SECURITIES AND EXCHANGE COMMISSION
                             Washington, DC  20549
                                    FORM 10-KSB
                  [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR
                 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the fiscal year ended December 31, 1997

                                                      OR

               [  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
                 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

      For the transition period from __________ to ___________

Commission File Number: 333-32245

                       HEARTLAND BANCSHARES, INC.
             (Exact name of registrant as specified in its charter)

       Indiana                                                 35-2017085
(State or Other Jurisdiction                            (IRS Employer Id. No.)
of Incorporation or Organization)

 420 North Morton Street
 Franklin, Indiana                                                 46131
(Address of principal executive offices)                        (Zip Code)

Registrant's telephone number, including area code:  (317) 738-3915

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:  None

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

Indicate by check mark if disclosure of delinquent  filers  pursuant to Rule 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated  by reference  in part III of this FORM 10-KSB or any  amendment to
this FORM 10-KSB. [X]
                  ---
Aggregate  market  value of common  stock  held by  non-affiliates  computed  by
reference  to the sale  price of such  stock as of March 23,  1998 of $11.25 per
share $13,200,728

Shares of common stock outstanding as of March 23, 1998:           1,265,000

DOCUMENT INCORPORATED BY REFERENCE:  None


<PAGE>

                          FORM 10-KSB TABLE OF CONTENTS

PART I                                                              Page

Item  1.  Business                                                     3
Item  2.  Properties                                                  10
Item  3.  Legal Proceedings                                           10
Item  4.  Submission of Matters to a Vote of Security Holders         11

PART II

Item  5.  Market for Registrant's Common Equity and
          Related Stockholder Matters                                 11
Item  6.  Selected Financial Data                                     12
Item  7.  Management's Discussion and Analysis of Financial
           Condition and Results of Operations for the Period
           May 27, 1997 (since inception) to December 31, 1997        12
Item  8.  Financial Statements and Supplementary Data                 14
Item  9.  Changes in and Disagreements with Accountants on
           Accounting and Financial Disclosure                        14

PART III

Item 10.  Directors and Executive Officers of the Company             14
Item 11.  Executive Compensation                                      15
Item 12.  Security Ownership of Certain Beneficial Owners
          and Management                                              17
Item 13.  Certain Relationships and Related Transactions              19

PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports
          on Form 8-K                                                 19
Signatures                                                            20



<PAGE>


                                     PART I

ITEM 1.  BUSINESS

GENERAL

Heartland  Bancshares,  Inc.  (the  "Company")  is a  one-bank  holding  company
incorporated  May 27, 1997.  The Company  raised  approximately  $11,731,000  in
equity  capital  through the sale of 1,265,000  shares of the  Company's  common
stock at $10 per  share,  net of  underwriting  discounts  and  offering  costs.
Proceeds were used to capitalize  Heartland  Community Bank  ("Heartland"),  the
Company's primary asset, a wholly-owned banking subsidiary, an Indiana-chartered
commercial bank.  Heartland received  regulatory approval to open in the fall of
1997 and commenced banking operation December 17, 1997.

At December 31, 1997,  the Company had  approximately  $14.5  million of assets,
deposits of approximately $2.1 million and stockholders' equity of approximately
$11.5 million.  The Company's primary business  consists of attracting  deposits
from the general  public and  originating  real estate,  commercial and consumer
loans and  purchasing  investments  through its offices  located in Franklin and
Greenwood,  Indiana.  As of  December  31,  1997,  Heartland  had 18  full  time
equivalent  employees.  The Company has no full time  employees.  The Company is
subject to regulation by the Federal Reserve Board.

Heartland's  deposits are insured to the maximum extent  permitted by law by the
Federal  Deposit  Insurance   Corporation   (FDIC).   Heartland  is  subject  to
comprehensive regulation,  examination and supervision by the Indiana Department
of Financial Institutions ("DFI") and the FDIC.

The business of Heartland  consists  primarily of  attracting  deposits from the
general public,  originating  commercial,  residential real estate, and consumer
loans and  purchasing  certain  investment  securities.  Consumer loans include,
among others,  new and used automobile and other secured and unsecured  personal
loans. Heartland offers small commercial loans to area businesses in addition to
new home construction loans and business lines of credit. Heartland also invests
in various US Treasury,  federal agency,  state,  municipal and other investment
securities  permitted by applicable laws and regulations.  The principal sources
of funds for Heartland's  lending  activities include deposits received from the
general public,  amortization and repayment of loans, and maturity of investment
securities.

Heartland's  primary  sources of income are  interest on loans,  and  investment
Securities.  Its principal  expenses are interest  paid on deposit  accounts and
borrowings,  salaries and employee benefits, premises and equipment expenses and
other overhead expenses incurred in operation.

AVERAGE  BALANCES,  INCOME,  EXPENSES AND RATES. The following tables depict for
the period since inception ended December 31, 1997, certain  information related
to the  Company's  average  balance  sheet and its average  yields on assets and
average  costs of  liabilities.  Such yields are  derived by dividing  income or
expense by the  average  balance  of the  corresponding  assets or  liabilities.
Average balances have been derived from daily averages.


<PAGE>


<TABLE>

                                                                                      Average/       Yield/
                                                                                       Balance        Rate
                                                                                        (Dollars in 000's)
<S>                                                                              <C>                <C>
Assets
   Cash & due from banks                                                          $        135
   Federal funds sold                                                                      729       5.42%
   Taxable securities                                                                    1,635       6.21
   Loans                                                                                   230       8.95
   Other assets                                                                            445
                                                                                  ------------
Total assets                                                                      $      3,174
                                                                                  ============

Liabilities   Non-Interest-bearing Demand deposits                                $         12
   Interest-bearing demand
    And Savings deposits                                                                    20       3.77%
   Time deposits                                                                            22       6.00
   Short-term borrowings                                                                   128       8.29
   Other liabilities                                                                        96
                                                                                  ------------
Total liabilities                                                                          278
   Stockholders' equity                                                                  2,896
Total liabilities and stockholders'
 Equity                                                                           $      3,174
                                                                                  ============

Average yield on interest-earning assets                                                6.23%
Average rate paid on interest-bearing liabilities                                       7.47
Net interest spread                                                                    (1.24)
Net interest margin (net interest earnings divided
 by total interest-earning assets)                                                      5.74
Return on average assets                                                               (7.56)
Return on average equity                                                               (8.29)

</TABLE>


LENDING ACTIVITIES

Heartland's loans,  before adjusting for the allowance for loan losses,  totaled
$3,958,000 at December 31, 1997.

The  following  table sets  forth  information  concerning  the  composition  of
Heartland's loan portfolio in dollar amounts and percentages.

<TABLE>
                                                                                            Percent of
                                                                    Amount                     Total
                                                                    ------                     -----
TYPE OF LOAN                                                               (Dollars in 000's)
<S>                                                              <C>                              <C>
Commercial                                                       $     3,096                      79.14%
Residential mortgages (1-4 family homes)                                 189                       4.83
Consumer                                                                 673                      17.20
                                                                 -----------                  ---------
Gross loans                                                            3,958                     101.17
Allowance for loan losses                                                (46)                     (1.17)
                                                                 -----------                  ----------
Loans, net                                                       $     3,912                     100.00%
                                                                 ===========                  =========
</TABLE>


<PAGE>


The  following  table sets forth  certain  information  at  December  31,  1997,
regarding  the dollar amount of loans  maturing in  Heartland's  loan  portfolio
based on the date that final  payment is due. This schedule does not reflect the
effects  of  possible   prepayments  or  enforcement  of  due-on-sale   clauses.
Management  expects  prepayments will cause actual maturities to be shorter than
contractual  maturities.  Certain mortgage loans such as construction  loans and
second mortgage loans are included in the commercial and installment loan totals
below.

<TABLE>
                                                                              Remaining Maturities
                                                                   One Year        Over one to        Over five
                                                  Amount            or less        five years           years
                                                  ------            -------        ----------           -----
TYPE OF LOAN                                                               (Dollars in 000's)
<S>                                             <C>              <C>              <C>              <C>
Commercial                                      $     3,096      $     2,059      $       113      $       924
Residential mortgages
 (1-4 family homes)                                     189                -                -              189
Consumer                                                673              358              256               59
                                                -----------      -----------      -----------       ----------
Total                                           $     3,958      $     2,417      $       369       $    1,172
                                                ===========      ===========      ===========       ==========
</TABLE>


ORIGINATION,  PURCHASE AND SALE OF LOANS. Interest rates charged by Heartland on
its  loans  are  affected  primarily  by loan  demand  and the  supply  of funds
available for lending.  These  factors are in turn affected by general  economic
conditions  and  monetary  policies of the  federal  government,  including  the
Federal Reserve Board,  the general supply of money in the economy,  legislative
tax policies and governmental budgetary matters.

Loan  originations are derived from a number of sources,  primarily from walk-in
customers.  All  property  securing  real  estate  loans  made by  Heartland  is
appraised in accordance with applicable  regulations of the FDIC and includes an
actual inspection of such property by designated fee appraisers.

Heartland  has  negotiated  with a third  party  mortgage  company an  agreement
whereby  Heartland  would  receive a fee for  originating  fixed rate 1-4 family
residential  real estate  mortgages.  Underwriting  and  servicing  would be the
responsibility of the third party mortgage  company.  Heartland may from time to
time originate a loan with the intention of  participating a portion of the loan
to another commercial bank in the area.

