UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934 [FEE REQUIRED]
          For the fiscal year ended March 31, 2000

                                       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 0-23370

                             PERMANENT BANCORP, INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)


            Delaware                                  35-1908797
 -------------------------------          ----------------------------------
 (State or other jurisdiction of          (IRS. Employer Identification No.)
  incorporation or organization)


101 Southeast Third Street, Evansville, Indiana             47708
-----------------------------------------------         -------------
  (Address of principal executive offices)                (Zip Code)

Registrant's telephone number, including area code:  (812) 437-2265
                                                     --------------

           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)

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
requirements for the past 90 days. YES X . NO    .
                                      ---     ---

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

     The aggregate  market value of the voting stock held by  non-affiliates  of
the registrant,  computed by reference to the closing price of such stock on the
NASDAQ  National  Market  System  as of June 12,  2000,  was  $66,417,312.  (The
exclusion from such amount of the market value of the shares owned by any person
shall  not be deemed  an  admission  by the  registrant  that such  person is an
affiliate of the registrant.)

     As of June 15, 2000, there were issued and outstanding 4,207,100 shares of
the Registrant's Common Stock.




                                       1
<PAGE>


                                     PART I
                                     ------

Item 1.  Business
-----------------

General


     Permanent Bancorp, Inc. (the "Company"), a Delaware corporation, was
organized in December 1993 as a savings and loan holding company for Permanent
Bank (the "Bank") in connection with the Bank's conversion from a mutual to a
stock form of ownership which was completed on March 31, 1994 (the
"Conversion"). Permanent Bank, the predecessor of which was originally organized
in 1885, is a federally chartered savings bank headquartered in Evansville,
Indiana. The Bank's deposits are insured up to the maximum allowable amount by
the Federal Deposit Insurance Corporation (the "FDIC"). Through its main office
and network of thirteen branch offices, the Company serves Vanderburgh, Gibson,
Warrick, Posey and Dubois Counties, Indiana. At March 31, 2000, the Company had
total assets of $492 million, deposits of $355.8 million, and total
stockholders' equity of $41.4 million (8.42% of total assets).

     Permanent Bank has been a community-oriented financial institution offering
a variety of financial services to meet the needs of the communities it serves.
The Bank attracts deposits from the general public and local governmental units
and uses these deposits, together with borrowings and other funds, primarily to
originate one- to four-family residential mortgage loans as well as loans
secured by multi-family and commercial real estate, automobile and other
consumer loans. To a lesser extent, the Bank also originates a limited number of
construction and commercial business loans. The Bank also invests in
mortgage-backed and other securities. See "Lending Activities" and "Investment
Activities."

     Through its service corporation, Perma Service Corp., the Bank also offers
various types of insurance products and provides brokerage services. See
"Subsidiary Activities."

     In December 1999 the Company announced its intention to merge with Old
National Bancorp which is also headquartered in Evansville, Indiana. The merger,
which is subject to shareholder and regulatory approval, is expected to be
completed during the quarter ending September 30, 2000. A description of the
terms of the proposed merger can be found in Note 1 to the Consolidated
Financial Statements contained in Part II, Item 8 of this report.

     The executive office of the Company is located at 101 Southeast Third
Street, Evansville, Indiana 47708. Its telephone number at that address is (812)
437-2265.

Forward-looking Statements

     The Company may from time to time make "forward-looking statements,"
including statements contained in the Company's filings with the Securities and
Exchange Commission (the "SEC"), in its reports to shareholders and in other
communications, which are made in good faith by the Company pursuant to the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995.

     These forward-looking statements include statements with respect to the
Company's beliefs, expectations, estimates and intentions, that are subject to
significant risks and uncertainties, and are subject to change based on various
factors, many of which are beyond the Company's control. Those risks and
uncertainties could cause the Company's financial performance to differ
materially from expectations, estimates, and intentions expressed in such
forward-looking statements.

     The Company does not undertake, and expressly disclaims any intent or
obligation, to update any forward-looking statement, whether written or oral,
that may be made from time to time by or on behalf of the Company.

                                       2
<PAGE>

Lending Activities

     General. Historically, the Bank originated fixed-rate, one- to four-family
     -------
mortgage loans. In the early 1980s, however, the Bank began to also originate,
subject to market conditions, adjustable-rate mortgage ("ARM") loans for
retention in its portfolio. At March 31, 2000, 69.8% of the Bank's total loan
portfolio was fixed-rate and 30.2% was adjustable-rate. The Bank's
adjustable-rate loan portfolio as a percentage of the total loan portfolio has
increased from 26% at March 31, 1996. See also "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Asset/Liability
Management" in Part II, Item 7 of this report.

     The Bank focuses its lending activities on the origination of loans secured
by first mortgages on owner-occupied, one-to four-family residences as well as
multi-family and commercial real estate loans, automobile and other consumer
loans. To a lesser extent, the Bank also originates a limited number of
construction and commercial business loans. At March 31, 2000, the Bank's total
loan portfolio, including commercial paper, totaled $329.6 million, of which
$172 million, or 52.2%, were one- to four-family mortgage loans. At the same
date, consumer loans (including indirect and direct automobile loans) totaled
$86.1 million, or 26.1%, multi-family and commercial real estate loans totaled
$45.6 million, or 13.8%, construction loans totaled $6.0 million, or 1.8%, and
there was $4.0 million of commercial paper, representing 1.2% of the loan
portfolio. Other business loans totaled $15.9 million or 4.9% of the loan
portfolio.

     The Bank also invests in mortgage-backed securities. At March 31, 2000, the
fair value of mortgage-backed securities totaled $49.2 million, or 10% of total
assets. See "Investment Activities -- Mortgage-Backed Securities."

     Loan applications are initially underwritten and approved at various levels
of authority, depending on the type and amount of the loan, as established by
the Board of Directors. Residential loans in excess of $350,000, commercial real
estate loans in excess of $1,000,000 and commercial business loans in excess of
$1,000,000 require the approval of the Board of Directors or the Senior Loan
Committee consisting of three Bank officers and three non-employee directors.
All unsecured loans in excess of $250,000 are reviewed by this committee.

     The Bank's loans-to-one-borrower limit is generally the greater of 15% of
unimpaired capital and surplus or $500,000. See "Regulation - Federal Regulation
of Savings Associations." At March 31, 2000, the maximum the Bank could have
lent to any one borrower and the borrower's related entities was approximately
$5.4 million. At March 31, 2000, the Bank had no loans with aggregate
outstanding balances in excess of this amount.

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



                                       3
<PAGE>


     Portfolio Composition. The following table sets forth the composition of
the Bank's loan and mortgage-backed securities portfolios (including loans held
for sale) in dollar amounts and in percentages at the dates indicated.

<TABLE>
<CAPTION>

                                                                           March 31,
                                       --------------------------------------------------------------------------
                                                 1996                      1997                     1998
(Dollars in Thousands)                           ----                      ----                     ----
Real Estate Loans:                      Amount       Percent       Amount      Percent       Amount      Percent
                                       --------     ---------     --------    ---------     ---------   ---------
<S>                                    <C>            <C>         <C>          <C>          <C>          <C>
 One- to four-family...............    $144,155      68.85%       $152,655     71.82%       $158,750     69.67%
 Multi-family......................      11,823       5.65           8,041      3.78           4,092      1.80
 Commercial real estate............       4,787       2.29           4,034      1.90           4,795      2.10
 Construction or development.......       2,700       1.29           1,888       .89           3,435      1.51
                                       --------     ---------     --------    ---------     ---------   ---------
     Total real estate loans.......    $163,465      78.08        $166,618     78.39        $171,072     75.08

Other Loans:
 Consumer Loans:
  Deposit account..................       1,148       0.55             940       .44             892      0.39
  Automobile.......................      31,056      14.83          31,394     14.77          31,436     13.80
  Home improvement.................       1,088       0.52           1,084       .51             839      0.37
  Retail mobile home loans.........       1,595       0.76           1,240       .58             935      0.41
  Home equity and other............       8,666       4.14          10,269      4.83           9,718      4.26
                                       --------     ---------     --------    ---------     ---------   ---------
     Total consumer loans..........      43,553      20.80          44,927     21.13          43,820     19.23
 Commercial business loans.........          57       0.03              52       .02           3,861      1.69
 Bankers' acceptances..............         299       0.14              --        --              --        --
 Commercial paper..................       1,997       0.95             979       .46           9,116      4.00
                                       --------     ---------     --------    ---------     ---------   ---------
     Total other loans.............      45,906      21.92          45,958     21.61          56,797     24.92
                                       --------     ---------     --------    ---------     ---------   ---------
     Total loans...................    $209,371     100.00%       $212,576    100.00%       $227,869    100.00%
                                       --------     =========     --------    =========     ---------   =========

Less:
 Loans in process..................          67                       (24)                       149
 Deferred fees and discounts.......         156                        284                       398
 Allowance for losses..............       2,238                      2,126                     1,973
                                       --------                   --------                  ---------
 Total loans ......................    $206,910                   $210,190                  $225,349
                                       ========                   ========                  =========

Mortgage-Backed Securities:
 FNMA..............................     $21,286      22.62%        $31,793      31.55%       $25,730     31.76%
 GNMA..............................      31,949      33.96          27,160      26.95         27,116     33.47
 FHLMC.............................      40,852      43.42          41,832      41.50         28,163     34.77
                                       --------     ---------     --------    ---------     ---------   ---------
    Total mortgage-backed
      securities...................      94,087     100.00%       100,785      100.00%       81,009     100.00%
                                                    =========                 =========                 =========

Net premiums and discounts.........          20                        448                       505
                                       --------                   --------                  ---------

Net mortgage-backed securities.....     $94,107                   $101,233                   $81,514
                                       ========                   ========                  =========
<CAPTION>

                                                                 March
                                           -------------------------------------------------
                                                    1999                       2000
                                                    ----                       ----
Real Estate Loans:                           Amount      Percent        Amount      Percent
                                           --------    -----------    --------    ----------
<S>                                        <C>           <C>          <C>           <C>
 One- to four-family...............        $171,250      52.84%       $171,960      52.17%
 Multi-family......................           4,838       1.49           1,627        .49
 Commercial real estate............          27,060       8.35          43,958      13.34
 Construction or development.......           8,208       2.53           6,030       1.83
                                           --------    -----------    --------    ----------
     Total real estate loans.......        $211,356      65.21        $223,575      67.83

Other Loans
  Consumer Loans:
  Deposit account..................             868        .27             392        .12
  Automobile.......................          56,779      17.52          57,320      17.39
  Home improvement.................             570        .18             434        .13
  Retail mobile home loans.........             724        .22             501        .15
  Home equity and other............          27,198       8.39          27,463       8.33
                                           --------    -----------    --------    ----------
     Total consumer loans..........          86,139      26.58          86,110      26.12
 Commercial business loans.........          17,328       5.35          15,965       4.84
 Bankers' acceptances..............             ---                        ---        ---
 Commercial paper..................           9,275       2.86           3,967       1.21
                                           --------    -----------    --------    ----------
  Total other loans.............            112,742      34.79         106,042      32.17
                                           --------    -----------    --------    ----------
     Total loans...................        $324,098      100.00%      $329,617      100.00%
                                           --------    ===========    --------    ==========

Less:
 Loans in process..................              52                         27
 Deferred fees and discounts.......             310                        207
 Allowance for losses..............          2 ,706                      2,232
                                           --------                   --------
 Total loans ......................        $321,030                   $327,151
                                           ========                   ========

Mortgage-Backed Securities:
 FNMA..............................         $17,464      32.09%        $18,016       36.80%
 GNMA..............................          20,105      36.94          15,289       31.22
 FHLMC.............................          16,858      30.97          15,661       31.98
                                           --------    -----------    --------    ----------
    Total mortgage-backed
      securities...................          54,427      100.00%        48,966      100.00%
                                                       ===========                ==========

Net premiums and discounts.........             422                        218
                                           --------                   --------

Net mortgage-backed securities.....         $54,849                    $49,184
                                           ========                   ========
</TABLE>




                                       4
<PAGE>

   The following  table sets forth the  composition of the Bank's loan portfolio
by fixed and adjustable rates at the dates indicated.
<TABLE>
<CAPTION>
                                                                                     March 31,
                                                    -------------------------------------------------------------------------
                                                             1996                      1997                     1998
(Dollars in Thousands)                                       ----                      ----                     ----
Fixed-Rate Loans:
-----------------
  Real estate:
                                                      Amount       Percent       Amount       Percent     Amount     Percent
                                                    -----------  ----------    ----------    ---------  ----------  ---------
<S>                                                  <C>           <C>          <C>            <C>       <C>          <C>
      One- to four-family...................         $ 99,568      47.56%       $ 94,476       44.44%    $ 95,432     41.88%
      Multi-family..........................            3,271       1.56           2,687        1.26        2,346      1.03
      Commercial real estate.................           3,634       1.74           3,357        1.58        3,386      1.49
      Construction or development............           2,686       1.28           1,855         .87        3,423      1.50
                                                    -----------  ----------    ----------    ---------  ----------  ---------
         Total real estate loans.............         109,159      52.14         102,375       48.16      104,587     45.90


      Consumer...............................          43,405      20.73          44,450       20.91       42,324     18.57
      Commercial business....................              57       0.03              52         .02          581      0.25
      Bankers' acceptances...................             299       0.14             ---         ---          ---       ---
      Commercial paper.......................           1,997       0.95             979         .46        9,116      4.00
                                                    -----------  ----------    ----------    ---------  ----------  ---------
         Total fixed-rate loans..............         154,917      73.99         147,856       69.55      156,608     68.73
                                                    -----------  ----------    ----------    ---------  ----------  ---------

Adjustable-Rate Loans:
----------------------
  Real estate:
      One- to four-family....................          44,588      21.30          58,179       27.37       63,318     27.79
      Multi-family...........................           8,552       4.08           5,354        2.52        1,746      0.77
      Commercial real estate.................           1,153       0.55             677         .32        1,409      0.62
      Construction or development............              13       0.01              33         .02           12        01
                                                    -----------  ----------    ----------    ---------  ----------  ---------
         Total real estate loans.............          54,306      25.94          64,243       30.22       66,485     29.18
     Consumer................................             148       0.07             477         .22        1,496      0.66
     Commercial business.....................             ---        ---             ---         ---        3,280      1.44
                                                    -----------  ----------    ----------    ---------  ----------  ---------
         Total adjustable-rate
          loans..............................          54,454      26.01          64,720       30.45       71,261     31.27
                                                    -----------  ----------    ----------    ---------  ----------  ---------
         Total loans.........................         209,371     100.00%        212,576      100.00%     227,869    100.00%
                                                                 ==========                  =========              =========
Less:
-----
     Loans in process........................              67                        (24)                     149
     Deferred fees and discounts.............             156                        284                      398
     Allowance for loan losses...............           2,238                      2,126                    1,973
                                                    -----------                ----------               ----------
         Total loans and loans
          held for sale, net ................        $206,910                   $210,190                 $225,349
                                                    ===========                ==========               ==========
<CAPTION>

                                                                      March 31,
                                                    ----------------------------------------------
Fixed-Rate Loans:                                            1999                   2000
-----------------                                            ----                   ----
  Real estate:
                                                      Amount      Percent     Amount     Percent
                                                    ----------   ---------  ---------- -----------
<S>                                                  <C>           <C>       <C>          <C>
      One- to four-family...................         $110,140      33.98%     102,585     31.12%
      Multi-family..........................            3,396       1.05          259       .08
      Commercial real estate.................          17,054       5.26       33,589     10.19
      Construction or development............           8,196       2.53        6,019      1.83
                                                    ----------   ---------  ---------- -----------
         Total real estate loans.............         138,786      42.82      142,452     43.22


      Consumer...............................          76,132      23.49       73,873     22.41
      Commercial business....................          17,203       5.31       9,733       2.95
      Bankers' acceptances...................             ---        ---         ---        ---
      Commercial paper.......................           9,275       2.86       3,967       1.21
                                                    ----------   ---------  ---------- -----------
         Total fixed-rate loans..............         241,396      74.49     230,025      69.79
                                                    ----------   ---------  ---------- -----------

Adjustable-Rate Loans:
----------------------
  Real estate:
      One- to four-family....................          61,110      18.86      69,375      21.05
      Multi-family...........................           1,442       0.44       1,368        .42
      Commercial real estate.................          10,006       3.09      10,369       3.15
      Construction or development............              12        ---          11        ---
                                                    ----------   ---------  ---------- -----------
         Total real estate loans.............          72,570      22.39      81,123      24.61
     Consumer................................           9,995       3.08      12,237       3.71
     Commercial business.....................             125       0.04       6,232       1.89
                                                    ----------   ---------  ---------- -----------
         Total adjustable-rate
          loans..............................          82,690      25.51      99,592      30.21
                                                    ----------   ---------  ---------- -----------
         Total loans.........................         324,086     100.00%    329,617     100.00%
                                                                 =========             ===========

Less:
-----
     Loans in process........................              52                      28
     Deferred fees and discounts.............             310                     212
     Allowance for loan losses...............           2,706                   2,232
                                                    ----------              ----------
         Total loans and loans
          held for sale, net ................        $321,018                $327,145
                                                    ==========              ==========
</TABLE>



                                       5
<PAGE>





     The following  table sets forth the maturities of the Bank's loan portfolio
(excluding  commercial  paper) at March 31, 2000.  Loans that have adjustable or
renegotiable interest rates are shown as maturing in the period during which the
contract is due. The table reflects scheduled principal  amortization,  but does
not reflect possible prepayments or enforcement of due-on-sale clauses.



<PAGE>

<TABLE>
<CAPTION>

                                                      Real Estate
                      ---------------------------------------------------------------------------
                                                      Multi-family
                                                          and
                                                       Commercial               Construction
                        One- to four-family           Real Estate              or Development
                      ----------------------          -----------              --------------
                                     Average                  Average                    Average
                      Amount          Rate        Amount        Rate        Amount         Rate
                      ------         -------      ------      -------       ------       -------
                                                (Dollars in Thousands)
 Due During Years
 Ending March 31,
-----------------

<S>                  <C>             <C>        <C>            <C>          <C>           <C>
     2001(1)         $ 10,725        7.73%      $  5,612       8.93%        $ 3,819       8.25%
   2002 to 2005        16,888        7.13         25,678       9.35             856       9.12
   2006 to 2010        79,548        7.36          7,046       7.84             144       8.08
   2011 to 2020        53,549        7.15          6,240       8.12           1,211       7.50
  2020 and over        11,250        7.28          1,009       7.78             ---        ---
                     --------                   --------                    -------
      Total          $171,960                   $ 45,585                    $ 6,030
                     ========                   ========                    =======

<CAPTION>

                                                     Commercial
                           Consumer                   Business                   Total
                           --------                  ----------                  -----
                                   Average                   Average                   Average
                      Amount         Rate       Amount        Rate         Amount       Rate
                      ------       -------      ------       -------       ------      -------
                                               (Dollars in Thousands)
 Due During Years
 Ending March 31,
-----------------

<S>                 <C>            <C>         <C>             <C>        <C>           <C>
     2001(1)        $ 14,331       10.40%      $ 3,390         9.61%      $ 37,877      9.14%
   2002 to 2005       61,525        8.51         8,764         8.89        113,711      8.53
   2006 to 2010        7,487        9.79         3,039         7.27         97,264      7.58
   2011 to 2020        2,647       10.55           772         5.94         64,419      7.37
   2020 and over         120        9.10           ---          ---         12,379      7.34
                    --------                  --------                    --------
      Total         $ 86,110                  $ 15,965                    $325,650
                    ========                  ========                    ========
</TABLE>



------------
(1) Includes demand loans, loans having no stated maturity and overdraft loans.





                                       6
<PAGE>


     The total amount of fixed interest rate loans due at March 31, 2000 was
$230 million while the total amount of variable rate loans due as of that date
was $99.6 million.

     One- to Four-Family Residential Mortgage Lending.
     -------------------------------------------------
     The Bank's primary lending activity  consists of the origination of one- to
four-family residential mortgage loans secured by property located in the Bank's
immediate market area. At March 31, 2000, the Bank had $172 million, or 52.2% of
its loan portfolio invested in these loans.

     The Bank presently offers fixed-rate conventional mortgage loans, Federal
Housing Administration ("FHA") Loans, Veterans Administration ("VA") loans, and
ARM loans. During fiscal 1995, the Bank introduced a 10-year adjustable-rate
loan which features an initial 10-year fixed-rate that converts to a one-year
adjustable-rate loan upon expiration of the initial fixed-rate period. The
Bank's origination of fixed-rate mortgage loans as compared to ARM loans is
determined on an on-going basis and is based on changes in market interest rates
and consumer preference. Recently many borrowers have opted for shorter-term
15-year fixed-rate mortgages or ten-year adjustable rate loans. Interest rates
charged on fixed-rate loans are competitively priced according to local market
conditions. The Bank's current policy is to sell all newly originated fixed-rate
loans with terms 15 years or more which conform to the secondary market
requirements as well as ARM loans converted to a fixed rate with a remaining
term to maturity in excess of 15 years, and all FHA and VA loans. See "-
Originations, Purchases, Sales and Servicing of Loans and Mortgage-Backed
Securities."

     The Bank currently makes adjustable-rate, one- to four-family residential
mortgage loans in amounts of up to 100% of the appraised value or selling price
of the security property, whichever is less. For loans with loan-to-value ratios
of greater than 80%, the Bank typically requires private mortgage insurance to
reduce the Bank's exposure to 75% of the appraised value or selling price of the
security property. Adjustable-rate loans generally have interest rate adjustment
limitations consisting of 2% annual adjustments and 6% lifetime adjustments, and
are generally indexed to the weekly average yield of U. S. Treasury securities
adjusted to a constant maturity of one year.

     The retention of ARM loans in the Bank's loan portfolio helps the Bank to
manage its exposure to changes in the interest rates. There are, however,
unquantifiable credit risks relating to such loans resulting from the potential
of increased monthly principal and interest payments due to increasing rates
which must be paid by the customer. It is possible that during periods of rising
interest rates, the risk of default on ARM loans may increase as a result of
repricing and the increased costs to the borrower. Furthermore, the ARM loans
originated by the Bank generally provide, as a marketing incentive to meet
competitive conditions, for initial rates of interest below the rates which
would apply were the adjustment index fully utilized when establishing the
initial loan rates. These loans are subject to increased risk of default or
delinquency due to this discounting. In addition, although ARM loans allow the
Bank to increase the sensitivity of its asset base to changes in interest rates,
the extent of this interest rate sensitivity is limited by the periodic and
lifetime interest rate adjustment limits and by the ability of borrowers to
refinance their loans without penalty during periods of declining mortgage
rates. Accordingly, there can be no assurance that yields on ARM loans will be
sufficient to offset increases in the Bank's cost of funds.

     In underwriting residential real estate loans, the Bank evaluates the
borrower's ability to make monthly payments, employment history, credit history
and the value of the property securing the loan. Potential borrowers are
qualified for fixed-rate loans based upon the initial or stated rate of the
loan. Borrowers on one and three year adjustable-rate loans are currently
qualified at an 8% rate or the fully-indexed rate after one year, whichever is
higher. Borrowers on other adjustable-rate loans are qualified at the initial
note rate.

     An appraisal of the security property from Board-approved independent fee
appraisers is obtained prior to mortgage loan approvals. In connection with
origination of residential real estate loans, the Bank


                                       7
<PAGE>



currently requires that the borrower obtain title insurance, and fire, flood (if
applicable) and casualty insurance to protect the Bank's interest.

     The Bank's residential mortgage loans customarily include due-on-sale
clauses giving the Bank the right to declare the loan immediately due and
payable in the event, among other things, the borrower sells or otherwise
disposes of the property subject to the mortgage and the loan is not repaid. The
Bank on occasion has enforced due-on-sale clauses in its mortgage contracts.

     Mortgage-backed securities decreased $19.7 million in fiscal 1998, $26.7
million in fiscal 1999 and another $5.6 million in fiscal 2000. At March 31,
2000 the mortgage-backed security portfolio was $49.2 million. The portfolio has
decreased during the last several years to fund growth in the consumer and
commercial loan portfolios. Although such securities are generally held for
investment, they can serve as collateral for FHLB borrowings. For information
regarding the carrying and market values of Permanent Bank's mortgage-backed
securities portfolio, see Note 2 of the Notes to Consolidated Financial
Statements contained in Part II, Item 8 of this report. See also "Investment
Activities - Mortgage-Backed Securities."

     Consumer Lending. The Bank considers consumer lending an integral component
     ----------------
of its lending operations and has during recent years expanded its consumer loan
portfolio particularly in the automobile and home lending areas. Consumer loans
generally have shorter terms to maturity (thus reducing Permanent Bank's
exposure to changes in interest rates) and historically have carried higher
rates of interest than do one- to four-family residential mortgage loans. In
addition, management believes that the offering of consumer loan products helps
to expand and create stronger ties to its existing customer base by increasing
the number of customer relationships and providing cross-marketing
opportunities. At March 31, 2000, the Bank's consumer loan portfolio totaled
$86.1 million, or 26.1% of its loan portfolio. The chief component of such loans
consists of indirect and direct automobile paper, accounting for $57.3 million,
or 66.6%, of the consumer loan portfolio at March 31, 2000. Under applicable
federal law, the Bank is authorized to invest up to 35% of its assets in
consumer loans.

     Permanent Bank offers a variety of secured consumer loans, including
automobile, boat, home equity, home improvement, mobile home loans, loans
secured by savings deposits and other consumer collateral. The Bank also offers
a limited amount of unsecured loans. The Bank generally originates consumer
loans in its market area. Although it has not done so in recent years, the Bank
may also purchase consumer loans, generally within its market area. Consumer
loan terms vary according to the type of collateral and length of contract.
Other than home equity lines of credit, the Bank's consumer loans generally have
fixed rates of interest.

     The Bank is actively engaged in indirect dealer financing of automobiles.
Such indirect dealer loans are originated through automobile dealers located in,
or in counties contiguous to, the Bank's primary market area and underwritten by
the Bank's lending staff in accordance with the Bank's general standards for
underwriting consumer loans. These loans are originated at fixed interest rates
and are typically for terms of up to six years. At March 31, 2000, indirect
dealer loans totaled $48 million, or 55.7%, of the Bank's consumer loan
portfolio.

     At March 31, 2000, $24.5 million of the Bank's consumer loans consisted of
home equity loans, including home equity lines of credit. The home equity loans
are typically collateralized by second mortgages on owner-occupied,
single-family mortgage loans.

     The Bank has also purchased loans secured by mobile homes. Such loans were
originated through a subsidiary of the Bank in association with two other
savings institutions. The subsidiary created pools of mobile home loans it
originated, and Permanent Bank and the other participating lenders each
purchased a one-third interest in the pools. The Bank's mobile home loan
portfolio as of March 31, 2000 was $501,000, or .10% of the Bank's loan
portfolio.



                                       8
<PAGE>



     The underwriting standards employed by the Bank for consumer loans include
a determination of the applicant's credit history and an assessment of the
ability to meet existing obligations and payments on the proposed loan. In
addition, the stability of the applicant's monthly income from primary
employment is considered during the underwriting process. 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.

     Consumer loans may entail greater credit risk than do residential mortgage
loans, particularly in the case of consumer loans which are unsecured, such as
checking account overdraft privilege loans, or are secured by rapidly
depreciable assets, such as automobiles, mobile homes and recreational vehicles.
In such cases, any repossessed collateral for a defaulted loan may not provide
an adequate source of repayment on the outstanding loan balance. 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.

     Multi-Family and Commercial Real Estate Lending. Over the past five years,
     ------------------------------------------------
an increasing percentage of the Bank's loan portfolio has been multi-family and
commercial real estate loans made primarily in its lending area. The Bank has
also purchased whole loan and participation interests in loans in Indiana, and
to a lesser extent, in Kentucky, Tennessee and elsewhere. At March 31, 2000, the
Bank had multi-family and commercial real estate loans totaling $45.6 million,
representing 13.8% of its loan portfolio.

     The majority of the Bank's multi-family and commercial real estate loans
are secured by apartment buildings, as well as other types of property,
including nursing homes, office buildings, hotels and shopping centers.

     The table below sets forth by type of security property the Bank's
multi-family and commercial real estate (including land) loans at March 31,
2000.


<TABLE>
<CAPTION>

                                                                                                      Amount of
                                                                                Outstanding       Non-Performing
                                                             Number of           Principal         or Of Concern
                                                                Loans             Balance              Loans
                                                             ---------          -----------       --------------
                                                                          (Dollars in Thousands)

<S>                                                             <C>              <C>                   <C>
Apartment buildings....................................         15               $  5,899              $ ---
Churches ..............................................          6                  4,464                ---
Small business facilities and office
  buildings............................................         97                 23,858                ---
Hotel .................................................          4                 10,238                ---
Shopping centers.......................................          5                  1,126                ---
                                                             ---------          -----------       --------------
 Total commercial and multi-family
  real estate loans....................................        127                $45,585              $ ---
                                                             =========          ===========       ==============
</TABLE>



     At March 31, 2000, the Bank had a total of 16 multi-family and commercial
real estate loans with outstanding principal balances in excess of $1.0 million.
Each of these loans was performing in accordance with its contractual terms.

     Multi-family and commercial real estate loans originated by the Bank
generally have terms ranging from 5 to 20 years and up to 25 year amortization
schedules. Rates on such loans generally either (i) adjust (subject, in some
cases, to specified interest rate caps) at one, three or five year intervals to
specified spreads



                                       9
<PAGE>


over an index, (ii) float (subject, in some cases, to specified interest rate
caps) with changes in a specified rate or (iii) carry fixed rates. Under the
Bank's current loan policy, multi-family and commercial real estate loans (other
than loans to facilitate) are written in amounts of up to 80% of the appraised
value of the properties.

     Appraisals on properties securing multi-family and commercial real estate
property loans originated by the Bank are performed by an independent appraiser
approved by the Board of Directors prior to the time the loan is made. All
appraisals on multi-family and commercial real estate loans are reviewed by the
Bank's management for appropriateness. 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. Historically, personal guarantees are generally obtained for
the Bank's multi-family and commercial real estate loans. While the Bank
continues to monitor multi-family and commercial real estate loans on a regular
basis after origination, updated appraisals are not normally obtained after
closing unless the Bank believes that there are questions regarding the
collectibility of the loan or the value of the collateral.

