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                                Table of Contents
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 President's Message . . . . . . . . . . . . . . . . . . . . . . . .  .     2

 Selected Consolidated Financial Information . . . . . . . . . . . .  .     3

 Management's Discussion and Analysis of Financial
          Condition and Results of Operations . . . . . . . . . . . . .     5

 Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . .    17

 Consolidated Financial Statements  . . . . . . . . . . . . . . . . . .    18

 Stockholder Information  . . . . . . . . . . . . . . . . . . . . . . .    49

 Corporate Information . . . . . . . . . . . . . . . . . . . . . . .  .    50


















                                       1
<PAGE>
President's Message
To Our Stockholders


On behalf of the Board of  Directors,  Officers and  Employees of AMB  Financial
Corp., and its wholly owned subsidiary,  American Savings, FSB., I am pleased to
present our 1998 Annual Report.

American  Savings,  FSB (the Bank), the wholly owned subsidiary of AMB Financial
Corp., had a good year.  Assets of the Bank increased  approximately $17 million
to $114 million.  Loans increased $13 million.  Deposits increased $7.5 million.
The Bank reported net income of $745,000,  representing approximately .7% return
on assets.  We  anticipate  that the Bank will continue its growth focus for the
next several years.

AMB Financial Corp., the holding company,  did not have a good year. The holding
company has a trading  portfolio of approximately  $2.5 million.  This portfolio
consists  of stock and  mutual  funds,  primarily  invested  in thrift  and bank
stocks.  As most of you are aware  1998 was not a good year for  thrift and bank
stocks. As a result, the holding company booked a loss of approximately $771,000
in this  portfolio.  I would like to emphasize that this is an unrealized  loss.
Accounting  rules  require us to report the current  market value of  securities
held in our trading  portfolio.  If we had  liquidated  our entire  portfolio on
December  31,  1998,  we would have  realized  an actual  loss of  approximately
$164,000.  We believe  that the stocks and funds in our  trading  portfolio  are
solid  investments,  and will perform better in the future. The stock market is,
however, subject to fluctuation, and so is our portfolio.

I believe  that our  company  is  pursuing  the proper  strategies  to remain an
independent  and viable banking  organization.  We plan to continue to serve the
needs of our local  residents and businesses,  and hope for continued  financial
success.

Our financial  performance and stock performance is available on our web site at
http://www.ambfinancial.com.  Our web site has other convenient services,  and I
urge you to visit it.

The entire staff of AMB Financial Corp. appreciates your commitment and support,
and we look forward to a long and profitable relationship.


Sincerely,


/s/Clement B. Knapp, Jr.
------------------------
Clement B. Knapp, Jr
President


                                       2
<PAGE>
<TABLE>
<CAPTION>
                                                            SELECTED CONSOLIDATED FINANCIAL INFORMATION
                                                                             At December 31,
                                       --------------------------------------------------------------------------------------------
                                         1998                 1997                 1996                 1995                  1994
                                       --------             --------             --------             --------             --------
                                                                             (In thousands)
<S>                                    <C>                  <C>                  <C>                  <C>                  <C> 
Selected Financial Data:

Total assets                           $116,913             $ 99,796             $ 86,102             $ 69,788             $ 65,536
Loans receivable, net                    89,762               77,093               67,366               54,639               51,849
Investment securities                     6,137                8,214                8,939                7,017                6,316
Mortgage-backed securities                2,649                3,494                4,019                1,479                1,593
Trading securities                        2,394                2,413                  539                - - -                - - -
Deposits                                 78,997               71,700               60,411               59,588               58,281
Borrowed funds                           23,074               12,000                9,500                3,000                1,000
Stockholder's equity                     13,413               14,770               15,170                6,314                5,633
<CAPTION>
                                                                     For the Year Ended December 31
                                                           1998         1997        1996        1995        1994
                                                        --------------------------------------------------------   
Selected Operating Data:                                                       (In thousands)
<S>                                                     <C>          <C>         <C>         <C>         <C>    
Total interest income                                   $ 7,969      $ 7,120     $ 5,957     $ 5,222     $ 4,837
Total interest expense                                    4,570        3,793       2,955       2,686       2,209
                                                        -------      -------     -------     -------     -------
     Net interest income                                  3,399        3,327       3,002       2,536       2,628
Provision for loan losses                                   102           74           0          39          62
                                                        -------      -------     -------     -------     -------
Net interest income after provision for loan losses       3,297        3,253       3,002       2,497       2,566
                                                        -------      -------     -------     -------     -------

Non-interest income:
Fees and service charges                                    450          349         263         203         224
Commission income                                            55           78          57          59          23
Gain on sale of securities                                   68           58          53          --          59
Unrealized gain (loss) on investments                      (771)         561          46          --          --
Gain on sale of deposits                                     27           --          --          --          --
Gain (loss) on sale of real estate owned                     (2)           5          28           2         178
Loss from investment in joint venture                       (11)          --          --          --          --
Other                                                       123           81          64          76          89
                                                        -------      -------     -------     -------     -------
       Total non-interest income                            (61)       1,132         511         340         573
                                                        -------      -------     -------     -------     -------