Lending  limits are reviewed  and changed  from time to time to reflect  current
market conditions. Fire and casualty insurance is required on all mortgage loans
as well as abstracts of title or title insurance.

COMMERCIAL  LENDING.  Commercial  loans include loans secured by commercial real
estate  or  deposits,  construction  loans and  loans  for  business  purchases,
operations,  inventory  and lines of credit.  At December 31,  1997,  commercial
loans totaled $3,096,000,  or 79.14% of Heartland's loan portfolio.  The primary
reason for the high  percentage  of the portfolio is the short amount of time in
operation for Heartland.

RESIDENTIAL MORTGAGE LOANS. Residential mortgage loans are predominantly secured
by  single-family  homes.  To reduce its exposure to changes in interest  rates,
Heartland currently originates adjustable rate first mortgage loans ("ARMs") and
second  mortgage  loans  also with  adjustable  rates.  At  December  31,  1997,
Heartland's  residential mortgage loans totaled approximately  $189,000 or 4.83%
of Heartland's total loans.

<PAGE>

Heartland  offers  residential  construction  mortgage loans with  maturities of
twelve  months or less at interest  rates which vary with current  market rates.
The  application  process  includes  the same items which are required for other
residential   mortgage  loans  and  include  a  submission  of  accurate  plans,
specifications and costs of the property to be constructed. These items are used
as a basis to determine the appraised value of the subject  property.  Appraisal
reports are completed by designated fee  appraisers,  and loans are based on the
current appraised value.  Loans of up to 80% of such amount may be offered for a
maximum period of twelve months for the construction of the properties  securing
the loans. Extensions are permitted, when circumstances warrant, if construction
has continued satisfactorily and the loan is current.

CONSUMER  LENDING.  Heartland  makes various types of consumer  loans  including
loans to depositors  secured by pledges of their deposit accounts,  new and used
automobile loans, and secured and unsecured personal loans.

A loan  officer's  approval is  required  for loans up to certain  amounts,  and
either the officer loan  committee  or the Board loan  committee  (including  at
least two outside  directors)  must  approve all other  loans.  The officer loan
committee  is  comprised  of at least  three  loan  officers  and the Board loan
committee  consists  of at least  two loan  officers  and at least  two  outside
directors.  Heartland has established  policies  regarding  financial  statement
requirements,  credit  verifications  procedures  and other matters  intended to
minimize underwriting risk. The most recent loan approval limits were adopted by
the Board of Directors in the fall of 1997.

NONPERFORMING ASSETS AND ALLOWANCE FOR LOAN LOSSES

Nonperforming assets consist of nonaccrual loans,  restructured loans,  past-due
loans,  real estate  owned  (acquired  in  foreclosure),  and other  repossessed
assets.  Nonaccrual  loans  are  loans on which  interest  recognition  has been
suspended  because  they are 90 days past due as to  interest  or  principal  or
because there is a question about  Heartland's  ability to collect all principal
and interest. Restructured loans are loans where the terms have been modified to
provide  a  reduction   or  deferral  of  interest  or   principal   because  of
deterioration in the borrower's financial position.  Past-due loans are accruing
loans  that  are  contractually  past  due 90 days or  more  as to  interest  or
principal  payments,  and the amount of the loan is no  greater  than 80% of the
fair  market  value  of the  collateral  securing  the loan or  Heartland  has a
reasonable expectation of collecting all past-due interest and principal.  There
were no  nonperforming  assets at December  31, 1997 or during the period  since
inception ended December 31, 1997.

Due to risks inherent in lending,  management estimates that a certain amount of
loan  balances  outstanding  at December  31,  1997 may not be fully  collected.
Although Heartland's management emphasizes the early detection and charge-off of
loan  losses,  it is  inevitable  that at any time  certain  losses exist in the
portfolio  which  have  not  been  specifically  identified.   Accordingly,  the
provision for loan losses is charged to earnings on an anticipatory  basis,  and
recognized  loan losses are deducted  from the  allowance so  established.  Over
time, all net loan losses must be charged to earnings.  The determination of the
adequacy  of the  allowance  for loan loss is based on  management's  continuing
review and evaluation of the loan  portfolio,  and its judgment as to the impact
of current  economic  conditions on the portfolio.  The evaluation by management
includes consideration of past loan loss experience,  changes in the composition
of the loan portfolio, the current condition and amount of loans outstanding and
the surrounding economic conditions.

<PAGE>

At  December  31,  1997,  the  balance  of the loan loss  reserve  was  $46,000.
Provision  charged  to  earnings  in the  period  from  May 27,  1997  (date  of
inception) to December 31, 1997 was $46,000.  The entire  balance of the reserve
is available to all loans.

INVESTMENT ACTIVITIES

The following  table sets forth the carrying  value of the Company's  investment
portfolio as of December 31, 1997:

<TABLE>

                                                                          Gross           Gross        Estimated
                                                         Amortized     Unrealized      Unrealized       Market
                                                           Cost           Gains          Losses          Value
                                                          ------         -------         ------          -----
                                                                        (Dollars in 000's)
<S>                                                    <C>             <C>            <C>            <C>
U.S. Government and its agencies                       $     7,949     $        18    $        (5)   $     7,962
Obligations of states and political
  subdivisions                                                  50               -              -             50
                                                       -----------     -----------    -----------    -----------

Total                                                  $    7,999      $        18    $       (5)    $     8,012
                                                       ==========       ==========     =========      ==========
</TABLE>



The  following  table sets forth the  maturities  of  investment  securities  at
December 31, 1997 and the weighted-average  yield (on a tax equivalent basis) on
such securities.

<TABLE>
                                                                                    Estimated         Weighted
                                                                   Amortized          Market           Average
                                                                     Cost             Value             Yield
                                                                     ----             -----             -----
                                                                               (Dollars in 000's)
<S>                                                              <C>              <C>                <C>
Due in one year or less                                          $          -     $           -             -%
Due after one year through five years                                   7,999             8,012          6.15
Due after five years through ten years                                      -                 -             -
Due after ten years                                                         -                 -             -
                                                                 ------------     -------------     ---------
Total                                                            $      7,999     $       8,012          6.15%
                                                                 ============     =============     =========
</TABLE>

1. Computation of yields is performed using amortized cost.

SOURCES OF FUNDS

Deposits are the primary source of Heartland's  funds for use in lending and for
other general business purposes.  Proceeds from issuance of common stock in 1997
have also been used as a source of funding for  current  loan  growth.  However,
additional  issuance  of  common  stock  is  not  in the  short-term  plans  for
Heartland.

DEPOSIT ACTIVITIES.  Heartland offers several types of deposit programs designed
to attract both short-term and long-term  savings by providing a wide assortment
of  accounts  and rates.  Heartland  also  obtains  deposits on a bid basis from
customers  or  potential  customers  wishing  to  deposit  amounts  of at  least
$100,000.

All  certificates  of deposit  outstanding at December 31, 1997 are due in 1998.
Heartland  had three  certificates  of deposit with balances of $100,000 or more
totaling $300,000 at December 31, 1997.

<PAGE>

Interest earned on statement  savings  accounts is paid from the date of deposit
to the date of withdrawal, compounded and credited quarterly. Interest earned on
money market demand  deposit  accounts is compounded and credited  monthly.  The
interest rates on these  accounts are reviewed by management of Heartland  daily
and adjusted as frequently as deemed  necessary  based on market  conditions and
other factors.

Borrowings.  Heartland  borrows federal funds from other  commercial  banks from
time to time to provide  for cash flow  requirements.  These  borrowings  mature
daily and are secured by certain investment securities in Heartland's portfolio.
The interest  rates on such  borrowings  may be changed  daily.  At December 31,
1997, Heartland had $800,000 in federal funds borrowed.

SERVICE AREA

Heartland's primary service area is Johnson County, Indiana.  Johnson County was
the second  fastest  growing county from 1990 through 1996 based on estimates of
the Indiana  Business  Research  Center.  Johnson County was recently ranked the
third fastest  growing  County in Indiana by the United States Census Bureau for
1997.  Census  data  may be  obtained  from  the  Census  Bureau  Internet  site
WWW.Census.gov.  The majority of Heartland's customers reside in Johnson County,
particularly in the northern  two-thirds of the county,  which accounts for over
88% of the county's population, according to the 1990 U.S. Census. Heartland has
branches  in Franklin  and  Greenwood,  which are the two largest  cities in the
county.

COMPETITION

The Company and Heartland face strong competition for deposits,  loans and other
financial services from numerous Indiana and out-of-state banks, thrifts, credit
unions and other financial  institutions as well as other entities which provide
financial services,  including consumer finance companies,  securities brokerage
firms,  mortgage brokers,  equipment  leasing  companies,  insurance  companies,
mutual funds and other lending sources and investment alternatives.  Some of the
financial institutions and financial services organizations with which Heartland
competes are not subject to the same degree of regulation as Heartland.  Many of
the  financial  institutions  aggressively  compete for business in  Heartland's
market areas.  Many of these  competitors  have been in business for many years,
have established  customer bases, have substantially  higher lending limits than
Heartland,  are larger and will be able to offer certain services that Heartland
does not currently  offer,  including  home  electronic  banking  services,  and
international banking services. In addition, most of these entities have greater
capital resources than Heartland,  which,  among other things, may allow them to
price their  services at levels more  favorable  to the  customer and to provide
larger credit facilities than could Heartland.

