Permanent Bancorp, Inc.



                               1999 Annual Report


<PAGE>
TABLE OF CONTENTS

Letter to Stockholders ...............................................       3

Selected Consolidated Financial Data .................................       5

Quarterly Results of Operations ......................................       7

Management's Discussion and Analysis of
  Financial Condition and Results of Operations ......................       8

Independent Auditors' Report .........................................      21

  Consolidated Statements of Financial Condition .....................      22

  Consolidated Statements of Income ..................................      23

  Consolidated Statements of Stockholders' Equity ....................      24

  Consolidated Statements of Cash Flows ..............................      25

  Notes to Consolidated Financial Statements .........................      27

Officers and Directors ...............................................      47

Corporate Information ................................................      48

[GRAPH OMITTED]depicting                          [GRAPH OMITTED]depicting
Net Income for the Year                           Total Assets at March 31,
Ended March 31,

                                                                               1
<PAGE>
[GRAPH OMITTED]depicting
Per Share Dividends (Quarter/Fiscal Year)



[GRAPH OMITTED]depicting
Deposit Structure at March 31,






[GRAPH OMITTED]depicting
Composition of Loan Portfolio at March 31,

2
<PAGE>
                                                      [GRAPHIC OMITTED: Logo of
                                                       Permanent Bacnorp, Inc.

TO OUR STOCKHOLDERS

         We are  pleased to report  that net income for the year ended March 31,
1999 was $2.86 million.  This amount  represents an 8.3% increase over the $2.64
million  earned during the year ended March 31, 1998. Net income for the Company
has increased every year since Permanent Bancorp, Inc. became publicly traded in
1994.

         Basic  earnings  per share were $0.72 for the year ended March 31, 1999
compared to $0.65 for the prior year.  Diluted earnings per share were $0.70 for
the year  ended  March 31,  1999  compared  to $0.62 for the prior  year.  Basic
earnings per share  increased  10.8% and diluted  earnings  per share  increased
12.9% during the year ended March 31, 1999 compared to the prior fiscal year. In
June 1998, the Board of Directors increased the dividend per share by 9.1% to an
annual rate of $0.24 per share.  Based upon the initial public offering price of
$5 (as adjusted for the  two-for-one  stock split effected in the form of a 100%
stock dividend in April 1998) this represents a dividend yield of 4.8%.

         The Company remains financially strong.  Total assets at March 31, 1999
were $492.3  million,  an increase of 12.1% from total assets at March 31, 1998.
Deposits  increased  $62.4  million,  or 22.1%,  and net loans  increased  $95.7
million, or 42.5%, from March 31, 1998.  Substantially all of the deposit growth
and  approximately  45% of the loan  growth  is  attributable  to the  Company's
acquisition  of the deposits and loans of four branch  locations from  NBD Bank,
N.A. in June 1998. The balance of the loan growth is  attributable to internally
generated  expansion of the Company's  consumer and commercial loan  portfolios.
This  expansion  into  higher  yielding  loans was funded by a  decrease  in the
securities portfolios.

         Interest  rate  spread  for the year  ended  March  31,  1999 was 2.74%
compared  to 2.41%  for the year  ended  March  31,  1998.  We are  particularly
encouraged  that at March 31, 1999  interest  rate spread was 2.86%  compared to
2.40% at March 31, 1998. Net interest margin (or net interest income dividend by
average  earnings assets) for fiscal 1999 was 2.91% compared to 2.74% for fiscal
1998.

         Asset  quality  remains  very  healthy.   Non-performing  assets  as  a
percentage  of total  assets  was .24% at March  31,  1999 and .25% at March 31,
1998.  The  allowance for loan losses as a percentage of total loans was .84% at
March 31, 1999 and .87% at March 1998.  Other measures of asset quality continue
to be very favorable.

         The  acquisition  of the  four  branch  locations  from  NBD Bank was a
milestone for the Company.  Not only did this  acquisition  provide  significant
growth,  it  drastically  changed the nature of the Company.  At the time of the
merger the Company had fifteen  branches  including  the four acquired from NBD.
Because of the close  proximity of some of the offices,  the Company was able to
close two offices and take advantage of more modern and efficient locations.

         Increasingly  the Company is  becoming a  community  bank rather than a
traditional thrift organization. Consider the following:

o  Consumer and commercial  loans represent 34.7% of the total loan portfolio at
   March 31, 1999 but five years ago represented only 20.5% of total loans.
<PAGE>
o  Five years ago certificates of deposit represented 70% of all deposits. As of
   March 31, 1999 they represent 62.5% of the Company's  deposits.  Non-interest
   bearing  deposits  have grown from just under $1 million at March 31, 1994 to
   $12.3 million at March 31, 1999.

o  Five years ago the internet was only beginning to gain commercial  viability.
   Today the Company has its own website at  www.permanentbank.com.  We hope you
   will visit this site.  It's a convenient way to keep abreast of your accounts
   as well as transfer funds and pay bills.

                                                                               3
<PAGE>
o  The Company paid its first dividend to shareholders in the quarter ended June
   30,  1995.  Dividends  have been  paid in every  quarter  since  then and the
   dividend rate per share has increased 240% since the initial dividend.

         In October  1998 the Board of Directors  formally  adopted a management
transition plan in anticipation of the retirement from management of the current
Chairman of the Board and Chief Executive Officer, Donald P. Weinzapfel.

         In July 1998 John W. Forster retired from the Board of Directors.  John
has served the Company and its operating  subsidiary,  Permanent Federal Savings
Bank,  for more than twenty years.  In recognition of this service John has been
elected a director emeritus of the Bank. We wish John well.

         This  spring the Company  began  construction  on a new branch  banking
facility  on the  growing  east  side of  Evansville.  We  anticipate  that this
facility will be fully operational by the end of 1999.

         We, as always, appreciate the support of our shareholders.  We are very
optimistic about fiscal 2000 and look forward to continued earnings growth.


                                                            /s/ Murray J. Brown
/s/ Donald P. Weinzapfel                                    -------------------
------------------------                                    Murray J.Brown
Donald P. Weinzapfel                                        President
Chairman of the Board
and Chief Executive Officer

4
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
                                                      [GRAPHIC OMITTED: Logo of
                                                       Permanent Bacnorp, Inc.
<TABLE>
<CAPTION>
(In Thousands)
                                                                              At March 31,
---------------------------------------------------------------------------------------------------------------------------
                                                     1999           1998          1997           1996          1995
---------------------------------------------------------------------------------------------------------------------------
<S>                                               <C>           <C>            <C>            <C>            <C>
Selected Financial Condition Data:
Total assets                                      $492,327      $439,115       $423,698       $395,903       $342,678
Loans, net                                         321,018       225,349        210,189        206,910        195,483
Cash and interest-bearing deposits                  13,952         6,083          6,364          4,916          5,573
Securities available for sale                      117,289       168,271        159,232        135,124          1,973
Securities held to maturity                          6,920        18,861         27,206         32,179        124,338
Deposits                                           345,341       282,942        280,753        280,008        267,520
Total borrowings                                    99,504        99,353        100,278         70,985         28,114
Stockholders' equity                                40,864        42,683         39,095         41,494         43,488

                                                                          Year Ended March 31,
---------------------------------------------------------------------------------------------------------------------------
                                                     1999           1998          1997           1996          1995
---------------------------------------------------------------------------------------------------------------------------

Selected Operating Data:
Interest income                                    $32,886       $30,521        $29,689        $25,892       $22,705
Interest expense                                    19,909        19,342         18,724         16,354        13,352
---------------------------------------------------------------------------------------------------------------------------
  Net interest income                               12,977        11,179         10,965          9,538         9,353
Provision for loan losses                              300           177            113            207           410
---------------------------------------------------------------------------------------------------------------------------
  Net interest income after provision
    for loan losses                                 12,677        11,002         10,852          9,331         8,943
---------------------------------------------------------------------------------------------------------------------------
Other income:
  Service charges                                    1,492           985            841            628           619
  Gain (loss) on sale of loans                         206            92             23             18           (16)
  Gain (loss) on sale of investment and
    mortgage-backed securities                         230            43            (56)            (6)            5
  Other                                              1,103           972            816            797         1,085
---------------------------------------------------------------------------------------------------------------------------
  Total other income                                 3,031         2,092          1,624          1,437         1,693
---------------------------------------------------------------------------------------------------------------------------
Other expense:
  Salaries and employee benefits                     5,696         4,519          4,295          4,427         4,397
  Deposit insurance assessment                         271           276          2,351            711           738
  Occupancy                                            764           821            809            819           769
  Other                                              4,172         3,015          2,714          2,900         2,614
---------------------------------------------------------------------------------------------------------------------------
  Total other expense                               10,903         8,631         10,169          8,857         8,518
---------------------------------------------------------------------------------------------------------------------------
Income before income taxes                           4,805         4,463          2,307          1,911         2,118
Income tax provision                                 1,945         1,818          1,003            662           874
---------------------------------------------------------------------------------------------------------------------------
Net income                                         $ 2,860       $ 2,645        $ 1,304        $ 1,249       $ 1,244
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
                                                                               5
<PAGE>
<TABLE>
<CAPTION>
                                                                    At or For the Year Ended March 31,
---------------------------------------------------------------------------------------------------------------------------
                                                     1999           1998          1997           1996          1995
---------------------------------------------------------------------------------------------------------------------------
<S>                                               <C>           <C>            <C>           <C>            <C>
Performance Ratios:
  Return on average assets (ratio of net
    income to average total assets)               0.60%         0.62%          0.31%         0.34%          0.36%
  Interest rate spread information:
      Average during year                         2.74          2.41           2.40          2.28           2.41
      End of year                                 2.86          2.40           2.41          2.33           2.28
  Net interest margin (1)                         2.91          2.74           2.76          2.72           2.83
  Ratio of operating expense to average
    total assets                                  2.28          2.03           2.44          2.41           2.37
  Return on average stockholders' equity
    (ratio of net income to average
    stockholders' equity)                         6.86          6.45           3.25          2.95           2.92
  Ratio of average interest-earning
    assets to average interest-bearing
    liabilities                                 103.94        106.97         107.63        109.42         110.51

Asset Quality Ratios:
 Non-performing assets to total assets at
    end of year (2)                               0.24          0.25           1.11          1.75          2.43
  Allowance for loan and real estate
    owned losses to non-performing assets       220.11        180.51          44.73         32.22         25.33
  Allowance for loan losses to total loans        0.84          0.87           1.00          1.07          1.06

Capital Ratios:
  Stockholders' equity to total assets at
    end of year                                   8.30          9.72           9.23         10.48         12.69
  Average stockholders' equity to average
    assets                                       11.43          9.63           9.63         11.54         12.29

Number of full-service offices                      13            11             11            11            11
Number of deposit accounts                      43,383        33,884         35,426        36,452        35,075

Book value per share (3)                        $10.27        $10.41          $9.52         $9.72         $9.36
Dividend payout ratio                             33.7%         30.6%          46.7%         27.9%          N/A
</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.
<PAGE>
QUARTERLY RESULTS OF OPERATIONS

         The following table presents certain  selected  unaudited data relating
to  results  of  operations  for the  three  month  periods  ending on the dates
indicated.
<TABLE>
<CAPTION>
                                                                             Three Months Ended
-----------------------------------------------------------------------------------------------------------------------
                                                        June 30,       September 30,     December 31,       March 31,
                                                          1998             1998              1998             1999
-----------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>              <C>              <C>             <C>
Fiscal 1999
Total interest income                                 $7,448,118       $8,599,719       $8,476,677      $8,361,322
Total interest expense                                 4,700,746        5,230,038        5,122,968       4,855,261
-----------------------------------------------------------------------------------------------------------------------
Net interest income                                    2,747,372        3,369,681        3,353,709       3,506,061
Provision for loan losses                                 75,000           75,000           75,000          75,000
-----------------------------------------------------------------------------------------------------------------------
Net interest income after
  provision for loan losses                            2,672,372        3,294,681        3,278,709       3,431,061
Other income                                             621,434          774,873          583,318       1,051,315
Other expense                                          2,230,777        2,980,656        2,469,756       3,221,578
-----------------------------------------------------------------------------------------------------------------------
Income before income taxes                             1,063,029        1,088,898        1,392,271       1,260,798
Income tax provision                                     435,681          403,039          529,822         576,569
-----------------------------------------------------------------------------------------------------------------------
Net income                                            $  627,348       $  685,859       $  862,449       $ 684,229
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                                             Three Months Ended
------------------------------------------------------------------------------------------------------------------------
                                                        June 30,       September 30,     December 31,       March 31,
                                                          1997             1997              1997             1998
------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>              <C>               <C>                <C>
Fiscal 1998
Total interest income                                 $7,653,837       $7,784,083        $7,587,707         $7,495,779
Total interest expense                                 4,850,898        5,001,278         4,817,298          4,673,037
------------------------------------------------------------------------------------------------------------------------
Net interest income                                    2,802,939        2,782,805         2,770,409          2,822,742
Provision for loan losses                                 77,386           75,164              (500)            25,000
------------------------------------------------------------------------------------------------------------------------
Net interest income after
  provision for loan losses                            2,725,553        2,707,641         2,770,909          2,797,742
Other income                                             497,035          529,984           591,674            473,300
Other expense                                          2,123,438        2,140,755         2,196,172          2,170,962
------------------------------------------------------------------------------------------------------------------------
Income before income taxes                             1,099,150        1,096,870         1,166,411          1,100,080
Income tax provision                                     461,228          451,966           461,303            442,847
------------------------------------------------------------------------------------------------------------------------
Net income                                            $  637,922       $  644,904        $  705,108         $  657,233
------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
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 Federal Savings 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  interest  rate 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   significantly   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.
<PAGE>
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  (some 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.