Non-interest expense:
Compensation and benefits                                  1377        1,294       1,129         909         886
Office occupancy and equipment expenses                     309          353         334         328         347
Data processing                                             368          336         295         248         210
Federal deposit insurance premiums                           45           41         130         134         134
SAIF special assessment                                      --           --         389          --          --
Stock conversion expenses                                    --           --          --          --         332
Loss on disposition of fixed assets                          29           --          --          --          --
Other                                                       751          662         580         595         608
                                                        -------      -------     -------     -------     -------
      Total non-interest expense                          2,879        2,686       2,857       2,214       2,517
                                                        -------      -------     -------     -------     -------

Income before income taxes                                  357        1,698         656         623         622
Income tax provision                                        152          675         214         236         239
                                                        -------      -------     -------     -------     -------
Net income                                                  205        1,023         442         387         383
                                                        -------      -------     -------     -------     -------

</TABLE>
                                       3
<PAGE>
<TABLE>
<CAPTION>
                                                                  At or For the Year Ended December 31,
                                                        1998         1997          1996          1995         1994
                                                      ------       ------        ------         -----        ----- 
<S>                                                   <C>          <C>           <C>           <C>          <C>  

Selected Financial Ratios and Other Data:
-----------------------------------------

Return on average assets (1)                            0.18%        1.07%         0.55%         0.57%        0.58%
Return on average stockholders' equity(2)               1.46         7.06          3.28          6.40         6.74 
Average stockholders' equity to                                                                                    
   average assets                                      12.61        15.10         16.78          8.76         8.61 
Stockholders' equity to total assets                   11.47        14.80         17.62          9.05         8.60 
Interest rate spread during period                      2.86         3.10          3.37          3.84         4.11 
Net interest margin (3)                                 3.29         3.67          3.97          4.03         4.25 
Operating expenses to average assets (4)                2.59         2.80          3.56          3.29         3.31 
Efficiency ratio (5)                                   87.41        60.28         70.23         76.99        73.72 
Non-performing assets to total assets                   0.43         0.34          0.35          0.53         0.76 
Allowance for loan losses to non-                                                                                  
   performing loans                                   104.87       133.12        116.27         97.43        66.00 
Allowance for loan losses to loans                                                                                 
   receivable, net                                      0.56         0.53          0.53          0.66         0.62 
Ratio of  average interest-earning                                                                                 
assets to average interest-bearing liabilities          1.10x        1.14x         1.16x         1.04x        1.04x
Number of full-service offices                             3            4             4             4            4 
</TABLE>                                                  
(1)  Return on average  assets for 1996  would have been .84%  without  the SAIF
     special assessment.

(2)  Return on  average  stockholders'  equity  for 1996  would  have been 5.02%
     without the SAIF special assessment.

(3)  Calculation  is based upon net interest  income  before  provision for loan
     losses divided by interest-earning assets.

(4)  For purposes of calculating this ratio, operating expenses for 1994 exclude
     the write-off of stock conversion expenses.  The 1996 ratio would have been
     3.07% without the SAIF special assessment.

(5)  Non-interest expense,  excluding the write-off of stock conversion expenses
     in 1994 and the SAIF special  assessment  in 1996,  divided by net interest
     income plus income except for gains and losses on securities  available for
     sale.  

                                       4
<PAGE>
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

      General

                     AMB Financial  Corp.  (the "Company") is the unitary thrift
      holding  company for  American  Savings  FSB,  (the  "Bank"),  a federally
      chartered  savings  bank  and a  wholly-owned  subsidiary  of the  Holding
      Company.  Collectively,  the Holding  Company and the Bank are referred to
      herein as the  "Company."  On March 29, 1996,  the Bank  converted  from a
      mutual savings bank to a stock savings bank (the "Conversion"). Concurrent
      with the Conversion, the Company sold 1,124,125 shares of its common stock
      in a subscription and community offering at a price of $10.00 per share.

                     The Company's primary market area consists of the northwest
      portion of Lake  County,  Indiana.  Business  is  conducted  from its main
      office  at  8230  Hohman  Avenue,   Munster,   Indiana,  as  well  as  two
      full-service  banking offices located in Dyer, and Hammond,  Indiana.  The
      Bank is a community-oriented  savings institution whose business primarily
      consists of accepting  deposits from customers  within its market area and
      investing  those funds in  mortgage  loans  secured by  one-to-four-family
      residences.  To a lesser  extent,  funds  are  invested  in  multi-family,
      commercial real estate,  consumer,  commercial business,  construction and
      land  loans.  The  Company  also  invests  in  mortgage-backed  and  other
      investment securities.

                     The Company's results of operations are primarily dependent
      on net  interest  income,  which is the  difference  between the  interest
      income on its interest-earning  assets, such as loans and securities,  and
      the interest expense on its interest-bearing liabilities, such as deposits
      and  borrowings  and  to  a  lesser   degree,   non-interest   income  and
      non-interest  expense.  Net  interest  income  depends  upon the volume of
      interest-earning assets and interest-bearing  liabilities and the interest
      rate  earned or paid on them,  respectively.  Non-interest  income  (loss)
      primarily  consists of service charges,  fees on deposit and loan products
      and, on occasion,  securities gains or losses. The Company's  non-interest
      expenses   primarily  consist  of  employee   compensation  and  benefits,
      occupancy and equipment  expenses,  federal deposit  insurance costs, data
      processing service fees and other operating expenses.