     Multi-family and commercial real estate loans generally present a higher
level of credit risk than loans secured by one- to four-family residences. This
greater risk is due to several factors, including the concentration of principal
in a limited number of loans and borrowers, the effect of general economic
conditions on income-producing properties and the increased difficulty of
evaluating and monitoring these types of loans. Furthermore, the repayment of
loans secured by multi-family and commercial real estate is typically dependent
upon the successful operation of the related real estate project. If the cash
flow from the project is reduced (for example, if leases are not obtained or
renewed, or a bankruptcy court modifies a lease term, or a major tenant is
unable to fulfill its lease obligations), the borrower's ability to repay the
loan may be impaired.

     Construction or Development Lending. The Bank makes construction loans to
     ------------------------------------
individuals for the construction of their residences. The Bank generally
requires that the borrower have a general contractor. The Bank also makes loans
to builders for presold and speculative single-family construction purposes and
a limited number of multi-family and commercial construction loans. At March 31,
2000, the Bank's construction loan portfolio totaled $6.0 or 1.8% of its total
loan portfolio. As of that date, all of these loans were secured by property
located within the Bank's market area.

     Construction loan terms to individuals are generally made under the ARM
program with provisions for converting to a fixed-rate loan upon completion of
the construction. Fixed-rate loans for construction purposes are limited to a
maximum term of 15 years. During the construction phase, the borrower pays
interest only. Residential construction loans are generally underwritten
pursuant to the same guidelines used for originating permanent residential loans
except that the record of the builder is also considered.

     Construction loans to builders are written for a term of 18 months at a
fixed rate of interest. Construction loans are obtained primarily through
continued business from builders who have previously borrowed from the Bank, as
well as referrals from existing customers. The application process includes a
submission of detailed plans, specifications and costs of the project to be
constructed. These items are also used as a basis for determining the appraised
value of the security property. Loans are based on the lesser of the current
appraised value or the cost of construction (land plus building). From time to
time, the Bank has lent funds for the development and subdivision of lots,
although the Bank had no such loans in its portfolio at March 31, 2000.

     Commercial Business Lending. Federally chartered savings institutions, such
     ----------------------------
as Permanent Bank, are authorized to make secured or unsecured loans and issue
letters of credit for commercial, corporate, business and agricultural purposes
and to engage in commercial leasing activities, up to a maximum of 10% of total
assets.


                                       10
<PAGE>


     At March 31, 2000, Permanent Bank had $15.9 million in commercial business
loans outstanding (representing 4.9% of the Bank's total loan portfolio). At
March 31, 2000, Permanent Bank had $300,000 of standby letters of credit
outstanding.

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

     The Bank originates real estate loans through marketing efforts, the Bank's
existing customer base, walk-in customers and referrals from realtors and
builders. The Bank originates both adjustable-rate and fixed-rate loans. Its
ability to originate loans is dependent upon the relative market demand for
fixed-rate or ARM loans, which is affected by the term structure (short-term
compared to long-term) of interest rates, as well as the current and expected
future level of interest rates and competition.

     During fiscal 2000, the Bank originated a total of $134.2 million in loans.
Of the loans originated during the year, $33.9 million were one- to four-family
real estate loans, $49 million were consumer loans, $38.6 million were
commercial loans, and $12.7 million were construction loans.

     The Bank's current policy is to sell all conforming fixed-rate conventional
loans that are originated or converted with terms of more than 15 years.
Likewise, all FHA and VA loans are sold, irrespective of term. In contrast, all
ARM loans, regardless of the term, are retained and other loans (generally
non-conforming loans) are also retained in the Bank's portfolio. Servicing is
retained on all loan sales, except for FHA and VA mortgage loans. During fiscal
1998, 1999 and 2000, the Bank sold $5.1 million, $12.7 million and $8.5 million
of loans, respectively.

     With respect to the loans that the Bank sells, it is the policy of the Bank
to sell current production of such loans as the loans are originated, unless it
is determined to temporarily hold these loans until more favorable rates are
available. However, it is the Bank's policy that in no event shall a loan
continue to be held for sale if the price to be received on that loan drops
below net 98 (98 cents on the dollar). In addition, the Bank's policy provides
that any loan held for sale which bears a rate too high to sell in the secondary
market without having to accept a discounted premium will continue to be held
until such time as market conditions allow the loan to be sold without such a
discount.

     Government loans are committed for sale with a private investor the same
day an application is received. The requirements for delivery are on a "best
effort" basis, providing that if for any reason the loan does not close, there
is no financial exposure to the Bank.

     The Board of Directors receives a monthly report identifying the number and
dollar amount of mortgage loans not sold which present any potential interest
rate risk exposure to the Bank. The report further details the current secondary
market buy rates and the estimated gain or loss at such rates. The Bank attempts
to limit any interest rate risk exposure created by commitments to make or sell
loans by limiting the number of days between the commitment and closing,
charging fees for commitments and managing the amount of its uncovered
commitments outstanding at any one time.

     The Bank occasionally purchases loans and loan participations for one- to
four-family, multi-family and commercial real estate loans. Such loans had a
carrying value of approximately $5.5 million, $14.3 million and $15.1 million at
March 31, 1998, 1999 and 2000, respectively.

     The Bank has purchased mortgage-backed securities as a means of
supplementing loan demand. In recent years, however, the Bank has elected to
utilize the liquidation of its mortgage-backed portfolio to fund increasing
demand for commercial and consumer loans.

     The Bank had commitments to make loans, including participations, of
approximately $4.9 million, $23.4 million and $26.1 million (excluding
undisbursed portions of loans in process) at March 31, 1998, 1999


                                       11
<PAGE>


and 2000, respectively. In addition, the Bank had approximately $100,000 and
$106,000 in commitments to sell loans at March 31, 1998 and 1999, respectively.
There were no loan sale commitments at March 31, 2000

     The amount of loans serviced by the Bank for others totaled $32.5 million,
$36.3 million and $37.7 million at March 31, 1998, 1999 and 2000, respectively.

     The Bank generally earns servicing fees of 25 basis points for servicing
loans for others. For the years ended March 31, 1998, 1999 and 2000 such fees
amounted to approximately $84,000, $82,000 and $84,000, respectively.



                                       12
<PAGE>


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

<TABLE>
<CAPTION>


                                                                 1998        1999       2000
(Dollars in Thousands)                                         -------     -------     -------
Originations by type:
---------------------
<S>                                                            <C>         <C>         <C>
  Real estate - one- to four-family......................      $39,373     $55,948     $33,905
              - multi-family.............................          ---         ---         ---
              - commercial real estate...................        3,144       4,308      19,629
              - construction.............................        3,634       3,943      12,733
  Non-real estate .......................................
                  -consumer..............................       24,829      76,933      48,962
                  -commercial business...................        5,192      27,676      18,961
                                                               -------     -------     -------
         Total loans originated .........................       76,172     168,808     134,190
                                                               -------     -------     -------

Purchases:
----------
  Real estate - one- to four-family......................       $  ---      $  ---      $6,479
              - multi-family.............................          ---         ---         ---
              - commercial real estate...................          ---         ---         ---
              - construction.............................          ---         ---         ---
  Non-real estate - consumer.............................          ---         ---         ---
              - commercial business......................          ---         ---         ---
              - commercial paper.........................       17,257      43,552      26,266
              - bankers' acceptances.....................          ---         ---         ---
                                                               -------     -------     -------
         Total loans purchased...........................       17,257      43,552      32,745
 Mortgage-backed securities..............................       18,485      20,919      11,005
                                                               -------     -------     -------
         Total purchases.................................       35,742      64,471      43,750
                                                               -------     -------     -------

Sales and Principal Repayments:
-------------------------------
Sales:
Real estate - adjustable-rate one- to four-family........       $  ---      $  ---      $  ---
   - fixed-rate one- to four-family......................        5,078      12,721       8,549
              - multi-family.............................          ---         ---         ---
              - commercial real estate...................          ---         ---         ---
              - construction.............................          ---         ---         ---
  Non-real estate - consumer.............................          ---         ---         ---
        - commercial business............................          ---         ---         ---
                                                               -------     -------     -------
         Total loans sold................................        5,078      12,721       8,549
  Mortgage-backed securities.............................       15,083      18,223         ---
                                                               -------     -------     -------
         Total sales.....................................       20,161      30,944       8,549
Principal repayments.....................................       97,399     187,707     172,473
                                                               -------     -------     -------
         Total reductions................................      117,560     218,651     181,022
Increase (decrease) in other items, net..................          ---         ---         ---
                                                               -------     -------     -------
         Net increase (decrease).........................      $(5,646)    $14,628     $(3,082)
                                                               =======     =======     =======
</TABLE>



                                       13
<PAGE>



Asset Quality


     Loan Monitoring Procedures. When a borrower fails to make a required
     ---------------------------
payment on a loan, the Bank attempts to cure the delinquency by contacting the
borrower. In the case of loans secured by real estate, a late notice is sent 10
to 15 days after the scheduled payment date, depending on the type of loan, and
a second notice is sent after 16 days. In the case of consumer loans, a late
notice is sent five days after the scheduled payment date and a second notice is
sent after ten days. If the delinquency is not cured by this time, contact with
the borrower is made by phone. Additional written and verbal contacts or
meetings with the borrower are made to the extent necessary. With respect to
mortgage loans, if the delinquency is not cured by the 90th day, a 30-day
default letter is sent and, once that period lapses, appropriate action to
foreclose on the property is initiated. Interest income on loans at this point
is reduced by the full amount of accrued and uncollected interest. If
foreclosed, the property is sold at a sheriff's sale and typically is purchased
by the Bank. Delinquent consumer loans are handled in a similar manner. If these
efforts fail to bring the loan current, appropriate action may be taken to
collect any loan payment that remains delinquent. The Bank's procedures for
repossession and sale of consumer collateral are subject to various requirements
under Indiana consumer protection laws.

     Real estate acquired by Permanent Bank 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 is charged
against the allowance for loan losses. Upon 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 net
realizable value.

     Prior to the consummation of commercial real estate loans, financial
information on the project and its principals are reviewed, and appraisals are
obtained and reviewed. Subsequent balance sheets and operating statements are
obtained and reviewed on at least an annual basis. On loans that indicate
potential weaknesses, more frequent reviews are made.

     A committee of senior officers and outside directors of the Bank
periodically reviews large loans (generally, those unsecured loans in excess of
$250,000, residential real estate loans in excess of $350,000 and commercial
credits in excess of $1,000,000). The committee examines the borrower's
financial information including operating statements and statements of financial
position, prior loan performance and any industry or economic trends which would
potentially affect the borrower's operations or collateral values.

     Appraisals are obtained on properties that are transferred to real estate
owned. The Bank performs periodic fair value computations using methodology
consistent with that of an appraiser. Appraisals are assigned only to qualified
appraisers located within or familiar with the location of the subject property.
Net realizable value calculations are performed on all properties in either real
estate owned or loans classified as impaired. The result of these calculations
may indicate a write down of the asset or the establishment of a specific
reserve.

     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 of 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 to be uncollectible
and of such little value that their continuance as assets without the
establishment of a specific loss reserve is not warranted. Assets which do not
currently expose the insured institution to



                                       14
<PAGE>


sufficient risk to warrant classification in one of the aforementioned
categories but possess weaknesses are required to be designated "special
mention" by management.

     When an insured institution classifies problem assets as either substandard
or doubtful, it may establish general allowances for loan 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. Additionally, while the Bank's asset quality is
generally strong and its reserves adequate, changes in the local or national
economy could adversely affect asset quality or call for the establishment of
additional reserves.

     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 in its portfolio to
determine whether such assets require classification in accordance with
applicable regulations. Classified assets of the Bank at March 31, 2000,
(without deduction for specific valuation allowances of $40,000) are as follows:


                                                       At March 31,
                                            ----------------------------------
                                               1998        1999         2000
                                            ---------    --------      -------
                                                      (In Thousands)
Substandard (including real
 estate owned).........................      $1,372       $2,606         $528
Doubtful...............................         141          975          268
Loss...................................         ---          ---          ---
                                            ---------    --------      -------
     Total classified assets
      (including real estate
      owned)...........................      $1,513       $3,581          796

Special mention........................      $2,753       $4,633        5,489
                                            ---------    --------      -------
     Total classified assets
      (including real estate
      owned) and special
      mention..........................      $4,266       $8,214       $6,285
                                            =========    ========      =======

         The specific reserves established with respect to classified assets are
included in the allowance for loan losses.



                                       15
<PAGE>



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

<TABLE>
<CAPTION>

                                                                       At March 31,
                               -----------------------------------------------------------------------------------------------
                                         1996                           1997                            1998
                               -----------------------------------------------------------------------------------------------
                                            Percent of                      Percent  of                      Percent  of
                                              Loans in                         Loans in                         Loans in
                                                  Each                             Each                             Each
                                              Category                         Category                         Category
                                              to Total                         to Total                         to Total
                                 Amount          Loans           Amount           Loans           Amount            Loan
                               ----------   -------------       ---------   ---------------     ----------   --------------
<S>                               <C>              <C>           <C>                <C>          <C>                <C>
(Dollars in Thousands)
Allocated:
----------
One- to four-
 family....................       $  90            69.4%         $  90              71.7%        $  ---             69.7%

Multi-family...............         166            5.5             183              3.8             ---             1.8
Commercial real
 estate....................         ---            2.4             ---              1.9             ---             2.1
Construction or
 development...............         ---            1.3             ---              1.0             ---             1.5
Consumer...................          50           20.3              68             21.1              50            19.2
Commercial business........         ---            ---             ---               --             ---             1.7
Bankers' acceptances.......         ---            0.1             ---               --             ---             ---
Commercial paper...........         ---            1.0             ---               .5             ---             4.0

Unallocated:
------------
  Consumer.................         456            N/A             454              N/A             520             N/A
  One- to four-family......         647            N/A             876              N/A             435             N/A
  Commercial business...
 Multi-family and
    commercial
    real estate............         829            N/A             455              N/A             968             N/A
  Construction or
    development............         ---            N/A             ---              N/A             ---             N/A
                               ----------   -------------       ---------   ---------------     ----------   --------------
     Total.................      $2,238            100%         $2,126              100%         $1,973             100%
                               ==========   =============       =========   ===============     ==========   ==============

<CAPTION>



                                                         At March 31,
                              ------------------------------------------------------------
                                         1999                           2000
                              ------------------------------------------------------------
                                             Percent of                     Percent of
                                               Loans in                       Loans in
                                                   Each                           Each
                                               Category                       Category
                                               to Total                       to Total
                                 Amount           Loans          Amount          Loans
                               ----------    -------------     ---------    --------------
<S>                              <C>               <C>           <C>               <C>

Allocated:
----------
One- to four-
 family....................      $   3             52.8%         $ ---             52.2%

Multi-family...............        ---             1.5             ---             .5
Commercial real
 estate....................        ---             8.4             ---           13.1
Construction or
 development...............        ---             2.5             ---            1.8
Consumer...................        256            26.6              98           26.1
Commercial business........        ---             8.2              40            5.1
Bankers' acceptances.......        ---             ---             ---            ---
Commercial paper...........        ---             ---             ---            1.2

Unallocated:
------------
  Consumer.................        997             N/A             861            N/A
  One- to four-family......        749             N/A             405            N/A
  Commercial business...                                           737            N/A
 Multi-family and
    commercial
    real estate............        643             N/A              41            N/A
  Construction or
    development............         58             N/A              50            N/A
                               ----------    -------------     ---------    --------------
     Total.................     $2,706              100%        $2,232             100%
                               ==========    =============     =========    ==============
</TABLE>




                                       16
<PAGE>




     The distribution of the allowance for loan losses is consistent with the
Bank's accounting policy. See also "Lending Activities - Multi-Family and
Commercial Real Estate Lending."

     Additional information concerning the quality of the Company's assets and
allowance for loan losses is "Management's Discussion and Analysis of Financial
Condition and Results of Operations" which is in Part II, Item 7 of this report.

Investment Activities

     General. Permanent Bank 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
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 reviewed to assure that adequate liquidity
is maintained. At March 31, 2000, the Bank's liquidity ratio (liquid assets as a
percentage of net withdrawable savings deposits and current borrowings) was
39.14%. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources" in the Annual Report
and "Regulation - Liquidity" which is in Part II, Item 7 of this report.

     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 Bank is to invest funds among
various categories of investments and maturities based upon the Bank's liquidity
needs, asset/liability management policies, investment quality and marketability
and performance objectives.

     Securities. At March 31, 2000, Permanent Bank's securities (including
     -----------
mortgage-backed securities) totaled $114.8 million, or 23.3% of total assets. As
of such date, the Bank also had a $5.5 million investment in FHLB stock,
satisfying its requirement for membership in the FHLB of Indianapolis.

     OTS and accounting guidelines regarding investment portfolio accounting
require institutions to categorize all securities and certain other assets as
"held to maturity", "available for sale" or "trading." The portion of the
investment portfolio which is held with the intent to hold to maturity is
accounted for on an amortized cost basis. Assets which are categorized as
available for sale are carried at estimated fair value. At March 31, 2000, the
Company had $108.1 million in securities "available for sale," $6.7 million of
securities which are held to maturity, and no securities identified as
"trading." The securities available for sale at March 31, 2000 had net
unrealized losses of $4,669,000. At March 31, 1999, the Bank had $117.3 million
in securities available for sale, $6.9 million of securities classified as held
to maturity and no securities identified as "trading." The securities available
for sale at March 31, 1999 had net unrealized gains of $9,869.



                                       17
<PAGE>




     The following table sets forth the composition of the Bank's securities
portfolio (including securities held to maturity and available for sale) at the
dates indicated.

<TABLE>
<CAPTION>
                                                                                           At March 31,
                                                              ---------------------------------------------------------------------
                                                                       1998                    1999                    2000
                                                                       ----                    ----                    ----
                                                                Book         % of        Book        % of         Book        % of
                                                               Value        Total       Value       Total        Value       Total
                                                               -----        -----       -----       -----        -----       -----
                                                                                    (Dollars in Thousands)
<S>                                                           <C>         <C>        <C>          <C>         <C>          <C>
Available for sale securities at fair value:
  U.S. government securities ............................     $  4,033      2.09%     $     --        --%     $     --         --%
  Federal agency securities .............................      100,972     52.43        62,478     48.18        58,886      48.95
  Mortgage backed securities ............................       62,652     32.53        54,811     42.27        49,184      40.88
  Municipal bonds & other ...............................          614      0.32            --        --            --         --
                                                              --------    ------      --------    ------      --------     ------
     Subtotal ...........................................      168,271     87.37       117,289     90.45       108,070      89.83

Held to maturity securities at amortized cost:
   Municipal bonds & other ..............................           --        --         6,920      5.34         6,701       5.57
   Mortgage backed securities ...........................       18,861      9.79            --        --            --         --
   FHLB stock ...........................................        5,466      2.84         5,466      4.21         5,528       4.60
                                                              --------    ------      --------    ------      --------     ------
     Subtotal ..........................................       24,327      12.63        12,386      9.55        12,229      10.17
                                                              --------    ------      --------    ------      --------     ------
         Total securities ...............................     $192,598    100.00%     $129,675    100.00%     $120,299     100.00%
                                                              ========    ======      ========    ======      ========     ======
Other interest earning deposits with
banks ...................................................     $  1,808    100.00%     $  6,361    100.00%     $  6,304     100.00%
                                                              ========    ======      ========    ======      ========     ======
</TABLE>


     The following table sets forth as of March 31, 2000 the composition and
maturities of the securities portfolio, excluding FHLB stock.

<TABLE>
<CAPTION>
                                                                                    March 31, 2000
                                                       ----------------------------------------------------------------------------
                                                        Less Than           1 to 5        Over 5             Total Investment
                                                         1 Year             Years         Years                 Securities
                                                        --------            ------        ------        ---------------------------
                                                        Fair Value        Fair Value    Fair Value       Fair Value  Amortized Cost
                                                        ----------        ----------    ----------      -----------  --------------
                                                                                (Dollars in Thousands)

<S>                                                     <C>                <C>           <C>             <C>             <C>
Federal agency obligations ....................              ---           $ 13,384      $ 45,502        $ 58,886        $ 63,185
Mortgage backed securities ....................         $    281              3,039        45,864          49,184          49,554
Municipal bonds & other .......................              ---                ---         5,926           5,926           6,701
                                                        ---------          ---------     ---------       ---------       ----------
Total investment securities ...................         $    281           $ 16,423      $ 97,292        $113,996        $119,440
                                                        =========          =========     =========       =========       ==========
</TABLE>

     At March 31, 2000 the Bank's securities portfolio did not contain
securities of any issuer with an aggregate book value in excess of 10% of the
Bank's retained earnings, excluding securities issued by the United States
Government or its agencies.

     The Bank's securities portfolio is managed in accordance with a written
investment policy adopted by the Board of Directors. Investments may be made by
authorized Bank officers within specified limits. See also Note 2 of the Notes
to Consolidated Financial Statements in Part II, Item 8 of this report.

     Mortgage-Backed Securities. The Bank has a portfolio of mortgage-backed
     --------------------------
securities and has utilized such investments to complement its mortgage lending
activities. See "Lending Activities -One-to Four-Family Residential Mortgage
Lending." At March 31, 2000, the Bank's mortgage-backed securities totaled $49.2
million. At such date, the mortgage-backed securities portfolio consisted
entirely of securities backed by loans insured or guaranteed by the Government
National Mortgage Association ("GNMA"), the Federal National Mortgage
Association ("FNMA") or the Federal Home Loan Mortgage Corporation ("FHLMC"). At
March 31, 2000, all of the Bank's portfolio of mortgage-backed securities was
classified as available for sale. At such date, the portfolio had a weighted
average interest rate of 6.44%.




                                       18
<PAGE>


     For information regarding the carrying and market values of Permanent
Bank's mortgage-backed securities portfolio, see Note 2 of the Notes to
Consolidated Financial Statements in Part II, Item 8 of this report.

     Under the OTS risk-based capital requirements, GNMA mortgage-backed
securities have a zero percent risk weighting and FNMA, FHLMC and AA-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.

Sources of Funds

     General. The Bank's primary sources of funds are deposits, amortization and
     --------
repayment of loan principal and interest, maturities of securities,
mortgage-backed securities and short-term investments, FHLB advances and funds
provided from operations.

     Borrowings are used to compensate for seasonal reductions in deposits or
deposit inflows at less than projected levels, to purchase investments and to
support lending activities. At March 31, 2000, the Bank's borrowings consisted
of FHLB advances totaling $86.9 million. See Notes 6, 7 and 8 of the Notes to
Consolidated Financial Statements in Part II, Item 8 of this report.

     Deposits. Permanent Bank offers a variety of deposit accounts having a wide
     ---------
range of interest rates and terms. The Bank's deposits consist of passbook
accounts, NOW, money market and other checking accounts and certificate
accounts. The Bank relies primarily on advertising, competitive pricing policies
and customer service to attract and retain these deposits. Permanent Bank
solicits deposits from its market area only and does not solicit or accept
brokered deposits.

     The flow of deposits is influenced significantly by general economic
conditions, changes in money market and prevailing interest rates and
competition. The variety of deposit accounts offered by the Bank has allowed it
to be competitive in obtaining funds and to respond to changes in consumer
demand. The Bank has become more susceptible to short-term fluctuations in
deposit flows as customers have become more interest rate conscious. The Bank
generally attempts to price its deposits in keeping with its asset/liability
management and profitability objectives. The ability of the Bank to attract and
maintain certificates of deposit, and the rates paid on these deposits, has been
and will continue to be significantly affected by market conditions. The Bank
believes that the recent trends in deposit migration represents an industry
phenomenon and are not unique to the Bank. The Bank will continue to remain rate
competitive relative to pricing on maturing deposits and to utilize FHLB
advances as a funding alternative when necessary. During fiscal years 1998,
1999, the Bank experienced a net inflow as a result of branch acquisitions.
During fiscal 2000 the Bank experienced a net deposit inflow due to its
increased utilization of the "jumbo" certificate of deposit market. These
certificates, which are greater than $100,000 and are obtained through a
competitive bidding process, are obtained primarily from local government units.
The FHLB has several advance programs that offer variable rates or amortizing
principal amounts specifically tied to funding one- to four-family residential
loans. These advances have proven to be a less costly funding source after
consideration of the cost of deposit insurance associated with traditional
deposits.


                                       19
<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>

                                                                       At March 31,
                                      ------------------------------------------------------------------------------
                                              1998                        1999                      2000
                                              ----                        ----                      ----
                                                      Percent                  Percent                   Percent
                                          Amount      of Total     Amount      of Total      Amount      of Total
                                         --------    ----------   --------    ----------    --------    ----------
                                                                      (In Thousands)

<S>                                       <C>           <C>       <C>            <C>         <C>           <C>
Transactions and Savings Deposits:
----------------------------------

Commercial Demand                         $1,755        0.62%     $12,268        3.53%       13,112        3.66%
Passbook Accounts (2.75-5.59%)            52,051       18.27       59,482       17.13        47,438       13.25
NOW Accounts (2.00-2.60%)                 22,468        7.89       30,889        8.89        32,213        9.00
Money Market Accounts (2.75-3.00%)        11,542        4.05       26,755        7.70        27,064        7.56
                                        ---------    ----------  ---------    ----------   ---------    ----------
Total Non-Certificates                    87,816       30.83      129,394       37.25       119,827       33.47
                                        ---------    ----------  ---------    ----------   ---------    ----------
Certificates:
-------------

 0.00 -  3.49%                                66        0.02           40         .01            33         .01
 3.50 -  5.49%                            61,523       21.59      120,750       34.77       108,672       30.35
 5.50 -  7.49%                           130,864       45.93       92,404       26.60       124,571       34.79
 7.50 -  9.49%                             2,673        0.94        2,753         .80         2,735         .76
                                        ---------    ----------  ---------    ----------   ---------    ----------
Total Certificates                       195,126       62.42      215,947       62.18       236,011       65.91
                                        ---------    ----------  ---------    ----------   ---------    ----------
Accrued Interest                           1,971        0.69        1,985         .57         2,208         .62
                                        ---------    ----------  ---------    ----------   ---------    ----------
Total Deposits                          $284,913      100.00%    $347,326      100.00%     $358,046      100.00%
                                        =========    ==========  =========    ==========   -========    ==========
</TABLE>


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

<
                                                Year Ended March 31,
                                     ------------------------------------------
                                         1998           1999            2000
                                         ----           ----            ----
                                                (Dollars in Thousands)

Opening balance ................     $ 280,753      $  282,942      $  345,341
Deposits .......................       585,093/(1)/  1,097,472       1,377,078
Withdrawals ....................       592,939       1,046,582       1,378,221
Interest credited...............        10,035          11,509          11,640
                                     ---------      ----------      ----------
Ending balance .................     $ 282,942      $  345,341      $  355,838
                                     =========      ==========      ==========
Net increase ...................     $   2,189      $   62,399       $  10,497
                                     =========      ==========      ==========
Percent increase                          0.78%           22.1%           3.04%
                                     =========      ==========      ==========



/(1)/  includes $78,749 of deposits acquired in branch acquisition




                                       20
<PAGE>


     The following table sets forth the rate and maturity information for the
Bank's certificates of deposit as of March 31, 2000.
<TABLE>
<CAPTION>
                                   0.00-      3.50-       5.50-          7.50-                Percent
                                   3.49%      5.49%       7.49%          9.49%       Total    of Total
                                  -------    -------     -------        -------     -------   --------
                                                       (Dollars in Thousands)

<S>                                 <C>      <C>          <C>            <C>         <C>       <C>
Certificate accounts maturing
in quarter ending:
------------------
June 30, 2000...............        15       26,671       25,152           ---       51,838    21.96%
September 30, 2000..........       ---       19,893       40,416           ---       60,309     25.55
December 31, 2000...........       ---       13,054       19,016           203       32,273     13.67
March 31, 2001..............       ---       13,500        3,182         1,136       17,818      7.55
June 30, 2001...............        18       10,411        1,839           590       12,858      5.45
September 30, 2001..........       ---        6,721        4,272           716       11,709      4.96
December 31, 2001...........       ---        2,670        1,162            90        3,922      1.66
March 31, 2002..............       ---        4,059        2,930           ---        6,989      2.96
June 30, 2002...............       ---          888        2,337           ---        3,225      1.37
September 30, 2002..........       ---          864        3,123           ---        3,987      1.69
December 31, 2002...........       ---          987        3,219           ---        4,206      1.78
March 31, 2003..............       ---        2,114        2,573           ---        4,687      1.99
Thereafter..................       ---        6,840       15,350           ---       22,190      9.41
                                  -------  ---------    --------       --------    --------   --------

   Total....................      $ 33     $108,672     $124,571       $ 2,735     $236,011    100.00%
                                  =======  =========    ========       ========    ========   ========

   Percent of total.........      0.01%       46.05%       52.78%         1.16%      100.00%
                                  =======  =========    ========       ========    =========
</TABLE>


         The following table indicates the amount of the Bank's  certificates of
deposit and public funds by time remaining until maturity as of March 31, 2000.

<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..............................     $29,521        $42,313      $42,820         $63,743      $178,397

Certificates of deposit of
 $100,000 or more...........................       3,734          7,178        5,378          10,030        26,320

Public funds/(1)/...........................      18,583         10,818        1,893            ---         31,294

Total certificates of
 deposit....................................     $51,838        $60,309       $50,091        $73,773      $236,011
</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 when they are a less costly source
of funds or can be invested at a positive rate of return.

     Permanent Bank may obtain advances from the FHLB of Indianapolis upon the
security of its FHLB capital stock and certain of its mortgage loans and
mortgage-backed securities. Such advances may be made pursuant to several
different credit programs, each of which has its own interest rate and range of
maturities. At March 31, 2000 the Bank's FHLB advances totaled $86.9 million.
See also Note 6 of the Notes to Consolidated Financial Statements in Part II,
Item 8 of this report.