8
<PAGE>
Information Systems and the Year 2000

         The  Company  began  working on its Year 2000 (or "Y2K")  plan,  a term
which refers to uncertainties  about the ability of data processing hardware and
software to properly  interpret  dates after the  beginning of the Year 2000, in
calendar year 1997. A project  leader who is a member of senior  management  has
been assigned to the project while senior  management  oversees it and regularly
reports to the Board of Directors.  A comprehensive  Year 2000 Plan (the "Plan")
that includes phases relating to awareness, assessment,  renovation,  validation
and  implementation has been established and includes a timetable and summarizes
each major  phase of the project and the  estimated  costs to renovate  and test
systems in preparation for the Year 2000.

         The awareness phase included a Company-wide campaign to communicate and
identify  the  problem  and the  potential  ramifications  to the  organization.
Concurrent  with this phase,  the  assessment  phase began  which  included  the
inventorying  of systems that may be  impacted.  The business use of each system
was analyzed and  prioritized  based upon the  perceived  adverse  effect on the
financial condition of the Company in the event of a loss or interruption in the
use of that system.  The Company has  completed  the  awareness  and  assessment
phases of the project.

         The Company has outsourced the most critical data processing activities
to an  industry-known  service  provider who is  responsible  for  modifying its
programs to be compliant with Year 2000  processing;  however,  testing of those
systems  is the  responsibility  of the  Company.  Focusing  on  these  critical
systems,  the Company has closely reviewed and monitored this vendor's progress.
Year 2000  compliant  upgrades  to these  outsourced  critical  data  processing
systems  were  installed  throughout  fiscal 1999 and the service  provider  has
represented that this process is substantially complete.

         The Y2K upgrades have been tested  according to a  comprehensive  plan.
All issues  discovered  during the testing were reported to the service provider
for remediation. Additional testing was conducted to assure that each identified
issue was correctly repaired. The Company has not discovered any material issues
during the testing.

         Other  critical  systems have also been  assessed as to their Year 2000
readiness.  These systems have been purchased from other industry-known  vendors
and are generally used in their purchased configuration.  The Company is closely
reviewing and  monitoring  these systems in addition to reviewing  less critical
systems as to each vendor's progress and testing.  Systems are being tested in a
non-production environment.  Assurance of Year 2000 compliance for these systems
has been  received  from  substantially  all of our vendors  including all those
deemed critical.  Integrated testing on all critical  applications will continue
through the first half of calendar year 1999. The review of non-critical systems
has begun and is also  expected to be  completed  by June 30,  1999. A system is
deemed  validated upon completion of an appropriate test plan and system testing
of the Year 2000 compliant version without problems.
<PAGE>
         The Company's  overall costs  associated with year 2000  implementation
will  be  reduced  due  to its  outsourcing  arrangement  previously  discussed;
however,  incremental direct expenses to date of approximately $55,000 have been
incurred  and  the  Company  anticipates  incurring   approximately  $90,000  of
additional  incremental  expenses  in fiscal  2000.  Included in this amount are
capital  improvements  which  will  be  accelerated  in part  due to  Year  2000
concerns. The capital improvements include replacing older technology,  personal
computers and software and telecommunication systems. Although implementation of
this  equipment  and software will resolve  certain Year 2000 issues,  they will
also provide increased or improved  functionality and efficiencies.  The cost of
this  equipment  and  software  is  expected  to be charged to expense  over the
estimated  useful lives. The  aforementioned  costs do not include the salary of
the project leader or the time of management and staff  assisting on the project
which are  estimated  to total  2,000  hours from fourth  quarter  1998  through
calendar  1999.  The total cost could vary  significantly  from those  currently
estimated   because  of   unforeseen   circumstances   which  could  develop  in
implementing the Plan.
                                                                               9
<PAGE>
         The Company has begun  communications with its customers informing them
of its efforts to become Y2K compliant and is  periodically  inserting a summary
of its progress in its periodic  mailings to  customers.  The Company has posted
Y2K  information  on its Web  Site  and is  training  its  employees  to  become
knowledgeable  about  the  progress  being  made to be  compliant.  Posters  are
displayed in the Bank's lobbies with Y2K information.

         Concurrent  with  the  development  and  execution  of the  Plan is the
evolution of the Company's Year 2000  contingency  plan. The contingency plan is
intended to be a changing  document  developed and modified based on the results
of  the  project.  The  contingency  plan  currently  includes  the  contingency
procedures  for  critical  data  processing  and  environmental  systems and key
suppliers.  The contingency  plan also addresses a variety of additional  issues
including credit risk, liquidity and loan and deposit customers.

         The Company has completed an evaluation of Year 2000 risks  relating to
its lines of business  separate  from its  dependence  on data  processing  that
includes a review of larger  commercial  customers  to ascertain  their  overall
preparedness for Year 2000. The process required lending and other bank officers
to meet with  their  customers  to review  and assess  their  preparedness.  The
failure of a commercial  customer to prepare adequately for Year 2000 could have
a significant adverse effect on such customer's operations and profitability and
thereby  inhibit its ability to repay loans or require the use of its  deposited
funds.  While the process of evaluating  the potential  adverse  effects of Year
2000 risks on these customers is substantially  complete,  it is not possible to
quantify the overall potential effect on the Company.

         The  plan  also  includes   provisions  which  address  the  Year  2000
compliance  of  environmental  systems,  which  include items such as elevators,
security  systems and  heating  and air  conditioning  systems.  No  significant
business risks have been revealed regarding these types of systems.

         While the  Company is making a  substantial  effort to become Year 2000
compliant,  there is no  assurance  that the failure to  adequately  address all
issues  relating  to the Year 2000  problem  would not have a  material  adverse
effect on its financial condition or results of operations.

FINANCIAL CONDITION

March 31, 1999 Compared to March 31, 1998

         The Company's  total assets at March 31, 1999 were $492.3  million,  an
increase  of $53.2  million,  or 12.1% from  $439.1  million at March 31,  1998.
Investment and  mortgage-backed  securities  amounted to $123.2 million at March
31, 1999, a decrease of $63.9 million from $187.1 million at March 31, 1998. Net
loans  increased  by $95.7  million or 42.4% to $321  million at March 31,  1999
compared to $225.3  million at March 31,  1998.  Total  liabilities  were $451.5
million at March 31, 1999,  up $55.1  million,  or 13.9% from $396.4  million at
March 31, 1998.  Deposits of $345.3  million were up $62.4 million or 22.1% from
$282.9  million at March 31, 1998.  Substantially  all of the deposit growth and
approximately   45%  of  the  loan  growth  is  attributable  to  the  Company's
acquisition of four branch  locations from NBD Bank,  N.A. on June 26, 1998. The
balance of the loan  portfolio  growth is  attributable  primarily to internally
generated growth primarily in the consumer loan portfolio.

         Federal  Home Loan Bank (FHLB)  advances  decreased  by $2.9 million to
$96.5 million at March 31, 1999 from $99.4 million at March 31, 1998.
<PAGE>
         Total  stockholders'  equity decreased by $1.8 million to $40.9 million
at March 31, 1999.  The Company  earned $2.86  million and paid $1.21 million of
dividends to its  shareholders.  The Company purchased $4.16 million of treasury
shares and received $0.22 million from the issuance of its stock. The fair value
of  securities  decreased by  approximately  $0.22  million and $0.69 million of
stock was earned or became vested under the Company's ESOP and restricted  stock
award programs.

10
<PAGE>
         One to four family first  mortgage  loans  increased by $14 million and
consumer loans  increased by $40.7 million.  Commercial  and  multi-family  real
estate loans increased by $36.5 million,  land and construction  loans increased
by $4.8 million and commercial  paper decreased by $.014 million.  The allowance
for loan losses  increased by $.73 million due principally to the acquisition of
$.76  million of loss  reserves  associated  with the loans  acquired  from NBD.

RESULTS OF OPERATIONS

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 $0.22 million  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.

         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,  which are  primarily
deposits and other short-term  investments,  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.

         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.
<PAGE>
         Interest Expense.  Interest expense increased by $0.57 million 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 balance 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  $.86  million  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. Fiscal 1998 borrowings consist primarily
of short-term borrowings to meet liquidity needs.
                                                                              11
<PAGE>
         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.  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,  generally  monthly,  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, 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  acquisitions  of assets 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.  The allowance  for losses,  as a ratio to
total loans,  was 0.84% at March 31, 1999 compared to .87% at March 31, 1998. At
March 31,  1999 and 1998,  the  allowance  for loan  losses as a  percentage  of
non-performing loans was 330.81% and 216.58%,  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 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.
<PAGE>
         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.

RESULTS OF OPERATIONS

Comparison of Operating Results for the Years Ended March 31, 1998 and March 31,
1997.

         General.  The Company's  net income of $2.64 million  during the fiscal
year ended  March 31,  1998 was $1.34  million  greater  than the $1.30  million
earned  during the fiscal year ended

12
<PAGE>
March 31,  1997.  The  results of  operations  for the year ended March 31, 1997
include a $1.77 million (pretax) payment of a special assessment to recapitalize
the Savings  Association  Insurance Fund (SAIF) of the Federal Deposit Insurance
Corporation  (FDIC).  The after tax impact of this  assessment  on earnings  was
$1.07  million.  Net income for the year ended March 31, 1998  compared to prior
year earnings before the special assessment increased $275,000 or 11.4%.

         Net Interest  Income.  The Company's net interest  income  increased by
$214,000 to $11.2  million  for the year ended March 31, 1998  compared to $11.0
million  for  the  year  ended  March  31,  1997.  The  increase  was  primarily
attributable  to  an  increase  in  average   interest  earning  assets  and  an
improvement in the interest rate spread of 0.01%.

         Interest  Income.  Interest  income for the year ended  March 31,  1998
increased  $833,000  to $30.5  million  compared  to $29.7  million for the same
period in 1997. With the exception of investment securities, interest income was
higher for all major  earning  asset  categories  including  increased  interest
income on loans of $713,000 (a 4.2% increase) and mortgage-backed  securities of
$269,000 (a 4.4%  increase).  Due to  decreased  holdings  of  interest  bearing
securities, investment security income decreased $199,000 or 3.2% from the prior
year. Due to increased holdings and an improved yield, dividends on Federal Home
Loan Bank stock were up by  $49,000.  Interest  income on loans  increased  as a
result of growth in average  loans  outstanding  of $ 5.6  million  for the year
ended March 31, 1998.  The weighted  average yield on loans was 8.14% during the
fiscal year ended March 31, 1998  compared to 8.02% during the fiscal year ended
March 31, 1997.  Interest  income on  mortgage-backed  securities also increased
primarily as a result of higher outstanding balances. Mortgage-backed securities
balances  averaged  $97.7  million  during fiscal 1998 compared to $91.4 million
during fiscal 1997.  Interest  bearing  securities and FHLB stock averaged $93.2
million  during fiscal 1998,  compared to $95.2 million  during fiscal 1997. The
weighted  average  yields on  mortgage-backed  securities  and interest  bearing
securities and FHLB stock were 6.52% and 7.01%, respectively during fiscal 1998,
compared to 6.67% and 7.02%, respectively, during fiscal 1997.

         Interest  Expense.  Interest  expense  increased  by  $619,000 to $19.3
million  during the fiscal year ended March 31, 1998  compared to $18.7  million
during  fiscal 1997.  Interest  paid on deposits  increased by $99,000 due to an
increase of $2.8  million in average  deposit  balance  which more than offset a
decrease  in the rate paid from 4.84% to 4.83%.  Interest  on Federal  Home Loan
Bank advances increased by $545,000 as average balances outstanding increased by
$9.1 million and the average  rate paid on advances  also  increased  from 5.74%
during fiscal 1997 to 5.77% during fiscal 1998.

