets and other
conditions  prescribed  by the Internal  Revenue  Code of 1986,  as amended (the
"Code"),  are  permitted to establish  reserves for bad debts and to make annual
additions  thereto which may, within  specified  formula  limits,  be taken as a
deduction in  computing  taxable  income for federal  income tax  purposes.  The
amount of the bad debt  reserve  deduction  is  computed  under  the  experience
method.

     Under the experience  method,  the bad debt reserve  deduction is an amount
determined under a formula based generally upon the bad debts actually sustained
by the savings association over a period of years.

     Since 1987,  the percentage of  specially-computed  taxable income that was
used to compute a savings  association's  bad debt reserve  deduction  under the
percentage of taxable income method (the  "percentage  bad debt  deduction") was
8%. The  percentage  bad debt  deduction thus computed was reduced by the amount
permitted as a deduction for  non-qualifying  loans under the experience method.
The availability of the percentage of taxable income method permitted qualifying
savings  associations to be taxed at a lower  effective  federal income tax rate
than that applicable to corporations generally (approximately 31.3% assuming the
maximum percentage bad debt deduction). Under changes in federal tax law enacted
in August 1996, the  percentage  bad debt deduction has been  eliminated for tax
years  beginning after December 31, 1995.  Accordingly,  this method will not be
available to the Bank for its tax years ending June 30, 1998 and thereafter.

     Under the  percentage of taxable  income  method,  the  percentage bad debt
deduction  could not exceed the amount  necessary to increase the balance in the
reserve for  "qualifying  real property  loans" to an amount equal to 6% of such
loans  outstanding  at the end of the  taxable  year or the  greater  of (i) the
amount  deductible  under the  experience  method or (ii) the amount  which when
added to the bad debt deduction for "non-qualifying  loans" equals the amount by
which 12% of the amount comprising  savings accounts at year-end exceeds the sum
of surplus, undivided profits and reserves at the beginning of the year. Through
December 31, 1995,  the 6% and 12%  limitations  did not restrict the percentage
bad debt deduction available to the Bank.

     The  federal  tax  legislation  enacted  in  August  1996  also  imposes  a
requirement  to recapture  into taxable income the portion of the qualifying and
non-qualifying  loan  reserves  in excess of the  "base-year"  balances  of such
reserves.  For the Bank, the base-year  reserves are the balances as of June 30,
1988.  Recapture of the excess reserves will occur over a six-year  period.  The
Bank began to recaputure excess reserves of $103,000 starting in the fiscal year
ended June 30,  1997,  in the amount of $17,200  per year.  The Bank  previously
established,  and will  continue to  maintain,  a deferred  tax  liability  with
respect  to its  federal  tax bad  debt  reserves  in  excess  of the  base-year
balances;  accordingly,  the  legislative  changes  will have no effect on total
income tax expense for financial reporting purposes.


                                       39

<PAGE>


     Also, under the August 1996  legislation,  the Bank's base-year federal tax
bad debt  reserves are "frozen"  and subject to current  recapture  only in very
limited circumstances. Generally, recapture of all or a portion of the base-year
reserves  will be required if the  Association  pays a dividend in excess of the
greater of its current or accumulated  earnings and profits,  redeems any of its
stock,  or is liquidated.  The Bank has not  established a deferred  federal tax
liability under SFAS No. 109 for its base-year federal tax bad debt reserves, as
it does not anticipate engaging in any of the transactions that would cause such
reserves to be recaptured.

     The Bank and its subsidiary file consolidated federal income tax returns on
a fiscal year basis using the accrual method of accounting.  The Company files a
consolidated federal income tax return with the Bank and its subsidiary. Savings
associations,  such as the Bank, that file federal income tax returns as part of
a consolidated group are required by applicable  Treasury  regulations to reduce
their taxable income for purposes of computing the percentage bad debt deduction
for losses attributable to activities of the non-savings  association members of
the consolidated  group that are  functionally  related to the activities of the
savings association member.

     The Bank and its  consolidated  subsidiary have not been audited by the IRS
recently with respect to consolidated federal income tax returns. In the opinion
of  management,  any  examination  of still open returns  (including  returns of
subsidiaries  and  predecessors of, or entities merged into, the Bank) would not
result  in a  deficiency  which  could  have a  material  adverse  effect on the
financial condition of the Bank and its consolidated subsidiary.

     Indiana  Taxation.  The  Company  and the Bank are  subject to the State of
Indiana's 8.5% franchise tax on the net income of financial  (including  thrift)
institutions,  exempting  them from the current gross income,  supplemental  net
income and  intangible  taxes.  Net  income  for  franchise  tax  purposes  will
constitute  federal  taxable  income before net operating  loss  deductions  and
special deductions,  adjusted for certain items, including Indiana income taxes,
tax exempt interest and bad debts. Other applicable Indiana taxes include sales,
use and property taxes.