REGULATION AND SUPERVISION OF THE COMPANY

The Company is a bank  holding  company  within the meaning of the Bank  Holding
Company Act of 1956,  as amended  ("BHCA"),  and is  registered as such with the
Board of  Governors  of the Federal  Reserve  System  ("Federal  Reserve").  The
Company is examined,  regulated  and  supervised  by the Federal  Reserve and is
required to file annual reports and other information regarding its business and
operations and the business and operations of its subsidiaries  with the Federal
Reserve.  The Federal Reserve has the authority to issue cease and desist orders
against a bank holding  company if it determines  that  activities  represent an
unsafe and unsound practice or a violation of law.

<PAGE>

Under the BHCA, a bank holding company is, with limited  exceptions,  prohibited
from  acquiring  direct or indirect  ownership or control of voting stock of any
company  which  is not a bank and  from  engaging  in any  activity  other  than
managing or controlling  banks. A bank holding company may, however,  own shares
of a company  engaged in activities  which the Federal Reserve has determined to
be so closely  related to banking or  managing or  controlling  banks as to be a
proper incident thereto.

Acquisitions by the Company of banks and savings  associations  are also subject
to regulation.  Any  acquisition by the Company of more than five percent of the
voting stock of any bank requires prior approval of the Federal Reserve.  A bank
holding  company and its  subsidiaries  are prohibited  from engaging in certain
tie-in  arrangements in connection with the extension of credit or the provision
of any property or service.  With certain exceptions,  a bank holding company, a
bank, and a subsidiary or affiliate  thereof,  may not extend  credit,  lease or
sell property or furnish any services or fix or vary the  consideration  for the
foregoing on the  condition  that (I) the  customer  must obtain or provide some
additional  credit,  property or services  from, or to, any of them, or (ii) the
customer  may  not  obtain  some  other  credit,  property  or  service  from  a
competitor, except to the extent reasonable conditions are imposed to assure the
soundness of credit extended.

REGULATION AND SUPERVISION OF HEARTLAND

Heartland  is  supervised,  regulated  and  examined  by the DFI and, as a state
nonmember  bank,  by the FDIC.  A cease or desist order may be issued by the DFI
and FDIC against Heartland if the respective agency finds that the activities of
Heartland  represent an unsafe and unsound banking practice or violation of law.
The deposits of Heartland are insured by the FDIC.

Branching by banks in Indiana is subject to the  jurisdiction,  and requires the
prior approval of, the Bank's primary federal regulatory  authority and the DFI.
Under Indiana law, Heartland may branch anywhere in the state.

The Company is a legal entity  separate and distinct from  Heartland.  There are
various legal  limitations on the extent to which  Heartland can supply funds to
the Company.  The principal  source of the Company's funds consists of dividends
from  Heartland.  State and federal laws restrict the amount of dividends  which
may be paid by banks. In addition,  Heartland is subject to certain restrictions
imposed by the Federal  Reserve on extensions of credit to the Company or any of
its subsidiaries,  or investments in the stock or other securities as collateral
for loans.

The  commercial  banking  business  is  affected  not only by  general  economic
conditions  but  also by the  monetary  policies  of the  Federal  Reserve.  The
instruments  of monetary  policy  employed by the  Federal  Reserve  include the
discount  rate on member  bank  borrowing  and  changes in reserve  requirements
against  member bank  deposits.  Federal  Reserve  monetary  policies have had a
significant  effect on the operating results of commercial banks in the past and
are expected to continue to do so in the future. In view of changing  conditions
in the  national  economy  and in the money  markets,  as well as the  effect of
actions by  monetary  fiscal  authorities,  including  the Federal  Reserve,  no
prediction can be made as to possible future changes in interest rates,  deposit
levels,  loan  demand  or  the  business  and  earnings  of the  Registrant  and
Heartland.

<PAGE>

CAPITAL REQUIREMENTS

Heartland must meet certain  minimum capital  requirements  mandated by the FDIC
and the  DFI.  These  regulatory  agencies  require  financial  institutions  to
maintain  certain  minimum  ratios of primary  capital to total assets and total
capital to total  assets.  The Company is not  required  to comply with  Federal
Reserve capital  requirements  because it has  consolidated  assets of less than
$150,000,000.

Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require the Bank to maintain  minimum amounts and ratios (set forth in the table
below)  of  total  and  Tier  I  capital  (as  defined  in the  regulations)  to
risk-weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined).  Management  believes the Bank meets all applicable capital
adequacy requirements as of December 31, 1997.

As of December 31, 1997, the Bank was  categorized  well  capitalized  under the
regulatory  framework for prompt  corrective  action.  To be categorized as well
capitalized, the Bank must maintain minimum total risk-based, Tier I risk-based,
and Tier I leverage ratios as set forth in the table below.

<TABLE>

                                                                                                  Minimum Required
                                                                                                     To Be Well
                                                                    Minimum Required              Capitalized Under
                                                                       For Capital                Prompt Corrective
                                               Actual               Adequacy Purposes           Action Regulations
                                               ------               -----------------           ------------------
                                        Amount        Ratio        Amount        Ratio         Amount        Ratio
                                        ------        -----        ------        -----         ------        -----
                                                                      (Dollars in 000's)
<S>                                    <C>          <C>         <C>             <C>          <C>            <C>
Total capital
(to risk weighted assets)              $   8,733      157%      $   444          8%          $   555         10%
Tier 1 capital
(to risk weighted assets)                  8,661      156           222          4               333          6
Tier 1 capital
(to average assets)                        8,661      352            99          4               123          5

</TABLE>

ITEM 2.  PROPERTIES

Heartland  owns its home office at 420 North Morton Street,  Franklin,  Indiana.
The facility is used as the main banking office and the Company's  headquarters.
The 5,700 square foot building was  constructed  over 25 years ago and underwent
an extensive renovation prior to the opening of Heartland.

Heartland  opened a temporary  branch office in  Greenwood,  Indiana in January,
1998 which it leases.  The lease of the temporary facility expires May, 1998 and
may be  extended  on a month to month basis if  necessary.  A  permanent  branch
office  in  Greenwood,  Indiana  is under  construction  and is  expected  to be
occupied in the spring of 1998.  That  facility will be leased and the temporary
facility  will cease to be used.  The lease for the  permanent  facility  is for
3,800  square feet of space in a strip center with  approximately  three to four
other tenants. The term of the lease is ten years with option to renew.

ITEM 3.  LEGAL PROCEEDINGS

The Company and Heartland were not involved in any legal proceedings at December
31, 1997.

<PAGE>

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to a vote of security  holders through the  solicitation
of proxies or otherwise, during the quarter ended December 31, 1997.


                                 PART II

Item 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
         MATTERS

The Company had  1,265,000  shares of Common  Stock  issued and  outstanding  to
approximately 1,800 shareholders (including those shares held in street name) on
March 23, 1998.

The Common Stock has been quoted on the NASDAQ  Over-The-Counter  Bulletin Board
since  October 3, 1997.  During the period from  October 3, 1997 to December 31,
1997,  the average  number of shares  traded per day was 45,507.  The  following
table  sets  forth the  reported  high and low ask and bid  prices of the Common
Stock for the  quarter  indicated  as  reported  on the Nasdaq  Over-The-Counter
Bulletin Board.

                                                    High            Low
                                                    Ask             Bid

         Fourth Quarter 1997                     $12.875           $8.75

The prices  quoted above  represent  prices  between  dealers and do not include
adjustments  for mark-ups,  mark-downs  or  commissions  and do not  necessarily
represent  actual  transactions.   Prior  to  October  3,  1997,  there  was  no
established trading market for the Common Stock.

The Bank is subject to  restrictions  on the payment of dividends  under Indiana
law  and  Indiana  Department  of  Financial   Institutions   regulations.   See
"Supervision and Regulation -- Dividends"  above. No assurance can be given that
any  dividends  will be declared by the Company in the future,  or if  declared,
what the  amount of the  dividends  would be or  whether  such  dividends,  once
declared,  would  continue.  Future  dividend  policy  will depend on the Bank's
earnings,   capital  requirements,   financial  condition,   and  other  factors
considered relevant by the Board of Directors of the Company.


<PAGE>

ITEM 6. SELECTED FINANCIAL DATA.

The  information  presented  below  should  be  read  in  conjunction  with  the
consolidated   financial   statements,   which  are  included  herein,  and  the
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations.  Amounts shown below are in thousands  except for earnings per share
information and shares outstanding.

                                                  May 27, 1997(since inception)
Income Statement Data:                               to December 31,1997
                                                        (Dollars in 000's)
Total Interest Income                                    $     162
Total Interest Expense                                          12
Net Interest Income                                            150
Provision for Loan Loss                                         46
Non Interest Income                                              3
Non Interest Expense                                           347
Provision for Income Taxes                                       -
Net loss                                                 $    (240)
Net loss Per Share                                       $    (.19)
Average Shares                                           1,265,000

                                                         At December 31,
                                                              1997
Balance Sheet Data:                                    (Dollars in 000's)
Total Assets                                             $      14,519
Loans, Net of Allowance
for Loan Loss                                                    3,912
Demand & Savings                                                 1,591
Time Deposits                                                      488
Stockholders' Equity                                            11,504
Book Value Per Share                                        $     9.09
Equity to Asset Ratio                                            79.23%


ITEM  7.   MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF FINANCIAL  CONDITION  AND
           RESULTS OF OPERATIONS FOR THE PERIOD  MAY 27, 1997  (SINCE INCEPTION)
           ENDED DECEMBER 31, 1997.