                                       21
<PAGE>


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

<TABLE>
<CAPTION>

                                                                   Year Ended March 31,
                                                      --------------------------------------------
                                                           1998            1999            2000
                                                           ----            ----            ----
                                                                     (In Thousands)

<S>                                                       <C>            <C>             <C>
Maximum Balance:
----------------
  FHLB advances...................................        $107,778       $102,003        $104,300
  Securities sold under agreements to repurchase..             445            ---           7,985
  FHLB overnight borrowings.......................           3,201            ---           1,000
                                                          --------       --------        --------
                                                          $111,424       $102,003        $113,285
                                                          ========       ========        ========

Average Balance:
----------------
  FHLB advances...................................        $101,711        $94,462         $96,141
  Securities sold under agreements to repurchase..             103             10             958
  FHLB overnight borrowings.......................              30             19             123
                                                          --------       --------        --------
                                                          $101,844       $ 94,491         $97,222
                                                          ========       ========        ========
</TABLE>



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

<TABLE>
<CAPTION>

                                                                   Year Ended March 31,
                                                      --------------------------------------------
                                                           1998            1999            2000
                                                           ----            ----            ----
                                                                     (In Thousands)

<S>                                                     <C>            <C>             <C>

FHLB advances.......................................     $ 99,353        $ 96,504         $86,848
Securities sold under agreements to repurchase......          ---             ---             ---
FHLB overnight borrowings...........................          ---             ---             ---
                                                         ---------       --------        --------

     Total borrowings...............................     $ 99,353        $ 96,504         $86,848
                                                         =========       ========        ========

Weighted average interest rate of FHLB advances.....         5.39%           5.10%           5.76%

Weighted average interest rate of securities sold
 under agreements to repurchase.....................          ---%            ---%            ---%

Weighted average interest rate
 of FHLB overnight borrowings.......................          ---%            ---%            ---%
</TABLE>

Subsidiary Activities

     Federal associations generally may invest up to 2% of their assets in
service corporations, plus an additional 1% of assets if for community purposes.
In addition, federal associations may invest up to 50% of their regulatory
capital in conforming loans to service corporations in which they own 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 which a federal association may engage
in directly.

     Permanent Bank has a first-tier service corporation, Perma Service Corp.
("Perma Service"), located in Evansville, Indiana and Permavest, Inc.
("Permavest") of Henderson, Nevada. Perma Service has approximately a 14.29%
interest, along with six other financial institutions, in Family Financial Life
Insurance Company ("FFLIC"), which underwrites various types of life and
disability insurance and annuity programs. FFLIC reinsures a majority of the
risk it underwrites with other insurers. The Bank uses the equity method to
account for its investment and in fiscal 2000, recognized $56,500 in income from
FFLIC.



                                       22
<PAGE>



     Perma Service also has one wholly owned subsidiary, Permanent Insurance
Agency Inc. ("PIAI"), which offers, on an agency basis, casualty, life,
accident, health, mortgage, disability, and consumer credit insurance. PIAI had
net income of $16,000 for the year ended March 31, 2000.

     Through Perma Service, the Bank also provides brokerage services, on an
agency basis, through INVESTTM.

     Permavest, Inc, is a Delaware corporation, 100% owned by the Bank, which
was formed during fiscal 2000 to maintain custody and manage the Bank's
municipal and revenue bond portfolio. Permavest, Inc. has entered into a
partnership with the Company to maintain custody of and manage a portion of the
Bank's agency and mortgage-backed security portfolio. The Bank has a 99.5%
interest in the partnership and the Company has a .5% interest. As of March 31,
2000, Permavest, Inc. owned $6,701,000 of municipal and revenue bonds classified
as held to maturity securities and $1,113,000 of money market funds. The
partnership, which is known as Permavest Partners, owned $31,360,000 of agency
securities and $49,184,000 of mortgage-backed securities. Securities held by the
partnership are classified as available for sale. In addition, the partnership
had $3,528,000 of money market funds at March 31, 2000.

Competition

     Permanent Bank faces strong competition, both in originating real estate
and other loans and in attracting deposits. Competition in originating real
estate loans comes primarily from commercial banks, other thrifts and mortgage
companies. There are approximately eighty-eight mortgage lenders in the
Evansville market. The Bank competes for loans principally on the basis of the
interest rates and loan fees it charges, the types of loans it originates and
the quality of services it provides to borrowers.

     The Bank attracts most of its deposits from Vanderburgh, Gibson, Warrick,
Posey and Dubois Counties. Competition for those deposits is principally from
commercial banks, other thrifts, credit unions and other financial
intermediaries doing business in the same community. The ability of the Bank to
attract and retain deposits depends on its ability to provide an investment
opportunity that satisfies the requirements of investors as to rate of return,
liquidity, risk and other factors. The Bank competes for these deposits by
offering a variety of deposit accounts at competitive rates and convenient
business hours.

Regulation

     General. Permanent Bank 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 Parent
Company and other holding companies is to protect subsidiary savings
associations. The Bank is a member of the Savings Association Insurance Fund
(the "SAIF") and the deposits of the Bank are insured by the FDIC. As a result,
the FDIC has certain regulatory and examination authority over the Bank.

     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 and FDIC examinations
of Permanent Bank, for which reports have been issued, were as of May 1999 and
April 1991, respectively.



                                       23
<PAGE>



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.
Financial institutions in various regions of the United States have periodically
been required by examiners to write down assets and to establish increased
levels of reserves, primarily as a result of perceived weaknesses in real estate
values and a more restrictive regulatory climate.

     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.
Permanent Bank's OTS assessment for the fiscal year ended March 31, 2000 was
$100,170.

     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 regulations, and it is prohibited from engaging
in any activities not permitted by such laws and regulations. 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 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 March 31, 2000, the Bank's lending
limit under this restriction was $5.4 million. At March 31, 2000, the Bank had
no loans in excess of this limit and 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 matters such as loan
underwriting and documentation, asset quality, earnings standards, 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 Bank has not been required to submit a compliance plan.

     Insurance of Accounts and Regulation by the FDIC. The Bank is a member of
     -------------------------------------------------
the SAIF ("Savings Association Insurance Fund"), 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 the
institutions it insures. 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 SAIF or the BIF ("Bank Insurance Fund"). 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 or is
engaging 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



                                       24
<PAGE>



upon their level of capital and supervisory evaluation. Under the system,
institutions classified as well capitalized (i.e., those with 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., those with core and 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 would pay the highest
premium. Risk classification of all insured institutions is made by the FDIC for
each semi-annual assessment period.

     The FDIC is authorized to increase assessment rates, on a semiannual basis,
if it determines that the reserve ratio of the SAIF will be less than the
designated reserve ratio of 1.25% of SAIF insured deposits. In setting these
increased assessments, the FDIC must seek to restore the reserve ratio to that
designated reserve level, or such higher reserve ratio as established by the
FDIC. The FDIC may impose special assessments on SAIF members to repay amounts
borrowed from the United States Treasury or for any other reason deemed
necessary by the FDIC.

Legislative Action

     On September 30, 1996, President Clinton signed into law the Economic
Development and Regulatory Paperwork Reduction Act of 1996 (the "Act"). The
Act's principal provisions relate to recapitalization of SAIF, but it also
contains numerous regulatory relief measures, some of which are directly
applicable to the Bank.

     Pursuant to the Act, as of January 1, 1997, commercial banks will be
required to share in the payment of interest due on Financial Corporation
("FICO") bonds used to provide assistance to the savings and loan industry in
the 1980's. Annual FICO assessments to be added to deposit insurance premiums
are expected to equal approximately 6.4 basis points for SAIF members and 1.3
basis points for BIF members from January 1, 1997 through December 31, 1999, and
approximately 2.12 basis points for both BIF and SAIF members thereafter.

     Although this provision of the Act establishes a time frame for the
eventual elimination of the thrift charter, it contains no provisions concerning
the form the current thrift charter may be required to take. The Bank cannot
determine at this time what effect this provision will have on financial
position or operations.

     Finally, the Act contains several other provisions designed to reduce
regulatory burdens associated with compliance with various consumer and other
laws applicable to the Company, including for example, provisions designed to
coordinate the disclosure and other requirements under the Truth-in-Lending and
Real Estate Settlement Procedures Act, modify certain insider lending
restrictions, permit OTS to allow exemptions to anti-tying prohibitions and
exempt certain transactions and simplify certain disclosures under the
Truth-in-Lending Act.

     On November 12, 1999, the Gramm-Leach-Bliley Act (the "GLB Act") was
enacted into law. The GLB Act modernized the financial services industry by
permitting affiliations between banks, securities firms and insurance companies.
The GLB Act also created two classes of unitary savings and loan holding
companies: grandfathered and non-grandfathered holding companies. A
grandfathered unitary savings and loan holding company is a company that (1) was
already a unitary savings and loan holding company before May 4, 1999 or (2)
applied for regulatory approval from the OTS to become a unitary savings and
loan holding company before May 4, 1999. Grandfathered unitary savings and loan
holding companies have no restrictions on their activities at the holding
company level. However, non-grandfathered unitary savings and loan holding
companies may engage in only banking, securities, insurance and merchant banking
activities permitted for financial holding companies under the GLB Act. The
Company is a grandfathered unitary savings and loan holding company.



                                       25
<PAGE>

     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 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 March 31, 2000, the Bank had no purchased mortgage servicing
rights.

     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 March 31, 2000, the Bank's service corporation,
Perma Service, was an includable subsidiary; however, Perma Service's investment
in FFLIC was not considered an includable investment and, accordingly, the Bank
was required to deduct 100% of its investment in FFLIC from capital. At March
31, 2000, the non-includable portion of the Bank's investment in FFLIC totaled
$724,000. See also "Service Corporation Activities." At March 31, 2000,
Permavest, Inc. is an includable subsidiary.

     At March 31, 2000, the Bank had core capital of $35.5 million, or 7.27% of
adjusted total assets, which is approximately $16 million above the minimum
requirement of 4% of adjusted total assets.

     The capital standards also require core capital equal to at least 4% of
adjusted total assets (as defined by regulation). 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 March 31, 2000, the Bank had no intangibles which were subject to
these tests.

     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.

     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. Other than goodwill, the
Bank's only exclusion from capital and assets at March 31, 2000 was its
investment in FFLIC.

     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 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.



                                       26
<PAGE>


     OTS Regulations also require that 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 will not become effective until the OTS
evaluates the process by which savings associations may appeal an interest rate
risk deduction determination. It is uncertain as to when this evaluation may 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. Until the rule is finalized, no determination can be
made of what, if any, impact this rule may have on the Bank.

     At March 31, 2000, the Bank had total capital of $36.8 million (including
$35.5 million in core capital) and risk-weighted assets of $266.9 million
(including $9.7 million in converted off-balance sheet assets) or total capital
of 13.8% of risk-weighted assets. This amount was $10.1 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 certain limited exceptions, within 90 days after it
becomes critically undercapitalized. Any undercapitalized association is also
subject to the general enforcement actions by 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 Bank
may have a substantial adverse effect on the Bank's operations and profitability
and the value of the Company's Stock. Company shareholders do not have
preemptive rights and, therefore, if the Company is directed by the OTS or the
FDIC



                                       27
<PAGE>


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 savings associations with respect
to their ability to make distributions of capital, which include dividends,
stock redemptions or repurchases, cash-out mergers and other transactions
charged to the capital account. OTS regulations also prohibit a savings
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.

     Generally, savings associations, such as the Bank that before and after the
proposed distribution meet their 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 capital
requirement for such capital component, as measured at the beginning of the
calendar year, or 75% of their net income for the most recent four quarter
period. However, an association deemed to be in need of more than normal
supervision by the OTS may have its dividend authority restricted by the OTS.
The Bank has paid dividends in accordance with this general authority.

     Savings associations proposing to make any capital distribution need only
submit written notice to the OTS 30 days prior to such distribution. Savings
associations that do not, or would not meet their current minimum capital
requirements following a proposed capital distribution, however, must obtain OTS
approval prior to making such distribution. The OTS may object to the
distribution during that 30-day period notice based on safety and soundness
concerns. See "Regulatory Capital Requirements."

     The OTS has proposed regulations that would revise the current capital
distribution restrictions. 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 of
supervisory concern, 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.

     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 Part II, Item 7 of this report. This liquid asset ratio requirement may vary
from time to depending upon economic conditions and savings flows of all savings
associations. At the present time, the minimum liquid asset ratio is 4%.

     Penalties may be imposed upon associations for violations of the liquid
asset ratio requirement. At March 31, 2000, the Bank was in compliance with the
requirements, with an overall liquid asset ratio of 39.1%.



                                       28
<PAGE>


     Accounting. An OTS policy statement applicable to all savings associations
     -----------
clarifies and re-emphasizes 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
rules.

     OTS accounting regulations, which may be made more stringent than GAAP by
the OTS, 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.

     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. As an alternative, the savings association may
maintain 60% of its assets in those assets specified in Section 7701(a)(19) of
the Internal Revenue Code. Under either test, such assets primarily consist of
residential housing related loans and investments. At March 31, 2000, the Bank
met the test and has always met the test since it has been in effect.

     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
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
its examination of Permanent 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 Permanent 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
November 1997 and received a rating of satisfactory.



                                       29
<PAGE>


     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 subsidiaries are not deemed affiliates; 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 required to register and file 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.


                                       30
<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 March 31, 2000, 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 ("FHLB System"), 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 regulation and 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 March 31, 2000, the Bank had $5.5 million in FHLB
stock, which was in compliance with this requirement. In past years, the Bank
has received substantial dividends on its FHLB stock. For the five fiscal years
ended March 31, 2000, such dividends have averaged approximately 8%. 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
Permanent Bank's FHLB stock may result in a corresponding reduction in the
Bank's capital. For the fiscal year ended March 31, 2000, dividends paid by the
FHLB of Indianapolis to the Bank totaled $439,875, which constitute a $2,179
increase over the amount of dividends received in the fiscal year ended March
31, 1999.

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"), had been permitted to
establish reserves for bad debts and to make annual additions thereto which
could, 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 for "non-qualifying loans" was computed under the experience
method. The amount of the bad debt reserve deduction for "qualifying real
property loans" (generally loans secured by improved real estate) could be
computed under either the experience method or the percentage of taxable income
method (based on an annual election).

     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.

     In August 1996, legislation was enacted that repealed the reserve method of
accounting (including the percentage of taxable income method) used by many
thrifts, including the Bank, to calculate their bad debt reserve for federal
income tax purposes. As a result, thrifts must recapture that portion of the
reserve that exceeds the amount that could have been deducted under the specific
charge-off method for post-1987 tax years. The legislation also requires thrifts
to account for bad debts for federal income tax purposes on the same


                                       31
<PAGE>


basis as commercial banks for tax years beginning after December 31, 1995. The
recapture will occur over a six-year period, the commencement of which will be
delayed until the first taxable year beginning after December 31, 1997, provided
the institution meets certain residential lending requirements. The management
of the company does not believe that the legislation has or will have a material
impact on the Company.

     In addition to the regular income tax, corporations, including savings
associations such as the Bank, generally are subject to a minimum tax. An
alternative minimum tax is imposed at a minimum tax rate of 20% on alternative
minimum taxable income, which is the sum of a corporation's regular taxable
income (with certain adjustments) and tax preference items, less any available
exemption. The alternative minimum tax is imposed to the extent it exceeds the
corporation's regular income tax, and net operating losses can offset no more
than 90% of alternative minimum taxable income. For taxable years beginning
after 1986 and before 1996, corporations, including savings associations such as
the Bank, are also subject to an environmental tax equal to 0.12% of the excess
of alternative minimum taxable income for the taxable year (determined without
regard to net operating losses and the deduction for the environmental tax) over
$2 million.

     To the extent earnings appropriated to a savings association's bad debt
reserves for "qualifying real property loans" and deducted for federal income
tax purposes exceed the allowable amount of such reserves computed under the
experience method and to the extent of the association's supplemental reserves
for losses on loans ("Excess"), such Excess may not, without adverse tax
consequences, be utilized for the payment of cash dividends or other
distributions to a shareholder (including distributions on redemption,
dissolution or liquidation) or for any other purpose (except to absorb bad debt
losses). As of March 31, 2000, the Bank's excess for tax purposes totaled
approximately $6 million.

     The Company files consolidated federal income tax returns with the Bank and
its subsidiaries.

     The Bank and its consolidated subsidiaries have not been audited by the IRS
with respect to consolidated federal income tax returns during the past seven
years. 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, results of operations or liquidity of the
Bank and its consolidated subsidiaries.

     Indiana Taxation. Indiana imposes a franchise tax on financial institutions
     -----------------
at the rate of 8.5% of modified federal taxable income. The modifications to
federal taxable income include an add-back of municipal interest and state and
local property taxes and bad debt deductions are limited to actual net
charge-offs. The franchise tax is imposed on a combined basis including the
Company, the Bank and its subsidiaries.

     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.


                                       32
<PAGE>



Executive Officers of the Company and the Bank

         The  following  table  sets forth  certain  information  regarding  the
executive officers of the Company and the Bank who are not also directors.


    Name                 Age      Positions Held with the Company and the Bank
    ----                 ---      --------------------------------------------

George E. Orr            58       Senior Vice President of Bank

Seth P. Allen            41       Senior Vice President of Bank

Richard A. Condi         46       Vice President of Bank

Robert A. Cern           50       Chief Financial Officer and Secretary of the
                                    Company and Senior Vice President,
                                    Secretary/Treasurer and Chief Financial
                                    Officer of Bank

Glenna J. Kirsch         50       Vice President of Bank

Charles A. Becker, Sr.   53       Vice President of Bank


     Officers are elected annually by the Board of Directors of the Bank. The
business experience of each executive officer who is not also a director is set
forth below.

     George E. Orr. As Senior Vice President, Mr. Orr is primarily responsible
     --------------
for the planning and development of the Bank's data processing operations and
manages the Bank's checking and proof of deposit departments. Mr. Orr joined the
Bank in 1963 and was promoted to his current position in 1990.

     Seth P. Allen. Mr. Allen joined the Bank in January 1997 as Senior Vice
     --------------
President and Commercial Lending Officer. Mr. Allen served as Senior Vice
President and Senior Lending Officer at Nashoba Bank in Memphis, Tennessee from
October 1994 to January 1997. Prior to that, Mr. Allen was Vice President and
Commercial Lending Officer at Deposit Guaranty National Bank in Jackson,
Mississippi from January 1991 to October 1994.

     Richard A. Condi. Mr. Condi is Vice President in charge of residential
     -----------------
mortgage lending. Mr. Condi joined the Bank in 1979 and has served in various
capacities in the Bank's lending department before being promoted to his current
position in January 1991.

     Robert A. Cern. Mr. Cern joined the Company in May 1998 as Chief Financial
     ---------------
Officer and Secretary. Mr. Cern is also Senior Vice President,
Secretary/Treasurer and Chief Financial Officer of the Bank. Prior to joining
the Company, Mr. Cern was an independent financial consultant. From December
1995 to December 1996, Mr. Cern was Vice President and Chief Financial Officer
of Associated Bank in Milwaukee, Wisconsin. Prior to this, Mr. Cern was Vice
President of Marshall & Ilsey Corporation in Milwaukee, Wisconsin.

     Glenna J. Kirsch. Ms. Kirsch joined the Bank in 1980 and has held several
     -----------------
positions at the institution, including Training Officer from 1991 until 1992.
In 1992, Ms. Kirsch was appointed Savings Officer and in 1995 was promoted to
Vice President. Currently, Ms. Kirsch is in charge of Deposit Operations and is
responsible for managing checking, savings and certificate of deposit processing
for the Bank.

     Charles A. Becker, Sr. From 1973-1991 Mr. Becker was responsible for Retail
     ----------------------
Banking at Peoples Savings Bank in Evansville, Indiana as Senior Vice President.
In 1991 Peoples Savings Bank was acquired


                                       33
<PAGE>



by INB Banking Company of Indianapolis, Indiana. As Vice President of Retail
Banking for the Southwest Region his responsibilities continued to be in the
areas of consumer lending and branch banking. In 1994 NBD Bank, N.A., Detroit,
Michigan purchased INB and Mr. Becker continued in the same capacity. Mr. Becker
joined Permanent Federal Savings Bank as Vice President, Branch Administration
in June 1998 as Permanent acquired the four Evansville branch locations from NBD
Bank, N.A.

Employees

     At March 31, 1999, the Bank had a total of 144 full-time and 23 part-time
employees. The Bank's employees are not represented by any collective bargaining
group. Management considers its employee relations to be good.



                                       34
<PAGE>
Item 2. Properties

         The following table sets forth  information  concerning the main office
and each  branch  office  of the Bank at March  31,  2000.  As of this  date the
Company's  premises,  office  properties and equipment had an aggregate net book
value of approximately $9.5 million.
<TABLE>
<CAPTION>
                                                                                                  Net Book
                                                Year      Owned or     Lease Expiration             Value
         Location                             Acquired     Leased             Date              (In Thousands)
         --------                             --------     ------       ---------------        --------------
Main (Downtown) Office
----------------------

<S>                                              <C>        <C>              <C>                    <C>
 101 Southeast Third Street                      1963       Owned            N/A                     $2,863
 Evansville, Indiana

Branch Offices

 University Heights
 4615 University Drive                           1988       Owned            N/A                        405
 Evansville, Indiana

 Town Center
 201 Diamond Avenue                              1981       Owned            N/A                        327
 Evansville, Indiana

 Green River Road
 123 South Green River Road                      1978       Owned            N/A                        228
 Evansville, Indiana

 Vogel & Burkhardt Roads                         1999       Owned            N/A                      1,596
 6245 Vogel Road
 Evansville, Indiana

 North Brook                                     1978      Leased            November 2002               66 (1)
 3820 First Avenue
 Evansville, Indiana

 Ross Center
 2521 Washington Avenue                          1994       Owned            N/A                        692
 Evansville, Indiana

 Fort Branch
 810 East Locust Street                          1987       Owned            N/A                        345
 Fort Branch, Indiana

 Jasper
 771 West Second Street                          1991       Owned            N/A                        460
 Jasper, Indiana

 Newburgh
 8533 Bell Oaks Drive                            1997       Owned            N/A                        800
 Newburgh, Indiana

 Oakland City
 410 West Morton Street                          1984       Owned            N/A                        214
 Oakland City, Indiana
</TABLE>
                                       35
<PAGE>
<TABLE>
<CAPTION>
<S>                                              <C>        <C>              <C>                    <C>
Fourth Street Office
19 N.W 4th Street                                1998      Leased            December 2001                0
Evansville, Indiana

Bellemeade Office
4601 Bellemeade                                  1998       Owned            N/A                        979
Evansville, Indiana

Buena Vista Office
1010 W. Buena Vista                              1998      Leased            September 2013              28
Evansville, Indiana

St. Joseph Office
530 N. St. Joseph Avenue                         1998       Owned            N/A                        383
Evansville, Indiana
</TABLE>

---------------------------------
(1) The Bank owns this branch's building and leases the land.

         The Bank maintains  depositor and borrower customer files on an on-line
basis  with a third  party  service  provider.  The net  book  value of the data
processing  and  computer  equipment  utilized by the Bank at March 31, 2000 was
$319,000.

Item 3.  Legal Proceedings
         -----------------
         The Bank is involved as plaintiff or defendant in various legal actions
arising in the normal  course of its  business.  While the  ultimate  outcome of
these  proceedings  cannot be  predicted  with  certainty,  it is the opinion of
management,  after  consultation  with  counsel  representing  the Bank in these
proceedings, that the resolution of these proceedings should not have a material
effect on the Company's results of operations.

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 March 31, 2000.


                                       36
<PAGE>

                                     PART II
                                     -------

Item 5.  Market for the Registrant's Common Stock and Related
         ----------------------------------------------------
         Security Holder Matters
         -----------------------

STOCK TRADING  AND DIVIDEND DATA
--------------------------------
                                            Volume     Dividend
Quarter Ended        High        Low        (000's)      Paid
-------------        ----        ---        -------      ----
June 30,1999    $   11.25    $    8.81        195.3     $    .06
Sept 30,1999        15.00         8.88        411.1          .07
Dec. 31,1999        19.94         9.56        909.0          .07
Mar. 31,2000        19.38        14.88        452.6          .07

June 30,1998    $   18.50    $   15.50        192.4     $    .055
Sept.30,1998        16.25        11.63      1,090.9          .06
Dec. 31,1998        14.38        10.56        207.4          .06
Mar. 31,1999        13.75        10.75        169.9          .06

REGISTERED MARKET MAKERS
The following firms make a market in Permanent Bancorp Inc.'s stock:

Capital Resources, Inc.
Spear, Leeds & Kellogg
McDonald & Company Sec., Inc.
J.J. B. Hilliard, W.L. Lyons
NatCity Investments, Inc.
Instinet Corporation
Friedman Billings Ramsey & Co.

                                       37

<PAGE>




Item 6.  Selected Financial Data
         -----------------------
<TABLE>
<CAPTION>

                      SELECTED CONSOLIDATED FINANCIAL DATA
                                 (in thousands)

                                                                               At March 31,
                                                 ---------------------------------------------------------------------
                                                     2000           1999          1998          1997         1996
                                                 -------------  ------------- ------------- ------------- ------------
<S>                                                 <C>            <C>            <C>           <C>          <C>
Selected Financial Condition Data:
Total assets                                        $ 491,995      $ 492,327      $439,115      $423,698     $395,903
Loans, net                                            327,151        321,018       225,349       210,189      206,910
Cash and interest-bearing deposits                     16,460         13,952         6,083         6,364        4,916
Securities available for sale                         108,070        117,289       168,271       159,232      135,124
Securities held to maturity                             6,701          6,920        18,861        27,206       32,179
Deposits                                              355,838        345,341       282,942       280,753      280,008
Total borrowings                                       89,348         99,504        99,353       100,278       70,985
Stockholders' equity                                   41,440         40,864        42,683        39,095       41,494

</TABLE>
<TABLE>
<CAPTION>
                                                                       Year Ended March 31,
                                              ------------------------------------------------------------------
                                                 2000        1999         1998          1997          1996
                                              ------------------------------------------------------------------
<S>                                               <C>         <C>           <C>           <C>           <C>
Selected Operating Data:
Interest income                                   $33,757     $32,886       $30,521       $29,689       $25,892
Interest expense                                   20,630      19,909        19,342        18,724        16,354
                                              ------------------------------------------------------------------
  Net interest income                              13,127      12,977        11,179        10,965         9,538
Provision for loan losses                             295         300           177           113           207
                                              ------------------------------------------------------------------
  Net interest income after provision
   for loan losses                                 12,832      12,677        11,002        10,852         9,331
                                              ------------------------------------------------------------------
Other income:
  Service charges                                   1,752       1,492           985           841           628
  Gain on sale of loans                               108         206            92            23            18
  Gain (loss) on sale of securities                               230            43           (56)           (6)
  Other                                             1,135       1,103           972           816           797
                                              ------------------------------------------------------------------
  Total other income                                2,995       3,031         2,092         1,624         1,437
                                              ------------------------------------------------------------------
Other expense:
  Salaries and employee benefits                    6,123       5,696         4,519         4,295         4,427
  Deposit insurance assessment                        243         271           276         2,351           711
  Occupancy                                         1,150         764           821           809           819
  Other                                             5,201       4,172         3,015         2,714         2,900
                                              ------------------------------------------------------------------
  Total other expense                              12,717      10,903         8,631        10,169         8,857
                                              ------------------------------------------------------------------

Income before income taxes                          3,110       4,805         4,463         2,307         1,911
Income tax provision                                  916       1,945         1,818         1,003           662
                                              ------------------------------------------------------------------
Net income                                         $2,194      $2,860        $2,645        $1,304        $1,249
                                              ------------------------------------------------------------------
</TABLE>

                                       38
<PAGE>
<TABLE>
<CAPTION>
                   SELECTED CONSOLIDATED FINANCIAL DATA (CONT.)

                                                                      At or For the Year Ended March 31,
                                                      ----------------------------------------------------------------

                                                         2000           1999        1998         1997         1996
                                                      ----------------------------------------------------------------
<S>                                                          <C>          <C>          <C>          <C>          <C>
Performance Ratios:
  Return on average assets (ratio of net
    income to average total assets)                          0.45 %       0.60 %       0.62 %       0.31 %       0.34 %
  Interest rate spread information:
      Average during year                                    2.58         2.74         2.41         2.40         2.28
      End of year                                            2.84         2.86         2.40         2.41         2.33
  Net interest margin (1)                                    2.84         2.91         2.74         2.76         2.72
  Ratio of operating expense to average
    total assets                                             2.55         2.28         2.03         2.44         2.41
  Return on average stockholders' equity
    (ratio of net income to average
    stockholders' equity)                                    5.32         6.86         6.45         3.25         2.95
  Ratio of average interest-earning
    assets to average interest-bearing
    liabilities                                            105.97       103.91       106.97       107.63       109.42

Asset Quality Ratios:
  Non-performing assets to total assets at
    end of year (2)                                          0.17         0.24         0.25         1.11         1.75
  Allowance for loan and real estate
    owned losses to non-performing assets                  271.53       220.11       180.51        44.73        32.22
  Allowance for loan losses to total loans                   0.68         0.84         0.87         1.00         1.07

Capital Ratios:
  Stockholders' equity to total assets at
    end of year                                              8.42         8.30         9.72         9.23        10.48
  Average stockholders' equity to average
    assets                                                   8.28        11.43         9.63         9.63        11.54

Number of full-service offices                                 12 (4)       13           11           11           11
Number of deposit accounts                                 39,952       43,383       33,884       35,426       36,452

Book value per share  (3)                                   $9.85       $10.27       $10.41        $9.52        $9.72
Dividend payout ratio                                       51.1%        33.7%        30.6%        46.7%        27.9%

</TABLE>

(1) Net interest income divided by average interest-earning assets.
(2) Non-performing assets consist of non-accruing loans,  including in-substance
    foreclosures,  accruing  loans  past  due 90 or  more  days,  troubled  debt
    restructuring and real estate owned.
(3) Amounts  reflect a stock split in the form of a 100% stock dividend on April
    14, 1998.
(4) In addition the Company operates one drive-up banking facility.

                                       39

<PAGE>


Stock Performance Presentation

         Set forth below is a line graph  comparing the cumulative  total return
on the  Company's  Common  Stock to the  cumulative  total  return of the Nasdaq
Market  Index and the Media  General  Savings  and Loan  Index for the past five
fiscal  years,  from March 31, 1995  through  March 31, 2000.  The  presentation
assumes $100 was invested on March 31, 1995.