                     The  Company's  results  of  operations  are  significantly
      affected by general  economic  and  competitive  conditions  (particularly
      changes  in  market  interest  rates),  government  policies,  changes  in
      accounting standards and actions of regulatory agencies. Future changes in
      applicable  laws,  regulations or government  policies may have a material
      impact on the Company. Lending activities are influenced by the demand for
      and supply of housing,  competition  among lenders,  the level of interest
      rates and the availability of funds.  Deposit flows and costs of funds are
      influenced  by  prevailing  market  interest  rates  (including  rates  on
      non-deposit investment alternatives),  account maturities,  and the levels
      of personal income and savings in the Company's market area.

      Operating Strategy

                     The Company's  basic mission is to maintain its focus as an
      independent, community-oriented financial institution-serving customers in
      its primary  market area.  The Board of Directors has sought to accomplish
      this mission through an operating strategy designed to maintain capital in
<PAGE>
      excess of regulatory requirements and manage, to the extent practical, the
      Company's  loan  delinquencies  and  vulnerability  to changes in interest
      rates. The key components of the Company's  operating strategy are to: (i)
      focus its  lending  operations  on the  origination  of loans  secured  by
      one-to-four-family   residential   real  estate;   (ii)   supplement   its
      one-to-four-family   residential   lending   activities   with   consumer,
      commercial business,  commercial real estate, construction and land loans;
      (iii) augment its lending  activities with investments in purchased loans,
      mortgage-backed  and other  securities;  (iv)  emphasize  adjustable  rate
      and/or short and medium duration assets when market  conditions permit (v)
      build and maintain its regular savings, transaction, money market and club
      accounts;  and  (vi)  increase,  at a  managed  pace,  the  volume  of the
      Company's assets and liabilities.

                                       5
<PAGE>
Comparison of Financial Condition at December 31, 1998 and 1997.

               Total  assets of the Company  increased  $17.1  million to $116.9
million as of December  31,  1998,  from $99.8  million as of December 31, 1997.
This  increase  of 17.1% was  primarily  the  result of an  increase  in savings
deposits of $7.3 million and additional  advances from the FHLB of  Indianapolis
in the amount of $9.7 million,  which were used to fund  mortgage  loans for the
Company's loan portfolio.

               Cash and cash  equivalents  increased by $3.4 million at December
31,  1998 as excess  funds  received  from the deposit  growth were  retained in
anticipation of loan funding and for general liquidity purposes.

               Investment  securities  available for sale decreased $2.1 million
to $6.1  million at December  31, 1998 as a result of  investment  sales of $2.8
million and $2.9 million in proceeds  from  maturing  securities  offset by $3.5
million in new purchases. The $2.8 million of security sales in the current year
were short term U.S. Treasury notes that were replaced with longer duration U.S.
Treasury securities in anticipation of lower interest rates.

               Loans receivable increased to $89.8 million at December 31, 1998,
a $12.7 million or 16.5% increase,  as new loan originations of both residential
and  non-residential  loans of $27.2 million and loan purchases of $13.3 million
exceeded  loan  repayments  of  $27.8  million  (See  note  5 of  the  Notes  to
Consolidated Financial  Statements).  The Company continues to remain focused on
an  aggressive  lending  effort as  evidenced by the better than 33% increase in
loans receivable over the last two years.

               Total deposits at December 31, 1998 increased by $7.3 million, or
10.2%, due to net deposit receipts of $4.5 million and interest credited of $2.8
million.  The  deposit  growth  was  primarily  attributable  to  the  Company's
continued  aggressive  advertising and competitive rates with regards to special
certificate  promotions  (primarily  13, 14, and 17 month terms) during 1998. In
addition,  $2.7  million  of  deposits  were  sold  to a  local  institution  in
connection with the closing of the East Chicago branch.

               Borrowed funds,  which consist  primarily of FHLB of Indianapolis
advances  increased  $11.1  million to $23.1  million at December 31, 1998.  The
increase in borrowed funds was utilized to fund loan production during the year.
Most of the new borrowings were at maturity terms of 3 years.

          Stockholders'  equity  decreased  $1.4  million  to $13.4  million  at
December 31, 1998 from $14.8  million at December 31,  1997.  This  decrease was
primarily due to the buyback of treasury stock in the amount of $1.6 million and
the payment of dividends  on common  stock of $244,000,  which was offset by net
income of $205,000 an increase of $43,000 in the  unrealized  gain on securities
available for sale and normal amortization of RRP and ESOP benefits of $260,000.


                  Analysis of Net Interest Income

                  Net interest income represents the difference between interest
   earned on  interest-earning  assets  and  interest  paid on  interest-bearing
   liabilities.  Net  interest  income is  affected by the  relative  amounts of
   interest-earning  assets and interest-bearing  liabilities,  and the interest
   rates earned or paid on them.
<PAGE>
                  The following table presents,  for the periods indicated,  the
   total dollar amounts of interest income from average  interest-earning assets
   and the  resultant  yields,  as  well  as the  interest  expense  on  average
   interest-bearing  liabilities,  expressed  both in dollars and rates.  No tax
   equivalent  adjustments were made. All averages  balances are monthly average
   balances and include non-accruing loans. Management does not believe that the
   use of month-end  balances  instead of daily average  balances has caused any
   material differences in the information presented.