         Provision  for Loan Losses.  During the year ended March 31, 1998,  the
Company  recorded a provision  for loan losses of $177,050  compared to $113,256
for the year ended March 31, 1997.  Net charge offs amounted to $330,000  during
fiscal 1998 compared to $225,000 during fiscal 1997. Asset quality,  as measured
by  non-performing  loans to total loans,  improved  significantly  for the year
ended March 31, 1998  compared to the prior year.  The ratios of  non-performing
loans to total  loans was 0.40% at March  31,  1998 and 2.16% at March 31,  1997
respectively.  The allowance for losses, as a ratio to total loans, was 0.87% at
March 31, 1998  compared to 1.00% at March 31, 1997. At March 31, 1998 and 1997,
the  allowance  for loan  losses as a  percentage  of  non-performing  loans was
216.58% and 46.31%, respectively.
<PAGE>
         Other Income.  Other income increased by $468,000 to $2,092,000  during
the fiscal year ended March 31, 1998.  This represents an increase of 28.8% over
fiscal 1997.  Service charges increased by $144,000 and profit on sale of loans,
securities and real estate owned increased by $193,000.  Commissions on the sale
of investment and insurance products  increased by $68,000.  Earnings from other
sources were up by $63,000 during fiscal 1998.

         Other Expense.  The Company's other expense  decreased by $1.54 million
from fiscal 1997 to fiscal 1998. The decrease is primarily  attributable  to the
aforementioned  $1.77 million SAIF  assessment.  Salaries and employee  benefits
increased  $224,000 or 5.2%.  The majority of this increase is  attributable  to
increased expense associated with the Company's ESOP and restricted stock awards
programs.

         Income Tax Provision.  The Company's income tax provision  increased by
$814,000  from  fiscal 1997 to fiscal 1998  primarily  as a result of  increased
pretax earnings.

                                                                              13
<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>
(Dollars in Thousands)                      1999                         1998                          1997
---------------------------------------------------------------------------------------------------------------------------------
                                Average     Interest   Average    Average    Interest  Average    Average  Interest  Average
                              Outstanding    Earned/   Yield/   Outstanding   Earned/  Yield/   Outstanding Earned/  Yield/
                                Balance       Paid      Rate      Balance      Paid     Rate      Balance    Paid     Rate
---------------------------------------------------------------------------------------------------------------------------------
<S>                            <C>          <C>         <C>       <C>          <C>       <C>       <C>        <C>       <C>
Interest-earning assets:
  Loans                        $279,790     $22,759     8.13%     $214,982     $17,509   8.14%     $209,420   $16,796   8.02%
  Mortgage-backed securities     68,259       4,212     6.17        97,668       6,370   6.52        91,431     6,101   6.67
  Securities and FHLB stock      91,456       5,631     6.16        93,210       6,536   7.01        95,212     6,686   7.02
  Other                           6,107         284     4.65         1,416         106   7.49         1,869       106   5.67
---------------------------------------------------------------------------------------------------------------------------------
    Total interest-earning
      assets (1)               $445,612     $32,886     7.38%     $407,276     $30,521   7.49%     $397,932   $29,689   7.46%
---------------------------------------------------------------------------------------------------------------------------------
Interest-Bearing Liabilities:
  Deposits                     $332,301     $14,756     4.44%     $278,181     $13,431   4.83%     $275,407   $13,333   4.84%
  FHLB advances                  94,463       5,002     5.30       101,704       5,866   5.77        92,604     5,320   5.74
  Other long-term debt &
    other borrowings              2,060         151     7.33           845          46   5.44         1,693        71   4.19
---------------------------------------------------------------------------------------------------------------------------------
    Total interest-bearing
      liabilities              $428,824     $19,909     4.64%     $380,730     $19,343   5.08%     $369,704   $18,724   5.06%
Net interest income                         $12,977                            $11,178                        $10,965
---------------------------------------------------------------------------------------------------------------------------------
Net interest rate spread                                2.74%                            2.41%                          2.40%
---------------------------------------------------------------------------------------------------------------------------------
Net earning assets            $  16,788                           $ 26,546                         $ 28,228
---------------------------------------------------------------------------------------------------------------------------------
Net interest margin(2)                                  2.91%                            2.74%                          2.76%
---------------------------------------------------------------------------------------------------------------------------------
Average interest-earning
  assets to average interest-
  bearing liabilities            103.91%                            106.97%                         107.64%
---------------------------------------------------------------------------------------------------------------------------------
</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.

         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.

14
<PAGE>
<TABLE>
<CAPTION>
                                                                         Year Ended March 31,
                                                          1999 vs. 1998                       1998 vs. 1997
---------------------------------------------------------------------------------------------------------------------------
                                                 Increase (Decrease)      Total        Increase (Decrease)     Total
                                                       Due to           Increase            Due to           Increase
                                                Volume        Rate     (Decrease)     Volume       Rate     (Decrease)
---------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>           <C>        <C>          <C>           <C>        <C>
Interest-earning assets:
 Loans receivable                               $ 5,275       $ (26)     $5,249       $ 451         $263       $ 714
 Mortgage-backed securities                      (1,867)       (291)     (2,158)        402         (133)        269
 Securities and FHLB stock                         (117)       (787)       (904)       (140)         (10)       (150)
 Other                                              285        (107)        178
---------------------------------------------------------------------------------------------------------------------------
   Total interest-earning assets                $ 3,576     $(1,211)     $2,365       $ 713         $120       $ 833
---------------------------------------------------------------------------------------------------------------------------
Interest-bearing liabilities:
 Deposits                                       $ 2,515     $(1,190)     $1,325       $ 134        $ (36)      $  98
 FHLB advances                                     (402)       (462)       (864)        525           21         546
 Other borrowings                                    78          28         106         (62)          37         (25)
---------------------------------------------------------------------------------------------------------------------------
   Total interest-bearing liabilities           $ 2,191     $(1,624)     $  567       $ 597        $  22       $ 619
---------------------------------------------------------------------------------------------------------------------------
Change in net interest income                                            $1,798                                $ 214
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>
         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,
---------------------------------------------------------------------------------------------------------------------------
                                                      1999                     1998                    1997
---------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>                     <C>                      <C>
Weighted average yield on:
 Loans, net                                        7.81%                   7.91%                    8.02%
 Mortgage-backed securities                        6.45                    6.80                     6.71
 Securities & FHLB Stock                           6.16                    6.84                     7.05
 Other                                             4.76                    6.06                     6.69
   Combined weighted average yield on
     interest-earning assets                       7.34                    7.42                     7.47
Weighted average rate paid on:
 Savings deposits                                  3.13                    3.77                     3.87
 Demand and NOW deposits                           1.55                    1.79                     2.06
 Time deposits                                     5.51                    5.78                     5.67
 FHLB Advances                                     5.10                    5.39                     5.65
 Other Borrowings                                  6.80                                             5.19
   Combined weighted average rate paid
     on interest-bearing liabilities               4.48                    5.02                     5.05
 Spread                                            2.86                    2.40                     2.41
</TABLE>
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.
                                                                             15
<PAGE>
<TABLE>
<CAPTION>
                                                     1999           1998          1997          1996          1995
---------------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>            <C>           <C>           <C>         <C>
Non-accruing loans:
  One- to four-family                                $  643         $  822        $1,131        $  695      $ 1,219
  Multi-family                                                                     1,062         3,654        3,696
  Commercial real estate                                 64
  Construction or development                                           12           171           171
  Consumer                                              111             77            99           185          78
---------------------------------------------------------------------------------------------------------------------------
    Total                                               818            911         2,463         4,705       4,993
---------------------------------------------------------------------------------------------------------------------------
Troubled debt restructurings                                                       2,128         2,165       3,293
---------------------------------------------------------------------------------------------------------------------------
Total non-performing loans                           $  818         $  911        $4,591        $6,870     $ 8,286
---------------------------------------------------------------------------------------------------------------------------
Real estate and other assets owned:
  One- to four-family                                $  112          $  93        $   41         $  22          $7
  Construction or development                                                                                   26
  Consumer                                              236             89            53            54          25
---------------------------------------------------------------------------------------------------------------------------
    Total                                               348            182            94            76          58
---------------------------------------------------------------------------------------------------------------------------
Total non-performing assets                          $1,166         $1,093        $4,685        $6,946     $ 8,344
---------------------------------------------------------------------------------------------------------------------------

Total as a percentage of total assets                  0.24%          0.25%         1.11%         1.75%       2.43%
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
        At  March  31,  1999  the Bank  had no  non-performing  assets  with an
outstanding  balance in excess of $100,000.  This compares to one non-performing
asset at March 31, 1998 that had a balance in excess of $100,000.

         Non-accruing Loans. As of March 31, 1999, the Bank had $818,000 in book
value of  non-accruing  loans compared to $911,000 as of March 31, 1998. For the
year ended March 31, 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 $65,000.  The amount that was included in interest  income on
such loans was $21,000 for the year ended March 31, 1999.

         Real Estate Owned.  At March 31, 1999, the Bank's real estate  acquired
through foreclosure totaled $112,000.

         Other Loans of Concern.  In addition to the  non-performing  assets set
forth in the table above,  as of March 31, 1999,  there was an aggregate of $7.3
million of loans  which  management  is closely  monitoring  for the  borrowers'
ability to comply with current repayment terms compared to $3.2 million at March
31, 1998. Management believes it has taken a conservative approach in evaluating
under-performing credits.
<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, 1999.
<TABLE>
<CAPTION>
                                                                 Loan Delinquent For:
---------------------------------------------------------------------------------------------------------------------------
                                         30-59 Days                   60-89 Days                 90 Days and Over
---------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)          Number   Amount  Percentage    Number   Amount Percentage   Number   Amount  Percentage
---------------------------------------------------------------------------------------------------------------------------
<S>                                <C>   <C>       <C>           <C>    <C>       <C>          <C>      <C>      <C>
 Real Estate:
  One- to four-family              70    $2,119    67.66%        47     $1,940    93.95%       24       $643     78.61%
  Multi-family construction
    or development                  1       135     4.31%         0          0     0.00%        0          0      0.00%
 Commercial real estate                                                                         1         64      7.82%
 Consumer                         116       878    28.03%        19        125     6.05%       18        111     13.57%
----------------------------------------------------------------------------------------------------------------------------
       Total                      187    $3,132   100.00%        66     $2,065    100.00%      43       $818     100.00%
----------------------------------------------------------------------------------------------------------------------------
</TABLE>

         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.

16
<PAGE>
         The following  tables set forth an analysis of the Bank's  allowance at
the years indicated.
<TABLE>
<CAPTION>
(Dollars in Thousands)                                                        At March 31,
---------------------------------------------------------------------------------------------------------------------------
                                                      1999          1998           1997         1996           1995
---------------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>           <C>            <C>          <C>           <C>
Balance at beginning of year                         $1,973        $2,126         $2,238       $2,093        $2,110
Charge-offs:
  One- to four-family                                    19            56                          11            20
  Multi-family                                                         72                                        86
  Consumer                                              488           276            354           93            63
  Commercial business                                                                 17                        414
---------------------------------------------------------------------------------------------------------------------------
                                                        507           404            371          104           583
---------------------------------------------------------------------------------------------------------------------------
Recoveries:
  One-to-four-family                                     10                            2           11           134
  Multi-family & commercial                                                           98            4
  Consumer                                              170            74             46           27            22
---------------------------------------------------------------------------------------------------------------------------
                                                        180            74            146           42           156
---------------------------------------------------------------------------------------------------------------------------
Net charge-offs                                         327           330            225           62           427
Provision for loan losses charged
  to operations                                         300           177            113          207           410
Acquired in branch acquisition                          760
---------------------------------------------------------------------------------------------------------------------------
Balance at end of year                               $2,706        $1,973         $2,126       $2,238        $2,093
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                                              At March 31,
---------------------------------------------------------------------------------------------------------------------------
                                                      1999          1998           1997         1996           1995
---------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>            <C>           <C>          <C>          <C>
Ratio of net charge-offs during the period to
  average loans outstanding during the year        0.12%          0.15%         0.11%        0.03%        0.22%
---------------------------------------------------------------------------------------------------------------------------
Ratio of net charge-offs during the period to
  ending non-performing  assets                   28.04%         30.19%         4.80%        0.89%        5.12%
---------------------------------------------------------------------------------------------------------------------------
Ratio of provision for loan losses
  to total loans                                   0.09%          0.08%         0.05%        0.10%        0.21%
---------------------------------------------------------------------------------------------------------------------------
Ratio of allowance for loan losses
  to non-performing loans                        330.81%        216.58%        46.31%       32.58%       25.26%
---------------------------------------------------------------------------------------------------------------------------
 Ratio of allowance for loan losses
  to total loans                                   0.84%          0.87%         1.00%        1.07%        1.06%
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

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, 1999, 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 $18.4 million,  representing a negative  cumulative  one-year
gap ratio of 3.74% of total assets.  The Company relies on certain  assumptions,
such  as the  amount  and  timing  of loan  prepayments,  among  others,  in the

                                                                              17
<PAGE>
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.