         [GRAPHIC - PLOTTED POINTS LISTED BELOW]
<TABLE>
<CAPTION>
                                      3/31/95     3/31/96     3/31/97      3/31/98     3/31/99     3/31/00
                                      -------     -------     -------      -------     -------     -------
<S>                                   <C>         <C>         <C>          <C>         <C>         <C>
Permanent Bancorp.....................$100.00     $ 92.82     $137.30      $234.66     $147.39     $255.75
MG Industry Group......................100.00      135.85      174.81       270.59      261.46      236.99
NASDAQ Market Index....................100.00      134.51      150.48       227.41      297.18      547.25
</TABLE>


                                       40

<PAGE>


Item 7.  Management's Discussion and Analysis of Financial
         -------------------------------------------------
           Condition and Results of Operations
           -----------------------------------
General

         This section presents  management's review of the operating results and
financial  condition  of  Permanent  Bancorp,   Inc.  (the  "Company")  and  its
subsidiary, Permanent Bank (the "Bank"). This section provides information which
is  not  otherwise  apparent  from  the  Consolidated  Statements  of  Financial
Condition, Income, Stockholders' Equity and Cash Flows and is intended to assist
readers in understanding the Company's performance and financial condition.

         The principal  business of the Company consists of attracting  deposits
from the general public and using these  deposits,  together with borrowings and
other funds, to originate one to four family residential  mortgage loans as well
as multi-family and commercial real estate loans,  automobile and other consumer
loans. The Company also originates  construction  and commercial  business loans
and invests in mortgage-backed  and other investment  securities.  The Company's
results of operations are primarily dependent on its interest rate spread, which
is the  difference  ("spread")  between  the average  yield on  interest-earning
assets, such as loans,  mortgage-backed and investment securities and short-term
interest  bearing  deposits  and  the  average  rate  paid  on  interest-bearing
liabilities,  such as  deposits  and  borrowings.  The  spread  is  affected  by
regulatory, economic and competitive factors that influence interest rates, loan
demand and deposit flows.  In addition to credit risk, the Company is subject to
interest  rate risk to the degree  that its  interest-earning  assets  mature or
reprice at different times, or on a different basis,  than its  interest-bearing
liabilities.

         The  Company's  results of  operations  also depend  upon,  among other
things, the level of fee income,  gains or losses on the sale of loans and other
assets,  provisions  for possible loan losses,  income  derived from  subsidiary
activities,  operating  expenses  and  income  taxes.  The  Company's  operating
expenses  principally consist of employee  compensation and benefits,  occupancy
expenses,   federal   deposit   insurance   premiums   and  other   general  and
administrative expenses.

         The Company is affected by prevailing  economic  conditions,  including
federal  monetary  and  fiscal  policies,  as well as by federal  regulation  of
financial institutions.  Deposit balances are influenced by a number of factors,
including interest rates paid on competing personal investments and the level of
personal income and savings within the  institution's  market area. In addition,
deposit  balances are influenced by the  perceptions of customers  regarding the
stability of the financial markets and financial services  industry.  Management
expects to retain a significant portion of existing deposit balances by offering
competitive rates on such deposits. The Bank has adopted a strategy of employing
Federal Home Loan Bank of Indianapolis  (FHLB) advances to supplement  deposits.
FHLB  advances are expected to augment the  liquidity  necessary to fund lending
operations and investment  opportunities.  Lending  activities are influenced by
the demand for housing,  consumer and  commercial  loans as well as  competition
from other  lending  institutions.  The  primary  sources  of funds for  lending
activities include deposits,  loan payments,  borrowings,  the sale of loans and
other assets and funds provided from operations.

Information Systems and the Year 2000 ("Y2K")

         To date  the  Company  has not  experienced  any  significant  computer
operating  problems  associated with passing from 1999 into 2000 and the Company
is unaware of any Y2K related problems  occurring at any of its major customers,
the presence of which might have a material financial impact on the Company.

         While the Company  believes  that Y2K  problems  would have  manifested
themselves,  no  assurance  can be given that a Year 2000  related  problem  may
subsequently  be discovered  which could have a material  adverse  effect on the
Company's financial condition or results of operations.

                                       41
<PAGE>


Financial Condition

March 31, 2000 Compared to March 31, 1999

              The Company's total assets at March 31, 2000 were $492 million,  a
decrease of $344,000 from $492.3 million at March
31, 1999.

         Securities  amounted to $114.8 million at March 31, 2000, a decrease of
$9.4 million from $124.2 million at March 31, 1999.  Approximately  $4.7 million
of this decrease is  attributable  to a decrease in fair value of the securities
available  for  sale.  Net loans  increased  by $6.1  million  or 1.9% to $327.2
million at March 31, 2000  compared to $321 million at March 31,  1999.  From an
earning asset perspective,  during fiscal 2000 the Company utilized the proceeds
from security maturities and principal repayments to fund loan growth.

         Total  liabilities were $450.6 million at March 31, 2000, a decrease of
$923,000  from $451.5  million at March 31, 1999 and deposits of $355.8  million
were up $10.5  million,  or 3%, from $345.3  million at March 31, 1999.  Federal
Home Loan Bank (FHLB)  advances  decreased by $9.7  million to $86.8  million at
March 31, 2000 from $96.5 million at March 31, 1999. From a funding perspective,
during fiscal 2000 the Company  increasingly  relied on certificates of deposits
in amounts of $100,000 or more due to the  attractiveness  of the borrowing cost
compared to FHLB  advances.  Certificates  of  deposits  greater  than  $100,000
totalled  $58  million at March 31,  2000  compared  to $30 million at March 31,
1999.

         Total  stockholders'  equity  increased by $579,000 to $41.4 million at
March 31, 2000.  The Company  earned $2.19 million and declared $1.12 million of
dividends to its shareholders. The vesting of ESOP shares resulted in a $540,000
increase in equity and the vesting and  forfeitures  of restricted  stock awards
resulted in a $201,000 increase.  The exercise of stock options increased equity
$2,551,000.  The Company  repurchased  $684,000  of its stock and the  after-tax
effect of the  decline in the fair  value of the  Company's  available  for sale
securities was $3,103,000.  The ratio of equity to assets was 8.42% at March 31,
2000  compared  to 8.30% at March 31,  1999.  Tangible  equity to assets,  which
excludes goodwill, was 6.66% at March 31, 2000 and 6.39% at March 31, 1999.

         Non-performing  assets were $822,000 at March 31, 2000 compared to $1.2
million at March 31, 1999.

         At March 31, 2000 the Company  maintained 3.35% of total assets as cash
and interest-bearing deposits compared to 2.83% at March 31, 1999.

Results of Operations

Comparison of Operating Results for the Years Ended March 31, 2000 and March 31,
1999.

         General.  The Company's  net income of $2.19 million  during the fiscal
year ended  March 31,  2000 was  $670,000  or 23.4% less than the $2.86  million
earned  during the fiscal year ended March 31, 1999.  Operating  results for the
year ended March 31, 2000  include the income and  expenses  related to branches
acquired from NBD Bank, N.A. for the entire year whereas  operating  results for
the year ended March 31, 1999  include  the income and  expenses  since June 26,
1998, the date of acquisition, since the transaction has been accounted for as a
purchase.

         Net Interest  Income.  The Company's net interest  income  increased by
$150,000 to $13.1  million  for the year ended  March 31,  2000  compared to $13
million  for  the  year  ended  March  31,  1999.  The  increase  was  primarily
attributable to an increase in loan balances.

         Interest  Income.  Interest  income for the year ended  March 31,  2000
increased  $871,000  to $33.8  million  compared  to $32.9  million for the same
period in 1999.

                                       42
<PAGE>

         Interest  income  increased  because  average  interest  earning assets
increased  by $16 million in fiscal 2000 from fiscal 1999 and funds were shifted
from lower earning securities into higher yielding loans.  Average loan balances
increased  by  $48.3  million  from  fiscal  1999 to  fiscal  2000  and  average
securities, which includes mortgage-backed securities, other securities and FHLB
stock,  decreased  by $33  million  from fiscal  1999 to fiscal  2000.  The loan
portfolio  represented  71.1% of average earning assets for fiscal 2000 compared
to 62.8% for fiscal 1999. The rate earned on the loan  portfolio  decreased .35%
from  fiscal 1999 to 2000 while the rate  earned on  mortgage-backed  securities
decreased by .09% and the rate earned on other securities increased .16%.

         The  average  balance  of other  interest  bearing  assets,  which  are
primarily deposits and other short-term  investments,  increased to $6.9 million
in fiscal 2000 from $6.1 million in the prior  fiscal  year.  The rate earned on
these  investments  increased  to 5.15% in fiscal 2000 from 4.65% in fiscal 1999
reflecting a general  increase in short term money  market  rates during  fiscal
2000.

         The  yield on all  interest-earning  assets  decreased  by .07%  during
fiscal 2000.  For the year ended March 31, 2000 the overall  earning asset yield
was 7.31% compared to 7.38% for the year ended March 31, 1999.  Increases in the
average  balances of earning assets  increased  interest income by approximately
$1,772,000  and the decrease in the yield on earning assets  decreased  interest
income by approximately $901,000.

         Interest  Expense.  Interest  expense  increased  by  $721,000 to $20.6
million for the fiscal year ended March 31, 2000  compared to $19.9  million for
fiscal 1999.  Interest paid on deposits increased by $413,000 due to an increase
of $3.2 million in average  interest-bearing deposit balances and an increase in
the rate paid from 4.44% to 4.52%.  Interest on Federal Home Loan Bank  advances
increased by $196,000 as average balances outstanding  increased by $1.7 million
and the average rate paid on advances  also  increased  from 5.30% during fiscal
1999 to 5.41% during fiscal year 2000.  Interest expense on other long-term debt
& other borrowings increased by $111,000 due primarily to an increase in average
borrowings  of $1.9 million which offset a decrease in rate from 7.33% in fiscal
1999 to 6.63% in fiscal 2000.

         The average balance for all  interest-bearing  deposits  increased from
$428.8  million in fiscal 1999 to $435.6  million in fiscal 2000 and the cost of
all interest-bearing  liabilities  increased from 4.64% for the fiscal year 1999
to 4.74% for the fiscal year 2000.  The increase in average  balances  increased
interest  expense by  $361,000  and the  increase  in rates  increased  interest
expense by $360,000.

         Provision for Loan Losses.  The Bank establishes its provision for loan
losses and  evaluates  the  adequacy of its  allowance  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. Such evaluation, which includes a
review of all loans for which full collectibility may not be reasonably assured,
considers,  among other  matters,  the  estimated  fair value of the  underlying
collateral,   economic   conditions,   historical  loan  loss  experience,   the
composition of its loan portfolio and other factors that warrant  recognition in
providing for an adequate loan loss allowance.  This methodology is performed on
a  periodic  basis  and is  designed  to  ensure  that  matters  affecting  loan
collectibility will be identified in a timely manner and evaluated by management
in  determining  the necessary  reserves and the provision for loan losses.  The
amounts  actually  reported  in each  period  will vary with the outcome of this
detailed review.

         During the year ended March 31, 2000, the Company  recorded a provision
for loan  losses of $296,000  compared to $300,000  for the year ended March 31,
1999.  Net charge  offs  amounted  to $770,000  during  fiscal 2000  compared to
$327,000 during fiscal 1999. Asset quality, as measured by non-performing  loans
to total  loans,  improved  significantly  for the year  ended  March  31,  2000
compared to the prior year.  The ratios of  non-performing  loans to total loans
was  0.19% at March  31,  2000 and .25% at March  31,  1999,  respectively.  The
allowance  for losses,  as a ratio to total  loans,  was 0.68% at March 31, 2000
compared to .84% at March 31, 1999.  At March 31, 2000 and 1999,  the  allowance
for loan losses as a percentage of  non-performing  loans was 364.7% and 330.8%,

                                       43
<PAGE>

respectively.  It is  management's  belief  that the  allowance  for loan losses
reflects an adequate  reserve  against  potential  losses in the loan portfolio.
Future  additions to the  Company's  allowance for loan losses and any change in
the related ratio to non-performing  loans are dependent upon the performance of
the Company's loan portfolio, the economy, inflation, changes in real estate and
other  collateral  values and interest  rates as well as the view of  regulatory
authorities toward adequate reserve levels. See also "Asset Quality."

         Other Income.  Other income  decreased by $36,000 to $2,995,000  during
the fiscal year ended March 31, 2000.  Offsetting a $260,000 increase in service
charges and a $60,000 increase in commission  income were a $230,000 decrease in
gain related to security  sales and a $97,000  decrease in gains related to loan
sales.  Service charges  increased  primarily due to more accounts being service
charged and higher service charge fee levels.

         Other Expense.  The Company's  other expense  increased by $1.8 million
from fiscal 1999 to fiscal  2000.  The  increase is  primarily  attributable  to
$584,000 of expenses  related to the Company's  planned merger with Old National
Bancorp,  $299,000  related to the exercise of stock  options and  approximately
$624,000 of various other expenses arising from acquired branches being included
for all of fiscal 2000 but for only nine months in fiscal 1999.

         Income Tax Provision.  The Company's income tax provision  decreased by
$1,029,000  from fiscal 1999 to fiscal 2000  primarily  as a result of decreased
pretax  earnings,  increased  utilization  of  tax  credit  opportunities  and a
restructuring of the management of the securities  portfolio.  The effective tax
rate was 29.45% for fiscal 2000 compared to 40.48% for the prior year.

Comparison of Operating Results for the Years Ended March 31, 1999 and March 31,
1998.

         General.  The Company's  net income of $2.86 million  during the fiscal
year  ended  March 31,  1999 was  $220,000  greater  or 8.3% more than the $2.64
million  earned during the fiscal year ended March 31, 1998.  Operating  results
for the year ended March 31, 1999 include the income and expenses related to the
assets and liabilities of the four locations  acquired from NBD Bank, N.A. since
June 26, 1998, the date of acquisition, since the transaction has been accounted
for as a purchase.

         Net Interest  Income.  The Company's net interest  income  increased by
$1.8 million to $13 million for the year ended March 31, 1999  compared to $11.2
million  for  the  year  ended  March  31,  1998.  The  increase  was  primarily
attributable to an increase in the interest rate spread of 0.33%.

         Interest  Income.  Interest  income for the year ended  March 31,  1999
increased  $2.4 million to $32.9 million  compared to $30.5 million for the same
period in 1998.

         Interest  income  increased   because  total  interest  earning  assets
increased,  primarily due to the previously described NBD acquisition, and funds
were shifted  from lower  earning  investment  securities  into higher  yielding
loans. Loans represented 62.8% of average earning assets in fiscal 1999 compared
to 52.8% in fiscal 1998.

         Average securities,  which includes mortgage-backed  securities,  other
securities and FHLB stock, decreased by $31.2 million from fiscal 1998 to fiscal
1999. The rate earned on mortgage-backed securities decreased to 6.17% in fiscal
1999  from  6.52% in the  prior  fiscal  year.  The  rate  earned  on all  other
securities,  including  the FHLB stock,  decreased  to 6.16% in fiscal 1999 from
7.01% in the prior fiscal year.

         The average of other interest  bearing assets increased to $6.1 million
in fiscal 1999 from $1.4 million in the prior  fiscal  year.  The rate earned on
these investments decreased to 4.65% in fiscal 1999 from 7.49% in fiscal 1998.

                                       44
<PAGE>


         Average loans  outstanding  increased $64.8 million from fiscal 1998 to
fiscal 1999. This represents a 30% increase in average outstanding loans. During
the same period, the yields on loans declined by one basis point (.01%).

         The yield on all  interest-earning  assets decreased by 11 basis points
(.11%)  in  fiscal  1999.  For  the  year  ended  March  31,  1999  the  overall
interest-earning  asset  yield was 7.38%  compared  to 7.49% for the year  ended
March 31, 1998.

         Interest  Expense.  Interest  expense  increased  by  $570,000 to $19.9
million  during the fiscal year ended March 31, 1999  compared to $19.3  million
during fiscal 1998.  Interest paid on deposits  increased by $1.3 million due to
an increase of $54.1 million in average deposit  balances which more than offset
a decrease in the rate paid from 4.83% to 4.44%.  Interest on Federal  Home Loan
Bank advances decreased by $860,000 as average balances outstanding decreased by
$7.2 million and the average  rate paid on advances  also  decreased  from 5.77%
during fiscal 1998 to 5.30% during fiscal year 1999.  Interest  expense on Other
long-term  debt &  other  borrowings  increased  due  primarily  to the  Company
borrowing  $4.16 million of long-term debt from an  unaffiliated  bank in August
1998. Proceeds from this borrowing was used by the Company to repurchase 302,100
shares of its own  common  stock.  Expense  related  to fiscal  1998  borrowings
consist primarily of short-term borrowings to meet liquidity needs.

         The cost of all interest-bearing  liabilities  decreased from 5.08% for
the year ended March 31, 1998 to 4.68% for the year ended March 31, 1999.

         Provision  for Loan Losses.  During the year ended March 31, 1999,  the
Company  recorded a provision  for loan losses of $300,000  compared to $177,050
for the year ended March 31, 1998. In addition the Company acquired  $760,000 of
loan loss reserves as part its  acquisition of assets and  liabilities  from NBD
Bank,  N.A. Net charge offs amounted to $327,000  during fiscal 1999 compared to
$330,000 during fiscal 1998. Asset quality, as measured by non-performing  loans
to total  loans,  improved  significantly  for the year  ended  March  31,  1999
compared to the prior year.  The ratios of  non-performing  loans to total loans
was 0.25% at March 31, 1999 and .40% at March 31, 1998 respectively.

         Other Income.  Other income increased by $939,000 to $3,031,000  during
the fiscal year ended March 31, 1999.  This represents an increase of 44.9% over
the prior year.  Service  charges  increased  by $507,000  and profit on sale of
loans,  securities and real estate owned  increased by $299,000.  Commissions on
the sale of investment  and insurance  products  decreased by $17,000.  Earnings
from other sources were up by $150,000 during fiscal 1999.

         Other Expense.  The Company's other expense  increased by $2.22 million
from fiscal 1998 to fiscal 1999.  Salaries and employee benefits  increased $1.2
million  or 26%.  Occupancy  expenses  increased  $199,000,  equipment  expenses
increased $155,000,  computer service expenses increased  $168,000,  advertising
expenses increased  $58,000,  postage and office supplies increased $158,000 and
other expenses increased $311,000 from fiscal 1998 to fiscal 1999, respectively,
due to an  expansion  of  personnel to staff  additional  branch  facilities  to
service additional deposit and loan accounts acquired from NBD Bank, N.A.

         Income Tax Provision.  The Company's income tax provision  increased by
$128,000  from  fiscal 1998 to fiscal 1999  primarily  as a result of  increased
pretax  earnings.  The effective tax rate was 40.48% for fiscal 1999 compared to
40.72% for the prior year.

                                       45

<PAGE>



         Average  Balance  Sheet.  The following  table presents for the periods
indicated the average balance of  interest-earning  assets and  interest-bearing
liabilities,  the amount of interest  income and the interest  expense,  and the
average  yield on assets and the average  cost of  liabilities.  Such yields and
costs are derived by dividing  interest income or expense by the average balance
of assets or liabilities, respectively, for the periods shown. No tax equivalent
adjustments  were made.  Non-accruing  loans have been  included in the table as
loans carrying a zero yield.
<TABLE>
<CAPTION>
                                                                               March 31,
                                          ----------------------------------------------------------------------------------
(Dollars in Thousands)                                      2000                                        1999
                                          ----------------------------------------------------------------------------------
                                                 Average   Interest      Average              Average  Interest   Average
                                             Outstanding    Earned/      Yield/           Outstanding  Earned/     Yield/
                                                 Balance     Paid         Rate                Balance    Paid       Rate
                                          ----------------------------------------------------------------------------------
<S>                                             <C>            <C>        <C>                <C>         <C>       <C>
Interest-Earning Assets:
 Loans                                          $328,109       $25,523    7.78%              $279,790    $22,759   8.13%
 Mortgage-backed securities                       51,686         3,144    6.08                 68,259      4,212    6.17
 Securities and FHLB stock                        74,988         4,737    6.32                 91,456      5,631    6.16
 Other                                             6,859           353    5.15                  6,107        284    4.65
                                          -----------------------------            ------------------------------
  Total interest-earning assets (1)             $461,642       $33,757    7.31%              $445,612    $32,886   7.38%
                                          ==================================================================================

Interest-Bearing Liabilities:
 Deposits                                       $335,516       $15,169    4.52%              $332,301    $14,756   4.44%
 FHLB advances                                    96,141         5,198    5.41                 94,463      5,002    5.30
 Other long-term debt & other borrowings           3,965           263    6.63                  2,060        151    7.33
                                          -----------------------------            ------------------------------
   Total interest-bearing liabilities           $435,622       $20,630    4.74%              $428,824    $19,909   4.64%
                                          ==================================================================================

Net interest income                                            $13,127                                   $12,977
                                          ==================================================================================
Net interest rate spread                                                  2.57%                                    2.74%
                                          ==================================================================================
Net earning assets                               $26,020                                      $16,788
                                          ==================================================================================
Net interest margin (2)                                                   2.84%                                    2.91%
                                          ==================================================================================
Average interest-earning assets to
 average interest-bearing liabilities            105.97%                                      103.91%
                                          ==================================================================================
</TABLE>

<TABLE>
<CAPTION>
                                                        March 31,
                                          --------------------------------------
(Dollars in Thousands)                                   1998
                                          --------------------------------------
                                               Average  Interest     Average
                                           Outstanding   Earned/      Yield/
                                               Balance    Paid         Rate
                                          --------------------------------------
<S>                                           <C>          <C>        <C>
Interest-Earning Assets:
 Loans                                        $214,982     $17,509    8.14%
 Mortgage-backed securities                     97,668       6,370     6.52
 Securities and FHLB stock                      93,210       6,536     7.01
 Other                                           1,416         106     7.49
                                          -------------------------
  Total interest-earning assets (1)           $407,276     $30,521    7.49%
                                          ======================================

Interest-Bearing Liabilities:
 Deposits                                     $278,181     $13,431    4.83%
 FHLB advances                                 101,704       5,866     5.77
 Other long-term debt & other borrowings           845          46     5.44
                                          -------------------------
   Total interest-bearing liabilities         $380,730     $19,343    5.08%
                                          ======================================

Net interest income                                        $11,178
                                          ======================================
Net interest rate spread                                              2.41%
                                          ======================================
Net earning assets                             $26,546
                                          ======================================
Net interest margin (2)                                               2.74%
                                          ======================================
Average interest-earning assets to
 average interest-bearing liabilities          106.97%
                                          ======================================
</TABLE>


<TABLE>
<CAPTION>
                                                       March 31,
                                          --------------------------------------
(Dollars in Thousands)                                   1998
                                          --------------------------------------
                                               Average  Interest     Average
                                           Outstanding   Earned/      Yield/
                                               Balance    Paid         Rate
                                          --------------------------------------
<S>                                           <C>          <C>        <C>
Interest-Earning Assets:
 Loans                                        $214,982     $17,509    8.14%
 Mortgage-backed securities                     97,668       6,370     6.52
 Securities and FHLB stock                      93,210       6,536     7.01
 Other                                           1,416         106     7.49
                                          -------------------------
  Total interest-earning assets (1)           $407,276     $30,521    7.49%
                                          ======================================

Interest-Bearing Liabilities:
 Deposits                                     $278,181     $13,431    4.83%
 FHLB advances                                 101,704       5,866     5.77
 Other long-term debt & other borrowings           845          46     5.44
                                          -------------------------
   Total interest-bearing liabilities         $380,730     $19,343    5.08%
                                          ======================================

Net interest income                                        $11,178
                                          ======================================
Net interest rate spread                                              2.41%
                                          ======================================
Net earning assets                             $26,546
                                          ======================================
Net interest margin (2)                                               2.74%
                                          ======================================
Average interest-earning assets to
 average interest-bearing liabilities          106.97%
                                          ======================================
</TABLE>

(1) Calculated net of deferred loan fees, loan  discounts,  loans in process and
loss reserves.
(2) Net interest margin represents net interest income divided by
average interest-earning assets.

                                       46
<PAGE>

         Rate/Volume Analysis.  The following table presents the extent to which
changes in interest rates and changes in the volume of  interest-earning  assets
and interest-bearing liabilities have affected the Company's interest income and
interest   expense   during  the  years   indicated.   For  each   category   of
interest-earning  assets  and  interest-bearing   liabilities,   information  is
provided for changes  attributable  to (i) changes in volume  (i.e.,  changes in
volume multiplied by prior rate) and (ii) changes in rate (i.e., changes in rate
multiplied by prior volume).  Changes  attributable to both rate and volume have
been allocated proportionately to the change due to volume and the change due to
rate.
<TABLE>
<CAPTION>
                                                                       Year Ended March 31,
                                         -----------------------------------------------------------------------------------------
                                             2000 vs. 1999                                      1999 vs. 1998
                                         -----------------------------------------------------------------------------------------
                                              Increase (Decrease)             Total           Increase (Decrease)        Total
                                                      Due to                Increase                Due to              Increase
                                         ------------------------------                     ------------------------
                                            Volume            Rate         (Decrease)        Volume         Rate         (Decrease)
                                         -------------    -------------   ----------------------------    ----------   -----------
                                                                                (In Thousands)
                                         -----------------------------------------------------------------------------------------
<S>                                       <C>              <C>              <C>             <C>            <C>          <C>
Interest-earning assets:
 Loans receivable                         $   3,780        $  (1,016)       $   2,764       $ 5,275        $  (26)      $ 5,249
 Mortgage-backed securities                  (1,008)             (60)          (1,068)       (1,867)         (291)       (2,158)
 Securities and FHLB stock                   (1,037)             143             (894)         (117)         (787)         (904)
 Other                                           37               32               69           285          (107)          178
                                       -------------    -------------   --------------    ----------    ----------   -----------
   Total interest-earning assets          $   1,772         $   (901)        $    871       $ 3,576       $(1,211)      $ 2,365
                                       =============    =============   ==============    ==========    ==========   ===========

Interest-bearing liabilities:
 Deposits                                  $    144          $   269         $    413       $ 2,515       $(1,190)      $ 1,325
 FHLB advances                                   90              106              196          (402)         (462)         (864)
 Other borrowings                               127              (15)             112            78            28           106
                                       -------------    -------------   --------------    ----------    ----------   -----------

   Total interest-bearing liabilities      $    361          $   360         $    721       $ 2,191       $(1,624)       $  567
                                       =============    =============   ==============    ==========    ==========   ===========

Change in net interest income                                                $    150                                   $ 1,798
                                                                        ==============                               ===========
</TABLE>

         The  following  table  presents the weighted  average  yields on loans,
investments and other  interest-earning  assets,  the weighted  average rates on
savings  deposits and borrowings and the resultant  interest rate spreads at the
dates indicated:
<TABLE>
<CAPTION>

                                                                         At March 31,
                                                      -------------------------------------------------
                                                         2000              1999               1998
                                                      ------------      ------------       ------------
<S>                                                       <C>               <C>                <C>
Weighted average yield on:
 Loans, net                                               7.83 %            7.81 %             7.91 %
 Mortgage-backed securities                               6.44              6.45               6.80
 Securities & FHLB Stock                                  6.21              6.16               6.84
 Other                                                    6.28              4.76               6.06
   Combined weighted average yield on
    interest-earning assets                               7.39              7.34               7.42
Weighted average rate paid on:
 Savings deposits                                         3.05              3.13               3.77
 Demand and NOW deposits                                  1.93              1.55               1.79
 Time deposits                                            5.64              5.51               5.78
 FHLB Advances                                            5.76              5.10               5.39
 Other Borrowings                                         7.51              6.80
   Combined weighted average rate paid
    on interest-bearing liabilities                       4.56              4.48               5.02
Spread                                                    2.83              2.86               2.40
</TABLE>


                                       47
<PAGE>

Asset Quality

         In  accordance  with the  Company's  classification  of assets  policy,
management periodically evaluates the loan and investment portfolios to identify
substandard  assets  that may  contain  the  potential  for loss.  In  addition,
management evaluates the adequacy of its allowance for possible loan losses.

         Non-Performing  Assets.  The following table sets forth the amounts and
categories of non-performing assets in the Bank's loan portfolio.  For the years
presented,  the Bank had no accruing loans  delinquent  more than 90 days.  Real
estate owned includes  property acquired in settlement of foreclosed loans which
are carried at the lower of cost or estimated  fair value less estimated cost to
sell. Other assets include other repossessed assets.
<TABLE>
<CAPTION>
                                                                              March 31,
                                              ----------------------------------------------------------------------
                                                 2000           1999           1998          1997           1996
                                              -----------    -----------    -----------    ----------    -----------
<S>                                               <C>            <C>            <C>          <C>             <C>
(Dollars in Thousands)
Non-accruing loans:
  One- to four-family                             $  492         $  643         $  822       $ 1,131         $  695
  Multi-family                                                                                 1,062          3,654
  Commercial real estate                                             64
  Construction or development                                                       12           171            171
  Consumer                                           120            111             77            99            185
                                              -----------    -----------    -----------    ----------    -----------
       Total                                         612            818            911         2,463          4,705
                                              -----------    -----------    -----------    ----------    -----------
Troubled debt restructurings                                                                   2,128          2,165
                                              -----------    -----------    -----------    ----------    -----------
Total non-performing loans                        $  612         $  818         $  911       $ 4,591        $ 6,870
                                              ===========    ===========    ===========    ==========    ===========

Real estate and other assets owned:
  One- to four-family                             $   27         $  112         $   93        $   41         $   22
  Consumer                                           183            236             89            53             54
                                              -----------    -----------    -----------    ----------    -----------
       Total                                         210            348            182            94             76
                                              -----------    -----------    -----------    ----------    -----------

Total non-performing assets                       $  822        $ 1,166        $ 1,093       $ 4,685        $ 6,946
                                              ===========    ===========    ===========    ==========    ===========
Total as a percentage of total
  assets                                          0.17 %         0.24 %         0.25 %        1.11 %         1.75 %
                                              ===========    ===========    ===========    ==========    ===========
</TABLE>


         At March 31, 2000 and 1999 the Bank had no  non-performing  assets with
an outstanding balance in excess of $100,000.

         Non-accruing  Loans.  As of March  31,  2000 the Bank had  $612,000  of
non-accruing loans compared to $818,000 as of March 31, 1999. For the year ended
March 31, 2000,  gross  interest  income which would have been  recorded had the
Bank's  non-accruing  loans been current in accordance with their original terms
amounted to $40,000 and the amount that was included in interest  income on such
loans was $18,000.

         Real Estate Owned.  At March 31, 2000, the Bank's real estate  acquired
through foreclosure was $27,000.

         Other Loans of Concern.  In addition to the  non-performing  assets set
forth in the table above,  as of March 31, 2000,  there was an aggregate of $5.4
million of loans  which  management  is closely  monitoring  for the  borrowers'
ability to comply with current repayment terms compared to $7.3 million at March
31, 1999. Management believes it has taken a conservative approach in evaluating
under-performing credits.