                                       6
<PAGE>
<TABLE>
<CAPTION>
                                                                           For the Year Ended December 31
                                                                               (Dollars in thousands)
                                             ---------------------------------------------------------------------------------------
                                                                1998                                          1997                  
                                             -----------------------------------------      ----------------------------------------
                                               Average         Interest                       Average       Interest                
                                             Outstanding        Earned/         Yield/      Outstanding      Earned/          Yield/
                                               Balance           Paid            Rate         Balance          Paid            Rate 
                                               -------           ----            ----         -------          ----            ---- 
<S>                                           <C>              <C>             <C>           <C>             <C>             <C>  
 Interest-Earning Assets
    Loans receivable   (1)                      86,033           7,027           8.17%         71,473          6,003           8.40%
    Mortgage-backed securities                   3,033             204           6.73%          3,783            258           6.82%
    Investment securities                        9,198             444           4.83%         10,494            583           5.56%
    Interest-bearing deposits                    4,072             213           5.23%          4,135            223           5.39%
    FHLB stock                                   1,013              81           8.00%            658             53           8.05%
                                              --------          ------           ----         -------         ------           ---- 
     Total interest-earning assets            $103,349          $7,969           7.71%        $90,543         $7,120           7.86%

 Interest-Bearing Liabilities
   Passbook accounts                            15,841             453           2.86%         16,407            489           2.98%
   Demand and NOW accounts                      10,028             221           2.20%          9,642            233           2.42%
   Certificate accounts                         49,707           2,800           5.63%         42,051          2,378           5.66%
   Borrowings                                   18,663            1096           5.87%         11,629            693           5.96%
                                              --------          ------           ----         -------         ------           ---- 
    Total interest-bearing liabilities        $ 94,239          $4,570           4.85%        $79,729         $3,793           4.76%
                                              --------          ------           ----         -------         ------           ---- 
                                                                                                                                    
 Net interest income                                            $3,399                                        $3,327                
                                                                ======                                        ======                
   Net interest rate spread                                                      2.86%                                         3.10%
                                                                                 ====                                          ==== 
   Net earning assets                         $  9,110                                        $10,814                               
                                              ========                                        =======                               
   Net yield on average
   interest-earning assets                                                       3.29%                                         3.67%
                                                                                 ====                                          ==== 
   Average interest-earning assets to
   average interest-bearing liabilities                           1.10x                                         1.14x               
                                                                  ====                                          ====                
</TABLE>
<PAGE>
<TABLE> 
<CAPTION>
                                                   For the Year Ended December 31
                                                      (Dollars in thousands)
                                           ------------------------------------------- 
                                                                1996                      
                                           -------------------------------------------  
                                              Average          Interest                  
                                           Outstanding          Earned/         Yield/   
                                              Balance            Paid           Rate    
                                              -------            ----           ----    
<S>                                           <C>               <C>             <C>                       
 Interest-Earning Assets                
    Loans receivable   (1)                     59,165            4,949           8.36%                     
    Mortgage-backed securities                  3,396              230           6.77%                     
    Investment securities                       8,565              521           6.08%                     
    Interest-bearing deposits                   3,876              214           5.52%                     
    FHLB stock                                    546               43           7.88% 
                                              -------           ------           ----                                         
     Total interet-earning assets             $75,548           $5,957           7.89%                     
                                                                                                          
 Interest-Bearing Liabilities                                                                             
   Passbook accounts                           16,490              510           3.09%                     
   Demand and NOW accounts                      9,258              226           2.44%                     
   Certificate accounts                        36,389            2,025           5.56%                     
   Borrowings                                   3,186              194           6.09%  
                                              -------           ------           ----                                         
    Total interest-bearing liabilities        $65,323           $2,955           4.52% 
                                              -------           ------           ----                                          
                                                                                          
 Net interest income                                            $3,002                                      
                                                                ======                                      
   Net interest rate spread                                                      3.37%                     
   Net earning assets                         $10,225                                                      
                                              =======                                                      
   Net yield on average                                                                                    
   interest-earning assets                                                       3.97%                     
                                                                                 ====                      
   Average interest-earning assets to                                                                      
   average interest-bearing liabilities                           1.16x                                    
                                                                  =====
</TABLE>
(1)  Calculated net of deferred loan fees, loan discounts,  loans in process and
     allowance for losses.



                                       7
<PAGE>
               The table below  presents the extent to which changes in interest
        rates and changes in the volume of interest-earning  assets and interest
        bearing  liabilities  have  affected the Company's  interest  income and
        interest expense during the period indicated. Information is provided in
        each  category  with respect to (i) changes  attributable  to changes in
        rate  (changes  in  rate  multiplied  by  prior  volume),  (ii)  changes
        attributable to changes in volume (changes in volume multiplied by prior
        rate),  (iii) changes  attributable to the combined impact of volume and
        rate (changes in the rate multiplied by the changes in the volume),  and
        (iv) the net change. The changes  attributable to the combined impact of
        volume and rate have been allocated  proportionately  to the changes due
        to volume and the changes due to rate.
<TABLE>
<CAPTION>
                                                                      For the Year Ended 
                                                                      ------------------ 
                                                                          December 31,
                                                                          ------------