         The  following  table sets forth the interest rate  sensitivity  of the
Company's  assets  and  liabilities  at  March  31,  1999  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, 1999 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.
<PAGE>
<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>
Fixed-rate one- to four-
  family, multi-family (including
  mortgage-backed securities),
  commercial real estate and
  construction loans                           $ 17,932    $ 10,572    $ 32,723    $ 24,151     $ 46,327
Adjustable rate one- to four-
  family, multi-family (including
  mortgage-backed securities),
  commercial real estate and
  construction loans                             56,123      19,092      35,299      16,959       22,727
Consumer loans                                   20,600       9,128      32,570      15,695        6,811
Investment securities and other                  15,248       2,003                   9,000       57,831
---------------------------------------------------------------------------------------------------------------------------
  Total interest-earning assets                 109,903      40,795     100,592      65,805      133,696
---------------------------------------------------------------------------------------------------------------------------
Savings deposits                                  2,706       4,599      13,472       6,514       32,191
Demand and NOW deposits                          20,017      11,485      13,985       4,298        7,860
Certificates                                     83,420      42,211      57,290      22,544       10,482
FHLB advances                                     4,536         157      15,137       7,448       72,763
---------------------------------------------------------------------------------------------------------------------------
  Total interest-bearing liabilities            110,679      58,452      99,884      40,804      123,296
---------------------------------------------------------------------------------------------------------------------------
Interest-earning assets less
  interest-bearing liabilities                 $   (776)  $ (17,657)    $   708    $ 25,001     $ 10,400
---------------------------------------------------------------------------------------------------------------------------

Cumulative interest-rate
  sensitivity gap                              $   (776)  $ (18,433)   $(17,725)  $   7,276     $ 17,676
---------------------------------------------------------------------------------------------------------------------------

Cumulative interest-rate
  gap as a percentage of assets                   (0.16)%     (3.74)%     (3.60)%      1.48%        3.59%
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

18
<PAGE>
         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
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.  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, 1999 as
calculated by the OTS (dollars in 000's):
<PAGE>
<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>
     +200                 47,409            (5,390)         -10%                     9.81%                  - 68
     +100                 50,612            (2,186)         - 4%                    10.25%                  - 24
        0                 52,798                                                    10.49%
    - 100                 54,660             1,862            4%                    10.65%                    16
    - 200                 55,998             3,200            6%                    10.70%                    21
</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, 1999, the amount of the
Bank's liquidity was $142.4 million, resulting in a liquidity ratio of 40.48%.

         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.

                                                                              19
<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, 1999, the Bank
had  approximately  $2.2  million of loan  commitments  and an  additional  $4.9
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,  1999  totaled  $117.9  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, 1999, these assets accounted for 90.8%
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, 1999, the Bank had outstanding borrowings of $96.5 million
from the FHLB and had the capacity to borrow up to a total of approximately $200
million.
<PAGE>
         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 Federal 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  Federal's  assets  and  liabilities  are
important factors in the maintenance of acceptable performance levels.

Recent Accounting Pronouncements

         See  the  notes  to  the  Consolidated   Financial   Statements  for  a
description of applicable pronouncements.

20
<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, 1999 and 1998 and the consolidated statements of income, stockholders'
equity and cash flows for each of the three years in the period  ended March 31,
1999.  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 generally  accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

         In our opinion, such consolidated  financial statements present fairly,
in all material respects,  the financial position of Permanent Bancorp, Inc. and
its  subsidiary  as of  March  31,  1999  and  1998,  and the  results  of their
operations  and their cash flows for each of the three years in the period ended
March 31, 1999 in conformity with generally accepted accounting principles.






/s/ DELOITTE & TOUCHE LLP
-------------------------
DELOITTE & TOUCHE LLP
May 21, 1999
Indianapolis, Indiana
                                                                              21
<PAGE>
CONSOLIDATED STATEMENTS OF
FINANCIAL CONDITION
<TABLE>
<CAPTION>
                                                                                                March 31,
---------------------------------------------------------------------------------------------------------------------------
                                                                                        1999                1998
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>                <C>
ASSETS:
Cash                                                                                 $ 7,591,117        $ 4,274,700
Interest-bearing deposits                                                              6,361,293          1,808,159
---------------------------------------------------------------------------------------------------------------------------
Total cash and cash equivalents                                                       13,952,410          6,082,859
Securities available for sale - at fair value
  (amortized cost - $117,279,217 and $167,898,534)                                   117,289,086        168,270,907
Securities held to maturity (fair value - $6,627,235
  and $19,119,093)                                                                     6,919,793         18,861,416
Other investments                                                                      1,698,477          1,100,826
Loans (net of allowance for loan losses of $2,706,408
  and $1,973,410)                                                                    321,017,805        225,349,258
Interest receivable                                                                    2,824,211          3,270,173
Office properties and equipment                                                        8,687,387          7,533,251
Other assets                                                                          19,937,789          8,645,810
---------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS                                                                        $492,326,958       $439,114,500
---------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
LIABILITIES:
Deposits                                                                            $345,341,089       $282,942,123
Federal Home Loan Bank advances                                                       96,503,610         99,352,678
Advance payments by borrowers for taxes and insurance                                    974,636            979,859
Other long-term debt                                                                   3,000,000
Interest payable                                                                       2,204,007          2,193,548
Other liabilities                                                                      3,442,429         10,963,033
---------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES                                                                    451,465,771        396,431,241
---------------------------------------------------------------------------------------------------------------------------
Commitments and contingencies
STOCKHOLDERS' EQUITY:
Serial Preferred Stock ($.01 par value)
  Authorized and unissued - 1,000,000 shares
Common Stock ($.01 par value)
  Authorized - 9,000,000 shares Issued - 4,930,508 and
  4,927,000 Outstanding - 3,978,322 and 4,232,934                                         49,241             49,241
Additional paid-in capital                                                            24,844,508         24,525,662
Treasury Stock - 936,786 and 682,674 shares - at cost                                 (9,920,624)        (6,255,083)
Retained Earnings - substantially restricted                                           26,573,401        25,127,127
Accumulated other comprehensive income, net
  of deferred tax of $3,909 and $147,127                                                   5,960            225,247
ESOP borrowing                                                                          (476,100)          (714,150)
Unearned compensation - restricted stock awards                                         (215,199)          (274,785)
---------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY                                                            40,861,187          42,683,259
---------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                          $492,326,958       $439,114,500
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.

22
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
                                                                                     Years Ended March 31,
---------------------------------------------------------------------------------------------------------------------------
                                                                              1999           1998            1997
---------------------------------------------------------------------------------------------------------------------------
INTEREST INCOME:
<S>                                                                      <C>             <C>            <C>
   Loans                                                                 $22,758,455     $17,509,318     $16,796,387
   Securities                                                              9,405,583      12,472,811      12,403,059
   Deposits                                                                  284,102         106,454         105,488
   Dividends on Federal Home Loan Bank stock                                 437,696         432,823         383,691
---------------------------------------------------------------------------------------------------------------------------
                                                                          32,885,836      30,521,406      29,688,625
---------------------------------------------------------------------------------------------------------------------------

INTEREST EXPENSE:
   Deposits                                                               14,755,940      13,431,142      13,332,587
   Federal Home Loan Bank advances                                         5,001,771       5,865,542       5,320,326
   Other long-term debt                                                      150,792
   Short-term borrowings                                                         510          45,827          71,083
---------------------------------------------------------------------------------------------------------------------------
                                                                          19,909,013      19,342,511      18,723,996
---------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME                                                       12,976,823      11,178,895      10,964,629
PROVISION FOR LOAN LOSSES                                                    300,000         177,050         113,256
---------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER LOAN LOSS
PROVISION                                                                 12,676,823      11,001,845      10,851,373
---------------------------------------------------------------------------------------------------------------------------

OTHER INCOME:
   Service charges                                                         1,491,788         984,668         840,520
   Gain on sale of loans                                                     205,837          91,866          22,771
   Commissions                                                               591,192         607,806         539,487
   Gain (loss) on sale of securities and mortgage-backed securities          229,708          42,643         (55,897)
   Gain on sale of real estate owned                                          39,790          41,966          16,811
   Other                                                                     472,625         323,044         260,221
---------------------------------------------------------------------------------------------------------------------------
                                                                           3,030,940       2,091,993       1,623,913
---------------------------------------------------------------------------------------------------------------------------

 OTHER EXPENSE:
   Salaries and employee benefits                                          5,695,772       4,519,290       4,294,824
   Deposit insurance assessment                                              271,397         275,986       2,350,715
   Occupancy                                                               1,020,658         821,412         809,138
   Equipment                                                                 763,669         608,472         566,098
   Computer service                                                          705,748         537,903         494,374
   Advertising                                                               412,183         354,370         326,211
   Postage and office supplies                                               444,469         285,906         273,474
   Other                                                                   1,588,871       1,227,988       1,053,922
---------------------------------------------------------------------------------------------------------------------------
                                                                          10,902,767       8,631,327      10,168,756
---------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES                                                 4,804,996       4,462,511       2,306,530
INCOME TAX PROVISION                                                       1,945,111       1,817,344       1,002,986
---------------------------------------------------------------------------------------------------------------------------
NET INCOME                                                               $ 2,859,885     $ 2,645,167    $  1,303,544
---------------------------------------------------------------------------------------------------------------------------

EARNINGS PER SHARE OF COMMON STOCK
   Basic                                                                   $    0.72       $    0.65       $    0.31
   Diluted                                                                      0.70            0.62            0.30
AVERAGE SHARES OUTSTANDING
   Basic                                                                   3,956,590       4,048,150       4,226,304
   Diluted                                                                 4,062,155       4,299,366       4,408,838

</TABLE>
See notes to consolidated financial statements.

23
<PAGE>
<TABLE>
<CAPTION>
                                                                              Additional
                                                      Common Stock              Paid-in         Treasury         Retained
                                                  Shares        Amount          Capital           Stock          Earnings
---------------------------------------------------------------------------------------------------------------------------------
<S>                                              <C>            <C>           <C>              <C>               <C>
BALANCES, APRIL 1, 1996                          4,496,786      $49,204       $23,824,898      ($3,361,279)      $22,727,602

Net income                                                                                                         1,303,544
Unrealized loss on
 securities available for sale
---------------------------------------------------------------------------------------------------------------------------------
Total comprehensive income
---------------------------------------------------------------------------------------------------------------------------------
ESOP shares earned                                                                205,471
Vesting of restricted stock awards
Cancellation of restricted
 stock awards                                       (2,428)         (24)          (12,116)
Purchase of Treasury Stock                        (224,838)                                     (2,286,925)
Issuance of restricted stock awards                  1,000                          2,570            7,930
Exercise of stock options                           11,658                                          92,451           (28,806)
Payment of dividends                                                                                                (608,639)
---------------------------------------------------------------------------------------------------------------------------------
BALANCES, MARCH 31, 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 restricted 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
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>

<TABLE>
<CAPTION>

                                                                                 Restricted         Total
                                               Unrealized          ESOP            Stock         Stockholders'
                                               Gain (Loss)       Borrowing         Awards           Equity
------------------------------------------------------------------------------------------------------------------------
<S>                                              <C>            <C>               <C>             <C>
BALANCES, APRIL 1, 1996                          ($98,371)      ($1,190,250)      ($458,173)      $41,493,631