                                       48

<PAGE>



         Delinquent  Loans.  The  following  table sets  forth the  Bank's  loan
delinquencies by type, by amount and by percentage of type at March 31, 2000.

<TABLE>
<CAPTION>

(Dollars in thousands)                                                  Loan Delinquent For:
                        -----------------------------------------------------------------------------------------------------------
                                    30-59 Days                           60-89 Days                   90 Days and Over
                                    ----------                           ----------                   ----------------
                           Number        Amount      Percentage   Number   Amount     Percentage   Number  Amount   Percentage
                           ------        ------      ----------   ------   ------     ----------   ------  ------   ----------
<S>                          <C>       <C>            <C>           <C>     <C>        <C>           <C>    <C>        <C>
One- to four-family           37       $   1,285       45.89 %       6      $ 201       61.85 %       7     $ 379       75.95 %
Commercial                     3             375       13.39
Consumer                     113           1,140       40.72        17        124       38.15        16       120       24.05
                          -------   -------------   ---------      ----   --------   ---------      ----  --------  ----------
Total                        153       $   2,800      100.00 %      23      $ 325      100.00 %      23     $ 499      100.00 %
                          =======   =============   =========      ====   ========   =========      ====  ========  ==========

</TABLE>

                                       49


<PAGE>



         Allowance for Loan Losses. The allowance for loan losses is established
through a provision  for loan losses based upon  management's  evaluation of the
risk inherent in the loan  portfolio and changes in the nature and volume of its
loan activity.

         The following  table sets forth an analysis of the Bank's  allowance at
the years indicated.

<TABLE>
<CAPTION>

(Dollars in Thousands)                                                     At March 31,
                                             ----------------------------------------------------------------------
                                                  2000           1999          1998           1997          1996
                                             ----------------------------------------------------------------------
<S>                                               <C>            <C>           <C>            <C>           <C>
Balance at beginning of year                      $2,706         $1,973        $2,126         $2,238        $2,093

Charge-offs:
  One- to four-family                                 22             19            56                           11
  Multi-family                                                                     72
  Consumer                                           872            488           276            354            93
  Commercial business                                                                             17
                                             ----------------------------------------------------------------------
                                                     894            507           404            371           104
                                             ----------------------------------------------------------------------

Recoveries:
  One-to-four-family                                                 10                            2            11
  Multi-family & commercial                                                                       98             4
  Consumer                                           124            170            74             46            27
                                             ----------------------------------------------------------------------
                                                     124            180            74            146            42
                                             ----------------------------------------------------------------------

Net charge-offs                                      770            327           330            225            62
Provision charged to operations                      296            300           177            113           207
Acquired in branch acquisition                                      760
                                             ----------------------------------------------------------------------
Balance at end of year                          $  2,232       $  2,706        $1,973         $2,126        $2,238
                                             ======================================================================

Ratio of net charge-offs during the
  period to average loans outstanding
  during the year                                  0.24%          0.12%         0.15%          0.11%         0.03%
                                             ======================================================================

Ratio of net charge-offs during the
  period to ending non-performing
  assets                                          93.67%         28.04%        30.19%          4.80%         0.89%
                                             ======================================================================

Ratio of provision for loan losses
  to total loans                                   0.09%          0.09%         0.08%          0.05%         0.10%
                                             ======================================================================
Ratio of allowance for loan losses
      to non-performing loans                    364.71%        330.81%       216.58%         46.31%        32.58%
                                             ======================================================================

Ratio of allowance for loan losses
 to total loans                                    0.68%          0.84%         0.87%          1.00%         1.07%
                                             ======================================================================
</TABLE>


                                       50

<PAGE>


Asset/Liability Management

         The  measurement and analysis of the exposure of the Bank to changes in
the interest rate environment is referred to as asset/liability  management. One
method used to analyze the Bank's sensitivity to changes in interest rates is to
measure the difference between the amount of  interest-earning  assets which are
anticipated  to mature or reprice  within a given period of time compared to the
amount of  interest-bearing  liabilities which are expected to mature or reprice
within  the  same  period.  This  difference  is  known  as  the  interest  rate
sensitivity "gap." A gap is considered positive when the amount of interest rate
sensitive assets anticipated to reprice or mature exceeds the amount of interest
rate sensitive liabilities anticipated to reprice or mature in a given period. A
gap  is  considered   negative  when  the  amount  of  interest  rate  sensitive
liabilities anticipated to reprice or mature exceeds the amount of interest rate
sensitive assets anticipated to reprice or mature in a given period.

         At March 31, 2000,  the Company's  total  interest-bearing  liabilities
maturing or repricing  within one year exceeded  total  interest-earning  assets
maturing  or  repricing  in the same  period by $99.3  million,  representing  a
negative  cumulative  one-year gap ratio of 20.2% of total  assets.  The Company
relies  on  certain  assumptions,   such  as  the  amount  and  timing  of  loan
prepayments,  among others,  in the measurement of the interest rate sensitivity
gap.  In  light  of  the  Company's  negative  cumulative  one-year  gap  ratio,
management believes that an increase in interest rates will adversely effect its
net interest income.

         The Company focuses lending efforts toward the origination and purchase
of  competitively  priced  adjustable-rate  loan  products and  fixed-rate  loan
products with  relatively  short terms to maturity,  generally  fifteen years or
less.  This allows the  Company to  maintain a portfolio  of loans which will be
sensitive to changes in the level of interest rates while providing a reasonable
spread to the cost of liabilities used to fund the loans.

         The effect of these  assumptions  is to quantify  the dollar  amount of
items that are  interest-sensitive  and which can be repriced within each of the
periods  specified.  Such repricing can occur in one of three ways: (i) the rate
of interest to be paid on an asset or liability may adjust  periodically  on the
basis of an interest rate index,  (ii) an asset or liability  such as a mortgage
loan may amortize,  permitting reinvestment of cash flows at the then-prevailing
interest  rate,  or (iii) an asset or  liability  may mature,  at which time the
proceeds can be reinvested at the current market rates.

                                       51
<PAGE>

         The  following  table sets forth the interest rate  sensitivity  of the
Company's  assets  and  liabilities  at  March  31,  2000  on the  basis  of the
above-described assumptions, and sets forth the repricing dates of the Company's
interest-earning  assets and interest-bearing  liabilities at March 31, 2000 and
the  Company's   interest  rate  sensitivity  "gap"  percentages  at  the  dates
indicated.  Information presented is based on estimated prepayment rates ranging
from 9% to 50% for  loans and  mortgage-backed  securities,  depending  on their
maturity and yield.  Passbook  savings and NOW account balances assume a 17% and
37% annual decay rate,  respectively,  and money market demand  amounts assume a
79% annual decay rate.
<TABLE>
<CAPTION>
                                                                  Maturing or Repricing
                                         --------------------------------------------------------------------------
                                           Less than         6-12         Over 1-3        Over 3-5        Over
                                            6 Months        Months          Years          Years         5 Years
                                         ---------------  ----------------------------  -------------  ------------
<S>                                          <C>             <C>            <C>            <C>            <C>
(Dollars in Thousands)
Fixed-rate one- to four-
 family, multi-family (including
 mortgage-backed securities),
 commercial real estate and
 construction loans                          $   20,368      $  9,279       $  29,879      $  22,091      $ 41,917
Adjustable rate one- to four-
 family, multi-family (including
 mortgage-backed securities),
 commercial real estate and
 construction loans                              47,478        14,187          45,797         23,677        26,401
Consumer loans                                   32,007        16,308          30,755         10,809         9,406
Investment securities and other                  11,973                         3,000          6,000        46,933

                                         --------------------------------------------------------------------------
  Total interest-earning assets                 111,826        39,774         109,431         62,577       124,657
                                         --------------------------------------------------------------------------

Savings deposits                                  4,129         3,852          12,275          8,002        19,180
Demand and NOW deposits                          21,307        11,993          13,887          4,336         7,753
Certificates                                    112,147        50,091          51,583         16,788         5,402
FHLB advances and other                          46,871           552          11,689          2,448        27,788

                                         --------------------------------------------------------------------------
  Total interest-bearing liabilities            184,454        66,488          89,434         31,574        60,123
                                         --------------------------------------------------------------------------

Interest-earning assets less
 interest-bearing liabilities                $  (72,628)    $ (26,714)      $  19,997      $  31,003      $ 64,534
                                         ==========================================================================

Cumulative interest-rate
 sensitivity gap                             $  (72,628)    $ (99,342)      $ (79,345)     $ (48,342)     $ 16,192
                                         ==========================================================================

Cumulative interest-rate
 gap as a percentage of assets                  -14.76%       -20.19%         -16.13%         -9.83%        3.29 %
                                         ==========================================================================
</TABLE>


         In  evaluating  the Company's  exposure to interest rate risk,  certain
shortcomings  inherent  in the method of  analysis  presented  in the  foregoing
tables must be considered.  For example, although certain assets and liabilities
may have similar maturities or periods to repricing, they may react in different
degrees to changes in market interest rates. Also, the interest rates on certain
types of assets and  liabilities  may  fluctuate in advance of changes in market
interest  rates,  while  interest rates on other types may lag behind changes in
market rates.  Additionally,  certain assets, such as adjustable-rate mortgages,
have features which restrict changes in interest rates on a short-term basis and
over the life of the asset. Further, in the event of a change in interest rates,
prepayment and early withdrawal levels would likely deviate  significantly  from
those assumed in calculating the table. For example,  projected passbook,  money
market and NOW account maturities may materially change if interest rates change

                                       52
<PAGE>

significantly or if alternative  savings/investment  products become attractive.
The ability of many borrowers to service their debt may decrease in the event of
an  interest  rate  increase.  The  Company  considers  all of these  factors in
monitoring its exposure to interest rate risk.

         In addition,  the  foregoing  table does not  necessarily  indicate the
impact of general  interest rate movements on the Company's net interest  income
because the repricing of certain categories of assets and liabilities is subject
to competitive and other pressures  beyond the Company's  control.  As a result,
certain  assets and  liabilities  indicated as maturing or  otherwise  repricing
within a stated period may, in fact, mature or reprice at different times and at
different volumes.

         The Office of Thrift Supervision ("OTS") requires the Bank to calculate
the  estimated   change  in  its  net  portfolio   value  ("NPV")   assuming  an
instantaneous,  parallel  shift in the Treasury yield curve either up or down in
100 basis point ("bp")  intervals.  NPV  represents the sum of future cash flows
discounted to present  value.  The OTS permits the Bank to utilize the OTS model
to  determine  the impact of parallel and  instantaneous  shifts in the Treasury
yields  curve.  While the OTS model uses data  submitted by the Bank to the OTS,
many of the assumptions imbedded in the model, such as loan prepayment rates and
deposit decay rates, are determined by the OTS.

The following table sets forth the Bank's interest rate sensitivity of NPV as of
March 31, 2000 as calculated by the OTS (dollars in 000's):

<TABLE>
<CAPTION>

                                 Net portfolio value                           NPV as % of PV of Assets
                                 -------------------                           ------------------------
Change in
    rates              $ Amount       $ Change        % Change                 NPV Ratio        Change
--------------       ------------   ------------    ------------             ------------     ------------
<S>       <C>            <C>            <C>              <C>                    <C>                <C>
         +300 bp         $22,568       -$25,499         -53%                    4.90%             -479 bp
         +200             31,328        -16,739          -35                     6.63             -306
         +100             39,927         -8,140          -17                     8.24             -145
            0             48,067                                                 9.69
         -100             55,322          7,255          +15                    10.91             +123
         -200             61,019         12,952          +27                    11.82             +213
         -300             67,079         19,012          +40                    12.75             +306
</TABLE>

Liquidity and Capital Resources

         The OTS  requires  minimum  levels of liquid  assets.  OTS  regulations
presently require the Bank to maintain an average daily balance of liquid assets
(United States Treasury, federal agency and other investments) equal to at least
4.0%  of the  sum of its  average  daily  balance  of net  withdrawable  deposit
accounts and borrowings  payable in one year or less. Such  requirements  may be
changed from time to time by the OTS to reflect  changing  economic  conditions.
Such  investments  are intended to provide a source of  relatively  liquid funds
upon which the Bank may rely,  if  necessary,  to fund deposit  withdrawals  and
other  short-term  funding  needs.  The Bank  has  historically  maintained  its
liquidity ratio in excess of that required. At March 31, 2000, the amount of the
Bank's liquidity was $124.5 million, resulting in a liquidity ratio of 39.14%.

         Liquidity  management is both a daily and long-term  responsibility  of
management.  The Bank  adjusts  its  investments  in liquid  assets  based  upon
management's  assessment  of (i) expected  loan demand,  (ii)  expected  deposit
flows,  (iii)  yields  available  on  interest-bearing  deposits  and  (iv)  the
objectives of its asset/liability management program. Excess liquidity generally
is  invested  in  interest-bearing   overnight  deposits  and  other  short-term
government and agency obligations. If the Bank requires additional funds, beyond
its internal ability to generate,  it has additional borrowing capacity with the
FHLB and collateral eligible for repurchase agreements.

                                       53
<PAGE>

         The Bank  principally  uses its  liquidity  resources  to meet  ongoing
commitments,  to fund maturing  certificates of deposit and deposit withdrawals,
to  purchase  securities,  to fund  existing  and future  loan  commitments,  to
maintain liquidity,  and to meet operating expenses. At March 31, 2000, the Bank
had  approximately  $26.1 million of loan  commitments  and an  additional  $4.7
million of undisbursed loans in process.  The Bank anticipates that it will have
sufficient funds available to meet current loan commitments.

         Certificates  of  deposit  scheduled  to  mature in one year or less at
March  31,  2000  totaled  $162.2  million.   Based  on  historical  experience,
management believes that a significant portion of such deposits will remain with
the Bank,  however,  there can be no assurance that the Bank can retain all such
deposits.

         Management  believes  that loan  repayments  and other sources of funds
will be adequate to meet and exceed the Bank's  foreseeable short- and long-term
liquidity needs.

         The primary  investing  activities  of the Bank  include  investing  in
loans, mortgage-backed securities, U.S. Treasury and agency securities and other
investment  securities.  At March 31, 2000,  these assets accounted for 89.8% of
the  Company's  total  assets.  The  purchases  are funded  primarily  from loan
repayments,  maturities of  securities,  FHLB advances and increases in deposits
and net income.

         At March 31, 2000, the Bank had outstanding borrowings of $86.9 million
from the FHLB and had the capacity to borrow up to a total of approximately $164
million.

         Dividends are subject to determination  and declaration by the Board of
Directors,  which will take into account the  Company's  consolidated  financial
condition  and results of  operations  as well as other  relevant  factors.  The
Company's  ability to pay  dividends is subject to federal  regulations  and its
continued compliance with regulatory capital  requirements.  The Company is also
subject to the requirements of Delaware law, which generally limits dividends to
an amount in excess of a company's net assets over paid-in-capital, or, if there
is no such excess, to its net profits for the current and immediately  preceding
fiscal  year.  See the  Notes to the  Consolidated  Financial  Statements  for a
further discussion.

Impact of Inflation and Changing Prices

         The consolidated financial statements and related data presented herein
have been prepared in accordance with generally accepted  accounting  principles
which require the measurement of financial position and results of operations in
terms  of  historical  dollars  without  considering  changes  in  the  relative
purchasing power of money over time because of inflation.

         Unlike  most  industrial  companies,  virtually  all of the  assets and
liabilities  of  Permanent  Bank are monetary in nature.  As a result,  interest
rates  have a more  significant  impact on the  Company's  performance  than the
effects of general levels of inflation.  Interest rates do not necessarily  move
in the same  direction  or in the same  magnitude  as the  prices  of goods  and
services.  In the present  interest rate  environment,  the liquidity,  maturity
structure and quality of Permanent  Bank's assets and  liabilities are important
factors in the maintenance of acceptable performance levels.

Item 7a.  Quantitative and Qualitative Disclosure About Market Risks
          ----------------------------------------------------------

         The  Company  is subject to various  risks  including  credit  quality,
interest risk and liquidity. See "Asset Quality" contained in Part I, Item 1 and
"Asset/Liability  Management" and "Liquidity and Capital Resources" contained in
Part II, Item 7 of this report.

         The Company is also exposed to general competitive  pressures and, as a
regulated  industry is subject to regulatory  oversight.  See  "Competition" and
"Regulation" in Part I, Item 1 of this report.


                                       54
<PAGE>




Item 8.  Financial Statements and Supplementary Data

                              TABLE OF CONTENTS FOR
                        CONSOLIDATED FINANCIAL STATEMENT
                                                                      Page(s)

Independent Auditors' Report........................................... 56

Consolidated Statements of Financial Condition at
     March 31, 2000 and 1999........................................... 57

Consolidated Statements of Income for the Years Ended
     March 31, 2000, 1999 and 1998..................................... 58

Consolidated Statements of Stockholders' Equity for the Years Ended
     March 31, 2000, 1999 and 1998..................................... 59

Consolidated Statements of Cash Flows for the Years Ended
     March 31, 2000, 1999 and 1998..................................... 60 - 61

Notes to Consolidated Financial Statements............................. 62 - 82


                                       55

<PAGE>



                          INDEPENDENT AUDITORS' REPORT


To the Stockholders and the Board of Directors of
           Permanent Bancorp, Inc.:

         We have audited the accompanying  consolidated  statements of financial
condition of Permanent  Bancorp,  Inc. and its subsidiary  (the "Company") as of
March 31, 2000 and 1999 and the consolidated statements of income, stockholders'
equity and cash flows for each of the three years in the period  ended March 31,
2000.  These  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

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

         In our opinion, such consolidated  financial statements present fairly,
in all material respects,  the financial position of Permanent Bancorp, Inc. and
its  subsidiary  as of  March  31,  2000  and  1999,  and the  results  of their
operations  and their cash flows for each of the three years in the period ended
March 31, 2000 in conformity with accounting  principles  generally  accepted in
the United States of America.




Deloitte & Touche LLP
May 25, 2000
Indianapolis,  Indiana


                                       56

<PAGE>
                             PERMANENT BANCORP, INC.
                 Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
                                                                                                 March 31,
                                                                                 ------------------------------------------
                                                                                         2000                   1999
                                                                                 -------------------    -------------------
<S>                                                                                    <C>                    <C>
ASSETS:

Cash                                                                                   $ 10,155,966           $  7,591,117
Interest-bearing deposits                                                                 6,303,819              6,361,293
                                                                                 -------------------    -------------------
Total cash and cash equivalents                                                          16,459,785             13,952,410

Securities available for sale - at fair value
   (amortized cost - $112,739,096 and $117,279,217)                                     108,069,628            117,289,086
Securities held to maturity (fair value - $5,926,222
   and $6,627,235)                                                                        6,701,343              6,919,793
Other investments                                                                         1,710,635              1,698,477
Loans (net of allowance for loan losses of $2,231,826 and
   $2,706,408)                                                                          327,150,866            321,030,131
Interest receivable, net                                                                  2,888,879              2,824,211
Office properties and equipment                                                           9,498,672              8,687,387
Other assets                                                                             19,515,526             19,937,789
                                                                                 -------------------    -------------------
TOTAL ASSETS                                                                           $491,995,334           $492,339,284
                                                                                 ===================    ===================

LIABILITIES AND STOCKHOLDERS' EQUITY:

LIABILITIES:
Deposits                                                                               $355,837,875           $345,341,089
Federal Home Loan Bank advances                                                          86,848,182             96,503,610
Advance payments by borrowers for taxes and insurance                                       912,335                974,636
Other debt                                                                                2,500,000              3,000,000
Interest payable                                                                          2,420,227              2,204,007
Other liabilities                                                                         2,036,971              3,454,755
                                                                                 -------------------    -------------------
TOTAL LIABILITIES                                                                       450,555,590            451,478,097


Commitments and contingencies

STOCKHOLDERS' EQUITY:

Serial Preferred Stock ($.01 par value) Authorized and unissued
     - 1,000,000 shares
Common Stock ($.01 par value)  Authorized - 9,000,000 shares Issued - 4,930,508;
   Outstanding - 4,207,100
   and 3,978,322                                                                             49,241                 49,241
Additional paid-in capital                                                               25,860,821             24,844,508
Treasury Stock - 708,008 and 936,786 shares - at cost                                    (7,688,842)            (9,920,624)
Retained Earnings - substantially restricted                                             26,553,405             26,573,401
Accumulated other comprehensive income, net
   of deferred tax of ($1,572,637) and $3,909                                            (3,096,831)                 5,960
ESOP borrowing                                                                             (238,050)              (476,100)
Unearned compensation - restricted stock awards                                                                   (215,199)
                                                                                 -------------------    -------------------
TOTAL STOCKHOLDERS' EQUITY                                                               41,439,744             40,861,187
                                                                                 -------------------    -------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                             $491,995,334           $492,339,284
                                                                                 ===================    ===================
</TABLE>

See notes to consolidated financial statements.


                                       57
<PAGE>
                             PERMANENT BANCORP, INC.
                        Consolidated Statements of Income
<TABLE>
<CAPTION>

                                                                               Year Ended March 31,
                                                            ----------------------------------------------------------
                                                                   2000                 1999                1998
                                                            -----------------     ----------------    ----------------
<S>                                                             <C>                  <C>                 <C>
INTEREST INCOME:
  Loans                                                         $ 25,522,808         $ 22,758,455        $ 17,509,318
  Securities                                                       7,440,079            9,405,583          12,472,811
  Deposits                                                           353,209              284,102             106,454
  Dividends on Federal Home Loan Bank stock                          440,745              437,696             432,823
                                                            -----------------     ----------------    ----------------
                                                                  33,756,841           32,885,836          30,521,406
                                                            -----------------     ----------------    ----------------
INTEREST EXPENSE:
  Deposits                                                        15,169,317           14,755,940          13,431,142
  Federal Home Loan Bank advances                                  5,197,654            5,001,771           5,865,542
  Other long-term debt                                               212,416              150,792
  Short-term borrowings                                               50,383                  510              45,827
                                                            -----------------     ----------------    ----------------
                                                                  20,629,770           19,909,013          19,342,511
                                                            -----------------     ----------------    ----------------

NET INTEREST INCOME                                               13,127,071           12,976,823          11,178,895

PROVISION FOR LOAN LOSSES                                            295,500              300,000             177,050
                                                            -----------------     ----------------    ----------------

NET INTEREST INCOME AFTER LOAN LOSS
  PROVISION                                                       12,831,571           12,676,823          11,001,845
                                                            -----------------     ----------------    ----------------

OTHER INCOME:
  Service charges                                                  1,752,033            1,491,788             984,668
  Gain on sale of loans                                              108,345              205,837              91,866
  Commissions                                                        651,333              591,192             607,806
  Gain on sale of securities                                                              229,708              42,643
  Gain on sale of real estate owned                                   21,358               39,790              41,966
  Other                                                              462,287              472,625             323,044
                                                            -----------------     ----------------    ----------------
                                                                   2,995,356            3,030,940           2,091,993
                                                            -----------------     ----------------    ----------------
OTHER EXPENSE:
  Salaries and employee benefits                                   6,122,814            5,695,772           4,519,290
  Deposit insurance assessment                                       243,382              271,397             275,986
  Occupancy                                                        1,149,623            1,020,658             821,412
  Equipment                                                          830,851              763,669             608,472
  Computer service                                                   796,708              705,748             537,903
  Advertising                                                        374,724              412,183             354,370
  Postage and office supplies                                        428,015              444,469             285,906
  Merger related expenses                                            584,183
  Other                                                            2,186,962            1,588,871           1,227,988
                                                            -----------------     ----------------    ----------------
                                                                  12,717,262           10,902,767           8,631,327
                                                            -----------------     ----------------    ----------------
INCOME BEFORE INCOME TAXES                                         3,109,665            4,804,996           4,462,511

INCOME TAX PROVISION                                                 915,790            1,945,111           1,817,344
                                                            -----------------     ----------------    ----------------

NET INCOME                                                      $  2,193,875          $ 2,859,885         $ 2,645,167
                                                            =================     ================    ================

EARNINGS PER SHARE OF COMMON STOCK:
   Basic                                                         $      0.55           $     0.72          $     0.65
   Diluted                                                              0.54                 0.70                0.62

AVERAGE SHARES OUTSTANDING
   Basic                                                           3,969,419            3,956,590           4,048,150
   Diluted                                                         4,053,031            4,062,155           4,299,366
</TABLE>

See notes to consolidated financial statements.

                                       58
<PAGE>
<TABLE>
<CAPTION>
                                      PERMANENT BANCORP, INC.
                          Consolidated Statements of Stockholders' Equity
                         For the Year Ended March 31, 2000, 1999 and 1998
--------------------------------------------------------------------------------------------------------------------------------

                                                 Common Stock            Additional
                                        ---------------------------        Paid-in          Treasury          Retained
                                             Shares          Amount        Capital            Stock           Earnings
                                        -----------------------------------------------------------------------------------

<S>                                         <C>             <C>          <C>               <C>               <C>
BALANCES, APRIL 1, 1997                     4,282,178       49,180       24,020,823        (5,547,823)       23,393,701

Net income                                                                                                    2,645,167
Unrealized gain on
  securities available for sale

Total comprehensive income

ESOP shares earned                                                          383,336
Vesting of restricted stock awards
Cancellation of restricted
   stock awards                                (2,856)         (29)         (14,251)
Purchase of Treasury Stock                    (92,000)                                       (993,628)
Issuance of retricted stock awards              9,000           90          135,754
Exercise of stock options                      36,112                                         286,368          (103,131)
Payment of dividends                                                                                           (808,610)
                                        -----------------------------------------------------------------------------------
BALANCES, MARCH 31, 1998                    4,232,434       49,241       24,525,662        (6,255,083)       25,127,127

Net income                                                                                                    2,859,885
Unrealized loss on
  securities available for sale

Total comprehensive income

ESOP shares earned                                                          318,846
Vesting of restricted stock awards
Cancellation of restricted
   stock awards                                (2,866)                                        (14,330)
Purchase of Treasury Stock                   (302,100)                                     (4,163,316)
Issuance of retricted stock awards              6,400                        19,751            64,974
Exercise of stock options                      44,454                       (19,751)          447,131          (205,109)
Payment of dividends                                                                                         (1,208,502)
                                        -----------------------------------------------------------------------------------
BALANCES, MARCH 31, 1999                    3,978,322       49,241       24,844,508        (9,920,624)       26,573,401

Net income                                                                                                    2,193,875
Unrealized loss on AFS securities
  securities available  for sale
Total comprehensive income
ESOP shares earned                                                          301,898
Vesting of restricted stock awards
Cancellation of restricted
   stock awards                                (1,360)                                        (14,398)
Purchase of Treasury Stock                    (44,497)                                       (683,886)
                                        -----------------------------------------------------------------------------------
Exercise of stock options                     274,635                       714,415         2,930,066        (1,093,261)
Payment of dividends                                                                                         (1,120,610)
                                        -----------------------------------------------------------------------------------
BALANCES, MARCH 31, 2000                    4,207,100      $49,241      $25,860,821       ($7,688,842)      $26,553,405
                                        ===================================================================================
</TABLE>

<TABLE>
<CAPTION>

                                     PERMANENT BANCORP, INC.
                         Consolidated Statements of Stockholders' Equity
                         For the Year Ended March 31, 2000, 1999 and 1998
---------------------------------------------------------------------------------------------------------

                                       Accumulated Other                      Restricted         Total
                                        Comprehensive            ESOP           Stock        Stockholders'
                                        Income (Loss)         Borrowing         Awards          Equity
                                     --------------------------------------------------------------------

<S>                                         <C>                <C>            <C>             <C>
BALANCES, APRIL 1, 1997                     (1,590,591)        (952,200)      (278,463)       39,094,627

Net income                                                                                     2,645,167
Unrealized gain on
  securities available for sale              1,815,838                                         1,815,838
                                                                                               ---------
Total comprehensive income                                                                     4,461,005
                                                                                               ---------
ESOP shares earned                                              238,050                          621,386
Vesting of restricted stock awards                                             125,242           125,242
Cancellation of restricted
   stock awards                                                                 14,280
Purchase of Treasury Stock                                                                      (993,628)
Issuance of retricted stock awards                                            (135,844)
Exercise of stock options                                                                        183,237
Payment of dividends                                                                            (808,610)
                                     --------------------------------------------------------------------
BALANCES, MARCH 31, 1998                       225,247         (714,150)      (274,785)       42,683,259

Net income                                                                                     2,859,885
Unrealized loss on
securities available for sale                 (219,287)                                         (219,287)
                                                                                                ---------
Total comprehensive income                                                                     2,640,598
                                                                                               ---------
ESOP shares earned                                              238,050                          556,896
Vesting of restricted stock awards                                             129,981           129,981
Cancellation of restricted
   stock awards                                                                 14,330                 0
Purchase of Treasury Stock                                                                    (4,163,316)
Issuance of retricted stock awards                                             (84,725)                0
Exercise of stock options                                                                        222,271
Payment of dividends                                                                          (1,208,502)
                                     --------------------------------------------------------------------
BALANCES, MARCH 31, 1999                         5,960         (476,100)      (215,199)       40,861,187

Net income                                                                                     2,193,875
Unrealized loss on
securities available for sale               (3,102,791)                                       (3,102,791)
                                                                                       ------------------
Total comprehensive income                                                                      (908,916)
                                                                                       ------------------
ESOP shares earned                                              238,050                          539,948
Vesting of restricted stock awards                                             200,801           200,801
Cancellation of restricted
   stock awards                                                                 14,398
Purchase of Treasury Stock                                                                      (683,886)
                                     --------------------------------------------------------------------
Exercise of stock options                                                                      2,551,220
Payment of dividends                                                                          (1,120,610)
                                     --------------------------------------------------------------------
BALANCES, MARCH 31, 2000                   ($3,096,831)       ($238,050)            $0       $41,439,744
                                     ====================================================================
</TABLE>
See note to consolidated financial statements

                                       59

<PAGE>
<TABLE>
<CAPTION>

                                    PERMANENT BANCORP, INC.
                            Consolidated Statements of Cash Flows

                                                                             Year Ended March 31,
                                                           ---------------------------------------------------
                                                                   2000              1999              1998
                                                           ----------------  ----------------  ---------------
<S>                                                             <C>               <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                      $2,193,875        $2,859,885       $2,645,167
Adjustments to reconcile net income to net cash
  provided by operating activities:
    Depreciation, amortization and accretion                     1,274,639         1,244,841          814,664
    Vesting of restricted stock awards                             146,614           129,981          125,243
    Provisions for loan losses                                     295,500           300,000          177,050
   (Gain) on sale of securities                                                     (229,708)         (42,641)
   (Gain) on sale of loans                                        (108,345)         (205,837)         (91,866)
   (Gain) loss on sale of other assets                             (66,435)          (15,631)         (74,288)
    ESOP shares earned                                             324,984           318,846          383,336
  Proceeds from the sales of loans held for sale                 8,657,663        12,926,125        5,169,926
  Origination of loans for resale                               (8,549,318)      (12,720,288)      (5,078,060)
Changes in assets and liabilities:
  Other investments                                                 88,690          (597,651)         (51,135)
  Interest receivable                                             (147,939)          162,142          268,912
  Other assets                                                   2,386,812          (711,591)        (173,604)
  Interest payable                                                 216,220            10,459          143,821
  Other liabilities                                              2,103,605        (9,145,930)       1,456,931
                                                           ----------------  ----------------  ---------------
       Net cash provided by (used in) operating activities       8,816,565        (5,674,357)       5,673,456
                                                           ----------------  ----------------  ---------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Cash acquired through branch purchase                                           26,933,017        4,578,736
  Loans originated                                            (134,189,861)     (168,807,683)     (71,424,204)
  Loan principal repayments                                    156,879,414       125,616,701       73,116,431
  Proceeds from maturities and calls of securities               3,000,000       143,007,087       61,016,550
  Sales of:
       Securities                                                                 41,112,062       24,072,258
       Other assets                                                517,574           271,376          323,174
  Purchases of:
       Securities                                              (14,104,277)     (150,710,053)     (97,993,517)
       Loans                                                   (32,744,354)       (9,885,578)     (17,257,140)
       Other assets                                             (1,716,975)         (834,601)        (730,464)
  Payments on mortgage-backed securities                        15,593,922        29,378,578       24,282,962
  Increase in cash surrender value of life insurance              (182,115)       (1,301,575)         (71,155)
  Other                                                             55,356            12,001           16,437
                                                           ----------------  ----------------  ---------------
       Net cash provided by (used in) investing activities     (6,891,316)       34,791,332          (71,075)
                                                           ----------------  ----------------  ---------------
</TABLE>

Continued on next page


                                       60
<PAGE>
<TABLE>
<CAPTION>

                                         PERMANENT BANCORP, INC.
                            Consolidated Statements of Cash Flows - Continuation

                                                                                                Year Ended March 31,
                                                                              ------------------------------------------------------
                                                                                    2000               1999               1998
                                                                              ----------------   ----------------   ----------------
<S>                                                                                <C>                  <C>                <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
  Dividends paid                                                                   (1,087,899)          (969,805)          (808,610)
  Purchase of treasury stock                                                         (93,125)        (4,163,316)          (993,628)
  Net change in deposits                                                           10,496,786        (16,720,332)        (3,542,954)
  Proceeds from FHLB advances                                                     130,300,000        174,749,242        274,500,000
  Proceeds from other debt                                                                             4,153,875       (273,631,307)
  Repayment of other debt                                                            (500,000)        (1,153,875)
  Payments on FHLB advances                                                      (139,955,428)      (177,598,310)
  Principal repayments of ESOP borrowing                                              238,050            238,050            238,050
  Advance payments by borrowers for taxes and insurance                               (62,301)            (5,223)           (34,739)
  Net change in other borrowed funds                                                                                     (1,793,967)
  Net proceeds from issuance of common stock                                        1,246,043            222,270            183,237
                                                                              ----------------   ----------------   ----------------

          Net cash provided by (used in) financing activities                         582,126        (21,247,424)        (5,883,918)
                                                                              ----------------   ----------------   ----------------


NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                2,507,375          7,869,551           (281,617)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                   13,952,410          6,082,859          6,364,476
                                                                              ----------------   ----------------   ----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                        $16,459,785        $13,952,410         $6,082,859
                                                                              ================   ================   ================


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid during the year for:
     Interest                                                                     $20,413,550        $19,898,554        $19,198,690
     Income taxes                                                                     920,000          1,595,000          1,588,000
   Noncash transactions:
     Transfers from loans to real estate owned                                        175,204            356,332            151,339
      Liability for purchase of available for sale securities                                                             8,995,000
     Transfer of held to maturity securities to securities
          available for sale                                                                          16,324,314
     Purchase of treasury shares                                                      590,761
</TABLE>
See notes to consolidated financial statements.