GENERAL

Heartland  is the only  subsidiary  of the  Company  and  operates as an Indiana
commercial  bank.  As a bank  holding  company,  the  Company  depends  upon the
operations  of its  subsidiary  for all  revenue  and  reports  its  results  of
operations on a consolidated basis with its subsidiary.

Heartland's  profitability  depends primarily upon the difference between income
on its loans and investments  and the cost of its deposits and borrowings.  This
difference is referred to as the spread or net interest  margin.  The difference
between the amount of interest  earned on loans and investments and the interest
incurred on deposits  and  borrowings  is  referred to as net  interest  income.
Interest  income from loans and investments is a function of the amount of loans
and  investments  outstanding  during the period and the interest  rates earned.
Interest  expense related to deposits and borrowings is a function of the amount
of deposits and borrowings  outstanding during the period and the interest rates
paid.

<PAGE>

RESULTS OF OPERATIONS

The Company's  operating  results during the period since inception May 27, 1997
through  December  31,  1997 are  limited  to  various  expenses  related to the
development stage and 14 calendar days of banking operations at the close of the
period.  The  Company  incurred  a net loss of  $240,000  for the  period  since
inception, ended December 31, 1997.

Interest income of $162,000 was earned during the period from inception  through
December 31, 1997 and was primarily generated from taxable investment securities
and loans.  Interest  expense of $12,000  was  incurred  during the period  from
inception  through December 31, 1997.  Interest expense is primarily  related to
the  related  party  notes  payable  and a  note  payable  obtained  during  the
organization  period to  purchase  the main office  facility  and for other cash
requirements. All such notes payable were repaid in 1997.

The provision for loan losses was $46,000 for the period since  inception  ended
December 31, 1997.  There were no charge-offs  and no recoveries of loans during
the same period.

Noninterest  income was  $3,000 and  consisted  of  miscellaneous  loan fees and
service charges for the period since inception ended December 31, 1997.

Salaries  and  benefits  expense was  $195,000  for the period  since  inception
through  December 31, 1997.  Salaries and benefits were paid to employees during
the development stage for services performed.

Occupancy  and  equipment  expenses of $27,000 were  incurred  during the period
since inception ended December 31, 1997 and consisted  primarily of depreciation
and utilities expenses.

The  remaining  expenses of $125,000  during the period  since  inception  ended
December 31, 1997,  relate to various other items such as postage,  advertising,
and supplies.

ASSET/LIABILITY MANAGEMENT

One of the  actions  undertaken  by  Heartland's  management  has  been to adopt
asset/liability  management  policies in an attempt to reduce the susceptibility
of Heartland's net interest spread to the adverse impact of volatile interest by
attempting to match maturities (or  time-to-repricing) of assets with maturities
or  repricing  of   liabilities   and  then  actively   managing  any  mismatch.
Accomplishing  this objective requires attention to both the asset and liability
sides of the balance sheet.  The balance between maturity of assets and maturity
of liabilities is measured by the interest-rate gap.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity  refers  to  the  ability  of  a  financial  institution  to  generate
sufficient cash to fund current loan demand,  meet savings  deposit  withdrawals
and  pay  operating  expenses.  The  primary  sources  of  liquidity  are  cash,
interest-bearing   deposits   in  other   financial   institutions,   marketable
securities,   loan  repayments,   increased  deposits  and  total  institutional
borrowing capacity.

<PAGE>

Cash  and  interest-bearing  deposits,  when  combined  with  investments,  have
decreased as a percentage  of total  assets  primarily  due to a shift to higher
yielding  loans to  improve  margins.  Management's  goal is to  maintain  cash,
interest-bearing deposits and investments at a level sufficient to satisfy needs
for liquidity and other short-term obligations.

Management  believes it has adequate  liquidity for long-term needs.  Short-term
liquidity needs resulting from normal deposit/withdrawal  functions are provided
by  retaining  a portion  of cash  generated  from  operations  in a FHLB  daily
investment account.  This account acts as the short-term  liquidity source while
providing interest income.

At December 31, 1997,  commitments to fund loan originations were  approximately
$2,351,000. In the opinion of management, Heartland has sufficient cash flow and
borrowing capacity to meet funding  commitments and to maintain proper liquidity
levels  based upon the  ability to borrow  Federal  Funds from other  commercial
banks and Heartland's favorable liquidity ratio.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The Company's  Financial  Statements are included in a separate  section of this
Report beginning on page F-1.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND ACCOUNTING
         AND FINANCIAL DISCLOSURE.

None

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

Directors:                                Executive Officers:

Gordon R. Dunn,                           Steve Bechman,
Chairman of the Board                     President, Chief Executive Officer and
                                          Director

Patrick A. Sherman,                       Jeffrey L. Goben,
Vice Chairman                             Senior Vice President, Chief Operating
                                          Officer and Director

Sharon Acton,                             John M. Morin,
Director                                  Vice President

J. Michael Jarvis,                        K. Keith Fox,
Director                                  Vice President

John Norton,                              R. Trent McWilliams,
Director                                  Vice President

Robert Richardson,                        Jeff Joyce,
Director                                  Vice President and Chief Financial
                                          Officer

James C. Stewart,
Director

<PAGE>

ITEM 11.        EXECUTIVE COMPENSATION

The following table sets forth  information  regarding  compensation paid to the
Company's Chief Executive Officer for 1997.


<TABLE>


                                                                                                       Long Term
                                                                                                     Compensation
                                                      Annual Compensation                                 Awards
                                                      -------------------                                -------
                                                                                                Securities Underlying
                    Name and                                                                         Options /
               Principal Position           Year            Salary(1)          Bonus                   SAR
               ------------------           ----            ---------          -----                   ----
             <S>                           <C>            <C>                  <C>                   <C>
              Steve Bechman, Chief          1997           $15,480.78           $0                    20,000
                Executive Officer
</TABLE>


(1)  Mr.  Bechman's  compensation  was  for  the  period  commencing  on
     November 1, 1997.


The following  table  presents  information on the stock option grants that were
made to the Company's President and Chief Executive Officer during 1997 pursuant
the Heartland Bancshares, Inc. 1997 Stock Option Plan.

<TABLE>


                                                                                             Potential Realizable Value
                                                                                             at Assumed Annual Rates of
                                                                                            Stock Price Appreciation for
                                                                                                     Option Term (1)
                                                   Individual Grants                               ------------------
                                                   -----------------
                                          % of Total
                                         Options/SARs
                      Number of           Granted to       Exercise or
                      Securities         Employees in      Base Price
                      Underlying          Fiscal Year        ($/Sh)          Expiration
                     Options/SARs                                               Date              5%             10%
     Name               Granted
    ------           ------------         -----------      ----------        ----------          ----           -----
<S>                     <C>                  <C>              <C>            <C>               <C>            <C>
Steve Bechman           20,000               24.1%            $10.00         9/24/2007         $125,800       $318,800
</TABLE>


*The Company does not grant Stock Appreciation Rights ("SARs").

1       The amounts in the table are not  intended to forecast  possible  future
        appreciation,  if any, of the Company's Common Shares.  Actual gains, if
        any, are dependent upon the future market price of the Company's  Common
        Shares and there can be no assurance that the amounts  reflected in this
        table will be achieved.

<PAGE>

2       The options were granted pursuant to the Heartland Bancshares, Inc. 1997
        Stock Option Plan (the "Employee Option Plan"). The Employee Option Plan
        provides for the grant of options intended to qualify as incentive stock
        options  within the meaning of Section 422 of the Internal  Revenue Code
        of 1986, as amended,  and of non-qualified  options. The options granted
        to Mr.  Bechman are intended to qualify as incentive  stock  options and
        have an exercise  price of $10.00 per share,  which was determined to be
        the fair  market  value of one  Common  Share on the date of grant.  The
        options become  exercisable in twenty  percent  increments,  with twenty
        percent of the shares covered by an option  becoming  exercisable on the
        date of grant and an additional  twenty percent becoming  exercisable on
        each of the  first  four  anniversaries  of the  grant  date;  provided,
        however,  that  the  options  become  immediately  exercisable  upon the
        occurrence of a change in control of the Company. If an optionee tenders
        already  owned  shares in payment (in whole or in part) of the  exercise
        price of an option (the  "Exercised  Option"),  the Employee Option Plan
        requires  the  Company to use its best  efforts  to issue a  replacement
        option for a number of shares equal to the number of shares tendered and
        with the same  expiration  date as the  Exercised  Option.  The exercise
        price for each share covered by the  replacement  option is equal to the
        fair  market  value of one Common  Share on the date of  exercise of the
        Exercised Option.


The following table sets forth  information with respect to the value of options
that were granted to Mr. Bechman pursuant to the Heartland Bancshares, Inc. 1997
Stock Option Plan during 1997. No option exercises occurred during 1997.

<TABLE>

                                           Number of Unexercised Options/SARs at                Value of Unexercised
                                                           Fiscal                       In-the-Money Options/SARs at Fiscal
                                                        Year-End (#)                                Year-End ($)

                         Name                    Exercisable/Unexercisable                  Exercisable/Unexercisable
                        ------                   -------------------------                  -------------------------
                   <S>                            <C>                                         <C>
                    Steve Bechman                       4,000/16,000                                   0 / 0 (1)

</TABLE>

             1    The options  were not "in the money"  since the last per share
                  trade price of the Company's  Common Shares as reported on OTC
                  on  December  29,  1997  ($9.00)  did not exceed the  exercise
                  prices of the options.