Net income                                                                                          1,303,544
Unrealized loss on
 securities available for sale                 (1,492,220)                                         (1,492,220)
------------------------------------------------------------------------------------------------------------------------
Total comprehensive income                                                                           (188,676)
------------------------------------------------------------------------------------------------------------------------
ESOP shares earned                                                  238,050                           443,521
Vesting of restricted stock awards                                                  178,070           178,070
Cancellation of restricted
 stock awards                                                                        12,140
Purchase of Treasury Stock                                                                         (2,286,925)
Issuance of restricted stock awards                                                 (10,500)
Exercise of stock options                                                                              63,645
Payment of dividends                                                                                 (608,639)
------------------------------------------------------------------------------------------------------------------------
BALANCES, MARCH 31, 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 restricted 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
------------------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                                     Years Ended March 31,
---------------------------------------------------------------------------------------------------------------------------
                                                                              1999           1998            1997
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>             <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                $ 2,859,885     $ 2,645,167    $ 1,303,544
Adjustments to reconcile net income to net cash
  provided by operating activities:
   Depreciation                                                               538,412         556,598        488,930
   Amortization and accretion                                                 706,429         258,006        (49,563)
   Vesting of restricted stock awards                                         129,981         125,243        178,070
   Provisions for loan losses                                                 300,000         177,050        113,256
   (Gain) loss on sale of securities                                         (229,708)        (42,643)        51,120
   (Gain) on sale of loans                                                   (205,837)        (91,866)       (22,771)
   (Gain) loss on sale of office properties and equipment                        (510)        (13,886)        61,766
   Gain on sale of real estate owned                                          (15,121)        (60,422)       (13,289)
   ESOP shares earned                                                         318,846         383,336        205,471
Changes in assets and liabilities:
   Proceeds from the sales of loans held for sale                          12,926,125       5,169,926        984,756
   Origination of loans for resale                                        (12,720,288)     (5,078,060)      (961,985)
   Other investments                                                         (597,651)        (51,135)      (422,734)
   Interest receivable                                                        162,142         268,912       (664,723)
   Other assets                                                              (711,591)       (173,604)       (34,071)
   Interest payable                                                            10,459         143,821        127,092
   Other liabilities                                                       (9,145,930)      1,456,933         36,942
---------------------------------------------------------------------------------------------------------------------------
         Net cash provided by (used in) operating activities               (5,674,357)      5,673,376      1,381,811
---------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
 Cash acquired through branch purchase                                     26,933,017       4,578,736
 Loans originated                                                        (168,807,683)    (71,247,154)   (61,933,496)
 Loan principal repayments                                                125,616,701      73,116,431     76,390,492
 Proceeds from:
   Maturities and calls of:
      Securities available for sale                                       143,007,087      60,991,550     18,000,000
      Securities held to maturity                                                              25,000
 Sales of:
      Securities available for sale                                        41,112,062      24,072,258     36,573,836
      Office properties and equipment                                          54,122         187,596
      Real estate owned                                                       217,254         135,578         27,224
 Purchases of:
      Securities available for sale                                      (143,786,943)    (97,993,517)   (91,445,439)
      Securities held to maturity                                          (6,923,110)
      Loans                                                                (9,885,578)    (17,257,140)   (17,741,292)
      FHLB stock                                                                             (273,400)    (1,689,000)
      Office properties and equipment                                        (834,601)       (457,064)      (305,595)
 Payments on mortgage-backed securities                                    29,378,578      24,282,962     15,416,207
 Increase in cash surrender value of life insurance                        (1,301,575)        (72,378)      (599,676)
 Other                                                                         12,001          16,517         49,499
---------------------------------------------------------------------------------------------------------------------------
         Net cash provided by (used in) investing activities               34,791,332         105,975    (27,257,240)
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
                            (Continued on next page)
                                                                              25
<PAGE>
<TABLE>
<CAPTION>
                                                                                     Years Ended March 31,
                                                                              1999           1998            1997
---------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
<S>                                                                          <C>             <C>            <C>
 Dividends paid                                                              (969,805)       (808,610)      (608,639)
 Purchase of treasury stock                                                (4,163,316)       (993,628)    (2,286,925)
 Net change in deposits                                                   (16,720,332)     (3,542,954)       745,291
 Proceeds from FHLB advances                                              174,749,242     274,500,000    142,900,000
 Proceeds from other long-term debt                                         4,153,875    (273,631,307)  (112,719,231)
 Repayment of other long-term debt                                         (1,153,875)
 Payments on FHLB advances                                               (177,598,310)
 Principal repayments of ESOP borrowing                                       238,050         238,050        238,050
 Advance payments by borrowers for taxes and insurance                         (5,223)        (34,739)        (7,665)
 Net change in other borrowed funds                                                        (1,793,967)      (887,786)
 Net proceeds from issuance of common stock                                   222,270         183,237         63,645
---------------------------------------------------------------------------------------------------------------------------
         Net cash provided by (used in) financing activities              (21,247,424)     (5,883,918)    27,436,740
---------------------------------------------------------------------------------------------------------------------------

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                        7,869,551        (281,617)     1,448,055
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                            6,082,859       6,364,476      4,916,421
---------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                               $ 13,952,410    $  6,082,859   $  6,364,476
---------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
   Interest                                                               $19,898,554     $19,198,690    $18,596,904
   Income taxes                                                             1,595,000       1,588,000      1,097,000
 Noncash transactions:
   Transfers from loans to real estate owned                                  356,332         151,339         39,307
   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
</TABLE>

See notes to consolidated financial statements.
26
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         The accounting and financial  reporting  policies of Permanent Bancorp,
Inc. (the  "Company") and its  subsidiary,  Permanent  Federal Savings 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, 1999.

         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.
<PAGE>
         As  discussed   below,   SFAS  No.  133,   "Accounting  For  Derivative
Investments,"  permitted a one time transfer of securities previously classified
as held to maturity into the available for sale category. On October 1, 1998 the
Company transferred  mortgage-backed securities previously classified as held to
maturity to 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.

         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.

                                                                              27
<PAGE>
         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  judgmentally  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.  Management  may
periodically  allocate  portions of the  allowance  for  specific  problem  loan
situations  although the entire  allowance is available for any loan charge-offs
which occur. 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.

         Office  Properties  and Equipment are 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  therefrom  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 are
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, 1999, 1998
and  1997  was  $602,682,  $167,036  and  $218,603,  respectively.  Goodwill  of
$9,357,000  and $453,000,  net of  accumulated  amortization  of $2,483,000  and
$1,909,000,  is  included  in Other  Assets in the  Consolidated  Statements  of
Financial Condition at March 31, 1999 and March 31, 1998, 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.
<PAGE>
         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.
28
<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 current fiscal year. The Company has
determined that it operates as a single segment which is community  banking.  At
March 31, 1999 and 1998, the Bank had assets of approximately $493.7 million and
$437.7 million,  or 100% and 99.7% of  consolidated  assets,  respectively.  Net
income of the Bank for the three  years  ended  March 31,  1999 was  $3,074,000,
$2,706,000 and $1,253,000 or 108%, 102% and 96% of  consolidated  net income for
fiscal years 1999,  1998 and 1997.  Net interest  income at the Bank for each of
the three years ended March 31, 1999 exceeded 98% of  consolidated  net interest
income.

         Earnings per Share - In 1998 the Company adopted SFAS 128 "Earnings per
Share" and has  retroactively  restated 1997 per share  amounts.  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:
<TABLE>
<CAPTION>
                                                                    Years Ended March 31,
-----------------------------------------------------------------------------------------------------
                                                             1999           1998            1997
-----------------------------------------------------------------------------------------------------
<S>                                                       <C>             <C>             <C>
Basic average common shares                               3,956,590       4,048,150       4,226,304
Dilutive effect of stock options                            105,565         251,216         182,534
-----------------------------------------------------------------------------------------------------
Diluted average common shares                             4,062,155       4,299,366       4,408,838
-----------------------------------------------------------------------------------------------------
</TABLE>
         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.

         Changes In  Presentation - Certain items appearing in the 1998 and 1997
financial statements have been reclassified to conform to the 1999 presentation.
29
<PAGE>
2. SECURITIES

         The amortized  cost and estimated  fair values of securities  available
for sale and securities held to maturity are summarized as follows:
<TABLE>
<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
---------------------------------------------------------------------------------------------------------------------------
                                                          $117,279,217       $606,201       $596,332    $117,289,086
---------------------------------------------------------------------------------------------------------------------------

                                                                                  March 31, 1999
---------------------------------------------------------------------------------------------------------------------------
                                                             Amortized           Gross Unrealized            Fair
                                                               Cost             Gains        Losses         Value
---------------------------------------------------------------------------------------------------------------------------
Securities held to maturity:
  Municipal & Revenue Bonds                                $ 5,908,859                      $290,346     $ 5,618,513
  Other                                                      1,010,934                         2,212       1,008,722
---------------------------------------------------------------------------------------------------------------------------
                                                           $ 6,919,793                      $292,558     $ 6,627,235
---------------------------------------------------------------------------------------------------------------------------

                                                                                  March 31, 1998
---------------------------------------------------------------------------------------------------------------------------
                                                             Amortized           Gross Unrealized            Fair
                                                               Cost             Gains        Losses         Value
---------------------------------------------------------------------------------------------------------------------------
Securities available for sale:
  U.S. Treasury                                            $ 3,995,076     $   38,049                    $ 4,033,125
  U.S. Agency                                              101,028,193        178,044      $ 234,772     100,971,465
  FHLMC certificates                                        27,355,375        171,134        131,638      27,394,871
  FNMA certificates                                         21,871,532        111,670         58,909      21,924,293
  GNMA certificates                                         13,142,014        206,137         15,029      13,333,122
  Other                                                        506,344        107,687                        614,031
---------------------------------------------------------------------------------------------------------------------------
                                                          $167,898,534     $  812,721      $ 440,348    $168,270,907
---------------------------------------------------------------------------------------------------------------------------

                                                                                  March 31, 1998
---------------------------------------------------------------------------------------------------------------------------
                                                             Amortized           Gross Unrealized            Fair
                                                               Cost             Gains        Losses         Value
---------------------------------------------------------------------------------------------------------------------------
Securities held to maturity:
  FHLMC certificates                                       $   938,942      $  3,378                     $   942,320
  FNMA certificates                                          4,003,242        47,147      $  26,415        4,023,974
  GNMA certificates                                         13,919,232       271,158         37,591       14,152,799
---------------------------------------------------------------------------------------------------------------------------
                                                          $ 18,861,416      $321,683      $  64,006      $19,119,093
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
         The amortized  cost and estimated fair value of securities at March 31,
1999 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 prepayment penalties.
<TABLE>
<CAPTION>
                                                              Amortized         Fair
                                                                Cost            Value
--------------------------------------------------------------------------------------
<S>                                                         <C>            <C>
Due within 1 year
  U.S. Agency                                               $ 2,002,961    $ 1,965,000
  FHLMC certificates                                            121,296        123,859
  Other                                                       1,010,934      1,008,722
--------------------------------------------------------------------------------------
                                                              3,135,191      3,097,581
--------------------------------------------------------------------------------------
Due after 1 year through 5 years
  U.S. Agency                                                14,998,002     14,916,329
  FHLMC certificates                                          1,692,783      1,705,069
  FNMA certificates                                           1,128,942      1,153,463
--------------------------------------------------------------------------------------
                                                             17,819,727     17,774,861
--------------------------------------------------------------------------------------
Due after 5 years through 10 years
  U.S. Agency                                                30,377,550     30,126,589
  FHLMC certificates                                          1,487,047      1,493,942
  FNMA certificates                                           3,913,787      3,902,361
  GNMA certificates                                             471,806        477,118
--------------------------------------------------------------------------------------
                                                             36,250,190     36,000,010
--------------------------------------------------------------------------------------
Due after 10 years through 15 years
  U.S. Agency                                                12,979,648     12,797,190
  FHLMC certificates                                          1,452,100      1,462,494
  FNMA certificates                                             179,951        182,875
  Municipal Bonds                                             1,325,711      1,259,008
--------------------------------------------------------------------------------------
                                                             15,937,410     15,701,567
--------------------------------------------------------------------------------------
Due after 15 years
  U.S. Agency                                                 2,588,938      2,672,888
  HLMC certificates                                          11,981,675     12,167,815
  FNMA certificates                                          12,196,431     12,357,870
  GNMA certificates                                          19,706,300     19,784,224
  Municipal Bonds                                             4,583,148      4,359,505
--------------------------------------------------------------------------------------
                                                             51,056,492     51,342,302
--------------------------------------------------------------------------------------
         Total                                             $124,199,010   $123,916,321
--------------------------------------------------------------------------------------
</TABLE>
<PAGE>
         Activities  related  to the  sales  of  securities  are  summarized  as
follows:

<TABLE>
<CAPTION>
                                                                                        Years Ended March 31,
---------------------------------------------------------------------------------------------------------------------
                                                                                 1999           1998          1997
---------------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>           <C>           <C>
Proceeds from sales                                                          $41,101,856   $24,072,258   $36,573,836
Gross gains on sales                                                             239,914        51,776       124,899
Gross loss on sales                                                               10,206         9,135       176,019
</TABLE>
                                                                              31
<PAGE>
3. LOANS