                                    1998 Compared to 1997                         1997 Compared to 1996
                                     Increase (Decrease)                           Increase (Decrease)
                                     -------------------                           -------------------
                                          Due to                                         Due to
                                          ------                                         ------
                                                           Rate/                                          Rate/
                                   Rate        Volume      Volume       Net         Rate      Volume      Volume        Net
                                   ----        ------      ------       ---         ----      ------      ------        ---
                                                                    (Dollars in thousands)
<S>                                 <C>        <C>           <C>       <C>            <C>      <C>             <C>     <C>  
Interest-earning assets:
Loans receivable, net               (165)      1,223         (34)      1,024          21       1,029           4       1,054
Mortgage-backed
   securities                         (4)        (51)          1         (54)          1          27                      28
Investment securities                (76)        (72)          9        (139)        (45)        117         (10)         62
Interest-bearing deposit              (7)         (3)                    (10)         (5)         14                       9
FHLB Stock                                        28                      28           1           9                      10
                                  ------      ------      ------      ------      ------      ------      ------      ------
      Totals                        (252)      1,125         (24)        849         (27)      1,196          (6)      1,163
                                  ------      ------      ------      ------      ------      ------      ------      ------

Interest-bearing liabilities:
Passbook accounts                    (20)        (17)          1         (36)        (19)         (2)                    (21)
Demand and Now
   accounts                          (20)          9          (1)        (12)         (2)          9                       7
Certificate accounts                  (9)        433          (2)        422          33         315           5         353
Borrowed funds                       (10)        419          (6)        403          (4)        514         (11)        499
                                  ------      ------      ------      ------      ------      ------      ------      ------
     Totals                          (59)        844          (8)        777           8         836          (6)        838
                                  ------      ------      ------      ------      ------      ------      ------      ------

Net change in net
   interest income                                                        72                                             325
                                                                      ------                                          ------ 

</TABLE>
<PAGE>
Comparison of Operating Results for the Years Ended December 31, 1998 and 1997.

Net Income.  The Company's  net income for the year ended  December 31, 1998 was
$205,000 as compared to $1.0  million for the same period in 1997, a decrease of
$818,000.  This decrease was due primarily to a decrease in non-interest  income
of $1.2  million,  an  increase  in  non-interest  expense of  $193,000,  and an
increase  in loan  loss  provision  of  $28,000,  offset by an  increase  in net
interest income of $72,000, and a decrease in income taxes of $523,000.

Interest  Income.  Total  interest  income for the year ended  December 31, 1998
increased  $849,000 or 11.9%,  as compared  to the prior year.  The  increase in
interest income was the result of an increase in average interest-earning assets
of $12.8 million,  partially  offset by a decrease in the average asset yield to
7.71% from 7.86%. Interest income on loans increased $1.0 million as a result of
a $14.6 million  increase in average loan  receivable,  offset by 23 basis point
decrease in the average  yield of the loan  portfolio.  Interest  income on both
mortgage-backed  and investment  securities declined as a result of decreases in
the average balance of both securities as well as declines in the average yield.
The lack of additional purchase activity in these investments is a result of the
Company's  ability and  strategy to  originate  and  purchase  loans for its own
investment portfolio.



                                       8
<PAGE>
Interest  Expense.  Total interest  expense for the year ended December 31, 1998
increased $777,000,  or 20.5% to $4.6 million as compared to $3.8 million in the
prior year. Deposit interest increased by $374,000, primarily as a result of the
$7.5 million increase in the average balance of deposit accounts and to a lesser
extent, by a 5 basis point increase in the average cost of deposits. The average
certificate  of  deposit  base  increased  by $7.7  million  in 1998 as the Bank
offered  special  certificate  promotions.  Interest  expense on borrowed  funds
increased  $393,000,  to $1.1 million as the average  balance of borrowed  funds
increased $7.0 million to $18.7 million for the year ended December 31, 1998.
This increase was primarily due to funding  requirements  for new mortgage loans
and to a lesser extent for normal operating liquidity.

Provision for Loan Losses.  The  determination  of the allowance for loan losses
involves  material  estimates that are susceptible to significant  change in the
near  term.  The  allowance  for loan  losses is  maintained  at a level  deemed
adequate  to  provide  for losses  through  charges to  operating  expense.  The
allowance  is based  upon past loss  experience  and other  factors,  which,  in
management's  judgment,  deserve current  recognition in estimating losses. Such
other factors  considered by management  include  growth and  composition of the
loan  portfolio,  the  relationship  of the allowance for losses to  outstanding
loans, and economic conditions.

A provision  of $102,000 was  recorded  during the year ended  December 31, 1998
while a provision of $74,000 was  recorded in the  comparable  1997 period.  The
increase in the provision for losses on loans was due to the  continuing  growth
in the  loan  portfolio  and is  based  upon  management's  review  of the  loan
portfolio by property type and  delinquency  status.  There were no  significant
individual loans, which contributed to the increase in the allowance,  and there
were no regulatory requests for additional provisions for loan losses during the
year ended December 31 1998 or 1997. Net charge offs for the year ended December
31, 1998  amounted  to less than  $5,000.  The Bank will  continue to review its
allowance for loan losses and make future  provisions as economic and regulatory
conditions dictate. Although the Bank maintains its allowance for loan losses at
a level that it considers to be adequate to provide for losses,  there can be no
assurance  that  future  losses  will  not  exceed  estimated  amounts  or  that
additional provisions for loan losses will not be required in future periods.