<PAGE>



ITEM 12.  SECURITY OWNERSHIP OF CERTAIN OWNERS AND MANAGEMENT

The following table presents certain information as of March 1, 1998,  regarding
the current Directors and executive officers of the Company, including the three
nominees  proposed by the Board of Directors  for election at this year's Annual
Meeting. All of the current Directors began serving on the Board of Directors of
the Company during 1997. Unless otherwise indicated in a footnote, the principal
occupation  of each  Director has been the same for the last five years and such
Director  possesses sole voting and investment powers with respect to the shares
indicated as beneficially owned by such Director.  Unless specified otherwise, a
Director is deemed to share voting and investment  powers over shares  indicated
as held by a  spouse,  children  or  other  family  members  residing  with  the
Director.  None of the persons named below beneficially owns one percent or more
of the outstanding Company Common Shares,  except for Messrs.  Bechman, Dunn and
Goben, who beneficially own 2.3%, 1.1% and 1.8% respectively.

     Name,
     Present principal occupation                            Shares
     And age                                             beneficially owned
     -------                                             ------------------
     Sharon Acton                                                2,501(1)
     Manager, Franklin/Greenwood District of
     Cinergy/PSI (energy services company)
     50

     Steve Bechman(2)                                           29,201(3)
     President and Chief Executive Officer of
     the Company and Bank
     46

     Gordon R. Dunn(4)                                          14,501(5)
     Retired
     76

     Jeffrey L. Goben(6)                                        23,315(7)
     Executive Vice President and Chief
     Operating Officer
     45

     J. Michael Jarvis(5)                                        6,001(8)
     President and Part Owner, Power Investments,
     Inc. Division of Delco Remy International,
     Inc. (engine remanufacturer)
     54

     John Norton                                                 6,401(9)
     President and Owner, Norton Farms, Inc.
     49

     Robert Richardson                                           4,001(10)
     President and Majority Owner, MegaSys, Inc.
     (logistics company)
     36


<PAGE>

     Patrick A. Sherman                                          6,401(11)
     President and Part Owner, Sherman &
     Armbruster P.C. (a public accounting firm)
     49

     James C. Stewart12                                          9,501(13)
     Consultant, Bauer Built Corp.
     46

     All Directors and Executive Officers
     as a group (13 persons)                                   116,602(14)

*Nominee

1.   Includes 500 shares that Ms. Acton holds  jointly with her spouse and 2,000
     shares  that  she has the  right to  acquire  upon  the  exercise  of stock
     options.
2.   Mr.  Bechman  served as  Regional  President  of  Citizens  Bank of Central
     Indiana  from 1993 until his  resignation  in 1997.  Mr.  Bechman  was with
     Citizens  Bank of Central  Indiana  beginning in 1975 and served in various
     other positions prior to 1993.
3.   Includes  10,278 shares that Mr.  Bechman holds jointly with his spouse and
     daughter  and  4,000  shares  that he has the  right  to  acquire  upon the
     exercise of stock options.
4.   Mr. Dunn is a retired  purchasing agent for L. S. Ayres department  stores,
     where he was  employed  for 43 years.  Mr.  Dunn  serves as Chairman of the
     Company's  Board of Directors and he  previously  served as Chairman of the
     Board of Citizens Bank of Central Indiana.
5.   Includes  6,500  shares  that Mr.  Dunn holds  jointly  with his spouse and
     others and 2,000  shares that he has the right to acquire upon the exercise
     of stock options.
6.   Mr. Goben held the position of Senior Vice President in charge of marketing
     and  community  development,   in  addition  to  various  other  management
     positions,  with  Citizens  Bank  of  Central  Indiana  from  1984  to  his
     resignation in 1997.
7.   Includes 9,275 shares that Mr. Goben holds jointly with his spouse and sons
     and 3,000  shares  that he has the right to acquire  upon the  exercise  of
     stock options.
8.   Includes  4,000 shares that Mr.  Jarvis  holds  jointly with his spouse and
     2,000  shares  he has the  right  to  acquire  upon the  exercise  of stock
     options.
9.   Includes  300 shares  that Mr.  Norton  holds  jointly  with his spouse and
     children  and  2,000  shares  that he has the  right  to  acquire  upon the
     exercise of stock options.
10.  Includes 2,000 shares that Mr. Richardson holds jointly with his spouse and
     2,000  shares that he has the right to acquire  upon the  exercise of stock
     options.
11.  Includes  2,000  shares that Mr.  Sherman has the right to acquire upon the
     exercise of stock options.
12.  In his position as consultant,  Mr. Stewart  manages Jim Stewart Truck Tire
     Company,  a firm he owned for 24 years prior to its sale in October 1996 to
     Bauer Built Corp.
13.  Includes  1,220 shares that Mr.  Stewart  holds jointly with his spouse and
     2,000  shares that he has the right to acquire  upon the  exercise of stock
     options.
14.  Includes 25,000 shares that Directors and executive officers have the right
     to acquire  upon the  exercise  of stock  options  and 34,773  shares  held
     jointly with spouses and others.

<PAGE>

ITEM 13.        Certain Business Relationships And Transactions

During  1997,  the Bank had,  and  expects to  continue  to have in the  future,
banking transactions in the ordinary course of business with Directors, officers
and  principal   shareholders  of  the  Company  and  their  associates.   These
transactions have been made on substantially the same terms,  including interest
rates,  collateral  and  repayment  terms  on  extensions  of  credit,  as those
prevailing at the same time for comparable  transactions with others and did not
involve more than the normal risk of collectibility or present other unfavorable
features.


                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

Exhibit No.           Description

3.1            Amended and  Restated  Articles  of  Incorporation  of  Heartland
               Bancshares,  Inc., which are incorporated by reference to Exhibit
               3.1 in the Registration Statement Form SB-2, filed July 28, 1997,
               as amended, ("Form SB-2").
3.2            Amended and Restated Bylaws of Heartland Bancshares,  Inc., which
               are  incorporated by reference to Exhibit 3.2 in the Form SB-2.
10.1           1997 Stock  Option Plan, which is  incorporated  by  reference to
               Exhibit 10.1 in the Form SB-2.
10.2           1997  Stock  Option  Plan for  Nonemployee  Directors,  which  is
               incorporated  by reference  to Exhibit  10.2 in the Form SB-2.
10.3           Form of  Organization  Agreement  Under Which Debt  Described  in
               Prospectus as "Borrowings" Was Incurred, which is incorporated by
               reference  to Exhibit  10.3 in the Form SB-2.
10.4           Purchase  Agreement and Note (Franklin,  Indiana property), which
               are incorporated by reference to Exhibit 10.4 in the Form SB-2.
10.5           Lease  (Greenwood,  Indiana  property),  which is incorporated by
               reference  to Exhibit  10.5 in the Form SB-2.
21             List of Subsidiaries
27             Financial Data Schedule (EDGAR filing only)


(a)  1. FINANCIAL  STATEMENTS.  The following  information  appears elsewhere in
     this Annual Report on FORM 10-KSB on the pages indicated

                                                                        Page

Independent Auditor's Report on consolidated financial statements.       F-1

Consolidated Balance Sheet at December 31, 1997                          F-2

Consolidated Statement of Income for the period from May 27, 1997
(since inception) to December 31, 1997                                   F-3

Consolidated  Statement of Changes In  Stockholders'  Equity for the period from
 May 27, 1997 (since inception) to December 31, 1997 F-4

Consolidated Statement of Cash Flows for the period from May 27, 1997
 (since inception) to December 31, 1997                                  F-5

Notes to consolidated financial statements.                              F-6

<PAGE>

SIGNATURES

Pursuant to the  requirements  of Section 13 of the  Securities  Exchange Act of
1934,  the Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, this 26th day of March, 1998.

HEARTLAND BANCSHARES, INC.

By:/s/ Steven L. Bechman
Steven L. Bechman,
Chief Executive Officer and President

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

Signatures and Title(s) Date

/s/ Gordon Dunn            March 26, 1998
Gordon Dunn, Chairman


/s/ Sharon Acton           March 26, 1998
Sharon Acton, Director

/s/ Jeffrey L. Goben       March 26, 1998
Jeffrey L. Goben, Director

/s/ J. Michael Jarvis      March 26, 1998
J. Michael Jarvis, Director

/s/ John Norton            March 26, 1998
John Norton, Director

/s/ Robert Richardson      March 26, 1998
Robert Richardson, Director

/s/ Patrick A. Sherman     March 26, 1998
Patrick A. Sherman, Director

/s/ James C. Stewart       March 26, 1998
James C. Stewart, Director




<PAGE>


                         REPORT OF INDEPENDENT AUDITORS



Board of Directors and Shareholders
Heartland Bancshares, Inc.
Franklin, Indiana


We have  audited  the  accompanying  consolidated  balance  sheet  of  Heartland
Bancshares, Inc. as of December 31, 1997 and the related consolidated statements
of income,  changes in  shareholders'  equity and cash flows for the period from
May 27,  1997  (date  of  inception)  to  December  31,  1997.  These  financial
statements  are  the  responsibility  of  the  Corporation's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audit.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in  all  material   respects,   the  financial  position  of  Heartland
Bancshares,  Inc. as of December 31, 1997, and the results of its operations and
its cash flows for the period from May 27, 1997 (date of  inception) to December
31, 1997 in conformity with generally accepted accounting principles.