     Delaware Taxation.  As a Delaware holding company,  the Company is exempted
from Delaware corporate income tax but is required to file an annual report with
and pay an annual fee to the State of  Delaware.  The Company is also subject to
an annual franchise tax imposed by the State of Delaware.

Executive Officer Who Is Not A Director

     Deborah  Huff,  age  48,  is  Treasurer  and  Chief  Financial  Officer  of
AmericanTrust and the Company,  positions she has held since joining the Bank in
July 1998. Ms. Huff is responsible for the supervision of the Bank's  accounting
department and will assume supervisory duties of the loan processing  department
in early  fiscal year 1999.  Prior to joining the Bank,  Ms.  Huff,  a CPA,  was
employed as  Corporate  Controller  and  Secretary  of Nixon  Newspapers,  Inc.,
located in Peru, Indiana.


                                       40

<PAGE>


Item 2. Description of Properties

     The Bank  conducts  its business  through  three  offices,  its main office
located in Peru, Indiana and two branch offices located in Kokomo,  Indiana; all
locations are owned by the Bank. In June,  1996,  IFSCO  purchased a building in
Kokomo, Indiana for the future use of U.S. Title. The following table sets forth
information  relating  to each of the Bank's  offices as of June 30,  1998.  The
total net book value of the  Bank's  premises  and  equipment  (including  land,
buildings and leasehold  improvements and furniture,  fixtures and equipment) at
June 30, 1998 was  approximately  $1.8  million.  See the Notes to  Consolidated
Financial Statements in the Annual Report.


                                                    Total
                                                  Approximate     Net Book Value
                                     Date           Square              at
               Location            Acquired         Footage       June 30, 1998
--------------------------------------------------------------------------------

Main Office:
    20 West Fifth Street             1962            6,600             $260,628
    Peru, Indiana  46970

Branch Offices:
    1936 South Dixon Road            1994            4,000              656,540
    Kokomo, Indiana  46902
    2531 North Washington Street     1997            3,000              560,668
    Kokomo, Indiana  46902

U.S. Title Office:                   1996            7,000              316,967
    210 N. Main Street
    Kokomo, Indiana  40901


     AmericanTrust believes that its current facilities are adequate to meet the
present and foreseeable needs of the Bank and the Company.

     The Bank  maintains  an on-line data base with a service  bureau  servicing
financial  institutions.  The net book value of the data processing and computer
equipment utilized by the Bank at June 30, 1998 was approximately $125,000.

Item 3. Legal Proceedings

     The Company and AmericanTrust are involved, from time to time, as plaintiff
or  defendant in various  legal  actions  arising in the normal  course of their
businesses.  While the ultimate outcome of these proceedings cannot be predicted
with certainty, it is the opinion of management, after consultation with counsel
representing  AmericanTrust  and  the  Company  in  the  proceedings,  that  the
resolution of these  proceedings  should not have a material effect on Company's
financial condition or results of operations on a consolidated basis.


                                       41

<PAGE>


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

     No  matter  was  submitted  to a vote  of  security  holders,  through  the
solicitation of proxies or otherwise, during the quarter ended June 30, 1998.


                                     PART II


Item 5. Market for Common Equity and Related Stockholder Matters

     Page 45 of the  attached  1998  Annual  Report  to  Stockholders  is herein
incorporated by reference.

Item 6. Management's Discussion and Analysis or Plan of Operation

     Pages 5 through 19 of the attached  1998 Annual Report to  Stockholders  is
herein incorporated by reference.

Item 7. Financial Statements and Supplementary Data

     The  following  information  appearing in the  Company's  Annual  Report to
Stockholders  for the year ended June 30, 1998, is  incorporated by reference in
this Annual Report on Form 10-KSB as Exhibit 13.

<TABLE>
<CAPTION>
                                                                                              Pages in
                                                                                               Annual
Annual Report Section                                                                          Report 
---------------------                                                                          ------ 

<S>                                                                                          <C>
Report of Independent Auditor.............................................................      20

Consolidated Statement of Balance Sheet as of June 30, 1998 and 1997......................      21

Consolidated Statement of Income for the Years Ended June 30, 1998, 1997
   and 1996...............................................................................      22

Consolidated Statement of Changes in Stockholders' Equity for the
   Years Ended June 30, 1998, 1997 and 1996.................................................    23

Consolidated Statement of Cash Flows for the Years Ended June 30, 1998, 1997
   and 1996.................................................................................    24

Notes to Consolidated Financial Statements.................................................. 25 to 43
</TABLE>


     With the exception of the aforementioned information,  the Company's Annual
Report to Stockholders  for the year ended June 30, 1998, is not deemed filed as
part of this Annual Report on Form 10-KSB.


                                       42

<PAGE>


Item 8. Changes  In  and  Disagreements  With  Accountants  on  Accounting  and
        Financial Disclosure

     There has been no Current  Report on Form 8-K filed  within 24 months prior
to the  date of the most  recent  financial  statements  reporting  a change  of
accountants and/or reporting disagreements on any matter of accounting principle
or financial statement disclosure.