Non-Interest  Income. The Company's  non-interest  income decreased $1.2 million
for the year ended  December  31, 1998  compared  with the  previous  year.  The
decrease was directly  related to an  unrealized  loss on trading  securities of
$771,000 recorded in 1998 compared to a $561,000 unrealized gain recorded in the
prior year.  The decline in income from  unrealized  gains and losses on trading
securities  is a reflection  of the erosion in the value of  community  bank and
thrift  stock prices  during the second half of 1998.  Although the stock market
appears to have generally recovered from its late summer declines, the Company's
trading  portfolio,  which consists primarily of equity investments in community
and  regional  financial  institutions,  has  yet to  experience  any  sustained
turnaround.  Non-interest  income also  declined due to a decrease of $22,000 in
commissions  from the sale of various  financial  products by the Bank's  wholly
owned  subsidiary  NIFCO,  and an $11,000 loss from  investment  in a low income
housing  joint  venture,  offset by an  increase of $101,000 in loan and deposit
related  fees, a $10,000  increase on the sale of investment  securities,  and a
$27,000 profit from the sale of the East Chicago deposit accounts.
<PAGE>
Non-Interest  Expense. The Company's  non-interest expense increased $193,000 to
$2.9 million for the year ended  December 31, 1998  compared to $2.7 million for
the previous year.  The increase was primarily the result of increased  staffing
costs of $83,000  due in part to normal  salary and  benefit  increases  and the
payment of a bonus in the first quarter of 1998 totaling $44,000, increased data
processing costs of $33,000 due to increased transaction charges and to a lesser
extent Y2K expenditures, a loss of $29,000 on the disposition of the closed East
Chicago branch office,  and an increase in other operating  expenses of $117,000
due to the expanded  product  offerings and growth in customer  activity levels.
Among  the  increased   expenses  were  bank  correspondent  and  courier  fees,
telephone,  insurance,  meetings, and professional service fees. This was offset
by decrease in  advertising  costs of $39,000,  and a decrease in occupancy  and
equipment expense of $44,000.


                                       9
<PAGE>
Provision  for Income  Taxes.  Tax expense for the year ended  December 31, 1998
decreased  $523,000 to $152,000  compared to $675,000 for the comparable year in
1997.  Income  taxes  decreased  primarily  as a result of  decrease  in pre-tax
income.

Comparison of Operating Results for the Years Ended December 31, 1997 and 1996.

Net Income.  The Company's  net income for the year ended  December 31, 1997 was
$1.0 million as compared to $442,000 for the same period in 1996, an increase of
$581,000.  This increase was due primarily to an increase in net interest income
of $361,000,  an increase in non-interest income of $587,000,  and a decrease in
non-interest expense of $167,000,  offset by an increase of $74,000 in provision
for loan losses and an increase  of $461,000 in tax  provisions.  Net income for
the year ended December 31, 1996 was reduced by a one-time special assessment of
$389,000  ($234,000 after taxes) imposed by federal  legislation to recapitalize
the Savings Association Insurance Fund ("SAIF").

Interest  Income.  Total  interest  income for the year ended  December 31, 1997
increased $1.2 million or 20.1%,  as compared to the prior year. The increase in
interest income was the result of an increase in average interest-earning assets
of $15.0 million. The increase in average interest-earning assets was the result
of a $12.3  million  increase  in the  average  balance of loans  receivable,  a
$387,000 increase in the average balance of mortgage-backed  securities,  a $1.9
million  increase in the average  balance of investment  securities,  a $259,000
increase in the average  balance of  interest-bearing  deposits,  and a $112,000
increase  in the  average  balance of FHLB stock.  These  increases  reflect the
Company's  investment of net proceeds from an increase in the average balance of
interest-bearing  liabilities,  as well  as a full  year  of  investment  of the
proceeds of the Company's March 31, 1996 stock  offering.  During the year ended
December  31,  1997,  the average  yield on  interest-earning  assets  increased
slightly to 7.90% from 7.89% during the year ended December 31, 1996.

Interest  Expense.  Total interest  expense for the year ended December 31, 1997
increased $837,000,  or 28.3% to $3.8 million as compared to $3.0 million in the
prior year. Deposit interest increased by $338,000, primarily as a result of the
$6.0 million  increase in the average  balance of deposit  accounts and the .11%
increase in the cost of deposits. The average certificate deposit base increased
by $5.7  million in 1997 as the Bank offered  special  premium  rates.  Interest
expense on borrowed  funds  increased  $499,000,  to $693,000 for the year ended
December 31, 1997. The average  balance of borrowed funds increased $8.4 million
to $11.6 million for the year ended December 31, 1997.  This increase was due to
funding  requirements  for new mortgage  loans and to a lesser extent for normal
operating liquidity.

Provision  for Loan Losses.  Provision  of $74,000 was recorded  during the year
ended December 31, 1997 while no provision was recorded in the  comparable  1996
period.  The increase in the provision for losses on loans was due to the growth
in the  loan  portfolio  and is  based  upon  management's  review  of the  loan
portfolio by property type and  delinquency  status.  There were no  significant
individual loans, which contributed to the increase in the allowance,  and there
were no regulatory requests for additional provisions for loan losses during the
year  ended  December  31 1997 or 1996.  The Bank will  continue  to review  its
allowance for loan losses and make future  provisions as economic and regulatory
conditions dictate. Although the Bank maintains its allowance for loan losses at
a level that it considers to be adequate to provide for losses,  there can be no
assurance  that  future  losses  will  not  exceed  estimated  amounts  or  that
additional provisions for loan losses will not be required in future periods.
<PAGE>
Non-Interest  Income.  The Company's  non-interest  income increased $591,000 to
$1.1 million for the year ended  December 31, 1997  compared to $511,000 for the
previous year. The increase was due primarily to an increase in unrealized gains
on investment  securities available for trade of $485,000,  due primarily to the
effect of  favorable  market  conditions  on a thrift  equity  fund in which the
Company has an interest, a gain of $36,000 on the sale of investment  securities
held for trade,  and an  increase  in  deposit  related  fees of $86,000  due to
general increases in many service fee categories.