                                        Crowe, Chizek and Company LLP

Indianapolis, Indiana
February 27, 1998


                                                                            F-1
<PAGE>


                           HEARTLAND BANCSHARES, INC.
                           CONSOLIDATED BALANCE SHEET
                                December 31, 1997
                    (Amounts in thousands, except share data)

--------------------------------------------------------------------------------

<TABLE>

<S>                                                                                             <C>
ASSETS
Cash and due from banks                                                                          $           1,140
Securities available-for-sale, at market                                                                     8,012
Loans                                                                                                        3,958
Allowance for loan losses                                                                                      (46)
                                                                                                 -----------------
     Loans, net                                                                                              3,912
Premises, furniture and equipment, net                                                                       1,207
Accrued interest receivable and other assets                                                                   248
                                                                                                 -----------------

                                                                                                 $          14,519
                                                                                                 =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
     Noninterest-bearing deposits                                                                $             988
     Interest-bearing demand and savings deposits                                                              603
     Interest-bearing time deposits                                                                            488
                                                                                                 -----------------
         Total deposits                                                                                      2,079
     Short-term borrowings                                                                                     800
     Accrued interest payable and other liabilities                                                            136
                                                                                                 -----------------
                                                                                                             3,015

Shareholders' equity
     Common stock, no par value:  10,000,000 shares
       authorized; 1,265,000 shares issued and outstanding                                                   1,265
     Additional paid-in capital                                                                             10,466
     Accumulated deficit                                                                                      (240)
     Unrealized gain on securities available-for-sale                                                           13
                                                                                                 -----------------
                                                                                                            11,504

                                                                                                 $          14,519
                                                                                                 =================

</TABLE>

                            See accompanying notes.
                                                                            F-2

<PAGE>

                           HEARTLAND BANCSHARES, INC.
                        CONSOLIDATED STATEMENT OF INCOME
              For the period from May 27, 1997 (date of inception)
                     to December 31, 1997 (Dollar amounts in
                        thousands, except per share data)

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

<S>                                                                                               <C>
Interest income
     Loans                                                                                         $             21
     Taxable securities                                                                                         101
     Other                                                                                                       40
                                                                                                   ----------------
                                                                                                                162
Interest expense
     Deposits                                                                                                     1
     Short-term borrowings                                                                                       11
                                                                                                   ----------------
                                                                                                                 12
                                                                                                   ================
Net interest income                                                                                             150

Provision for loan losses                                                                                        46
                                                                                                   ----------------

Net interest income after provision for loan losses                                                             104

Noninterest income
     Service charges and fees                                                                                     3
Noninterest expense
     Salaries and employee benefits                                                                             195
     Occupancy and equipment expenses, net                                                                       27
     Data processing expense                                                                                     31
     Supplies                                                                                                    19
     Advertising                                                                                                 17
     Other operating expenses                                                                                    58
                                                                                                   ----------------
                                                                                                                347
                                                                                                   ----------------
Income before income taxes                                                                                     (240)

Income taxes                                                                                                      -

                                                                                                   -----------------
Net loss                                                                                           $           (240)
                                                                                                   =================
Basic and diluted earnings per share                                                               $           (.19)
                                                                                                   =================

</TABLE>
                             See accompanying notes.
                                                                            F-3

<PAGE>

                           HEARTLAND BANCSHARES, INC.
            CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
   For the period from May 27, 1997 (date of inception) to December 31, 1997
         (Dollar amounts in thousands, except share and per share data)

--------------------------------------------------------------------------------

<TABLE>

                                                                                         Unrealized
                                                                                            Gain          Total
                                                          Additional                    on Securities     Share-
                                             Common         Paid-in       Retained       Available-       holders'
                                              Stock         Capital       Earnings        for-Sale        Equity
                                              -----         -------       --------       ----------       -------
<S>                                       <C>            <C>            <C>             <C>              <C>
Balance at inception,
  (May 27, 1997)                           $     -        $     -         $    -          $    -          $    -

Issuance of common stock
  1,265,000 shares                           1,265          11,385             -               -           12,650

Underwriter's discount
  on issuance of common stock                    -            (816)            -               -             (816)

Costs associated with
  issuance of common stock                       -            (103)            -               -             (103)

Net loss for 1997                                                            (240)                           (240)

Change in  unrealized gain on
securities available-for-sale                    -              -              -              13               13

                                       -----------      ----------      ----------      --------        ---------
Balance December 31, 1997              $     1,265      $   10,466      $    (240)      $     13        $  11,504
                                       ===========      ==========      ==========      ========        =========
</TABLE>





                            See accompanying notes.
                                                                           F-4

<PAGE>

                           HEARTLAND BANCSHARES, INC.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
    For the period from May 27, 1997 (date of inception) to December 31, 1997
                          (Dollar amounts in thousands)

--------------------------------------------------------------------------------

<TABLE>

<S>                                                                                                   <C>
Cash flows from operating activities
    Net loss                                                                                            $      (240)
    Adjustments to reconcile net loss to net cash
      from operating activities
       Depreciation                                                                                               5
       Provision for loan losses                                                                                 46
       Change in assets and liabilities:
          Accrued interest receivable and other assets                                                         (248)
          Accrued interest payable and other liabilities                                                        136
              Net cash from operating activities                                                               (301)

Cash flows from investing activities
    Purchase of securities available-for-sale                                                                (7,999)
    Loans made to customers, net of payments collected                                                       (3,958)
    Property and equipment expenditures                                                                      (1,212)
                                                                                                        -----------
       Net cash from investing activities                                                                   (13,169)

Cash flows from financing activities
    Net change in deposit accounts                                                                            2,079
    Net change in short-term borrowings                                                                         800
    Proceeds from issuance of common stock, net of issuance costs                                            11,731
                                                                                                        -----------
       Net cash from financing activities                                                                    14,610

Net change in cash and cash equivalents                                                                       1,140

Cash and cash equivalents at beginning of period                                                                  -
                                                                                                        -----------

Cash and cash equivalents at  end of period                                                             $     1,140
                                                                                                        ===========

Supplemental  disclosures of cash flow  information  Cash paid during the period
    for:
       Interest                                                                                         $        11
       Income taxes                                                                                               -

</TABLE>

                            See accompanying notes.
                                                                           F-5

<PAGE>


                           HEARTLAND BANCSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1997
         (Dollar amounts in thousands, except share and per share data)

--------------------------------------------------------------------------------

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description  of Business:  The  consolidated  financial  statements  include the
accounts  of  Heartland  Bancshares,  Inc.  (Corporation)  and its  wholly-owned
subsidiary,  Heartland  Community Bank (Bank),  after elimination of significant
intercompany  transactions and accounts.  The Bank commenced  operation December
17, 1997.

The Corporation  operates primarily in the banking industry,  which accounts for
more than 90% of its revenues,  operating income and assets. The Bank is engaged
in the business of commercial  and retail  banking,  with  operations  conducted
through  its main  office  located  in  Franklin,  Indiana.  The Bank  opened an
additional  branch location in Greenwood,  Indiana in January 1998. The majority
of the Bank's income will be derived from commercial and retail business lending
activities  and  investments.  The  majority of the Bank's  loans are secured by
specific  items of  collateral  including  business  assets,  real  property and
consumer assets.

Use of Estimates:  To prepare financial  statements in conformity with generally
accepted accounting principles, management makes estimates and assumptions based
on available  information.  These estimates and  assumptions  affect the amounts
reported in the financial  statements and the disclosures  provided,  and future
results  could  differ.  The  allowance  for loan  losses,  the fair  values  of
financial  statements,  and status of contingencies are particularly  subject to
change.

Securities:  Securities  are  classified  as held to  maturity  and  carried  at
amortized cost when  management has the positive intent and ability to hold them
to maturity.  Securities are classified as available for sale when they might be
sold before maturity.  Securities  available for sale are carried at fair value,
with unrealized  holding gains and losses reported  separately in  shareholders'
equity, net of tax.  Securities are written down to fair value when a decline in
fair  value  is  not  temporary.  Interest  and  dividend  income,  adjusted  by
amortization of purchase premium or discount, is included in earnings.  The Bank
had no held to maturity securities at year end.

Loans: Loans are reported at the principal balance outstanding,  net of unearned
interest,  deferred  loan fees and  costs,  and an  allowance  for loan  losses.
Interest income is reported on the interest method and includes  amortization of
net deferred loan fees and costs over the loan term.

Interest income is not reported when full loan repayment is in doubt,  typically
when  payments are past due over 90 days (180 days for  residential  mortgages).
Payments received on such loans are reported as principal reductions.

                                                                            F-6

<PAGE>

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Allowance  for Loan  Losses:  The  allowance  for  loan  losses  is a  valuation
allowance,  increased  by  the  provision  for  loan  losses  and  decreased  by
charge-offs less recoveries. Management estimates the allowance balance required
based on past loan loss  experience,  known and inherent risks in the portfolio,
information about specific borrower situations and estimated  collateral values,
economic conditions, and other factors. Allocations of the allowance may be made
for specific loans,  but the entire allowance is available for any loan that, in
management's judgment, should be charged-off.