                                    PART III


Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
        with Section 16(a) of the Exchange Act


     Information  concerning  directors of the Registrant is incorporated herein
by  reference  from the  Company's  definitive  Proxy  Statement  for the Annual
Meeting of  Stockholders  to be held in 1998,  a copy of which will be filed not
later than 120 days after the close of the fiscal year.  Information  concerning
the executive officer of the Registrant who is not a director is incorporated by
reference from Part I of this Form 10-KSB under the caption  "Executive  Officer
of the Registrant Who Is Not A Director."


Item 10.  Executive Compensation

     Information  concerning  executive  compensation is incorporated  herein by
reference  from  the  definitive  Proxy  Statement  for the  Annual  Meeting  of
Stockholders  to be held in 1998,  a copy of which  will be filed not later than
120 days after the close of the fiscal year.


Item 11.  Security Ownership of Certain Beneficial Owners and Management

     Information  concerning security ownership of certain beneficial owners and
management  is  incorporated  herein  by  reference  from the  definitive  Proxy
Statement for the Annual Meeting of  Stockholders  to be held in 1998, a copy of
which will be filed not later than 120 days after the close of the fiscal year.


                                       43

<PAGE>


Item 12.  Certain Relationships and Related Transactions

     Information  concerning certain  relationships and related  transactions is
incorporated  herein by reference  from the definitive  Proxy  Statement for the
Annual Meeting of Stockholders to be held in 1998, a copy of which will be filed
not later than 120 days after the close of the fiscal year.

<TABLE>
<CAPTION>
Item 13.  Exhibits and Reports on Form 8-K

(a)  Exhibits

            
                                                                              Reference to
    Regulation                                                               Prior Filing or
   S-B Exhibit                                                               Exhibit Number
      Number                           Document                              Attached Hereto
---------------   ---------------------------------------------------------  ---------------

       <S>                                                                        <C>    
        2         Plan of acquisition, reorganization, arrangement,               None
                  liquidation or succession
       3(a)       Articles of Incorporation                                        *
       3(b)       By-Laws                                                         3(b)
        4         Instruments defining the rights of security holders,             *
                  including debentures
        9         Voting Trust Agreement                                          None
        10        Material contracts
                    Form of Proposed Stock Option and Incentive Plan               *
                    Form of Proposed Recognition and Retention Plan                *
                    Employment Agreement with Bruce M. Borst                       *
        11        Statement regarding computation of per share earnings           None
        13        Annual Report to Security Holders                                13
        16        Letter regarding change in certifying accountants               None
        18        Letter regarding change in accounting principles                None
        21        Subsidiaries of Registrant                                       21
        22        Published report regarding matters submitted to vote of         None
                  security holders
        23        Consents of Experts and Counsel                                  23
        24        Power of Attorney                                               None
        27        Financial Data Schedule                                          27
        28        Information from reports furnished to state insurance           None
                  regulatory authorities
        99        Additional Exhibits                                             None
</TABLE>

----------
*    Filed as exhibits to the Company's Form S-1 registration statement filed on
     December  19,  1994  (File No.  33-  87580)  pursuant  to  Section 5 of the
     Securities Act of 1933. All of such  previously  filed documents are hereby
     incorporated  herein by reference in accordance with Item 601 of Regulation
     S-B.

(b)  Reports on Form 8-K

     During the quarter ended June 30, 1998, the Company  filed:  (1) a Form 8-K
dated April 27, 1998,  announcing a stock repurchase  program and (2) a Form 8-K
dated May 19, 1998, announcing a branch purchase.


                                       44

<PAGE>



                                   SIGNATURES

     Pursuant to the  requirements  of Section 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                              AMTRUST CAPITAL CORP.



Date:  October 13, 1998               By:/s/ Bruce M. Borst                     
                                      ------------------------------------------
                                      Bruce M. Borst, President, Chief Executive
                                      Officer and Director
                                      (Duly Authorized Representative)

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report has been signed below by the following  persons in the  capacities and on
the dates indicated.



/s/ Bruce M. Borst                          /s/ Kenneth L. Hasselkus     
----------------------------                ------------------------------------
Bruce M. Borst, President,                  Kenneth L. Hasselkus, Director
 Chief Executive Officer and Director              
(Principal Executive and Operating Officer)                               


Date:    October 13, 1998                   Date:    October 13, 1998  



/s/ Dean H. Hartley                         /s/ Thomas A. Kirk                  
----------------------------                ------------------------------------
Dean H. Hartley, Director                   Thomas A. Kirk, Director    


Date:    October 13, 1998                   Date:    October 13, 1998   
0.


/s/ Roderic E. Daniels                      /s/ Deborah M. Huff                 
----------------------------                ------------------------------------
Roderic E. Daniels, Director                Deborah M. Huff, Treasurer and Chief
                                            Financial Officer 
                                            (Principal Financial and Accounting
                                                  Officer)  


Date:    October 13, 1998                   Date:    October 13, 1998


                                       45