         Approximately 89% of the Bank's loans are to customers in Indiana.  The
portfolio of loans consists of residential,  commercial real estate,  commercial
construction, consumer and other loans.
<TABLE>
<CAPTION>
                                                                                                 March 31,
---------------------------------------------------------------------------------------------------------------------
                                                                                         1999               1998
---------------------------------------------------------------------------------------------------------------------
First mortgage:
<S>                                                                                 <C>                <C>
  Secured by one-to-four family residences                                          $171,249,927       $157,225,530
  Secured by other properties                                                         31,897,812          8,886,895
  Construction loans                                                                   8,193,828          3,409,383
  Land                                                                                    14,437             25,455
Automobile                                                                            56,779,077         31,436,243
Consumer                                                                              26,609,416         10,708,903
Commercial                                                                            17,327,986          3,799,904
Mobile home                                                                              724,200            935,365
Loans on savings accounts                                                                868,346            891,516
Credit card                                                                              582,185            565,538
Second mortgage                                                                                              24,661
Home improvement                                                                         569,597            838,893
Loan contracts                                                                             7,023             24,135
Commercial paper                                                                       9,275,099          9,116,180
---------------------------------------------------------------------------------------------------------------------
Subtotal                                                                             324,098,933        227,888,601
Allowance for loan losses                                                             (2,706,408)        (1,973,410)
Deferred loan fees, net                                                                 (310,064)          (397,765)
Undisbursed loan proceeds                                                                (52,330)          (148,567)
Unearned interest and unearned discounts                                                 (12,326)           (19,601)
---------------------------------------------------------------------------------------------------------------------
Loans, net                                                                          $321,017,805       $225,349,258
---------------------------------------------------------------------------------------------------------------------
</TABLE>


         The   principal   balance  of  loans  on  nonaccrual   status   totaled
approximately  $818,000 and  $911,000 at March 31, 1999 and 1998,  respectively.
For the years ended March 31, 1999 and 1998,  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 $65,013 and $73,277  respectively.  The
amounts  included in interest  income on such loans were $20,681 and $39,388 for
the years ended March 31, 1999 and 1998, respectively.

         The Bank  originates  commercial  real estate  loans.  Such loans had a
carrying value of approximately $32 million and $9 million at March 31, 1999 and
1998,  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,  $3 million and $4
million are  collateralized  by multi-family  residential  property at March 31,
1999 and 1998,  respectively;  and $29 million and $5 million by hotel and other
property at March 31, 1999 and 1998, respectively.

         The Bank had  commitments to make loans  approximating  $23,421,000 and
$4,886,000 excluding  undisbursed portions of loans in-process at March 31, 1999
and 1998, respectively.

32
<PAGE>
         The Bank originates both adjustable and fixed interest rate loans.  The
composition of these loans was as follows:
<TABLE>
<CAPTION>
                    Fixed Rate                                                     Adjustable Rate
--------------------------------------------------------   ----------------------------------------------------------
                               Book Value                                                       Book Value
--------------------------------------------------------   ----------------------------------------------------------
 Term to              March 31,             March 31,           Term to Rate           March 31,            March 31,
 Maturity                1999                 1998               Adjustment              1999                 1998
---------------------------------------------------------   ---------------------------------------------------------
<S>                 <C>                 <C>                      <C>  <C>            <C>                 <C>
1mo.-1yr           $ 30,171,000         $ 17,079,000            1mo.-1yr.           $27,279,000         $20,329,000
1yr.-3yr.            18,322,000           12,125,000            1yr.-3yr.             4,978,000           3,533,000
3yr.-5yr.            65,390,000           30,023,000            3yr.-5yr.             7,272,000           5,487,000
5yr.-10yr.           46,433,000           28,317,000            5yr.-10yr.           37,219,000          38,578,000
10yr.-20yr.          78,742,000           68,512,000            10yr.-20yr.           1,006,000           1,817,000
Over 20 years         7,164,000            1,884,000            over 20 yrs             123,000             205,000
--------------------------------------------------------   ----------------------------------------------------------
                  $ 246,222,000        $ 157,940,000                                $ 77,877,000        $69,949,000
--------------------------------------------------------   ----------------------------------------------------------
</TABLE>
         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 $609,277 and $630,613
at March 31, 1999 and 1998, respectively. For the years ended March 31, 1999 and
1998 loans of $152,383 and $202,444 respectively, were disbursed to officers and
directors  and  repayments  of principal of $173,719 and $248,686  respectively,
were received from officers and directors.

         The  amount  of  loans  serviced  for  others   totaled   approximately
$36,327,537 and $32,468,000 at March 31, 1999 and 1998, 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  approximately  $228,391  and  $233,216 at March 31, 1999 and 1998,
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,  1999 and 1998,  these  obligations  were  limited  to
approximately $316,000 and $443,000 respectively.

         Loan servicing fee income for the years ended March 31, 1999,  1998 and
1997 was $81,575, $84,274, and $100,824, respectively.

         There were no  restructured  loans in the Bank's loan  portfolio  as of
March 31,  1999 and 1998.  For the year ended  March 31,  1997,  gross  interest
income which would have been recorded had the Bank's modified loans been current
in  accordance  with their  original  terms  amounted  to  $165,000.  The amount
included in interest income during 1997 on such loans was $151,000.
<PAGE>
         An analysis of the allowance for loan losses is as follows:
<TABLE>
<CAPTION>

                                                                                    Years Ended March 31,
---------------------------------------------------------------------------------------------------------------------------
                                                                            1999            1998             1997
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                    <C>             <C>              <C>
Beginning balance                                                      $1,973,410      $2,126,225       $2,237,804
Provision for losses charged to operations                                300,000         177,050          113,256
Charge-offs                                                              (506,753)      (403,896)         (370,519)
Recoveries                                                                179,751          74,031          145,684
Acquired in branch acquisition                                            760,000
---------------------------------------------------------------------------------------------------------------------------
Ending balance                                                         $2,706,408      $1,973,410       $2,126,225
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
                                                                              33
<PAGE>
         The recorded  investment in loans considered impaired at March 31, 1999
and 1998 was $362,920 and $116,778 for which no specific  valuation  reserve has
been  established.  For the year  ended  March  31,  1999  and 1998 the  average
recorded investment in impaired loans was approximately $243,116 and $1,215,012,
respectively.  Cash  received  for  interest on  impaired  loans was $17,039 and
$108,989 for the years ended March 31, 1999 and 1998, 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  $169 million and $154
million as of March 31, 1999, and 1998, 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 $4.9 million at March 31, 1999 and $5.7 million at March
31,1998.  At March  31,  1999  and  1998  there  were no  loans  exceeding  this
limitation.


4. OFFICE PROPERTIES AND EQUIPMENT

         Office properties and equipment are summarized as follows:
<TABLE>
<CAPTION>


                                                                                                 March 31,
---------------------------------------------------------------------------------------------------------------------------
                                                                                         1999                1998
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>                <C>
Land                                                                                 $ 2,578,358        $ 1,841,659
Office buildings                                                                       8,212,588          7,379,489
Furniture and equipment                                                                3,551,173          3,560,222
Leasehold improvements                                                                   289,824            375,184
Automobiles                                                                               55,642             52,728
---------------------------------------------------------------------------------------------------------------------------
       Total                                                                          14,687,585         13,209,282
Less accumulated depreciation                                                          6,000,198          5,676,031
---------------------------------------------------------------------------------------------------------------------------
Office properties and equipment, net                                                 $ 8,687,387        $ 7,533,251
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
         Depreciation  expense  included  in  operations  during the years ended
March  31,  1999,  1998  and  1997  totaled  $538,412,  $556,598  and  $488,930,
respectively.
<PAGE>
5. DEPOSITS

         Deposit accounts are summarized as follows:
<TABLE>
<CAPTION>
                                                                                       March 31,
-----------------------------------------------------------------------------------------------------------------------
                                                                          1999                           1998
-----------------------------------------------------------------------------------------------------------------------
                                                                                Weighted                     Weighted
                                                                                 Average                      Average
                                                                  Amount          Rate           Amount        Rate
-----------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>            <C>           <C>                 <C>
Noninterest-bearing                                            $ 12,267,705                   $ 1,755,251
NOW and MMDA's                                                   57,644,600      1.0%          34,010,142          2.0%
Passbook savings                                                 59,482,126      3.1%          52,050,522          3.7%
-----------------------------------------------------------------------------------------------------------------------
Total                                                           129,394,431                    87,815,915
-----------------------------------------------------------------------------------------------------------------------
Certificates of deposit:
  1.50 - 3.49%                                                       40,396      2.4%              66,459          2.9%
  3.50 - 5.49%                                                  120,750,095      4.9%          61,522,709          5.0%
  5.50 - 7.49%                                                   92,403,547      6.1%         130,864,156          6.0%
  7.50 - 9.49%                                                    2,752,620      7.8%           2,672,884          7.8%
-----------------------------------------------------------------------------------------------------------------------
Total certificates of deposit                                   215,946,658                   195,126,208
-----------------------------------------------------------------------------------------------------------------------
Total                                                          $345,341,089                  $282,942,123
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
34
<PAGE>
         Certificates  of  deposit  in the  amount  of  $100,000  or more  total
approximately $30 million at March 31,1999 and $21 million at March 31, 1998.

         A summary of certificate  accounts by scheduled maturities at March 31,
1999 is as follows:
<TABLE>
<CAPTION>
                          2000           2001          2002         2003         2004       Thereafter       Total
---------------------------------------------------------------------------------------------------------------------------
<S>       <C>           <C>          <C>          <C>          <C>           <C>          <C>             <C>
Less than 3.49%         $   40,396                                                                        $     40,396
   3.50 - 5.49%         72,305,918   $32,306,250  $ 7,652,773  $ 4,018,315   $3,209,364   $ 1,257,474      120,750,094
   5.50 - 7.49%         45,448,624    17,456,235    4,065,480    9,710,389    5,906,793     9,816,027       92,403,548
   7.50 - 9.49%             65,355     1,315,885    1,371,380                                                2,752,620
---------------------------------------------------------------------------------------------------------------------------
                      $117,860,293   $51,078,370  $13,089,633  $13,728,704   $9,116,157   $11,073,501     $215,946,658
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
         Interest expense on deposits is as follows:
<TABLE>
<CAPTION>
                                                                                        Years Ended March 31,
---------------------------------------------------------------------------------------------------------------------------
                                                                                 1999          1998           1997
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>            <C>           <C>
NOW and MMDA's                                                               $ 1,141,417    $  716,098    $  780,027
Passbook savings                                                               1,974,533     1,951,908     2,056,077
Certificates of deposit                                                       11,639,990    10,763,136    10,496,483
---------------------------------------------------------------------------------------------------------------------------
                                                                             $14,755,940   $13,431,142   $13,332,587
---------------------------------------------------------------------------------------------------------------------------
</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,
---------------------------------------------------------------------------------------------------------------------------
                Fiscal Year                1999           1998                 1999                  1998
---------------------------------------------------------------------------------------------------------------------------
<S>                <C>                     <C>           <C>                 <C>                  <C>
Fixed Rate:
                   1999                                  5.55%                                    $19,494,333
                   2000                    4.89%         5.59%               $  805,873             2,026,678
                   2001                    5.50%         5.50%               14,584,231            14,770,924
                   2002                    5.46%         5.46%                5,000,000             5,000,000
                After 2003                 5.01%         5.09%               76,113,506            42,310,743
---------------------------------------------------------------------------------------------------------------------------
             Total fixed rate                                               $96,503,610           $83,602,678
---------------------------------------------------------------------------------------------------------------------------
Variable Rate:
                   1999                                  5.88%                                     15,750,000
---------------------------------------------------------------------------------------------------------------------------
             Total variable rate                                                                  $15,750,000
---------------------------------------------------------------------------------------------------------------------------
             Total advances                                                 $96,503,610           $99,352,678
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
         Fixed rate advances at March 31, 1999 include  $38,500,000  of advances
that have reached the initial  conversion  date and $42,000,000 of advances that
reach the  conversion  date  subsequent  to March 31,  1999.  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 FHLB did not convert any
advances in 1999.


                                                                              35
<PAGE>
         The Bank has pledged  mortgage  loans and FHLB stock as  collateral  on
these  advances.  The Bank may receive  advances  from the FHLB up to 50% of the
Bank's adjusted assets which was approximately $200 million at March 31, 1999.