                                       10
<PAGE>
Non-Interest  Expense. The Company's  non-interest expense decreased $164,000 to
$2.7 million for the year ended  December 31, 1997  compared to $2.9 million for
the previous year.  The decrease was primarily the result of a $390,000  charge,
reflected in the 1996 period,  for the special insurance  assessment  imposed by
the FDIC to recapitalize  the SAIF. As a result of the  recapitalization  of the
SAIF, quarterly insurance premiums decreased by $89,000 as compared to the prior
year  period.  This  decrease  in cost was  partially  offset by an  increase in
staffing  costs of  $165,000  during the year due to normal  salary and  benefit
increases and increases in the expense  recognition of the ESOP and the RRP, and
an increase in advertising costs of $44,000 associated with the marketing of the
special certificate of deposit program and loan solicitations.  The ESOP expense
increased  because of the increase of the stock price as well as the maintenance
of the plan for an entire year rather than nine months as was the case for 1996.
The RRP expense increased because that plan was not implemented until October of
1996. In addition,  data processing costs increased $40,000  associated with the
servicing  and  maintenance  of the new ATM  machines and  increased  debit card
activity,  and other operating expenses  increased $80,000 primarily  reflecting
increased expenses relating to operations as a public company for the full year.

Provision  for Income  Taxes.  Tax expense for the year ended  December 31, 1997
increased  $461,000 to $675,000  compared to $214,000 for the comparable year in
1996.  Income taxes increased  primarily as a result of increased  income before
taxes.

        Qualitative and Quantitative Disclosure of Market Risk

               The  principal  objectives  of the  Company's  interest rate risk
management  activities  are to: (i) define an acceptable  level of risk based on
the  Company's  business  focus,  operating  environment,  capital and liquidity
requirements,  and performance objectives;  (ii) quantify and monitor the amount
of interest  rate risk  inherent  in the  asset/liability  structure;  and (iii)
modify the Company's asset/liability structure, as necessary, to manage interest
rate risk and  maintain  net  interest  margins in changing  rate  environments.
Management seeks to reduce the vulnerability of the Company's  operating results
to changes in interest  rates and to manage the ratio of interest rate sensitive
assets to interest rate sensitive  liabilities  within  specified  maturities or
repricing  periods.  The  Company  does  not  currently  engage  in  the  use of
off-balance  sheet  derivative  instruments to control  interest rate risk. Even
though  such  activity  may be  permitted  with  the  approval  of the  Board of
Directors,  management  does  not  intend  to  engage  in such  activity  in the
immediate future.

               Notwithstanding  the  Company's  interest  rate  risk  management
activities,  the potential for changing  interest rates is an  uncertainty  that
could have an adverse effect on the earnings and net asset value of the Company.
When   interest-bearing   liabilities   mature  or  reprice  more  quickly  than
interest-earning  assets in a given  period,  a  significant  increase in market
interest  rates could  adversely  affect net interest  income.  Similarly,  when
interest-earning  assets  mature or reprice more  quickly than  interest-bearing
liabilities  and net asset  value,  falling  interest  rates  could  result in a
decrease in net interest  income and net asset value.  Finally,  a flattening of
the "yield curve" (i.e.,  a narrowing of the spread between long- and short-term
interest  rates),  could adversely impact net interest income to the extent that
the Company's assets have a longer average term than its liabilities.
<PAGE>
               In managing the Company's asset/liability position, the Board and
management  attempt to manage the Company's  interest rate risk while  enhancing
net interest margins.  However, the Board of Directors continues to believe that
the increased net interest  income  resulting from a mismatch in the maturity of
the Company's asset and liability portfolios can, during periods of declining or
stable  interest  rates and  periods in which  there is a  substantial  positive
difference  between long- and  short-term  interest  rates (i.e.,  a "positively
sloped yield  curve"),  can provide high enough returns to justify the increased
exposure to sudden and unexpected  increases in interest rates. As a result, the
Company's  results of operations and net portfolio  values remain  significantly
vulnerable to increases in interest rates and to  fluctuations in the difference
between long- and short-term interest rates.