Loan  impairment  is  reported  when full  payment  under the loan  terms is not
expected. Im-pairment is evaluated in total for smaller-balance loans of similar
nature such as residential  mortgage,  consumer and credit card loans, and on an
individual loan basis for other loans.  If a loan is impaired,  a portion of the
allowance is allocated so that the loan is reported,  net, at the present  value
of  estimated  future cash flows using the loan's  existing  rate or at the fair
value of collateral if repayment is expected solely from the  collateral.  Loans
are evaluated  for  impairment  when payments are delayed,  typically 90 days or
more, or when it is probable that all principal and interest amounts will not be
collected according to the original terms of the loan.

Premises, Furniture and Equipment:  Premises, furniture and equipment are stated
at cost less accumulated  depreciation.  Depreciation expense is recognized over
the  estimated  useful  lives of the assets,  principally  on the  straight-line
method.  These  assets are  reviewed  for  impairment  when events  indicate the
carrying amount may not be recoverable. Maintenance and repairs are expensed and
major improvements are capitalized.

Intangibles: Organizational costs are amortized on the straight-line method over
5  years  and are  included  in  other  assets.  Intangibles  are  assessed  for
impairment  based on  estimated  undiscounted  cash flows,  and written  down if
necessary.

Stock Compensation:  Expense for employee  compensation under stock option plans
is based on Accounting  Principles  Board Opinion 25, with expense reported only
if options are granted below market price at grant date.  Pro forma  disclosures
of net income and earnings per share are provided as if the fair value method of
Financial Accounting Standard No. 123 were used for stock-based compensation.

Income  Taxes:  Income tax expense is the sum of the current year income tax due
or refundable  and the change in deferred tax assets and  liabilities.  Deferred
tax assets and liabilities are the expected future tax consequences of temporary
differences   between  the  carrying   amounts  and  tax  bases  of  assets  and
liabilities, computed using enacted tax rates. A valuation allowance, if needed,
reduces deferred tax assets to the amount expected to be realized.

Statement of Cash Flows:  Cash and cash  equivalents are defined to include cash
on hand, amounts due from banks, and federal funds sold. The Corporation reports
net cash  flows  for  customer  loan  transactions,  deposit  transactions,  and
short-term borrowings.

                                                                            F-7

<PAGE>

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (Continued)

Fair Values of Financial  Instruments:  Fair values of financial instruments are
estimated using relevant market information and other assumptions, as more fully
disclosed separately.  Fair value estimates involve uncertainties and matters of
significant  judgment regarding interest rates,  credit risk,  prepayments,  and
other factors,  especially in the absence of broad markets for particular items.
Changes in assumptions or in market  conditions could  significantly  affect the
estimates.  The fair value  estimates  of  existing  on- and  off-balance  sheet
financial  instruments does not include the value of anticipated future business
or the values of assets and liabilities not considered financial instruments.


NOTE 2 - SECURITIES

The amortized  cost and estimated  market values of securities are as follows at
December 31, 1997:

<TABLE>
                                                                        Gross          Gross         Estimated
                                                       Amortized     Unrealized     Unrealized         Market
                                                          Cost          Gains         Losses           Value
                                                          ----          -----         ------           -----
<S>                                                 <C>              <C>            <C>            <C>
     Securities Available-for-Sale

     U.S. Government and its agencies                $     7,949      $       18     $     (5)      $    7,962
     Obligations of states and political
       subdivisions                                           50               -            -               50
                                                     -----------     -----------    -----------    -----------

                                                     $     7,999      $       18     $     (5)      $    8,012
                                                     ===========      ==========     ==========     ==========

</TABLE>


There were no sales of  securities  during the period from May 27, 1997 (date of
inception) to December 31, 1997.

The  amortized  cost and  estimated  market value of  securities at December 31,
1997, by contractual maturity, are shown below.


<TABLE>
                                                                                      Estimated
                                                                                      Amortized        Market
                                                                                        Cost           Value
                                                                                      ---------        ------
<S>                                                                                 <C>            <C>
     Due in one year or less                                                        $         -    $         -
     Due after one year through five years                                                7,999          8,012
     Due after five years through ten years                                                   -              -
     Due after ten years                                                                      -              -
                                                                                    -----------    -----------
                                                                                    $     7,999    $     8,012
                                                                                    ===========    ===========
</TABLE>

A security with a carrying  value of $1,250 at December 31, 1997, was pledged to
secure federal funds purchased.


                                                                           F-8
<PAGE>

NOTE 3 - LOANS

Loans are comprised of the following as of December 31:

<TABLE>

<S>                                                                                              <C>
     Commercial                                                                                  $       2,960
     Real estate construction                                                                              136
     Residential real estate mortgages                                                                     189
     Installment loans to individuals                                                                      673
                                                                                                 -------------
                                                                                                 $       3,958
                                                                                                 =============
</TABLE>


There were no impaired or non-performing  loans outstanding at December 31, 1997
or during the period then ending.


NOTE 4 - ALLOWANCE FOR LOAN LOSSES

The activity in the allowance for loan losses is as follows:

<TABLE>

<S>                                                                                              <C>
     Balance, May 27, 1997                                                                       $           -
     Provision charged to operations                                                                        46
     Loans charged-off                                                                                       -
     Recoveries on loans previously charged-off                                                              -
                                                                                                 -------------
     Balance, December 31, 1997                                                                  $          46
                                                                                                 =============
</TABLE>

NOTE 5 - PREMISES, FURNITURE AND EQUIPMENT

A summary of premises, furniture and equipment by major category follows:

<TABLE>

<S>                                                                                              <C>
     Land                                                                                        $         205
     Buildings and improvements                                                                            711
     Leasehold improvements                                                                                  2
     Furniture and equipment                                                                               294
                                                                                                 -------------
         Total                                                                                           1,212
     Accumulated depreciation                                                                                5
                                                                                                 -------------
         Premises, furniture and equipment, net                                                  $       1,207
                                                                                                 =============

</TABLE>

                                                                            F-9

<PAGE>

NOTE 6 - INTEREST-BEARING TIME DEPOSITS

Interest-bearing  time deposits issued in  denominations of one hundred thousand
dollars or greater totaled $300 at December 31, 1997.

At December 31, 1997, all time deposits are scheduled to mature in 1998.


NOTE 7 - SHORT-TERM BORROWINGS

Short-term  borrowings  are comprised of federal funds  purchased from Bank One,
Indiana,  NA The Bank pledged one security as  collateral  for those  borrowings
(see Note 2),  which  security is  maintained  in  safekeeping  under the Bank's
control. Federal funds purchased mature daily.


NOTE 8 - EMPLOYEE BENEFIT PLANS

The Bank created a retirement savings plan covering  substantially all employees
which became  effective  January 1, 1998.  The Plan requires  employees to be 21
years of age before entering the Plan.  Employee  contributions are limited to a
maximum of 15% of their salary.  The Plan allows for a 50% matching of the first
6% of employee salary  contributions and an annual  discretionary  contribution.
Participants  are  fully  vested  in  salary  deferral  contributions.  Employer
matching  contributions  vest at a rate of 20% per  year of  employment  and are
fully vested after the completion of 5 years of service with the Bank. There was
no 401(k)  contribution  charged  to  expense  for 1997,  since the plan  became
effective on January 1, 1998.


NOTE 9 - STOCK OPTION PLAN

On July 25, 1997, the Corporation's  Board of Directors adopted two stock option
plans: an employee plan and a non-employee director plan. Under the terms of the
plans, options for up to 115,000 shares of the Corporation's common stock may be
granted to key  management  employees and directors of the  Corporation  and its
subsidiaries.  The exercise  price of the options will be determined at the time
of  grant  by an  administrative  committee  to be  appointed  by the  Board  of
Directors  and in any  event,  will not be less  than fair  market  value of the
shares of common stock at the time the option is granted.

Regarding the employee plan, options are immediately exercisable with respect to
20 percent of the shares  covered by the option and will vest with respect to an
additional 20 percent of the shares on each of the following four  anniversaries
of the date of grant, assuming continued employment of the optionee. The options
will expire after ten years.

                                                                           F-10
<PAGE>

NOTE 9 - STOCK OPTION PLAN (Continued)

Regarding  the  nonemployee  director  plan,  options  granted  are  immediately
exercisable  for 1,000 shares of common stock per nonemployee  director.  On the
date of each successive  annual meeting of the Corporation,  options will become
exercisable  (assuming  continued  service  on the  Board of  Directors)  for an
additional  1,000 shares of common  stock per  nonemployee  director,  until all
options are exercisable in full.

A summary of the Corporation's  stock option activity,  and related  information
for the period ended December 31, 1997 follows:

<TABLE>
                                                                                                     Weighted-
                                                                                                      Average
                                                                                                     Exercise
                                                                                      Options          Price
                                                                                      -------          -----
<S>                                                                               <C>              <C>
     Outstanding May 27, 1997                                                                 -    $        -
     Granted                                                                             83,000         10.00
     Exercised                                                                                -             -
     Forfeited                                                                                -             -
                                                                                  -------------    ----------

     Outstanding-end of period                                                           83,000    $    10.00
                                                                                  =============    ==========

     Exercisable at end of period                                                        18,000    $    10.00
                                                                                  =============    ==========

     Weighted-average fair value per
       option granted during the period                                           $        2.70

</TABLE>

Financial  Accounting  Standard  No.  123  requires  pro forma  disclosures  for
companies  that do not adopt its fair value  accounting  method for  stock-based
employee  compensation.  The pro  forma  information  presents  net  income  and
earnings  per share had the  Standard's  fair value  method been used to measure
compensation cost for stock option plans.  Compensation cost actually recognized
for  stock  options  was $0 for 1997.  The fair  value  for  these  options  was
estimated at the date of grant using a  Black-Scholes  option pricing model with
the following weighted average assumptions for 1997:  risk-free interest rate of
6.3% dividend yields of 0%;  volatility  factors of the expected market price of
the Corporation's  common stock of .001, and a weighted average expected life of
the options of 9.75 years.