7. OTHER LONG-TERM 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.
This debt is secured by the stock of the Bank.

         The rate on the note is  determined  quarterly and is, at the Company's
option, the prime rate or LIBOR plus 180 basis points (1.80%). At March 31, 1999
the rate was 6.80%

         Interest on the debt is payable quarterly. Annual principal payments of
$500,000  commence  February  29, 2000 with a final  payment of any  outstanding
balance  due on August 15,  2003.  Principal  may be repaid at any time  without
penalty and in November 1998 the Company repaid $1,153,875.

         The loan agreement  requires that the Company  maintain defined capital
ratios which generally are those required by regulatory agencies. The Company is
also  required to earn a minimum  return on average  assets of .50% and maintain
defined  asset  quality  ratios.  At March 31, 1999 the Company is in compliance
with the loan agreement.

8. OTHER BORROWED FUNDS

         The Company had no other  borrowed funds at March 31, 1999 or March 31,
1998.

         An analysis of  securities  sold under  agreements  to repurchase is as
follows:
<TABLE>
<CAPTION>
                                                                                      Years Ended March 31,
---------------------------------------------------------------------------------------------------------------------------
                                                                                1999          1998           1997
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>            <C>          <C>
Highest month-end balance                                                      $    0        $444,636     $3,955,494
Average balance                                                                10,417         103,260      1,484,957
Weighted average interest rate at end of period                                                                 5.70%
Weighted average interest rate during the period                                 5.33%           5.10%          4.80%
</TABLE>

9. INCOME TAXES

         An analysis of the income tax provision is as follows:
<TABLE>
<CAPTION>
                                                                                        Years Ended March 31,
---------------------------------------------------------------------------------------------------------------------------
                                                                                  1999          1998          1997
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>             <C>             <C>
Current:
  Federal                                                                  $1,232,983      $1,366,610     $  862,572
  State                                                                       448,893         447,482        254,275
Deferred                                                                      263,235           3,252       (113,861)
---------------------------------------------------------------------------------------------------------------------------
                                                                           $1,945,111      $1,817,344     $1,002,986
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE>

         The difference  between the financial  statement  provision and amounts
computed by using the statutory rate of 34% is reconciled as follows:
<TABLE>
<CAPTION>
                                                                                        Years Ended March 31,
---------------------------------------------------------------------------------------------------------------------------
                                                                                  1999          1998          1997
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                           <C>          <C>           <C>
Income tax provision at federal statutory rate                                $1,633,699   $1,517,254    $   784,221
State tax, net of federal tax benefit                                            272,365      295,338        167,822
Nondeductible expenses                                                           133,797      188,734         50,347
Other                                                                            (94,750)    (183,982)           596
---------------------------------------------------------------------------------------------------------------------------
Total income tax provision                                                    $1,945,111    $1,817,344    $1,002,986
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
         The  Company's  deferred  income  tax  assets  and  liabilities  are as
follows:
<TABLE>
<CAPTION>
                                                                                                     March 31,
---------------------------------------------------------------------------------------------------------------------------
                                                                                                1999          1998
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                                          <C>           <C>
Deferred tax assets:
  Bad debt reserves                                                                          $657,839      $628,648
  Goodwill                                                                                    117,670        23,225
  Accrued employee benefits                                                                   146,564       113,198
  Other                                                                                                       9,561
---------------------------------------------------------------------------------------------------------------------------
                                                                                              922,073       774,632
---------------------------------------------------------------------------------------------------------------------------

Deferred tax liabilities:
  Depreciation                                                                                124,717       107,547
  Deferred loan fees                                                                          588,802       258,986
  Unrealized gain of securities available for sale                                              3,909       147,127
  Other                                                                                       144,206        80,516
---------------------------------------------------------------------------------------------------------------------------
                                                                                              861,634       594,176
---------------------------------------------------------------------------------------------------------------------------
Deferred income tax, net                                                                    $  60,439      $180,456
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
         Retained earnings at March 31, 1999 and 1998 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.
<PAGE>
         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
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.
                                                                              37
<PAGE>
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").

         Quantitative  measures  established  by  regulation  to ensure  capital
adequacy require the Bank to maintain minimum amounts and ratios as set forth in
the following tables of core and total  risk-based  capital.  Prompt  Corrective
Action  provisions  contained  in  the  Federal  Deposit  Insurance  Corporation
Improvement Act of 1991 (FDICIA) require specific supervisory actions as capital
levels  decrease.  To  be  considered   well-capitalized  under  the  regulatory
framework for Prompt Corrective  Action  Provisions under FDICIA,  the Bank must
maintain minimum Tier 1 leverage, Tier 1 risk-based and total risk-based capital
ratios as set forth in the following  tables. As of March 31, 1999 and 1998, 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, 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

                                                                          As of March 31, 1998
---------------------------------------------------------------------------------------------------------------------------
                                                             Actual Capital                      Required Capital
---------------------------------------------------------------------------------------------------------------------------
                                                       Amount             Ratio             Amount             Ratio
---------------------------------------------------------------------------------------------------------------------------
OTS capital adequacy
   Tangible Capital                                 $38,178,000       8.76%              $ 6,537,000       1.50%
   Core capital                                      38,178,000       8.76                17,440,000       4.00
   Risk-based capital                                40,097,000      21.05                15,239,000       8.00
FDICIA regulations to be
  classified well-capitalized
   Tier 1 leverage capital                           38,178,000       8.76                21,800,000       5.00
   Tier 1 risk-based capital                         38,178,000      20.04                11,429,000       6.00
   Total risk-based capital                          40,097,000      21.05                19,049,000      10.00
</TABLE>
38
<PAGE>
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 which remains unissued at March 31, 1999. 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.

         Recapitalization  of SAIF - On September 30, 1996, the President signed
into law an omnibus appropriations act for fiscal year 1997 that included, among
other things,  the  recapitulation  of the Savings  Association  Insurance  Fund
(SAIF) in a section  entitled  "The  Deposit  Insurance  Funds Act of 1996" (the
Act).  The Act included a provision  where all insured  depository  institutions
would be charged a one-time special assessment on their SAIF assessable deposits
as of March 31, 1995. The Company recorded a pre-tax charge of $1,766,185 during
the year ended March 31, 1997, which  represented 65.7 basis points of the March
31, 1995, assessable deposits.'

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.

         Pension expense  amounted to $40,000 for the year ended March 31, 1997.
There was no pension expense in 1999 and 1998.

         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 $476,100 and $714,150 at March 31, 1999 and 1998, 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  $594,925,
$639,317 and $479,046 during 1999, 1998, and 1997,  respectively.  During fiscal
years ended March 31, 1999,  1998 and 1997,  45,607  shares,  47,688  shares and
49,728 shares were earned by participants. At March 31, 1999, 84,736 shares with
a fair value of approximately  $911,000 were held in suspense by the ESOP. These
shares  are not  considered  to be  outstanding  for the  purpose  of  computing
earnings per share.
                                                                              39
<PAGE>
         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. During the fiscal year ended March 31, 1999, and 1998 an
additional  9,000 and 1,000  shares were  awarded.  The cost of the RRP is being
reflected as compensation  expense as vesting occurs. This amounted to $139,200,
$125,242  and $178,070  during the fiscal  years ended March 31, 1999,  1998 and
1997.  Termination  of employees  resulted in 2,866  shares,  2,856 shares 2,428
shares being  canceled  during the fiscal  years ended March 31, 1999,  1998 and
1997 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.

         The  following is an analysis of stock option  activity for each of the
three  years  in the  period  ending  March  31,  1999  and  the  stock  options
outstanding at the end of the respective years:
<TABLE>
<CAPTION>
                                                                                                 Weighted
                                                                                                  Average
                                                                                  Shares           Price
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                               <C>             <C>
         Outstanding April 1, 1996                                                449,760         $ 5.26
         Granted                                                                    9,522           8.13
         Exercised                                                                (11,658)          5.46
         Forfeited or expired                                                      (5,952)          5.00
-------------------------------------------------------------------------------------------------------------------
         Outstanding March 31, 1997                                               441,672           5.32
         Exercised                                                                (36,112)          5.07
         Forfeited or expired                                                      (3,572)          5.00
-------------------------------------------------------------------------------------------------------------------
         Outstanding March 31, 1998                                               401,988           5.34
         Granted                                                                    7,000          11.25
         Exercised                                                                (44,454)          5.00
-------------------------------------------------------------------------------------------------------------------
         Balance at March 31, 1999                                                364,534           5.49
-------------------------------------------------------------------------------------------------------------------
</TABLE>
         The number of vested shares  exercisable  at March 31, 1999,  1998, and
1997 were: 344,773, 376,465 and 296,272, respectively and had a weighted average
exercise price of $5.28,  $5.16 and $5.09,  respectively.  The weighted  average
remaining contractual life of the options outstanding at March 31, 1999 and 1998
was  5.3  years  and  6.3  years,  respectively.  Exercise  prices  for  options
outstanding at March 31, 1999 ranged from $5.00 to $11.25.

         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:

40
<PAGE>
<TABLE>
<CAPTION>
                                                                                        Year Ended March 31,
---------------------------------------------------------------------------------------------------------------------------
                                                                                 1999          1998          1997
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>            <C>          <C>
Net income :
  As reported                                                               $2,859,885     $2,645,167   $1,303,544
  Proforma                                                                   2,843,474      2,631,973    1,293,311
Basic :
Net income per share:
  As reported                                                               $     0.72     $     0.65   $     0.31
  Proforma                                                                        0.72           0.65         0.31
Diluted Net income per share:
  As reported                                                               $     0.70     $     0.62   $     0.30
  Proforma                                                                        0.70           0.61         0.29
</TABLE>
         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
0.96% to 2.64%,  risk-free interest rates of 5.23% to 6.74%, expected volatility
of 18% to 30% 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
matching expense was $22,271,  $21,450 and $19,203 during the fiscal years ended
March 31, 1999, 1998 and 1997, 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  retirement.  The present
value of the benefit to be paid is accrued over the active  period of employment
of individual participants and is funded by life insurance policies. Cash values
associated with these policies in the amount of $2,926,828 at March 31, 1999 and
$1,625,253  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,
---------------------------------------------------------------------------------------------------------------------------
                                                                                  1999          1998          1997
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                           <C>          <C>         <C>
Net realized and unrealized gains (losses)
  on available for sale securities                                            ($ 80,566)   $1,841,590  ($1,525,976)
Less: Adjustment for net securities gains (losses)
  realized in net income, net of tax                                            138,721        25,752      (33,756)
---------------------------------------------------------------------------------------------------------------------------
      Other comprehensive income (loss)                                       ($219,287)   $1,815,838  ($1,492,220)
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
         Substantially all of other comprehensive  income is attributable to the
Bank as the amount of available  for sale  securities  at the parent  company is
immaterial.

41
<PAGE>
14. COMMITMENTS

         Lease  commitments - The Company has future minimum rental  commitments
for noncancelable operating leases as follows:
<TABLE>
<CAPTION>
                    Fiscal year ended March 31:
                    ---------------------------
                       <S>           <C>
                       2000          $306,904
                       2001           296,410
                       2002           259,382
                       2003           132,982
                       2004           112,976
</TABLE>

         Rental  expense for the years ended March 31,  1999,  1998 and 1997 was
$261,022, $79,036 and $70,265, respectively.

         Rental  income from  noncancelable  subleases for the years ended March
31, 1999, 1998 and 1997 was $137,063, $119,306 and $103,306, 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.  Unless noted otherwise, the Company does not require collateral or
other security to support financial instruments with 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 predominantly of residential family units,
commercial residential or non-residential real estate, and personal property.

         Employment   agreement  -  The  Company  has  entered  into  employment
agreements with two executive  officers.  One agreement is in effect until March
31, 2000. 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 $136,000 at March 31, 1999.

42
<PAGE>
15. PERMANENT BANCORP, INC. FINANCIAL INFORMATION (PARENT COMPANY ONLY)

         The following  condensed  statement of financial  condition as of March
31, 1999 and 1998 and condensed  statement of operations  and cash flows for the
three years ended March 31, 1999 for Permanent  Bancorp,  Inc. should be read in
conjunction with the consolidated financial statements and notes thereto.