                                       61

<PAGE>




1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         The accounting and financial  reporting  policies of Permanent Bancorp,
Inc. (the "Company") and its subsidiary, Permanent Bank (the "Bank"), conform to
generally  accepted  accounting  principles and reporting  practices followed by
thrift holding companies. The more significant policies are described below.

         Basis of Presentation - The consolidated  financial  statements include
the accounts of the Company and the Bank, which is wholly owned. All significant
intercompany  balances  and  transactions  have  been  eliminated.  The  Company
operates as a single business segment.

         Use  of  Estimates  -  The  preparation  of  financial   statements  in
conformity with generally accepted accounting  principles requires management to
make estimates and  assumptions  that affect the reported  amounts of assets and
liabilities and disclosures of contingent  assets and liabilities at the date of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the reporting  period.  Actual results could differ from those estimates.
Estimates most  susceptible to change in the near term include the allowance for
loan losses and the fair value of securities.

         Cash and cash  equivalents  - All  highly  liquid  investments  with an
original maturity of three months or less are considered to be cash equivalents.

         Securities  Available  for  Sale  and  Securities  Held to  Maturity  -
Securities are classified and accounted for as follows:

         o  Debt securities that the Company has the positive intent and ability
            to hold to maturity are classified as "held to maturity  securities"
            and reported at amortized cost.  Debt securities  classified as held
            to maturity and sold within three months of their expected  maturity
            or  call  dates  are  considered   maturities  of  the   securities.
            Similarly,  the sale of held to maturity debt  securities  occurring
            after  the  Company  has  collected  at least  85% of the  principal
            originally acquired is considered a maturity of the security.

         o  Debt and equity  securities  that are acquired and held  principally
            for the purpose of selling them in the near term are  classified  as
            "trading  securities"  and  reported  at fair value with  unrealized
            gains and losses  included  in  earnings.  The  Company has not held
            trading securities during the three years ended March 31, 2000.

         o  Debt and equity securities not classified as either held to maturity
            or  trading   securities  are  classified  as  "available  for  sale
            securities"  and  reported at fair value with  unrealized  gains and
            losses, after applicable taxes,  excluded from earnings and reported
            as a separate component of stockholders' equity.

         Premiums and discounts are amortized over the contractual  lives of the
related  securities  using the level yield  method.  Gains or losses on sales of
securities are based on the specific identification method.

         As  discussed   below,   SFAS  No.  133,   "Accounting  For  Derivative
Investments,"  permitted a one-time transfer of securities previously classified
as held to maturity to the available for sale  category.  On October 1, 1998 the
Company  transferred   mortgage-backed   securities   previously  classified  as
held-to-maturity into the available-for-sale category at fair value. At the time
of the transfer these securities had an amortized cost of $16,113,992 and a fair
value of $16,324,314.

         Other Investments - The Bank,  through a subsidiary,  has an investment
in an insurance company partnership, which underwrites various types of life and
disability insurance and annuity programs.  The investment is recorded using the
equity method.

                                       62
<PAGE>


         Loans - Loans are reported at their  outstanding  principal balance net
of the  allowance  for loan losses and any deferred  fees or costs on originated
loans.  Deferred loan fees and origination costs are amortized and recognized as
an adjustment of yield over the life of the loan.

         The Bank originates  loans for portfolio  investment or for sale in the
secondary market.  During the loan origination  period,  loans are designated as
held for sale or  portfolio  investment.  Loans held for sale are carried at the
lower of cost or market, determined on an individual loan basis.

         Allowance for Losses - The balance in the allowance for loan losses and
the amount of the provision for loan losses are  determined  based upon a number
of factors.  The allowance is  maintained  by  management at a level  considered
adequate to cover possible losses that are currently  anticipated  based on past
loss  experience,  general  economic  conditions,   information  about  specific
borrower  situations,  collateral  values and other  factors.  While  management
endeavors  to use the best  information  available  in making  the  evaluations,
future  allowance  adjustments may be necessary.  Increases to the allowance are
recorded by a provision for possible loan losses  charged to expense.  A loan is
charged  off  by  management  as a  loss  when  deemed  uncollectable,  although
collection efforts continue and future recoveries may occur.

         Loan  Servicing - The Company  services  mortgage  loans for  permanent
investors  under servicing  contracts.  Fees earned for servicing loans owned by
investors  are based on the  outstanding  principal  balances of the loans being
serviced and are  recognized  as income when the related  mortgage  payments are
received.  Loan servicing  costs are charged to expense as incurred.  When loans
are sold servicing assets are recognized.

         Office  Properties  and  Equipment is carried at cost less  accumulated
depreciation.  Depreciation  is computed on the  straight-line  and  accelerated
methods over estimated useful lives that range from three to thirty-five years.

         Real Estate Owned - When  property is  acquired,  it is recorded at the
lower  of cost or  estimated  fair  value at the  date of  acquisition  less any
estimated  selling  costs and any  write-down  resulting is charged  against the
allowance  for loan  losses.  Any  subsequent  deterioration  of the property is
charged  directly to real estate owned  expense.  Loans  secured by property for
which there is an  indication  that the  borrower has little or no equity in the
collateral  based upon the current fair value of the  collateral,  no longer has
the ability to repay the loan and it is doubtful  that equity will be rebuilt in
the  foreseeable  future are  classified  as  in-substance  foreclosures.  Costs
relating  to  the   development   and  improvement  of  real  estate  owned  are
capitalized,  whereas costs relating to holding and  maintaining the property is
charged to expense.

         Goodwill  represents the fair market value of  liabilities  assumed and
cash consideration paid over the fair market value of assets acquired.  Goodwill
is amortized over the life of the underlying net assets or liabilities that give
rise to it but not more than fifteen years.  Impairment of goodwill results in a
charge to expense. Amortization expense for the years ended March 31, 2000, 1999
and  1998  was  $695,816,  $602,682  and  $167,036,  respectively.  Goodwill  of
$8,660,000  and  $9,356,000  is  included  in Other  Assets in the  Consolidated
Statements  of  Financial  Condition  at March  31,  2000 and  March  31,  1999,
respectively.

        Uncollected  Interest - The Bank  provides an allowance  for the loss of
uncollected  interest  on  loans  which  are more  than 90 days  past  due.  The
allowance is  established  by a charge to interest  income equal to all interest
previously accrued and income is subsequently recognized only to the extent that
cash payments are received  until,  in  management's  judgment,  the  borrower's
ability to make periodic  interest and principal  payments returns to normal, in
which case the loan is returned to accrual status.

        Federal  Income  Taxes - Deferred  income  tax  assets  and  liabilities
reflect  the  impact of  temporary  differences  between  amounts  of assets and
liabilities  for  financial  reporting  purposes  and basis of such  assets  and
liabilities  as measured by tax laws and  regulations.  The Company and the Bank
file consolidated income tax returns.

                                       63
<PAGE>

        New Accounting  Pronouncements  - In June 1998 the Financial  Accounting
Standards Board issued SFAS No. 133,  "Accounting  for Derivative  Instruments,"
which establishes  accounting and reporting standards for derivative instruments
including  derivative  instruments  embedded in  financial  instruments  and for
hedging.  The Company  adopted this statement on October 1, 1998 and, except for
the   reclassification   of  securities   from  the   held-to-maturity   to  the
available-for-sale  category noted above,  the adoption of this statement had no
significant  impact on the  financial  condition,  results of operations or cash
flows of the Company.

        SFAS No. 131,  "Disclosures  about Segments of an Enterprise and Related
Information"  became  effective  during the fiscal  year 1999.  The  Company has
determined that it operates as a single segment which is community  banking.  At
March 31, 2000 and 1999, the Bank had assets of approximately $492.7 million and
$493.7 million,  or substantially all of consolidated  assets as of these dates.
Net income of the Bank for the three years ended March 31, 2000 was  $3,045,000,
$3,074,000 and $2,706,000 or 138%, 108% and 102% of consolidated  net income for
fiscal years 2000,  1999 and 1998.  Net interest  income at the Bank for each of
the three years ended March 31, 2000 exceeded 98% of  consolidated  net interest
income.

         Earnings per Share - The difference  between basic and diluted earnings
per share  represents  the dilutive  impact of the Company's  outstanding  stock
options. The following is a reconciliation of the weighted average common shares
for the basic and diluted earnings per share computations:

                                                Year Ended March 31,
                                    -------------------------------------------
                                        2000           1999            1998
                                    ------------   ------------   -------------
Basic average common shares           3,969,419      3,956,590       4,048,150
Dilutive effect of stock options         83,612        105,565         251,216
                                    ------------   ------------   -------------
Diluted average common shares         4,053,031      4,062,155       4,299,366
                                    ============   ============   =============


         Acquisitions  - On June 26,  1998 the  Company  acquired  deposits  and
certain  assets  of four  branch  banking  locations  from NBD Bank,  N.A.  in a
purchase  transaction.  The operating results of the acquired branches have been
consolidated  since  the  acquisition  date.  As a result of the  purchase,  the
Company acquired $79.1 million of deposits,  $43.6 million of loans, $900,000 of
office  properties  and  equipment  and  received  cash of  approximately  $26.9
million. The purchase created approximately $9.5 million of goodwill.

         On May 19, 1997 the Company acquired in a purchase transaction a branch
facility, which included $5.7 million of deposit liabilities, $838,000 of office
properties and equipment and $30,000 of other assets.  This transaction  created
approximately $294,000 of goodwill.

         Pro forma  information is not presented since the  transactions are not
considered significant.

         Pending  Merger - On  December  20,  1999,  the  Company  announced  an
agreement to merge with Old National  Bancorp,  Inc. ("Old National") in a stock
transaction valued at approximately $92 million.

         The  agreement  calls for a fixed price with the  exchange  ratio to be
based on the price of Old National  stock at the time of the closing  subject to
adjustment. The agreement provides for adjustments in the exchange ratio and the
renegotiation  of the  agreement  under certain  conditions.  The following is a
description  of the  significant  provisions  of the  agreement  related  to the
exchange  ratio.  Old National share prices have been adjusted from the original
agreement to reflect the 5% stock dividend payable to its shareholders of record
on January 6, 2000.

         o  The  assumed  number of  Permanent  shares and vested  options to be
            exchanged in the transaction is approximately  4,432,742. At a total
            purchase price of $92 million, this equates to a projected price per
            Permanent share/option of approximately $20.75.

                                       64
<PAGE>


         o  If the share price of Old National at the time of closing is between
            $26.60  and  $34.20,  the  number of shares  of Old  National  stock
            payable to Permanent  shareholders  would be derived by dividing $92
            million by the Old National  share price.  Assuming the $20.75 value
            above,  the exchange ratio per Permanent share would range between a
            low of .6069  shares of Old  National  at an Old  National  price of
            $34.20 to a high of .7802 shares at an Old National price of $26.60.

         o  If the share price of Old National is less than $26.60, the exchange
            ratio will be fixed at .7802 and the value of the  transaction  will
            be less  than  $92  million.  However,  if the  share  price  of Old
            National is less than $24.70,  Permanent may terminate the agreement
            if Old  National  elects not to increase  the  transaction  value to
            $85.4 million.

         o  If the share  price of Old  National  is greater  than  $34.20,  the
            exchange  ratio  will  be  fixed  at  .6069  and  the  value  of the
            transaction will be greater than $92 million.  If the share price of
            Old  National is greater  than  $36.10,  Old National may request to
            renegotiate  the  exchange  ratio and if the  parties  are unable to
            agree to a new  exchange  ratio,  Old  National  may  terminate  the
            agreement.

         This merger,  which requires both regulatory and shareholder  approval,
is expected to be completed in the quarter ending September 30, 2000.

         The Company has in conjunction  with this merger  retained the services
of qualified  professionals to advise it on merger related matters.  Included in
operating results for the year ended March 31, 2000 are  approximately  $439,000
of expenses related to these services.

         In addition, as of December 13, 1999, the Company accelerated the
vesting of all shares of stock held under the  Recognition  and  Retention  Plan
(RRP) which resulted in a pre-tax charge to earnings of approximately $145,000.

         Because of this pending merger, the employment contract of the Chairman
of the Board and Chief Executive Officer of the Company, which was scheduled to
terminate on March 31, 2000,  was extended to the earlier of the  completion  of
the  merger or the end of the month  following  the  termination  of the  merger
agreement. In conjunction with and upon completion of the merger the Chairman of
the Board and Chief Executive Officer of the Company will enter into an eighteen
month consulting agreement with Old National.

         As part of the merger  agreement  the  Company  has agreed to repay all
borrowings  of the parent  company,  which  amounted to  $2,500,000 at March 31,
2000, and refrain from borrowing under the $1,000,000 line of credit. See "Other
Debt" note.

         Changes In  Presentation - Certain items appearing in the 1999 and 1998
financial statements have been reclassified to conform to the 2000 presentation.

                                       65
<PAGE>


2.       SECURITIES

         The amortized  cost and estimated  fair values of securities  available
for sale and securities held to maturity is summarized as follows:
<TABLE>
<CAPTION>

                                                                        March 31, 2000
                                               Amortized               Gross Unrealized                Fair
                                                  Cost               Gains          Losses             Value
                                          ----------------------------------------------------------------------
<S>                                         <C>                   <C>          <C>               <C>
  Securities available for sale:
    U.S. Agency                             $   63,184,591                     $  4,298,931      $   58,885,660
    FHLMC certificates                          15,981,838        $  23,626         290,898          15,714,566
    FNMA certificates                           18,257,776           66,465         259,276          18,064,965
    GNMA certificates                           15,314,891          130,623          41,077          15,404,437
                                          ----------------------------------------------------------------------
  Total securities available for sale          112,739,096          220,714       4,890,182         108,069,628
                                          ----------------------------------------------------------------------
 Securities held to maturity:
   Municipal & Revenue Bonds                     6,701,343                          775,121           5,926,222
                                          ----------------------------------------------------------------------
Total securities                            $  119,440,439        $ 220,714    $  5,665,303      $  113,995,850
                                          ======================================================================
<CAPTION>


                                                                      March 31, 1999
                                          ----------------------------------------------------------------------
                                                 Amortized             Gross Unrealized                Fair
                                                   Cost              Gains          Losses             Value
                                          ----------------------------------------------------------------------
<S>                                         <C>                   <C>          <C>               <C>
  Securities available for sale:
    U.S. Agency                             $   62,947,099                      $   469,103      $   62,477,996
    FHLMC certificates                          16,734,901        $ 247,720          29,472          16,953,149
    FNMA certificates                           17,419,111          206,609          29,121          17,596,599
    GNMA certificates                           20,178,106          151,872          68,636          20,261,342
                                          ----------------------------------------------------------------------
  Total securities available for sale          117,279,217          606,201         596,332         117,289,086
                                          ----------------------------------------------------------------------
 Securities held to maturity:
   Municipal & Revenue Bonds                     5,908,859                          290,346           5,618,513
   Other                                         1,010,934                            2,212           1,008,722
                                          ----------------------------------------------------------------------
   Total securities held to maturity             6,919,793                          292,558           6,627,235
                                          ----------------------------------------------------------------------
Total securities                            $  124,199,010        $ 606,201     $   888,890      $  123,916,321
                                          ======================================================================
</TABLE>

The estimated fair value of U.S. Agency  securities  pledged to the Federal Home
Loan Bank of Indianapolis as security for advances is approximately $20,151,000.

                                       66
<PAGE>

         The amortized  cost and estimated fair value of securities at March 31,
2000 by contractual  maturity are shown below.  Expected  maturities will differ
from  contractual  maturities  because  borrowers  may have the right to call or
prepay obligations with or without penalties.

                                             Amortized                 Fair
                                                Cost                  Value
                                       ----------------------------------------
Due within 1 year
  FHLMC certificates                           $281,721               $280,566
                                       -----------------      -----------------
                                                281,721                280,566
                                       -----------------      -----------------
Due after 1 year through 5 years
  U.S. Agency                                14,000,000             13,383,705
  FHLMC certificates                          2,382,972              2,352,247
  FNMA certificates                             682,927                687,121
                                       -----------------      -----------------
                                             17,065,899             16,423,073
                                       -----------------      -----------------

Due after 5 years through 10 years
  U.S. Agency                                33,675,317             31,652,531
  FHLMC certificates                          1,882,196              1,820,903
  FNMA certificates                           3,408,956              3,259,355
  GNMA certificates                             393,417                379,956
                                       -----------------      -----------------
                                             39,359,886             37,112,745
                                       -----------------      -----------------

Due after 10 years through 15 years
  U.S. Agency                                12,980,961             11,751,163
  FHLMC certificates                            683,996                653,216
  FNMA certificates                             160,544                158,746
  Municipal & Revenue Bonds                   1,325,226              1,141,102
                                       -----------------      -----------------
                                             15,150,727             13,704,227
                                       -----------------      -----------------

Due after 15 years
  U.S. Agency                                 2,528,313              2,098,261
  FHLMC certificates                         10,750,953             10,607,634
  FNMA certificates                          14,005,349             13,959,743
  GNMA certificates                          14,921,474             15,024,481
  Municipal & Revenue Bonds                   5,376,117              4,785,120
                                       -----------------      -----------------
                                             47,582,206             46,475,239
                                       -----------------      -----------------
   Total                                   $119,440,439           $113,995,850
                                       =================      =================


         There were no sales of securities  during the year ended March 31, 2000
and activities  related to the security sales for the years ended March 31, 1999
and 1998 are:

                                       Year Ended March 31,
                                ----------------------------------
                                      1999             1998
                                ----------------------------------
Prodeeds from sales               $41,101,856      $24,072,258
Gross gains on sales                  239,914           51,776
Gross loss on sales                    10,206            9,135



                                       67
<PAGE>


3.     LOANS

       Approximately  84% of the Bank's loans are to customers in Indiana and it
has no foreign loans. The portfolio of loans consists of residential, commercial
real estate, commercial construction, consumer and other loans.
<TABLE>
<CAPTION>
                                                                        March 31,
                                                      ------------------------------------------
                                                               2000                    1999
                                                      -------------------      -----------------
<S>                                                        <C>                     <C>
First mortgage:
  Secured by one-to-four family residences                 $ 171,957,118           $171,249,927
  Secured by other properties                                 45,584,797             31,897,812
  Construction loans                                           5,939,129              8,193,828
Automobile                                                    57,320,284             56,779,077
Consumer                                                      26,917,610             26,609,416
Commercial                                                    15,965,302             17,327,986
Commercial paper                                               3,966,748              9,275,099
Credit card                                                      544,997                582,185
Other loans                                                    1,421,414              2,183,603
                                                      -------------------      -----------------
Subtotal                                                     329,617,399            324,098,933

Allowance for loan losses                                     (2,231,826)            (2,706,408)
Deferred loan fees and undisbursed proceeds                     (234,707)              (362,394)
                                                      -------------------      -----------------
Loans, net                                                 $ 327,150,866           $321,030,131
                                                      ===================      =================
</TABLE>

       The principal balance of nonaccrual loans totaled approximately  $612,000
and $818,000 at March 31, 2000 and 1999, respectively. For the years ended March
31, 2000 and 1999,  gross interest income which would have been recorded had the
Bank's  non-accruing  loans been current in accordance with their original terms
amounted to $39,768 and $65,013  respectively.  The amounts included in interest
income on such loans were $18,289 and $20,681 for the years ended March 31, 2000
and 1999, respectively.

       The Bank  originates  commercial  real  estate  loans.  Such  loans had a
carrying  value of  approximately  $46 million and $32 million at March 31, 2000
and 1999,  respectively.  These  loans are  considered  by  management  to be of
somewhat greater risk of uncollectibility than other loans due to the dependency
on income  production.  Of the commercial  real estate loans,  $6 million and $3
million are  collateralized  by multi-family  residential  property at March 31,
2000 and 1999,  respectively,  and $40 million and $29 million by hotel,  office
and other property at March 31, 2000 and 1999, respectively.

       The Bank had  commitments  to make loans  approximating  $23,563,000  and
$23,421,000 excluding undisbursed portions of loans in process at March 31, 2000
and 1999, respectively.
<TABLE>
<CAPTION>

                   Fixed Rate                                              Adjustable Rate
------------------------------------------------         ----------------------------------------------
                              Book Value                                           Book Value
  Term to                      March 31,                    Term to Rate            March 31,
                --------------------------------                         ------------------------------
 Maturity             2000              1999                 Adjustment        2000             1999
------------------------------------------------         ----------------------------------------------
<S>               <C>               <C>                                    <C>             <C>
To.-1yr           $11,114,000       $30,171,000            To.-1yr.        $35,647,000     $27,279,000
1yr.-3yr.          24,232,000        18,322,000            1yr.-3yr.         6,484,000       4,978,000
3yr.-5yr.          71,462,000        65,390,000            3yr.-5yr.         8,192,000       7,272,000
5yr.-10yr.         48,778,000        46,433,000            5yr.-10yr.       47,990,000      37,219,000
10yr.-20yr.        62,303,000        78,742,000            10yr.-20yr.       1,159,000       1,006,000
Over 20 years      12,136,000         7,164,000            over 20 yrs         120,000         123,000
                --------------    --------------                         --------------   -------------
                 $230,025,000      $246,222,000                            $99,592,000     $77,877,000
                ==============    ==============                         ==============   =============

</TABLE>

                                       68
<PAGE>

        The adjustable rate loans have interest rate adjustment  limitations and
are  generally  indexed on a weekly  average yield of U.S.  Treasury  securities
adjusted to a constant  maturity of one year.  Future market  factors may affect
the  correlation of the interest rate adjustment with the rates the Bank pays on
the short-term deposits that have been primarily utilized to fund these loans.

        Aggregate loans to officers and directors  totaled $778,040 and $609,277
at March 31, 2000 and 1999, respectively. For the years ended March 31, 2000 and
1999 loans of $385,816 and $152,383 respectively, were disbursed to officers and
directors and  repayments  of principal of $217,053 and $173,719,  respectively,
were received from officers and directors.

         The  amount  of  loans  serviced  for  others   totaled   approximately
$37,650,000 and $36,328,000 at March 31, 2000 and 1999, respectively.  Servicing
loans for others generally consists of collecting mortgage payments, maintaining
escrow amounts,  disbursing payments to investors and foreclosure processing. In
connection  with loans  serviced  for others,  the Bank held  borrower's  escrow
balances of $231,392 and $228,391 at March 31, 2000 and 1999, respectively.  The
Bank is obligated to  repurchase  certain loans sold to and serviced for others,
which become delinquent as defined by the various agreements.  At March 31, 2000
and 1999, these obligations were limited to approximately  $72,000 and $316,000,
respectively.

        Loan  servicing  fee income for each of the three  years ended March 31,
2000 was $93,901, $81,575, and $84,274, respectively.

        There were no  restructured  loans in the Bank's  loan  portfolio  as of
March 31, 2000 and 1999.

       An analysis of the allowance for loan losses is as follows:
<TABLE>
<CAPTION>

                                                                  Year Ended March 31,
                                                -----------------------------------------------------
                                                       2000              1999              1998
                                                -----------------  ----------------  ----------------
<S>                                                   <C>               <C>               <C>
Beginning balance                                     $2,706,408        $1,973,410        $2,126,225
Provision for losses charged to operations               295,500           300,000           177,050
Charge-offs                                             (894,278)         (506,753)         (403,896)
Recoveries                                               124,196           179,751            74,031
Acquired in branch acquisition                                             760,000
                                                -----------------  ----------------  ----------------
Ending balance                                        $2,231,826        $2,706,408        $1,973,410
                                                =================  ================  ================
</TABLE>

       The recorded  investment in loans  considered  impaired at March 31, 2000
  and 1999 was $361,042 and $362,920 for which no specific valuation reserve has
  been  established.  For the years  ended  March 31,  2000 and 1999 the average
  recorded investment in impaired loans was approximately $347,000 and $243,000,
  respectively.  Cash  received for  interest on impaired  loans was $29,346 and
  $17,039 for the years ended March 31, 2000 and 1999, respectively.

         As a federally chartered savings bank, aggregate commercial real estate
  loans may not exceed 400% of capital as determined under the capital standards
  provisions of FIRREA.  This limitation was approximately $171 million and $169
  million as of March 31, 2000, and 1999, respectively.

        Also, under applicable regulations, the loans-to-one borrower limitation
is defined and is generally 15% of unimpaired  capital which,  for the Bank, was
approximately $5.4 million at March 31, 2000 and $4.9 million at March 31, 1999.
At March 31, 2000 and 1999 there were no loans exceeding this limitation.

                                       69

<PAGE>


4.      OFFICE PROPERTIES AND EQUIPMENT

         Office properties and equipment are summarized as follows:

                                                         March 31,
                                           ----------------------------------
                                                 2000               1999
                                           ----------------   ---------------

Land                                            $2,506,477        $2,578,358
Office buildings                                 8,908,807         8,212,588
Furniture and equipment                          4,006,831         3,551,173
Leasehold improvements                             389,713           289,824
Automobiles                                         55,642            55,642
                                           ----------------   ---------------
      Total                                     15,867,470        14,687,585
Less accumulated depreciation                    6,368,798         6,000,198
                                           ----------------   ---------------
Office properties and equipment, net            $9,498,672        $8,687,387
                                           ================   ===============

        Depreciation expense included in operations during the years ended March
31, 2000, 1999 and 1998 totaled $598,950, $538,412 and $556,598, respectively.

5.       DEPOSITS

         Deposit accounts are summarized as follows:

<TABLE>
<CAPTION>
                                                             March 31,
                                --------------------------------------------------------------------
                                               2000                                1999
                                ----------------------------------    ------------------------------
                                                       Average                            Average
                                    Amount              Rate               Amount           Rate
                                ---------------   ----------------    ---------------  -------------

<S>                                <C>                  <C>              <C>                 <C>
Noninterest-bearing                $13,112,294                           $12,267,705
NOW and MMDA's                      59,276,434          2.4%              57,644,600         1.0%
Passbook savings                    47,437,703          3.0               59,482,126         3.1
                                ---------------                       ---------------
Total                              119,826,431                           129,394,431
                                ---------------                       ---------------

Certificates of deposit:
  1.50 - 3.49%                          33,318          2.6                   40,396         2.4
  3.50 - 5.49%                     108,672,484          5.0              120,750,095         4.9
  5.50 - 7.49%                     124,571,102          6.0               92,403,547         6.1
  7.50 - 9.49%                       2,734,540          7.8                2,752,620         7.8
                                ---------------                       ---------------
Total certificates of deposit      236,011,444                           215,946,658
                                ---------------                       ---------------
Total                             $355,837,875                          $345,341,089
                                ===============                       ===============
</TABLE>


         Certificates  of  deposit  in the  amount  of  $100,000  or more  total
approximately $58 million at March 31, 2000 and $30 million at March 31, 1999.