                                                                          F-11
<PAGE>

NOTE 9 - STOCK OPTION PLAN (Continued)

For purposes of pro forma  disclosures,  the estimated fair value of the options
is amortized to expense over the options' vesting period.  The Corporation's pro
forma   information   follows  (in  thousands  except  for  earnings  per  share
information):

     Pro forma net income                                        $      (289)

     Pro forma basic and diluted earnings per share              $      (.23)

In future years, the pro forma effect of not applying this standard may increase
if additional options are granted.


NOTE 10 - INCOME TAXES

The  Corporation  had an operating loss  carryforward at December 31, 1997 which
can  be  utilized  over a 15  year  period.  No  deferred  tax  asset  has  been
recognized,  as a valuation  allowance  reduces the gross  deferred tax asset to
zero.


NOTE 11 - PER SHARE DATA

The following  illustrates  the  computation  of basic and diluted  earnings per
share.

Basic earnings per share
     Net loss                                              $          (240)
     Weighted average shares outstanding                          1,265,000
                                                            ---------------

         Basic earnings per share                          $          (.19)
                                                            ===============

Diluted earnings per share
     Net loss                                              $          (240)
     Weighted average shares outstanding                         1,265,000
     Stock options                                                  83,000
     Assumed shares repurchased upon exercise                      (82,914)
                                                            ---------------
         Diluted average shares outstanding                      1,265,086

         Diluted earnings per share                        $          (.19)
                                                            ===============



                                                                           F-12
<PAGE>

NOTE 12 - CAPITAL REQUIREMENTS

The Bank is subject to regulatory capital  requirements  administered by federal
banking  agencies.  Capital  adequacy  guidelines and prompt  corrective  action
regulations involve quantitative and qualitative measures of assets, liabilities
and certain  off-balance-sheet  items  calculated  under  regulatory  accounting
practices.

The prompt corrective action regulations provide five classifications, including
well  capitalized,  adequately  capitalized,   undercapitalized,   significantly
undercapitalized and critically  undercapitalized,  although these terms are not
used to represent overall financial condition.  If only adequately  capitalized,
regulatory   approval   is   required   to   accept   brokered   deposits.    If
undercapitalized,  capital  distributions  are  limited,  as is asset growth and
expansion, and plans for capital restoration are required.

At year end,  the  capital  requirements  were met.  Actual  capital  levels and
minimum required levels were:

<TABLE>
                                                                                               Minimum Required
                                                                                                  To Be Well
                                                                                               Capitalized Under
                                                                    Minimum Required           Prompt Corrective
                                               Actual                  For Capital                  Action
                                               ------               Adequacy Purposes             Regulations
                                                                    -----------------             ------------
                                         Amount       Ratio         Amount      Ratio         Amount       Ratio
                                         ------       -----         ------      -----         ------       -----
<S>                                     <C>          <C>            <C>         <C>           <C>          <C>
Total capital
(to risk weighted assets)               $  8,706      157%          $  444        8%           $ 555        10%

Tier 1 capital
(to risk weighted assets)                  8,660      156              222        4              333         6

Tier 1 capital
(to average assets)                        8,660      352               99        4              123         5

</TABLE>


NOTE 13 - COMMITMENTS AND CONTINGENT LIABILITIES

The Bank leases the branch  facility under an operating  lease expiring in 2007.
Future minimum lease payments are as follows:

           1998                               $      60,420
           1999                                      60,420
           2000                                      60,420
           2001                                      62,320
           2002                                      64,220
           Thereafter                               349,600
                                               ------------
           Total minimum lease payments       $     657,400
                                              =============


                                                                          F-13

<PAGE>


NOTE 13 - COMMITMENTS AND CONTINGENT LIABILITIES (Continued)

In the  ordinary  course  of  business,  the Bank  has  loans,  commitments  and
contingent  liabilities,  such as guarantees  and  commitments to extend credit,
which are not reflected in the  consolidated  balance sheet. The Bank's exposure
to  credit  loss in the  event  of  nonperformance  by the  other  party  to the
financial instrument for commitments to make loans and standby letters of credit
is represented by the contractual amount of those instruments. The Bank uses the
same credit  policy to make such  commitments  as it uses for  on-balance  sheet
items.

At December  31,1997  off-balance  sheet  financial  instruments  whose contract
amount represents credit risk are summarized as follows:

      Unused lines of credit              $        369
      Commitments to make loans                  1,982

Since many  commitments to make loans expire without being used, the amount does
not necessarily  represent  future cash  commitments.  Collateral  obtained upon
exercise of the commitment is determined using management's credit evaluation of
the borrower, and may include accounts receivable, inventory, property, land and
other items.  These  commitments are generally  variable rate or carry a term of
one year or less.

The cash  balance  required  to be  maintained  on hand or on  deposit  with the
Federal  Reserve  was $48 at  December  31,  1997.  These  reserves  do not earn
interest.


NOTE 14 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying  value and  estimated  fair values of the  Corporation's  financial
instruments as of December 31, 1997 are as follows:

<TABLE>

                                                                      Carrying            Fair
                                                                        Value             Value
                                                                       -------            ------
                <S>                                              <C>                <C>
                  Financial assets:
                      Cash and cash equivalents                   $        1,140     $      1,140
                      Securities available-for-sale                        7,999            8,012
                      Loans, net                                           3,912            3,912
                      Accrued interest receivable                            129              129

                  Financial liabilities:
                      Deposits                                    $        2,079     $      2,079
                      Short-term borrowings                                  800              800
                      Accrued interest payable                                 1                1
</TABLE>



                                                                          F-14
<PAGE>

NOTE 14 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

The estimated fair value approximates carrying amount for all items except those
described  below.  Estimated fair value for securities is based on quoted market
values for the  individual  securities or for equivalent  securities.  Estimated
fair  value for loans is based on the  rates  charged  at year end for new loans
with  similar  maturities,  applied  until the loan is  assumed to reprice or be
paid.  Estimated  fair  value  for  IRAs,  time  certificates  of  deposit,  and
agreements to repurchase is based on the rates paid at year end for new deposits
or borrowings,  applied until maturity. Estimated fair value for other financial
instruments and off-balance-sheet loan commitments are considered nominal.


NOTE 15 - PARENT COMPANY STATEMENTS

Presented below are condensed balance sheet, statements of income and cash flows
for the parent company:

                             CONDENSED BALANCE SHEET
                                December 31, 1997
                          (Dollar amounts in thousands)

<TABLE>

<S>                                                                             <C>
ASSETS
Cash                                                                             $           5
Securities available-for-sale, at market                                                  2,704
Investment in bank                                                                        8,733
Other assets                                                                                 62
                                                                                  -------------
                                                                                  $      11,504
                                                                                  =============

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities                                                                       $           -

Shareholders' equity                                                                     11,504
                                                                                  -------------
                                                                                  $      11,504
                                                                                  =============
</TABLE>



                                                                          F-15
<PAGE>

NOTE 15 - PARENT COMPANY STATEMENTS (Continued)

                          CONDENSED STATEMENT OF INCOME
    For the period from May 27, 1997 (date of inception) to December 31, 1997
                          (Dollar amounts in thousands)

<TABLE>

<S>                                                                   <C>
Operating income
    Dividends received from subsidiary bank                            $         -
    Interest income                                                             38
                                                                       -----------
Operating expenses
    Amortization of deferred costs                                               1
                                                                        ----------
Income before income taxes and equity in
 undistributed earnings of subsidiary                                           37

Income tax expense                                                               -
                                                                        ----------

Income before equity in undistributed earnings of bank                          37

Equity in undistributed earnings of bank                                      (277)
                                                                        -----------

Net loss                                                                $     (240)
                                                                        ===========
</TABLE>


                                                                          F-16

<PAGE>

NOTE 15 - PARENT COMPANY STATEMENTS (Continued)


                        CONDENSED STATEMENT OF CASH FLOWS
    For the period from May 27, 1997 (date of inception) to December 31, 1997
                          (Dollar amounts in thousands)



Cash flows from operating activities
    Net loss                                                       $      (240)
    Adjustments to reconcile net loss to net cash
      from operating activities
       Amortization of deferred costs                                       (1)
       Equity in undistributed earnings of bank                            277
       Other assets and other liabilities                                  (62)
                                                                    -----------
          Net cash from operating activities                               (26)

Cash flows from investing activities
          Purchase of securities available-for-sale                     (2,700)
    Purchase of stock in bank                                           (9,000)
                                                                    -----------
              Net cash from investing activities                       (11,700)
Cash flows from financing activities
    Proceeds from issuance of common stock                              11,731
                                                                    ----------
       Net cash from financing activities                               11,731
                                                                    ----------
Net change in cash and cash equivalents                                     5

Cash and cash equivalents at May 27, 1997                                   -
                                                                   -----------
Cash and cash equivalents at end of period                        $         5
                                                                   ===========





                                                                           F-17