CONDENSED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
                                                                                                   March 31,
---------------------------------------------------------------------------------------------------------------------------
                                                                                              1999           1998
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                                       <C>            <C>
Cash                                                                                      $  322,070    $ 1,519,171
Securities available for sale                                                                838,766      2,614,031
Loans receivable from ESOP                                                                   476,100        714,150
Fixed assets                                                                                 454,855        460,282
Interest receivable                                                                                          11,353
Other assets                                                                                  28,704          8,746
Investment in subsidiary                                                                  42,120,304     38,514,563
---------------------------------------------------------------------------------------------------------------------------
  Total assets                                                                           $44,240,799    $43,842,296
---------------------------------------------------------------------------------------------------------------------------

Deferred income taxes                                                                     $   30,445     $  111,341
Accrued expenses                                                                             110,470      1,047,696
Dividends payable                                                                            238,697
Other borrowed funds                                                                       3,000,000
---------------------------------------------------------------------------------------------------------------------------
  Total liabilities                                                                        3,379,612      1,159,037
---------------------------------------------------------------------------------------------------------------------------
  Total stockholders' equity - net                                                        40,861,187     42,683,259
---------------------------------------------------------------------------------------------------------------------------
      Total liabilities and stockholders' equity                                         $44,240,799    $43,842,296
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
                                                                                      Year Ended March 31,
INCOME:                                                                       1999            1998           1997
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>            <C>            <C>
  Interest income from securities held to maturity
    and available for sale                                                 $  86,342      $  145,162     $  293,929
  Interest on loans                                                           38,029          52,510         66,991
  Other income                                                                63,395          92,656         81,094
---------------------------------------------------------------------------------------------------------------------------
      Total income                                                           187,766         290,328        442,014
---------------------------------------------------------------------------------------------------------------------------
EXPENSES:
  Salaries and benefits                                                      187,648         172,019        223,192
  Interest expense                                                           150,792
  Legal and professional fees                                                 93,878         130,957         67,433
  Other expenses                                                             110,561          86,646         79,418
---------------------------------------------------------------------------------------------------------------------------
      Total expenses                                                         542,879         389,622        370,043
---------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE EQUITY IN UNDISTRIBUTED EARNINGS                       (355,113)        (99,294)        71,971
INCOME TAX PROVISION                                                        (140,615)        (38,426)        21,296
EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARY                             3,074,383       2,706,035      1,252,869
---------------------------------------------------------------------------------------------------------------------------
NET INCOME                                                                $2,859,885      $2,645,167     $1,303,544
---------------------------------------------------------------------------------------------------------------------------

</TABLE>
                                                                              43
<PAGE>
<TABLE>
<CAPTION>
                                                                                      Year Ended March 31,
                                                                              1999            1998           1997
---------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                       <C>             <C>           <C>
  Net income                                                             $ 2,859,885      $ 2,645,167    $ 1,303,544
  Equity in undistributed earnings of subsidiary                          (3,074,383)      (2,706,035)    (1,252,869)
  Adjustments to reconcile net income to net cash
    provided by operating activities
  Vesting of restricted stock awards                                         139,200          125,243        178,070
  Depreciation, amortization and accretion                                     7,836             (246)        28,238
  (Gain) Loss on sale of investments                                          10,206           (5,198)        (5,790)
  Changes in assets and liabilities:
  Interest receivable                                                         11,353           53,847         16,838
  Deferred income tax                                                       (153,532)          (7,422)       (46,817)
  Other assets                                                               (19,958)          (4,059)
  Other liabilities                                                           62,774          (18,519)        20,848
---------------------------------------------------------------------------------------------------------------------------
    Net cash provided (used in) by operating activities                     (156,619)          82,778        242,062
---------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
 Proceeds from:
  Maturities of:
  Securities available for sale                                            3,689,138        1,997,500      2,974,688
  Commercial Paper                                                         1,200,000        1,500,000      5,500,000
  Principal repayments on loans                                              238,050          238,050        238,050
 Sale of:
  Securities available for sale                                                             1,986,510      2,934,384
 Purchase of:
  Loans                                                                                      (497,415)    (6,438,563)
  Securities held to maturity                                                                             (3,995,625)
  Securities available for sale                                           (2,759,969)      (2,497,500)
  Commercial paper                                                        (1,492,876)
  Fixed assets                                                                (3,974)
---------------------------------------------------------------------------------------------------------------------------
    Net cash provided by investing activities                                870,369       2,727,145       1,212,934
---------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
 Proceeds from other borrowed funds                                        4,153,875
 Dividends paid                                                             (969,805)        (808,610)      (608,737)
 Purchase of treasury stock                                               (4,163,316)        (993,628)    (2,286,926)
 Sale of common stock                                                        222,270          183,237         63,645
 Principal repayment on other borrowed funds                              (1,153,875)
---------------------------------------------------------------------------------------------------------------------------
    Net cash used in financing activities                                 (1,910,851)      (1,619,001)    (2,832,018)
---------------------------------------------------------------------------------------------------------------------------

NET INCREASE (DECREASE) IN CASH                                           (1,197,101)       1,190,922     (1,377,022)
CASH AT BEGINNING OF PERIOD                                                1,519,171          328,249      1,705,271
---------------------------------------------------------------------------------------------------------------------------
CASH AT END OF PERIOD                                                     $  322,070      $ 1,519,171      $ 328,249
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
44
<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, 1999                   March 31, 1998
---------------------------------------------------------------------------------------------------------------------------
                                                        Carrying           Fair           Carrying           Fair
                                                          Value            Value            Value            Value
---------------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>              <C>             <C>              <C>
Assets:
  Cash                                                 $ 7,591,117      $ 7,591,117     $ 4,274,700      $ 4,274,700
  Interest-bearing deposits                              6,361,293        6,361,293       1,808,159        1,808,159
  Securities available for sale                        117,289,087      117,289,087     168,270,907      168,270,907
  Securities held to maturity                            6,919,793        6,627,235      18,861,416       19,119,093
  Loans, net                                           321,017,805      324,264,853     225,349,258      226,008,379
  Interest receivable                                    2,824,211        2,824,211       3,270,173        3,270,173
  Federal Home Loan Bank stock                           5,466,000        5,466,000       5,466,000        5,466,000
  Cash surrender value of life insurance                 2,926,828        2,926,828       1,625,253        1,625,253

Liabilities:
  Deposits                                             345,341,089      350,438,836     282,942,123      287,384,759
  Federal Home Loan Bank advances                       96,503,610       97,541,079      99,352,678       98,824,254
  Advance payments by borrowers
    for taxes and insurance                                974,636          974,636         979,859          979,859
  Other borrowed funds                                   3,000,000        3,000,000
  Interest payable                                       2,204,007        2,204,007       2,193,548        2,193,548
  Off balance sheet: commitments
    to extend credit                                                     23,421,000                       10,485,000
</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.

                                                                              45
<PAGE>
         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.

         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, 1999 and 1998.  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.

46
<PAGE>
<TABLE>
<CAPTION>
<S>                                       <C>                           <C>
BOARD OF DIRECTORS AND                                                  EXECUTIVE OFFICERS
EXECUTIVE OFFICERS
                                                                        Donald P. Weinzapfel
PERMANENT BANCORP INC.                                                     Chairman of the Board and
                                                                           Chief Executive Officer
BOARD OF DIRECTORS                                                      Murray J. Brown
                                                                           President
Donald P. Weinzapfel                           Daniel L. Schenk         Robert A. Cern
James W. Vogel                            James A. McCarty, Jr.            Chief Financial Officer
Jack H. Kinkel                                   Daniel F. Korb            and Secretary
Robert L. Northerner                              John R. Stone
James D. Butterfield                            Murray J. Brown

PERMANENT FEDERAL SAVINGS BANK

BOARD OF DIRECTORS

Donald P. Weinzapfel                            Daniel L.Schenk         EXECUTIVE OFFICERS
James W. Vogel                            James A. McCarty, Jr.
Jack H. Kinkel                                   Daniel F. Korb         Murray J. Brown              George E. Orr
Robert L. Northerner                              John R. Stone            Chairman of the Board,       Senior Vice President
James D. Butterfield                            Murray J. Brown            President &               Richard A. Condi
                                                                           Chief Executive Officer      Vice President
Louis H. Boink, Jr(Director Emeritus)                                   Robert A. Cern               Glenna J. Kirsch
Carl F. Bernhardt (Director Emeritus)                                      Senior Vice President,       Vice President
Kenneth F. Allen  (Director Emeritus)                                      Chief Financial Officer   Charles A. Becker, Sr.,
John W. Forster   (Director Emeritus)                                      & Secretary                  Vice President
                                                                        Seth P. Allen
JASPER ADVISORY BOARD                                                      Senior Vice President


Stephen A. Habig                                 Roger W. Brown         For information  about enrolling in
G. Earl Metzger                                                         the Company's Dividend Reinvestment
                                                                        and  Stock  Purchase  Plan,  please
WHOLLY OWNED SUBSIDIARY                                                 write    Registrar   and   Transfer
                                                                        Company,   Shareholders  Investment
PERMA SERVICE CORP.                                                     Services,    10   Commerce   Drive,
                                                                        Cranford,  NJ  07016  or use  their
                                                                        toll free number at 1-800-368-5948.
Perma   Service   Corp.    provides
brokerage  services,  on an  agency
basis,  through  INVEST(R),  and  a
full  line  of  insurance  products                                     Visit us on the world-wide web at: www.permanentbank.com
through PERMANENT INSURANCE AGENCY,
INC.
</TABLE>
                                                                              47
<PAGE>
CORPORATE INFORMATION

        ANNUAL MEETING

        The  annual meeting of shareholders will be held Tuesday,  July 27, 1999
        at 1:00 p.m.  Central  Daylight  Time at the Radisson Hotel,  606 Walnut
        Street,  Evansville, Indiana

        CORPORATE OFFICE

        Permanent Bancorp, Inc.
        101 S.E. Third Street
        Evansville, IN 47708


        BRANCH OFFICES


        University Heights                St. Joe
        4615 University Drive             530 N. St. Joseph Avenue
        Evansville, Indiana               Evansville, Indiana

        Town Center                       Fort Branch
        201 Diamond Avenue                810 East Locust Street
        Evansville, Indiana               Fort Branch, Indiana

        Green River Road                  Jasper
        123 South Green River Road        771 West Second Street
        Evansville, Indiana               Jasper, Indiana

        Ross Center                       Newburgh
        2521 Washington Avenue            8533 Bell Oaks Drive
        Evansville, Indiana               Newburgh, Indiana

        4th Street                        Oakland City
        19 N. W. 4th Street               410 West Morton Street
        Evansville, Indiana               Oakland City, Indiana

        Bellemeade                        Vogel & Burkhardt Roads
        4601 Bellemeade Avenue            Evansville, Indiana
        Evansville, Indiana               (Opening late 1999)

        Buena Vista
        1010 W.Buena Vista
        Evansville, Indiana


        FORM 10-K

        The  Company's  Annual Report on Form 10-K, as required to be filed with
        the Securities and Exchange  Commission,  is available,  without charge,
        upon written request to:

                Robert A. Cern
            Chief Financial Officer and Secretary
            Permanent Bancorp, Inc.
            101 S.E. Third St., Evansville,  IN  47708
<PAGE>
STOCK INFORMATION

The stock of the  Company  is traded  over-the-counter  on the  NASDAQ  National
Market System under the symbol PERM. At March 31, 1999, the Company's  stock was
held by approximately 1,115 holders of record. The stock transfer agent is:

REGISTRAR AND TRANSFER COMPANY
10 Commerce Drive
Cranford, New Jersey 07016

STOCK TRADING AND DIVIDEND DATA
<TABLE>
<CAPTION>
                                       Volume   Dividend
Quarter Ended       High       Low     (000's)    Paid
------------------------------------------------------------
<S>               <C>       <C>         <C>     <C>
June 30, 1998     $18.50    $15.50      192.4  $  .055
September 30, 1998 16.25     11.63    1,090.9     .06
December 31, 1998  14.38     10.56      207.4     .06
March 31, 1999     13.75     10.75      169.9     .06

June 30, 1997     $13.00    $10.38      652.2  $  .0375
September 30, 1997 13.25     11.38      210.1     .05
December 31, 1997  15.56     12.03      312.6     .05
March 31, 1997     18.75     13.38      356.7     .055
</TABLE>

REGISTERED MARKET MAKERS
The following firms make a market in Permanent Bancorp Inc.'s stock:
Capital Resources, Inc.
Herzog, Heine, Geduld, Inc.
J.J. B. Hilliard, W.L. Lyons
Knight Securities L.P.
NatCity Investments, Inc.
Friedman Billings Ramsey & Co.

GENERAL BANK COUNSEL
Bowers, Harrison, Kent and Miller, LLP
25 Northwest Riverside Drive
Evansville, IN 47708

SPECIAL COUNSEL
Silver, Freedman & Taff, L.L.P.
1100 New York Avenue, N.W.
Washington, D.C. 20005

INDEPENDENT AUDITORS
Deloitte & Touche LLP
111 Monument Circle
Bank One Center/Tower
Indianapolis, IN 46204-5120