                                       70
<PAGE>



         A summary of certificate  accounts by scheduled maturities at March 31,
2000 is as follows:
<TABLE>
<CAPTION>

                     2001             2002             2003           2004           2005        Thereafter         Total
                ----------------------------------------------------------------------------------------------------------------
<S>                  <C>             <C>              <C>            <C>            <C>             <C>             <C>
Less than
  3.49%                 $15,609         $17,709                                                                         $33,318
3.50 - 5.49%         73,118,450      23,861,311       $4,853,066     $3,976,817     $1,635,745      $1,227,095      108,672,484
5.50 - 7.49%         87,765,321      10,203,358       11,252,038      5,856,385      5,318,694       4,175,306      124,571,102
7.50 - 9.49%          1,338,473       1,396,067                                                                       2,734,540

                ----------------------------------------------------------------------------------------------------------------
                   $162,237,853     $35,478,445      $16,105,104     $9,833,202     $6,954,439      $5,402,401     $236,011,444
                ================================================================================================================
</TABLE>

         Interest expense on deposits is as follows:
<TABLE>
<CAPTION>
                                                    Year Ended March 31,
                             --------------------------------------------------------------------
                                    2000                     1999                    1998
                             -------------------     -------------------     --------------------
<S>                              <C>                     <C>                       <C>
NOW and MMDA's                   $    1,267,208          $    1,141,417            $     716,098
Passbook savings                      1,640,274               1,974,533                1,951,908
Certificates of deposit              12,261,835              11,639,990               10,763,136
                             -------------------     -------------------     --------------------
                                 $   15,169,317          $   14,755,940           $   13,431,142
                             ===================     ===================     ====================
</TABLE>


6.      FEDERAL HOME LOAN BANK ADVANCES

         Advances from the Federal Home Loan Bank of Indianapolis  (FHLB) are as
follows:
<TABLE>
<CAPTION>
                                   Average Rate, March 31,                     Borrowings, March 31,
                                   -----------------------                     ----------------------
                             Fiscal Year         2000       1999                2000            1999
                         --------------------- ---------- --------- ----------------- ---------------
<S>                      <C>                     <C>       <C>            <C>             <C>
            Fixed Rate:
                         2000                              4.89%                            $805,873
                         2001                    6.12%     5.50%          $9,579,872      14,584,231
                         2002                    6.11%     5.46%             149,611       5,000,000
                         2003                    5.61%     4.80%          10,136,937       3,084,231
                         2004 & thereafter       5.32%     4.99%          40,481,762      73,029,275
                         --------------------- ---------- --------- ----------------- ---------------
                         Total fixed rate                                 60,348,182      96,503,610
                         --------------------- ---------- --------- ----------------- ---------------

         Variable Rate:
                         2001                    6.39%                    26,500,000
                         --------------------- ---------- --------- ----------------- ---------------
                         Total advances                                  $86,848,182     $96,503,610
                         --------------------- ---------- --------- ----------------- ---------------
</TABLE>


         Fixed rate  advances at March 31, 2000 include  $10,000,000  of putable
advances  that have  reached  the initial  conversion  date and  $39,000,000  of
putable  advances that reach the conversion  date  subsequent to March 31, 2000.
The terms of these advances  generally  allow the FHLB to convert the fixed rate
advance to a LIBOR based rate,  which will  adjust  quarterly.  Once the initial
conversion  date is reached,  the FHLB may  periodically  exercise its option to
convert  the  advance,  generally  quarterly.  If the FHLB elects to convert the
advance, the Company has the option to repay the advance without penalty.

         The Bank has  pledged  mortgage  loans,  securities  and FHLB  stock as
collateral on these advances.  The Bank may receive additional advances up to an
amount approved by the FHLB, which was  approximately  $164 million at March 31,
2000.

                                       71
<PAGE>

7.      OTHER DEBT

        In August 1998 the Company borrowed $4,153,875 from an unaffiliated bank
and utilized the funds to  repurchase  302,100  shares of its common  stock.  In
November 1998 the Company  repaid  $1,153,875 of this debt and in September 1999
the  Company  refinanced  the  remaining  $3,000,000  of  the  debt  to  another
unaffiliated financial institution and obtained an additional $1,000,000 line of
credit.

        Both the refinanced  debt and the line of credit  facilities are secured
by the  stock of the Bank and bear  interest  at LIBOR (as  defined  in the loan
agreement) plus 160 basis points. The interest rate adjusts monthly and at March
31, 2000 the rate was 7.51%.

        The Company  repaid  $500,000 of  principal  and the loan  balance as of
March 31, 2000 is $2,500,000.  The next scheduled quarterly principal payment of
$250,000 is in April 2000.

        Under the terms of its merger agreement with Old National  Bancorp,  the
Company is precluded from borrowing  under its line of credit  facility and must
retire its remaining $2,500,000 of borrowings prior to the merger.

        The loan  agreement  requires that the Company meet defined  performance
standards  including a return on average  assets ratio of .50%.  The Company did
not meet this  requirement  for the year ended March 31, 2000 but has obtained a
waiver of this requirement  from the lender.  All other loan covenants have been
met.


8.      OTHER BORROWED FUNDS

        The Company had no other  borrowed  funds at March 31, 2000 or March 31,
1999.

        An analysis of  securities  sold under  agreements  to  repurchase is as
follows:
<TABLE>
<CAPTION>
                                                                       Year Ended March 31,
                                                    -----------------------------------------------------
                                                          2000              1999              1998
                                                    ----------------- ----------------   ----------------
<S>                                                      <C>                  <C>           <C>
Highest month-end balance                                $ 5,835,000          $     0       $  444,636
Average balance                                              957,853           10,417          103,260
Weighted average interest rate during the period               5.26%            5.33%            5.10%
</TABLE>


9.       INCOME TAXES

         An analysis of the income tax provision is as follows:
<TABLE>
<CAPTION>
                                                                        Year Ended March 31,
                                                     ------------------------------------------------------
                                                            2000                1999              1998
                                                     -----------------    --------------    ---------------
<S>                                                       <C>                <C>               <C>
Current:
  Federal                                                 $   206,505        $1,232,983        $ 1,366,610
  State                                                        51,616           448,893            447,482
Deferred                                                      657,669           263,235              3,252
                                                     -----------------    --------------    ---------------
                                                          $   915,790        $1,945,111        $ 1,817,344
                                                     =================    ==============    ===============
</TABLE>

                                       72
<PAGE>


         The difference  between the financial  statement  provision and amounts
computed by using the statutory rate of 34% is reconciled as follows:
<TABLE>
<CAPTION>
                                                               Year Ended March 31,
                                            -----------------------------------------------------------
                                                   2000                 1999                 1998
                                            ------------------    ----------------    -----------------
<S>                                               <C>                 <C>                  <C>
Income tax provision at federal
  statutory rate                                  $ 1,057,286         $ 1,633,699          $ 1,517,254
State tax, net of federal tax benefit                 (70,774)            272,365              295,338
Nondeductible expenses                                383,232             133,797              188,734
Tax exempt interest                                  (156,707)
Other                                                (297,247)            (94,750)            (183,982)
                                            ------------------    ----------------    -----------------
Total income tax provision                         $  915,790         $ 1,945,111          $ 1,817,344
                                            ==================    ================    =================
</TABLE>

        The Company's deferred income tax assets and liabilities are as follows:

                                                              March 31,
                                                     --------------------------
                                                          2000          1999
                                                     -------------   ----------

Deferred tax assets:
  Bad debt reserves                                    $  410,179    $ 657,839
  Goodwill                                                118,966      117,670
  Accrued employee benefits                               179,273      146,564
  Net operating loss carryforwards                      1,069,037
  General business tax credits                            107,301
  Unrealized loss on securities available for sale      1,572,637
                                                     -------------   ----------
                                                        3,457,393      922,073
                                                     -------------   ----------
Deferred tax liabilities:
  Depreciation                                            111,568      124,717
  Deferred loan fees                                      703,410      588,802
  Unrealized gain on securities available for sale                       3,909
  Mark to market transfer                               1,358,520
  Other                                                   304,579      144,206
                                                     -------------   ----------
                                                        2,478,077      861,634
                                                     -------------   ----------
Deferred income tax, net                                $ 979,316     $ 60,439
                                                     =============   ==========

         As of March 31, 2000, the Company has net operating loss  carryforwards
of  approximately  $1,069,000 for tax purposes which will be available to offset
future taxable  income.  If not used,  these  carryforwards  will expire between
March  31,  2015 and March 31,  2020.  To the  extent  that net  operating  loss
carryforwards,  when realized, relate to stock option deductions,  the resulting
benefits will be credited to stockholders' equity.

        Retained  earnings at March 31, 2000 and 1999 includes  approximately $6
million of income that has not been subject to tax because of deductions for bad
debts allowed for federal  income tax purposes.  Deferred  income taxes have not
been provided on such bad debt  deductions  since the Company does not intend to
use the  accumulated  bad debt deductions for purposes other than to absorb loan
losses.  If, in the future,  this  portion of retained  earnings is used for any
purpose  other  than to absorb  bad debt  losses,  federal  income  taxes may be
imposed on such amounts at the then current corporate income tax rate.

        In August  1996,  the "Small  Business Job  Protection  Act of 1996" was
passed into law.  One  provision of the act repeals the special bad debt reserve
method for thrift institutions currently provided for in Section 593 of the IRC.
The provision  requires thrifts to recapture any reserve  accumulated after 1987
but  forgives  taxes  owed  on  reserves   accumulated  prior  to  1988.  Thrift
institutions  will be given  six  years to  account  for the  recaptured  excess

                                       73
<PAGE>


reserves,  beginning  with  the  first  taxable  year  after  1995,  and will be
permitted to delay the timing of this recapture for one or two years, subject to
whether they meet certain residential loan test requirements.

10.     REGULATORY CAPITAL REQUIREMENTS

        The  Bank  is  subject  to  various  regulatory   capital   requirements
administered  by the federal banking  agencies.  Failure to meet minimum capital
requirements  can  initiate  certain  mandatory  and  discretionary  actions  by
regulators that could have a direct  material effect on the Company's  financial
position and results of  operations.  The  regulations  require the Bank to meet
specific capital adequacy guidelines that involve  quantitative  measures of the
Bank's assets,  liabilities,  and certain  off-balance-sheet items as calculated
under regulatory  accounting practices.  The Bank's capital  classifications are
also subject to  qualitative  judgments by the  regulators.  The Bank's  primary
regulator  is the Office of Thrift Supervision ("OTS"). As of March 31, 2000 and
1999, the most recent  notification  from the OTS  categorizes the Bank as "well
capitalized" under the regulatory framework for prompt corrective action. There
are no events or conditions  since that  notification  that management  believes
have changed the Bank's category.

        The  following  presents  the  Bank's  minimum  and   "well-capitalized"
regulatory capital levels.
<TABLE>
<CAPTION>
                                                  As of March 31, 2000
                                   ------------------------------------------------------
                                        Actual Capital             Required Capital
                                   ------------------------------------------------------
                                      Amount        Ratio        Amount        Ratio
                                   ------------------------------------------------------
<S>                                  <C>               <C>       <C>              <C>
OTS Capital adequacy
   Tangible Capital                  $35,538,000       7.27 %    $7,329,000       1.50 %
   Core Capital                       35,538,000       7.27      19,543,000       4.00
   Risk-based Capital                 36,799,000      13.79      21,351,000       8.00
FDICIA regulations to be
     classified well-capitalized
   Tier 1 leverage capital            35,538,000       7.27      24,429,000       5.00
   Tier 1 risk-based capital          35,538,000      13.32      16,013,000       6.00
   Total risk-based capital           36,799,000      13.79      26,689,000      10.00

<CAPTION>

                                                  As of March 31, 1999
                                   ------------------------------------------------------
                                       Actual Capital              Required Capital
                                   ------------------------------------------------------
                                      Amount       Ratio          Amount       Ratio
                                   ------------------------------------------------------
<S>                                  <C>               <C>       <C>              <C>
OTS Capital adequacy
   Tangible Capital                  $32,803,000       6.76 %     $7,278,000       1.50 %
   Core Capital                       32,803,000       6.76       19,410,000       4.00
   Risk-based Capital                 34,347,000      12.26       22,410,000       8.00
FDICIA regulations to be
     classified well-capitalized
   Tier 1 leverage capital            32,803,000       6.76       24,263,000       5.00
   Tier 1 risk-based capital          32,803,000      11.71       16,808,000       6.00
   Total risk-based capital           34,347,000      12.26       28,015,000      10.00
</TABLE>



11.      STOCKHOLDERS' EQUITY AND REGULATORY MATTERS

        Dividend  Restrictions  - Under  current  regulations,  the  Bank is not
permitted to pay dividends on its stock if its regulatory  capital would thereby
reduce  below  (i)  the  amount  then  required  for  the  liquidation   account
established  at the time  the Bank  converted  from a  mutual  to stock  form of
ownership  or (ii) the Bank's  regulatory  capital  requirements.  As a "Tier 1"
institution  (an  institution  with  capital  in excess  of its fully  phased-in
capital requirements,  both immediately before the proposed capital distribution
and on a pro forma basis after giving effect to such distribution), the Bank may
make capital distributions after prior notice to the OTS in any calendar year up
to 100% of its net  earnings to date during such  calendar  year plus the amount
that would reduce by one-half its capital surplus ratio at the beginning of such
calendar  year.  Any additional  amount of capital  distributions  would require
prior regulatory approval.

        Preferred Stock - The Company is authorized to issue 1,000,000 shares of
preferred stock,  $.01 par value that remains unissued at March 31, 2000. In the
event any preferred  shares are issued,  the Board of Directors is authorized to
fix and state the voting  powers,  designations,  preferences  and rights of the
shares of each such series and the qualifications,  limitations and restrictions
thereof.  Under the terms of its merger  agreement  with Old  National  Bancorp,
however,  the Company may not make any  changes to its  capital  stock  accounts
except for the issuance of stock under its stock option plans.

12.     EMPLOYEE BENEFIT PLANS

       Multi-employer  Pension Plan - The Bank participates in a noncontributory
multi-employer  pension  plan  covering  all  qualified  employees.  The plan is
administered  by the trustees of the Financial  Institutions'  Retirement  Fund.
There is no separate  valuation  of the plan  benefits nor  segregation  of plan
assets  specifically for the Bank because the plan is a multi-employer  plan and
separate actuarial valuations are not made with respect to each employer.

       There was no pension expense during the three years ended March 31, 2000.

       Employee  Stock  Ownership  Plan  - The  Company  has an  Employee  Stock
Ownership Plan (ESOP) which owns 333,270  shares of the Company's  common stock.
The ESOP  purchase  of the stock was  funded  by a loan from the  Company  (loan
balance of $238,050 and $476,100 at March 31, 2000 and 1999, respectively) which
will be  repaid  by  contributions  to the ESOP by the  Company  in the  future.
Pursuant to the ESOP,  the shares are to be allocated to  participants  annually
over an 8-year period.  The ESOP covers  substantially  all employees and shares
are allocated  based upon  employee  compensation  levels during the year.  ESOP
expense  is based on the fair  value of  shares  earned  and  totaled  $552,010,
$594,925 and $639,317 during 2000, 1999, and 1998,  respectively.  During fiscal
years ended March 31, 2000,  1999 and 1998,  43,482  shares,  45,607  shares and
47,688 shares were earned by participants. At March 31, 2000, 41,255 shares with
a fair value of approximately  $753,000 were held in suspense by the ESOP. These
shares are not considered to be outstanding for the purpose of computing earning
per share.

         Under the terms of the merger agreement with Old National Bancorp,  the
Company  will  terminate  the  ESOP as of the  merger  date  and all  previously
unvested shares will become fully vested and non-forfeitable.

       Recognition  and  Retention  Plan - The  Company  has a  Recognition  and
Retention  Plan (RRP) which  provides  executive  officers and employees  with a
proprietary  interest in the  Company in a manner  designed  to  encourage  such
individuals to remain with the Bank.  Restricted  stock awards covering up to 4%
of the common stock issued may be awarded under the RRP.  Awarded stock vests at
a rate of 20% per year.  No shares were awarded  during the year ended March 31,
2000 and 9,000 and 1,000 shares were awarded during the fiscal years ended March
31,  1999  and  1998,  respectively.  The  cost  of  the  RRP  is  reflected  as
compensation  expense as vesting occurs. In anticipation of the Company's merger
with Old National  Bancorp,  the Board of Directors  accelerated  the vesting of
shares so that as of December 13, 1999 all previously unvested RRP shares became
100% vested. RRP expense amounted to $200,801,  $139,200 and $125,242 during the
fiscal  years ended March 31,  2000,  1999 and 1998.  Termination  of  employees
resulted in 1,360 shares,  2,866 shares 2,856 shares being  canceled  during the
fiscal years ended March 31, 2000, 1999 and 1998, respectively.

       Stock Option and  Incentive  Plan - The Company has granted stock options
to existing stockholders,  officers,  directors and other affiliated individuals
to purchase shares of the Company's stock. Awarded options vest at a rate of 25%
per year and are exercisable in the ten years immediately following the grant.

                                       75
<PAGE>

        The  following is an analysis of stock  option  activity for each of the
three  years  in the  period  ending  March  31,  2000  and  the  stock  options
outstanding at the end of the respective years:

                                                                     Weighted
                                                                     Average
                                              Shares                  Price
--------------------------------------------------------------------------------
Outstanding March 31, 1997                      441,672                 $  5.32
Granted                                           9,522                   15.75
Exercised                                       (36,712)                   5.07
Forfeited or expired                             (3,572)                   5.00
--------------------------------------------------------
Outstanding March 31, 1998                      410,910                    5.59
Granted                                           7,000                   11.25
Exercised                                       (44,454)                   5.00
--------------------------------------------------------
Outstanding March 31, 1999                      373,456                    5.76
Granted                                         134,000                   12.50
Exercised                                      (274,635)                   5.10
Forfeited                                        (7,140)                   5.00
--------------------------------------------------------
Balance at March 31, 2000                       225,681                 $ 10.59
================================================================================

        The number of vested shares  exercisable  at March 31, 2000,  1999,  and
1998 were: 129,290, 344,773 and 376,465, respectively and had a weighted average
exercise price of $5.79,  $5.28 and $5.16,  respectively.  The weighted  average
remaining contractual life of the options outstanding at March 31, 1999 and 1998
was  6.5  years  and  5.3  years,  respectively.  Exercise  prices  for  options
outstanding at March 31, 2000 ranged from $5.00 to $15.75.  All unvested options
become fully  vested upon a vote of the  Company's  shareholders  to approve the
proposed merger with Old National Bancorp.

        The Company applies APB opinion No. 25 ("Accounting  for Stock Issued to
Employees")  and  related   interpretations  in  accounting  for  the  plan.  No
compensation  cost has been  recognized  for the plan  because the stock  option
price is equal to the fair value at the grant date.  Had  compensation  cost for
the plan been  determined  based on the fair value at the grant dates for awards
under  the  plan  consistent  with  the  fair  value  method  of  SFAS  No.  123
("Accounting for Stock-Based  Compensation"),  the Company's proforma net income
per share would be as follows:

                                               Year Ended March 31,
                               -------------------------------------------------
                                    2000             1999               1998
                               --------------    -------------     -------------
Net income :
   As reported                    $2,193,875        $2,859,885       $2,645,167
   Proforma                        2,101,650         2,843,474        2,631,973

Basic : Net income per share:
   As reported                        $ 0.55            $ 0.72           $ 0.65
   Proforma                             0.53              0.72             0.65

Diluted Net income per share:
   As reported                        $ 0.54            $ 0.70           $ 0.62
   Proforma                             0.52              0.70             0.61


                                      76
<PAGE>


        The fair value of option grants are estimated on the date of grant using
an option pricing model with the following assumptions: dividend yields of 2.21%
to 2.64%, risk-free interest rates of 5.23% to 6.75%, expected volatility of 18%
to 35%  and an  expected  life of  five  years.  The  proforma  amounts  are not
representative of the effects on reported net income for future years.

        Deferred Compensation (401K) Plan - The Company has an Employee Deferred
Compensation  (401K)  Plan  administered  through  the  financial  institution's
retirement fund. Each employee may contribute up to 6% of compensation. Employee
contributions  of up to 4% of compensation  are matched by the Company at a rate
of $.25 per dollar of employee contribution.  The Company's matching expense was
$19,083,  $22,271 and $21,450 during the fiscal years ended March 31, 2000, 1999
and 1998, respectively.

        Directors  Deferred  Compensation  Plan  - The  Bank  has  entered  into
deferred  compensation  agreements with certain directors.  Benefits under these
agreements  are paid over a  predetermined  period  upon  attaining  the year of
retirement.  The  present  value of the  benefit to be paid is accrued  over the
active  period  of  service  of  individual  participants  and is funded by life
insurance policies.  Cash values associated with these policies in the amount of
$3,108,943  at March 31, 2000 and  $2,926,828  at March 31, 1999 are included in
Other Assets in the Consolidated Statements of Financial Condition.


13.      COMPREHENSIVE INCOME

       The  Company's   other   comprehensive   income  included  the  following
components:
<TABLE>
<CAPTION>

                                                               Fiscal Year Ended March 31,
                                                     ------------------------------------------------
                                                        2000             1999              1998
                                                        ----             ----              ----
<S>                                                   <C>                 <C>             <C>
Net realized and unrealized gains (losses)
      on available for sale securities                ($3,102,791)        ($80,566)       $1,841,590
Less:  Adjustment for net securities gains
      realized in net income, net of tax                                   138,721            25,752
                                                     -------------   --------------   ---------------
            Other comprehensive income (loss)         ($3,102,791)       ($219,287)       $1,815,838
                                                     =============   ==============   ===============
</TABLE>

       Substantially  all of the other  comprehensive  income is attributable to
the Bank as the amount of available for sale securities at the parent company is
immaterial.


14.     COMMITMENTS

        Lease  commitments - The Company has future minimum  rental  commitments
for noncancelable operating leases as follows:

                           Fiscal Year Ended March 31
                           ---------------------------
                            2001              $240,922
                            2002               200,111
                            2003               132,982
                            2004               112,086
                            2005               113,207


         Rental  expense for the years ended March 31,  2000,  1999 and 1998 was
$311,642, $261,022, and $79,036, respectively.

                                       77
<PAGE>


         Rental  income from  noncancelable  subleases for the years ended March
31, 2000, 1999 and 1998 was $140,662, $137,063 and $119,306, respectively.

         Financial Instruments with Off-Balance Sheet Risk - The Bank is a party
to  financial  instruments  with  off-balance-sheet  risk of loss as part of its
normal  business  operations  to meet the  financing  needs of its  customers by
providing  commitments to extend credit.  These instruments  involve, to varying
degrees,  elements  of credit  and  interest  rate risk in excess of the  amount
recognized  in the  balance  sheet.  The  contract  amount of these  instruments
reflects  the extent of  involvement  the Company has in this class of financial
instruments.

         Exposure  to credit  loss in the event of  nonperformance  by the other
party  to  the  financial   instrument  for  commitments  to  extend  credit  is
represented by the contract  amount of those  instruments.  The Company uses the
same  credit  policies  in making  commitments  as it does for  on-balance-sheet
instruments. The Company does not generally require collateral or other security
to support financial instruments with off-balance-sheet credit risk.

         Commitments  to extend  credit  are  agreements  to lend to a  customer
provided  there is no violation of any  condition  established  in the contract.
Commitments  generally have fixed expiration dates or other termination  clauses
and may require  payment of a fee. Some  commitments  will expire without a loan
disbursement;  thus, the total commitment does not necessarily  represent future
cash  requirements.  The Bank evaluates each  customer's  creditworthiness  on a
case-by-case  basis. The amount of collateral  obtained,  if deemed necessary by
the Bank upon extension of credit, is based on management's credit evaluation of
the  borrower.  The  collateral  consists  primarily of single and  multi-family
residential property, other real estate, and personal property.

       Employment agreement - The Company has entered into employment agreements
with two executive officers. One agreement,  which was scheduled to end on March
31, 2000, was extended to the earlier of the completion of the Company's pending
merger  with  Old  National  Bancorp  or  the  end of the  month  following  the
termination of the merger agreement. Under the terms of the other agreement, the
Company may be obligated  under terms specified in the agreement to continue the
officer's salary for a period of three years.

       Standby  letters of Credit - Standby  letters  of credit are  conditional
commitments  issued by the Bank to guarantee the  performance of a customer to a
third party. Standby letters of credit amounted to $300,000 at March 31, 2000.


                                       78
<PAGE>


15.     PERMANENT BANCORP, INC. FINANCIAL INFORMATION
        (PARENT COMPANY ONLY)

        The following condensed statement of financial condition as of March 31,
2000 and 1999 and condensed statement of operations and cash flows for the three
years  ended  March  31,  2000 for  Permanent  Bancorp,  Inc.  should be read in
conjunction  with the  consolidated  financial  statements and the related notes
hereto.
<TABLE>
<CAPTION>
                                                                                        March 31,
                                                                          ---------------------------------
CONDENSED STATEMENTS OF FINANCIAL CONDITION                                      2000              1999
                                                                          ---------------------------------
<S>                                                                           <C>             <C>
Cash                                                                             $ 544,392       $ 322,070
Other investments                                                                  491,500         539,624
Loans receivable                                                                   238,050         775,242
Fixed assets                                                                       466,138         454,855
Accrued income tax benefit                                                         985,104          22,732
Other assets                                                                        10,950          28,704
Investment in subsidiary                                                        41,549,745      42,120,304
                                                                          ---------------------------------
   Total assets                                                               $ 44,285,879    $ 44,263,531
                                                                          =================================

Deferred income taxes                                                             $ 30,445        $ 30,445
Accrued expenses                                                                    21,196         133,302
Dividends payable                                                                  294,494         238,697
Other borrowed funds                                                             2,500,000       3,000,000
                                                                          ---------------------------------
   Total liabilities                                                             2,846,135       3,402,344
                                                                          ---------------------------------

   Total stockholders' equity                                                   41,439,744      40,861,187
                                                                          ---------------------------------
     Total liabilities and stockholders' equity                               $ 44,285,879    $ 44,263,531
                                                                          =================================
</TABLE>
<TABLE>
<CAPTION>


CONDENSED STATEMENTS OF INCOME                                                        Year Ended March 31,
                                                                         ---------------------------------------------
INCOME:                                                                       2000             1999            1998
                                                                         ---------------------------------------------
<S>                                                                        <C>             <C>             <C>
   Interest on securities                                                                     $ 86,342      $ 145,162
   Interest on loans                                                          $ 24,455          38,029         52,510
   Other income                                                                 79,482          63,395         92,656
                                                                         ---------------------------------------------
     Total income                                                              103,937         187,766        290,328
                                                                         ---------------------------------------------

EXPENSES:
   Salaries and benefits                                                       555,801         187,648        172,019
   Interest expense                                                            212,416         150,792
   Legal and professional fees                                                  75,432          93,878        130,957
   Merger related expenses                                                     584,183
   Other expenses                                                               86,345         110,561         86,646
                                                                         ---------------------------------------------
     Total expenses                                                          1,514,177         542,879        389,622
                                                                         ---------------------------------------------
LOSS BEFORE EQUITY IN
   UNDISTRIBUTED EARNINGS                                                   (1,410,240)       (355,113)       (99,294)
INCOME TAX BENEFIT                                                            (558,596)       (140,615)       (38,426)
EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARY                               3,045,519       3,074,383      2,706,035
                                                                         ---------------------------------------------
NET INCOME                                                                 $ 2,193,875     $ 2,859,885     $2,645,167
                                                                         =============================================
</TABLE>

                                       79
<PAGE>
<TABLE>
<CAPTION>
                                                                       Year Ended March 31,
                                                           ---------------------------------------------
CONDENSED STATEMENTS OF CASH FLOWS                                2000           1999           1998
                                                           ---------------------------------------------
<S>                                                           <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
        Net income                                            $ 2,193,875    $ 2,859,885    $ 2,645,167
        Equity in undistributed earnings of subsidiary         (3,045,519)    (3,074,383)    (2,706,035)
        Adjustments to reconcile net income to net cash
        provided by operating activities
            Vesting of restricted stock awards                    146,614        139,200        125,243
            Depreciation, amortization and accretion                7,514          7,836           (246)
            (Gain) Loss on sale of investments                                    10,206         (5,198)
            Non-cash compensation                                 298,516
        Changes in assets and liabilities:
            Interest receivable                                                   11,353         53,847
            Deferred income tax                                                 (153,532)        (7,422)
            Other assets                                           17,754        (19,958)        (4,059)
            Other liabilities                                    (506,719)        62,774        (18,519)
                                                           ---------------------------------------------
 Net cash provided (used in) by operating activities             (887,965)      (156,619)        82,778
                                                           ---------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Proceeds from:
        Maturities of securities                                               3,689,138      1,997,500
        Loan repayments                                           538,050      1,438,050      1,738,050
        Sale of securities                                                                    1,986,510
   Purchase  of:
        Loans                                                                 (1,492,876)      (497,415)
        Securities                                                 (9,375)    (2,759,969)    (2,497,500)
        Fixed assets                                              (20,155)        (3,974)
   Investment in partnership                                     (388,345)
   Dividends and distributions from subsidiaries                1,425,093
                                                           ---------------------------------------------
Net cash provided by investing activities                       1,545,268        870,369      2,727,145
                                                           ---------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
        Proceeds from other debt                                               4,153,875
        Dividends paid                                         (1,087,899)      (969,805)      (808,610)
        Purchase of treasury stock                               (683,886)    (4,163,316)      (993,628)
        Sale of common stock                                    1,836,804        222,270        183,237
        Principal repayment on other debt                        (500,000)    (1,153,875)
                                                           ---------------------------------------------
 Net cash used in financing activities                           (434,981)    (1,910,851)    (1,619,001)
                                                           ---------------------------------------------

NET INCREASE (DECREASE) IN CASH                                   222,322     (1,197,101)     1,190,922
CASH AT BEGINNING OF PERIOD                                       322,070      1,519,171        328,249
                                                           ---------------------------------------------
CASH AT END OF PERIOD                                           $ 544,392      $ 322,070    $ 1,519,171
                                                           =============================================
</TABLE>



                                       80
<PAGE>


16.     FAIR VALUE OF FINANCIAL INSTRUMENTS

        The  following  disclosure  of the  estimated  fair  value of  financial
instruments  is made  in  accordance  with  the  requirements  of  Statement  of
Financial Accounting Standards No. 107 (SFAS 107), "Disclosures about Fair Value
of Financial Instruments":
<TABLE>
<CAPTION>

                                                        March 31, 2000                   March 31, 1999
                                             ---------------------------------  ---------------------------------
                                                 Carrying            Fair           Carrying           Fair
                                                   Value            Value             Value            Value
                                             ---------------- ----------------  ---------------- ----------------
<S>                                              <C>              <C>               <C>              <C>
Assets:
  Total cash and cash equivalents                $16,459,785      $16,459,785       $13,952,410      $13,952,410
  Securities available for sale                  108,069,628      108,073,273       117,289,086      117,289,086
  Securities held to maturity                      6,701,343        5,926,222         6,919,793        6,627,235
  Loans, net                                     327,150,866      324,447,261       321,030,131      324,264,853
  Interest receivable                              2,888,879        2,888,880         2,824,211        2,824,211
  Federal Home Loan Bank stock                     5,527,500        5,527,500         5,466,000        5,466,000
  Cash surrender value of life insurance           3,108,943        3,108,943         2,926,828        2,926,828

Liabilities:
  Deposits                                       355,837,875      361,326,292       345,341,089      350,438,836
  Federal Home Loan Bank advances                 86,848,182       86,281,229        96,503,610       97,541,079
  Advance payments by borrowers
      for taxes and insurance                        912,335          912,335           974,636          974,636
  Other borrowed funds                             2,500,000        2,500,000         3,000,000        3,000,000
  Interest payable                                 2,420,227        2,420,227         2,204,007        2,204,007
  Off balance sheet: commitments to
     extend  credit                                                23,563,000                         23,421,000
</TABLE>

        The estimated  fair value amounts are  determined by the Company,  using
available market information and appropriate valuation  methodologies.  However,
considerable  judgment is required  in  interpreting  market data to develop the
estimates of fair value.  Accordingly,  the estimates  presented  herein are not
necessarily  indicative  of the amounts the Company  could  realize in a current
market  exchange.  The use of different  market  assumptions  and/or  estimation
methodologies may have a material effect on the estimated fair value amounts.

        Cash,  interest-bearing deposits, Federal Home Loan Bank stock, interest
receivable  and payable,  advance  payments by borrowers for taxes and insurance
and other borrowed funds - The carrying  amounts of these items are a reasonable
estimate of their fair value.

        Securities - Fair values are based on prices  obtained from  independent
pricing services.

        Loans - The fair value of mortgage  loans is estimated  using  published
loan buy rates for similar loans and quoted  market  prices for  mortgage-backed
securities  backed by loans  with  similar  characteristics.  The fair  value of
non-mortgage  loans is estimated by discounting  the future cash flows using the
current rates for loans of similar credit risk and maturities.

        Deposits - The fair value of demand deposits, savings accounts and money
market deposit  accounts is the amount payable on demand at the reporting  date.
The fair  value of  fixed-maturity  certificates  of  deposit  is  estimated  by
discounting  future  cash flows using rates  offered on the  reporting  date for
deposits of similar remaining maturities.


                                       81
<PAGE>


        Federal  Home  Loan  Bank  advances  - The fair  value is  estimated  by
discounting  future cash flows using rates  currently  available to the bank for
advances of similar maturities.

        Commitments - The fair values of  commitments to extend credit are based
on fees  currently  charged  to  enter  into  similar  agreements  with  similar
maturities and interest rates.

        The fair  value  estimates  presented  herein  are based on  information
available to  management as of March 31, 2000 and 1999.  Although  management is
not aware of any factors  that would  significantly  affect the  estimated  fair
value amounts, such amounts have not been comprehensively  revalued for purposes
of these  consolidated  financial  statements  since that date,  and  therefore,
current  estimates  of fair  value  may  differ  significantly  from the  amount
presented herein.


Item 9.  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 10. Directors and Executive  Officers of the  Registrant;  Compliance  with
         Section 16(a) of the Exchange Act
         -----------------------------------------------------------------------

         The Company's  Board of Directors  currently  consists of nine members.
The Board is divided into three classes  containing  three  members.  One of the
three  stands for  election  annually.  Directors  of the Company are elected to
serve for a three-year term or until their respective successors are elected and
qualified.


                                       82
<PAGE>

         The  following  table sets forth  certain  information,  as of June 15,
2000,  regarding the composition of the Company's Board of Directors.  Except as
disclosed  herein,  there are no  arrangements  or  understandings  between  any
director and any other person pursuant to which the director was selected.
<TABLE>
<CAPTION>
                                                                                                   Shares of
                                                                                                 Common Stock      Percent
                                       Position(s) Held                 Director    Term to      Beneficially        of
           Name             Age        in the Company                  Since (1)    Expire         Owned (2)        Class
           ----             ---        --------------                  ---------    ------        ----------        -----

<S>                          <C>       <C>                                  <C>       <C>            <C>             <C>
Donald P. Weinzapfel         64        Chairman of the Board,               1978      2002           244,345         5.74%
                                       Chief Executive Officer
                                       & Director

Daniel L. Schenk             46        Director                             1998      2002             4,960          (3)

James D. Butterfield         43        Director                             1995      2002             7,452          (3)

Daniel F. Korb               68        Director                             1981      2000            18,563          (3)

Robert L. Northerner         71        Director                             1978      2000            19,378          (3)

James W. Vogel               71        Director                             1975      2000            37,378          (3)

Jack H. Kinkel               60        Director                             1975      2001            46,808          1.11% (4)

James A. McCarty, Jr.        47        Director                             1996      2001            11,142          (3)

Murray J. Brown              51        President & Director                 1997      2001            70,704         1.68%
</TABLE>



(1) Includes service as a director of the Bank.

(2) Amounts  include  shares held directly and jointly with family  members,  as
well as  shares  which  are held in  retirement  accounts,  held in a  fiduciary
capacity, held by certain members of the director's family, or held by trusts of
which the  director is a trustee or  substantial  beneficiary,  with  respect to
which  shares  the  respective  directors  may be  deemed to have sole or shared
voting and/or  investment  power.  Amounts also include 50,000,  4,760 and 5,261
shares  subject  to  options  awarded  under  the  stock  option  plans  to  Mr.
Weinzapfel,  Mr.  Schenk  and  Mr.  Brown,  which  have  vested  and  which  are
exercisable  within 60 days of the date hereof.  Amounts exclude 2,382 and 2,380
shares subject to options granted under the stock option plans to Mr. Schenk and
Mr. McCarty, respectively,  which have not vested and are not exercisable within
60 days of the date hereof.

(3) Less than one percent.

(4)  Includes  26,808  shares  held  directly  and 20,000  shares held as profit
sharing plan  trustee.


                                       83
<PAGE>


         The  principal  occupation  of each director of the Company and each of
the nominees for director is set forth below.  All  directors  and nominees have
held their present position for at least five years unless otherwise indicated.

         Donald P. Weinzapfel.  Mr.  Weinzapfel  joined the Bank in 1978 as Vice
President  and  Director  upon  the  merger  of Home  Federal  Savings  and Loan
Association  of  Evansville  into the Bank.  He served  as  President  and Chief
Executive Officer of the Bank from 1985 until 1998, and as Chairman of the Board
of the Bank from 1990 to January 1, 1999. Mr. Weinzapfel is currently serving as
Chairman of the Board and Chief Executive Officer of the Company.

         Daniel L.  Schenk.  Mr.  Schenk  is the  Chancellor  of Ivy Tech  State
College -  Evansville  Region,  a position  he has held since 1990.  Mr.  Schenk
joined the Board of Directors in March 1998.

         James D.  Butterfield.  Since  1987,  Mr.  Butterfield  has  served  as
President of Smith & Butterfield, Inc., a large office equipment and supply firm
in the Evansville area.

         Daniel F. Korb.  Prior to his retirement on December 31, 1993, Mr. Korb
served as Executive  Vice  President and Secretary of the Bank.  Mr. Korb joined
the Bank in 1953,  was promoted to Executive  Vice  President in 1985 and became
Secretary in 1990.

         Robert  L.  Northerner.   Until  his  retirement  in  April  2000,  Mr.
Northerner  has,  since  1991,  served as Vice  President  of Sales and  General
Manager  of The Floor  Covering  Emporium,  a  Evansville-based  floor  covering
company.  Prior thereto, Mr. Northerner was co-owner (along with Director Vogel)
and served as  President  of Dale Sales  Company,  Inc, a service  merchandising
company,  prior to its  merger  into  Roundy's,  another  service  merchandising
company.  After the merger, Mr. Northerner served as Vice President of Sales for
the Evansville branch of Roundy's from 1985 to 1989.

         James W. Vogel. Mr. Vogel was founder and co-owner (along with Director
Northerner) of Dale Sales Company,  Inc..  from 1952 to 1985, when this business
was sold to Roundy's. Mr. Vogel is now a private investor.

         Jack H.  Kinkel.  Mr.  Kinkel  is  President  of Jack R.  Kinkel  & Son
Architects,  P.C. and has been in private  practice  since 1964. Mr. Kinkel is a
licensed  architect in Indiana,  Kentucky and  Illinois.  He is certified by the
National  Council of  Architectural  Registration  Boards and is a member of the
American Institute of Architects.

         James A.  McCarty,  Jr. Mr.  McCarty  joined the Board of  Directors in
August of 1996.  Since 1989,  he has served as President  of McCarty's  Colonial
Home and Garden  Supplies.  As  president,  Mr.  McCarty  oversees  all  company
business including management of 100 full-time employees.

         Murray J. Brown.  Mr.  Brown is  currently  serving as President of the
Company and Chairman of the Board,  President and Chief Executive Officer of the
Bank. Mr. Brown joined the Board of Directors in March 1997.  From November 1991
until  November  1993,  Mr.  Brown  served  as the  President  and CEO of  Trans
Financial  Bank of Tennessee.  From November 1993 until October 1995,  Mr. Brown
was self-employed as a private  investor/consultant and from February 1992 until
November 1993, he served as a Director of Trans Financial Corporation. Mr. Brown
joined the Company in October, 1995.

         Information  concerning  executive officers of the Company and the Bank
who are not also directors is provided under Item 1 of Part I of this report.


                                       84
<PAGE>

         To the Company's  knowledge,  based solely on a review of the copies of
such reports furnished to the Company and written  representations that no other
reports were required  during the fiscal year ended March 31, 2000,  all Section
16(a) filing requirements applicable to its officers, directors and greater than
10%   beneficial   owners  were  complied   with  except  that  Mr.   Weinzapfel
inadvertently failed to timely file a Form 4 to report a transaction and Mr. Orr
inadvertently failed to timely file Form 4s to report two transactions.  Section
16(a) of the  Securities  Exchange  Act  requires the  Company's  directors  and
executive  officers,  and persons who own more than 10% of a registered class of
the  Company's  equity  securities,  to file  with the SEC  initial  reports  of
ownership  and reports of changes in  ownership  of common stock of the Company.
Officers,  directors  and  greater  than 10%  stockholders  are  required by SEC
regulation to furnish the Company with copies of all Section 16 forms they file.

Item 11.  Executive Compensation

         The Company has not paid  compensation to its executive  officers since
its formation.  The Company does not presently anticipate paying compensation to
such persons.

         The following table sets forth information regarding  compensation paid
by the Bank to its Chief Executive  Officer and President for services  rendered
during fiscal years ended March 31, 2000,  1999,  and 1998.  No other  executive
officer made in excess of $100,000 during the fiscal year ended March 31, 2000.
<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------
                                             SUMMARY COMPENSATION TABLE
------------------------------------------------------------------------------------------------------------------------------
                                                                                             Long Term
                                                                                            Compensation
                        Annual Compensation                                                    Awards
------------------------------------------------------------------------------------------------------------------------------
                                                                                Restricted
                                                                                   Stock      Options/       All other
         Name and Principal Position    Year          Salary          Bonus     Awards (s)      SARs       Compensation
                                                      ($) (1)          ($)          ($)          (#)            ($)
------------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>         <C>         <C>           <C>         <C>              <C>     <C>
Donald P. Weinzapfel                        2000        $186,720    $  - - -      $  - - -       - - -         $55,510 (2)
Chairman of the Board,                      1999         181,500       - - -         - - -       - - -          39,582
Chief Executive Officer and                 1998         165,213      33,043         - - -       - - -           5,016
Director

Murray J. Brown                             2000        $152,220     $18,750      $ 37,700      50,000         $56,712 (2)
President and Director                      1999         137,603      16,784        14,700       - - -          37,933
                                            1998         115,508      17,326         - - -       - - -           4,499
------------------------------------------------------------------------------------------------------------------------------
</TABLE>


(1)  Includes  directors  fees of $7,500 and $7,500 to  Messrs.  Weinzapfel  and
     Brown, respectively.

(2)  Includes  matching 401(k) plan   contributions  of $1,600 and $1,500,  ESOP
     allocations of $43,313 and $43,313 and health insurance  premiums of $3,989
     and $3,989 on behalf of Messrs. Weinzpafel and Brown, respectively.


                                       85
<PAGE>

         The  following  table sets forth  certain  information  concerning  the
number and value of stock options held by Mr.  Weinzapfel and Mr. Brown at March
31, 2000.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
                             AGGREGATED OPTION IN LAST FISCAL YEAR AND FY-END
                                            OPTION VALUES
-------------------------------------------------------------------------------------------------------------------------------
                                                                                                  Value of
                                                               Number of                        Unexercised
                                                              Unexercised                       In-the-Money
                                                               Options at                        Options at
                                                               FY-End (#)                      FY-End ($) (1)
                                                             ------------------------------------------------------------------
                           Shares Acquired        Value
Name                       on Exercise (#)     Realized ($)  Exercisable    Unexercisable     Exercisable      Unexercisable
-------------------------------------------------------------------------------------------------------------------------------
<S>                                 <C>           <C>             <C>                <C>         <C>                 <C>
Donald P. Weinzapfel                86,000        $679,426        50,000             - - -       $662,500            $ - - -

Murray J. Brown                     76,739        $506,458         5,261             - - -        $30,251            $ - - -

----------------------------------------------  ------------------------------------------------  -----------------------------
</TABLE>

         (1) Represents the aggretage market value of incentive stock options to
purchase  shares of Common Stock (market price less the exercise  price of $5.00
per share  with  regard to Mr.  Weinzapfel's  options  and $12.50 per share with
regard to Mr.  Brown's  options)  awarded to Messrs.  Weinzapfel and Brown based
upon the  closing  price of $18.25 per share for the  Common  Stock on March 31,
2000, as reported by the Nasdaq National Market.

Employment Agreements

         The Company and the Bank  entered  into an  employment  agreement  with
Donald P.  Weinzapfel  on  October  6,  1998.  The Bank  also has an  employment
agreement  with  Murray J. Brown  dated  November  21,  1995.  Mr.  Weinzapfel's
employment  agreement  was to expire on April 1,  2000 but was  extended  to the
earlier of the  completion  of the  Company's  pending  merger with Old National
Bancorp  or  the  end of the  month  following  the  termination  of the  merger
agreement.  Mr. Brown's employment agreement provides for a three year term. Mr.
Weinzapfel's  salary is a fixed amount,  and Mr.  Brown's  employment  agreement
provides  for an annual base  salary as  determined  by the Board of  Directors,
which may not be less than his current  salary.  Salary  increases for Mr. Brown
are reviewed  not less often than  annually  thereafter,  and are subject to the
sole  discretion of the Board of Directors.  Mr.  Brown's  employment  agreement
provides for an extension  for one  additional  year at the end of each contract
year, but only upon  authorization  by the Board of Directors.  Both  agreements
provide for  termination  upon the  officer's  death,  for cause or upon certain
events  specified  by  regulations  of the  Office  of Thrift  Supervision.  The
agreement is terminable by the officer upon 90 days' notice to the Bank.

         The employment  agreements  also provide for payment to the officers in
the event there is a change in control of the Company or the Bank (as defined in
the agreement) where employment terminates involuntarily in connection with such
change  in  control  or within 12 months  thereafter,  of the  remaining  salary
payable under the contract, plus an additional amount, the sum of which will not
exceed  299% of the  officer's  highest  salary in effect  under the  employment
agreements  at any time during the 12 months  prior to the date of  termination,
provided that total payments under the agreements may not exceed three times the
officers'  average  annual  compensation  or an amount that would cause  certain
adverse tax  consequences to the Bank and the officers under Section 280G of the
Internal  Revenue Code of 1986, as amended.  The agreements  contain a provision
which  prohibits  the  officers,  for a period of one year,  from,  directly  or

                                       86
<PAGE>

indirectly,  owning, managing, operating or controlling, or participating in the
ownership,  management,  operation or control of, or be employed by or connected
in any manner with, any financial institution having an office located within 20
miles of any office of the Bank at the date of his  termination.  The agreements
also provide,  among other things,  for participation in any equitable manner in
employee benefits applicable to executive personnel.  The employment  agreements
may  have  an  "anti-takeover"  effect  that  could  affect  a  proposed  future
acquisition of control of the Company.

Pension Plan

         The  Bank's  employees  are  included  in  the  Financial  Institutions
Retirement Fund, a multiple  employer  comprehensive  pension plan (the "Pension
Plan").  This  noncontributory   defined  benefit  retirement  plan  covers  all
full-time  employees who have reached the age of 21 and have  completed one year
of service.  The Pension Plan currently provides for an annual benefit at normal
retirement (age 65) equal to 2% of the employee's average annual salary over the
five consecutive  years of highest salary multiplied by the employee's number of
years of service. Other than administrative expenses of the Pension Plan paid by
the Bank, the Bank did not contribute to the Pension Plan during fiscal 2000.

         The following table indicates the annual retirement  benefit that would
be payable  under the Pension Plan upon  retirement  at age 65 to a  participant
electing to receive his  retirement  in the standard  form of benefit,  assuming
various specified levels of compensation and years of service.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
                                           PENSION PLAN TABLE
---------------------------------------------------------------------------------------------------------
                                            Years of Service
                  ---------------------------------------------------------------------------------------
Remuneration           15          20          25           30          35          40           45
---------------------------------------------------------------------------------------------------------
<S>       <C>          <C>         <C>         <C>          <C>         <C>         <C>          <C>
          $50,000      $15,000     $20,000     $25,000      $30,000     $35,000     $40,000      $45,000
           75,000       25,000      30,000      37,500       45,000      52,500      60,000       67,500
          100,000       30,000      40,000      50,000       60,000      70,000      80,000       90,000
          125,000       37,500      50,000      62,500       75,000      87,500     100,000      112,500
          150,000       45,000      60,000      75,000       90,000     105,000     120,000      122,727
          175,000       52,500      70,000      87,500      105,000     122,500     122,727      122,727
          200,000       60,000      80,000     100,000      120,000     118,182     122,727      122,727
          225,000       67,500      90,000     112,500      122,727     122,727     122,727      122,727
---------------------------------------------------------------------------------------------------------
</TABLE>


         At March 31, 2000 the  estimated  years of credited  service of Messrs.
Weinzapfel and Brown were 45 and 5 respectively.

Director Compensation

         Fees.  The  Company's  directors are not paid fees for their service in
such capacity.  Non-employee  directors of the Bank are paid a fee of $1,250 per
quarter plus $625 per regular Board meeting  attended.  Employee  members of the
Bank's Board  receive $625 for each Board meeting  attended.  No fee is paid for
membership on the Company's or Bank's committees.

         Deferred Compensation Agreements.  The Bank has entered into a Director
Deferred Compensation  Agreement ("DDCA") with each non-employee  director.  The
DDCAs are  unfunded,  non-qualified  agreements  which  provide for  retirement,
financial hardship,  death and disability benefits for the participants or their
designated  beneficiaries.  Under the DDCAs, each non-employee director may make
an annual election to defer receipt of all or a portion of his monthly  director
fees. When the director reaches the age specified in his DDCA (generally between
age 70 and 73), he will be entitled to receive his accrued  benefit payable over
a 10-year  period.  The DDCAs also provide for  disability  and death  benefits,
including  a $10,000  burial  expense  payment.  Until  disbursed,  the  amounts

                                       87
<PAGE>

directed to be deferred are subject to the claims of general creditors.

Item 12.  Security Ownership of Certain Beneficial Owners and
             Management

         As of June 15, 2000 the Company had  4,207,100  shares of Common  Stock
issued and  outstanding.  The following table sets forth  information  regarding
share  ownership  of:  (i) those  persons or  entities  known by  management  to
beneficially  own more than five percent of the Common Stock,  (ii) each officer
of the Company  and the Bank who made in excess of  $100,000  (salary and bonus)
(the "Named  Officers")  during the 2000 fiscal year ("fiscal 2000"),  and (iii)
all directors and executive  officers as a group.  Information  regarding  share
ownership of the  directors  of the Company is  contained  under Item 10 of this
report.

                                                     Shares             Percent
                                                  Beneficially            of
Beneficial Owner                                      Owned              Class
--------------------------------------------------------------------------------

Five Percent Beneficial Owners

Permanent Bancorp, Inc.                              333,270 (1)         7.9%
   Employee Stock Ownership Plan
   101 Southeast Third Street
   Evansville, IN  47708

Rahmi Soyugenc                                       259,646 (2)         6.2
   119 LaDonna Boulevard
   Evansville, IN  47711

Named Officers

Donald P. Weinzapfel                                 244,345 (3)         5.7

Murray J. Brown                                       70,704 (4)         1.7

All directors and executive officers                 530,157 (5)         12.5
   of the Company and the Bank
   As a group (16 persons)



     (1) First  Bankers Trust Co.,  N.A.,  Quincy  Illinois,  the Trustee of the
         ESOP, has sole voting and investment  power over the 41,255 shares held
         by the Company's  Employee Stock Ownership Plan (the "ESOP") which have
         not been allocated to participants,  and may be deemed under applicable
         regulations to  beneficially  own such shares.  Participants  under the
         ESOP  have  the  right to  direct  the  voting  of the  292,015  shares
         allocated  to  their  ESOP  accounts.  Under  the  terms  of the  ESOP,
         unallocated shares are voted by the trustee in the same proportion that
         the  participants  vote the allocated shares with respect to each issue
         being voted upon.

     (2) As  reported  in a Schedule  13D,  dated  April 4,  1995,  in which Mr.
         Soyugenc  reported sole voting and investment power over 259,646 shares
         of Common Stock.

     (3) As  reported  on  Schedule  13D,  dated  May 26,  1998,  in  which  Mr.
         Weinzapfel   reported  sole  voting  power  over  95,559  shares,  sole
         dispositive  power over 90,897 shares,  shared voting power over 22,319
         shares and shared  dispositive  power over 22,319 shares on a pre-split
         basis.

     (4) Includes  60,143 shares held  directly,  5,300 shares held jointly with
         Mr.  Brown's  spouse,  and 5,261  shares  subject  to  options  granted
         pursuant  to  the  Company's  stock  option  plan,  which  options  are
         exercisable within 60 days of June 15, 2000. Mr. Brown may be deemed to
         have sole or shared voting and/or investment power with respect to the
         shares reported above as beneficially owned.

                                       88
<PAGE>


     (5) This  amount  includes  shares  held  directly,  as well as shares held
         jointly with family members, shares held in retirement accounts, shares
         allocated to the accounts of such persons  under the ESOP,  shares held
         in a  fiduciary  capacity,  held  by  certain  of  the  group  members'
         families,  or held by trusts of which the group  member is a trustee or
         substantial beneficiary,  with respect to which shares the group member
         may be deemed to have sole or shared  voting and/or  investment  power.
         This amount also  includes an  aggregate of 265,107  shares  subject to
         options awarded under the Company's stock option plan which have vested
         and are  exercisable  within 60 days of the date  hereof.  This  amount
         excludes an  aggregate  of 163,338  shares  subject to options  granted
         under  the  stock  option  plan  which  have  not  vested  and  are not
         exercisable within 60 days of the date hereof.

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

         The Bank has followed a policy of granting  loans offered  generally by
the  Bank,  subject  to  applicable  regulations,  to  officers,  directors  and
employees. The loans to such persons are made in the ordinary course of business
and on the  same  terms  and  conditions  as those  of  comparable  transactions
prevailing at the time, in accordance with the Bank's  underwriting  guidelines,
and do not involve more than the normal risk of  collectibility or present other
unfavorable  features,  which is consistent with current  federal  requirements.
Loans to executive  officers and directors must be approved by a majority of the
disinterested  directors and loans to other officers and other employees must be
approved by two officers of the Bank who are  authorized  to approve such loans.
Loans to all  directors,  executive  officers,  employees  and their  associates
totaled  approximately  $778,000 at March 31, 2000, which was approximately 1.9%
of the Company's stockholders' equity at such date.

                                                       PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on
          -------------------------------------------------------
          Form 8-K
          -------------------------------------------------------
 (a) (1)  Financial Statements:
------------------------------
         Financial  statements  filed on this form 10-K  under Item 8 are hereby
incorporated by reference.

(a) (2)  Financial Statement Schedules:
--------------------------------------
         All financial  statement schedules have been omitted as the information
is not required under the related instructions or is inapplicable.



                                       89
<PAGE>
<TABLE>
<CAPTION>

(a) (3)  Exhibits:
-----------------
                                                               Reference to Prior
   Regulation                                                  Filing or Exhibit
   S-K Exhibit                                                  Number Attached
     Number              Document                                   Hereto
   -----------         -------------------------------        -------------------


<S>    <C>                                                             <C>
       2      Plan of acquisition, reorganization,                     None
              arrangement, liquidation or
              succession

       3 (i)  Articles of Incorporation                                *
       3 (ii) Bylaws                                                   *

       4      Instruments defining the rights of                       *
              security holders, including                              See also Exhibit 3
              indentures

       9      Voting trust agreement                                   None

      10      Material contracts:

              (a) 1993 Stock Option and                                *
                    Incentive Plan

              (b) Recognition and Retention Plan                       *

              (c) Employment Agreement with                             ****
                    Donald P. Weinzapfel dated October
                    6, 1998

              (d) Director Deferred Compensation                       **
                    Agreement

              (e) Employment Agreement with                            ***
                   Murray T. Brown

      11      Statement re computation of                              None
              per share earnings

      12      Statements re computation of                             Not required
              ratios

      13      Annual Report to security holders                        Not required

      16      Letter re change in certifying                           Not required
              accountant

      18      Letter re change in accounting                           None
              principles

      19      Previously unfiled documents                             None
</TABLE>



                                       90
<PAGE>
<TABLE>
<CAPTION>

<S>   <C>                                                              <C>
      21      Subsidiaries of the registrant                           21


      22      Published report regarding matters                       None
              submitted to vote of security holders

      23      Consents of experts and counsel                          23

      24      Power of Attorney                                        Not required

      27      Financial Data Schedule                                  27

      28      Information from reports                                 Not required
              furnished to state insurance
              regulatory authorities

      99      Additional Exhibits                                      Not applicable
</TABLE>


         *Filed as exhibits to the Company's  Registration Statement on Form S-1
under  the  Securities  Act of 1933,  filed  with the  Securities  and  Exchange
Commission  on  December  23,  1993  (Registration  No.  33-73394).  All of such
previously  filed  documents  are hereby  incorporated  herein by  reference  in
accordance with Item 601 of Regulation S-K.

         **Filed as Exhibit  10(d) to the  Company's  Annual Report on Form 10-K
under the Securities Exchange Act of 1934 on June 29, 1995 (File No. 0-23370).

         ***Filed as Exhibit 10(e) to the  Company's  Annual Report on Form 10-K
under the Securities Exchange Act of 1934 on June 27, 1996 (File No. 0-23370)

         ****Filed  as  Exhibit  10(c) to the  Company's  Annual  Report on Form
10-K/A under the Securities Exchange Act of 1934 on July 13, 1999.

(b)  Reports on Form 8-K:
------------------------
         On February 2, 2000 the Company filed Form 8-K containing the Agreement
of Affiliation and Merger with Old National  Bancorp dated December 20, 1999 and
press release dated February 1, 2000 describing the proposed merger.


                                       91
<PAGE>




                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 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.

                             PERMANENT BANCORP, INC.

Date:   June 15, 2000
     ---------------------------
By: /s/ Donald P. Weinzapfel
    --------------------------------
        Donald P. Weinzapfel
        (Duly Authorized Representative)

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

<S>                                                         <C>
By: /s/ Donald P. Weinzapfel                                By: /s/ Daniel L. Schenk
    --------------------------------                            -----------------------------
           Donald P. Weinzapfel                                     Daniel L.Schenk, Director
           Chairman of the Board
           and Chief Executive Officer                      Date:    June 15, 2000
           (Principal Executive Officer)                         ------------------

Date:    June 15, 2000
     -------------------


By: /s/ Daniel F. Korb                                      By: /s/ Jack H. Kinkel
    --------------------------------                            ---------------------------
       Daniel F. Korb, Director                                    Jack H. Kinkel, Director

Date:    June 15, 2000                                      Date:    June 15, 2000
     -------------------                                         ------------------


By: /s/ Murray J. Brown                                     By: /s/ James W. Vogel
    -------------------------------------------                 ---------------------------
       Murray J. Brown, President and  Director                    James W. Vogel, Director


Date:    June 15, 2000                                      Date:    June 15, 2000
     ----------------------------                                -----------------


By: /s/ James D. Butterfield                                By: /s/ Robert L. Northerner
    ----------------------------------                          -----------------------------
       James D. Butterfield, Director                               Robert L. Northerner, Director

Date:    June 15, 2000                                      Date:   June 15, 2000
     ----------------------------                                ----------------


By: /s/ James A. McCarty, Jr.                               By: /s/ Robert A. Cern
    -----------------------------------                         ------------------------------------
        James A. McCarty, Jr., Director                             Robert A. Cern, Chief Financial
Date:   June 15, 2000                                               Officer (Principal Financial and
     ----------------------------                                     Accounting Officer)

                                                            Date:    June 15, 2000
                                                                 -----------------
</TABLE>

                                       92