                                       11
<PAGE>
               Consistent with its asset/liability  management  philosophy,  the
Company has taken  several steps to manage its interest  rate risk.  First,  the
Company maintains a portfolio of interest rate sensitive  adjustable-rate loans.
At December 31, 1998, adjustable-rate loans represented $39.9 million, or 43.85%
of the total loan  portfolio.  At December 31, 1998, the Company had $794,000 of
adjustable-rate  mortgage-backed  pass-through  securities  or  securities  with
anticipated  lives of five years or less.  Second, a significant  portion of the
Company's   other  debt  securities   (primarily  U.S.   Government  and  agency
securities)  are  intermediate-term   instruments  with  $4.9  million  of  such
securities contractually maturing within five years of December 31, 1998. Third,
the Company has a  substantial  amount of regular  savings,  transaction,  money
market and club  accounts,  which may be less  sensitive  to changes in interest
rates than  certificate  accounts.  At December 31, 1998,  the Company had $15.1
million of regular savings  accounts,  $3.8 million of money market accounts and
$7.4  million  of NOW,  checking  and club  accounts.  Overall,  these  accounts
comprised  33.2%  of the  Company's  total  deposit  base.  Fourth,  most of the
mortgage-backed  securities  purchased  by  the  Company  in  recent  years  had
adjustable  interest  rates  and/or  short or  intermediate  effective  terms to
maturity,

               One approach used by management to qualify  interest rate risk is
the net portfolio value ("NPV") analysis.  NPV is generally considered to be the
present  value  of the  difference  between  expected  incoming  cash  flows  on
interest-earning   and  other  assets  and  expected   incoming   cash  flow  on
interest-earning   and  other  assets  and  expected   outgoing  cash  flows  on
interest-bearing  and other  liabilities.  The application  attempts to quantify
interest  rate  risk  as the  change  in  the  NPV  which  would  result  form a
theoretical  200  basis  point (1 basis  point  equals  .01%)  change  in market
interest rates.

               Presented  below, as of December  31,1998,  is an analysis of the
Bank's  interest rate risk as measured by changes in NPV for  instantaneous  and
sustained  parallel  shifts of 100 basis  points in market  interest  rates.  As
illustrated  in the table,  the Company's NPV is more  sensitive to rising rates
than  declining  rates.  From  an  overall   perspective,   such  difference  in
sensitivity occurs principally  because, as rates rise,  borrowers do not prepay
fixed rate loans as quickly as they do when interest rates are declining.  Also,
the  interest  the  Company  would  pay on its  deposits  in the event of a rate
increase would  increase more rapidly than the yield on its assests  because the
Company's deposits generally have shorter periods to repricing.
<TABLE>
<CAPTION>
                                INTEREST RATE SENSITIVITY OF NET PORTFOLIO VALUE


          Assumed                                                             NPV as % of Present
 Change in Interest Rates                Net Portfolio Value                     Value of Assets
 ------------------------     -----------------------------------------      ------------------------                           
      (Basis Points)          $ Amount        $ Change         % Change      % Ratio        Bp Change
      --------------          --------        --------         --------      -------        ---------
<S>                             <C>             <C>                <C>         <C>              <C>
           +400                  9,186          -2,872             -24          8.41            -192
           +300                 10,205          -1,853             -15          9.17            -116
           +200                 11,093            -965              -8          9.79             -53
           +100                 11,739            -319              -3         10.19             -13
                                12,058                                         10.32
           -100                 12,095              37                         10.22             -10
           -200                 11,969             -89              -1          9.99             -33
           -300                 11,899            -159              -1          9.79             -53
           -400                 11,517            -541              -4          9.35             -97
</TABLE>
                                       12
<PAGE>
               Certain assumptions utilized by the OTS in assessing the interest
rate risk of thrift institutions were employed in preparing the preceding table.
These assumptions relate to interest rates, loan prepayment rates, deposit decay
rates, and the market values of certain assets under the various  interests rate
scenarios.  It was also  assumed  that  delinquency  rates would not change as a
result of changes in interest rates although there can be no assurance that this
will be the case. Even if interest rates change in the designated amounts, there
can be no assurance that the Bank's assets and liabilities  would perform as set
forth above.  In addition,  a change in U.S.  Treasury  rates in the  designated
amounts  accompanied  by a change in the shape of the Treasury yield curve would
cause significantly different changes to the NPV than indicated above.

           Other types of market risk,  such as foreign  currency  exchange risk
and  commodity  price risk,  do not arise in the normal  course of the Company's
business activities.

Liquidity and Capital Resources

               The Company's  primary  sources of funds are deposits,  principal
and  interest  payments  on  loans  and  securities  and,  to a  lesser  extent,
borrowings and proceeds from the sale of loans and securities.  While maturities
and scheduled  amortization of loans and securities provide an indication of the
timing of the receipt of funds,  other sources of funds such as loan prepayments
and  deposit  inflows  are less  predictable  due to the  effects  of changes in
interest rates, economic conditions and competition.

               The  primary   investing   activities  of  the  Company  are  the
origination  and  purchase of real estate and other  loans,  and the purchase of
mortgage-backed and other securities.  During the years ended December 31, 1998,
and 1997,  the  Company's  disbursements  for loan  originations  totaled  $27.2
million, and $19.9 million respectively and loan purchases totaled $13.3 million
and $6.9 million respectively.  For the years ended December 31, 1998, and 1997,
there were no purchases of  mortgage-backed  securities while purchases of other
securities totaled $3.5 million and $4.0 million, respectively. These activities
were  funded  primarily  by  net  deposit  inflows,   borrowings  and  principal
repayments on loans and securities.

               For the years ended  December  31,  1998,  and 1997,  the Company
experienced  net  increases  in  deposits  (including  the  effect  of  interest
credited) of $7.3 million and $11.3 million respectively. The increase in fiscal
1998 reflects a concerted effort to increase the deposit base through  marketing
local  special  rate  certificates  for  periods of 13 through 17 months.  Also,
during the year ended December 31, 1998, the Company sold deposit  accounts from
a branch location totaling $2.7 million.  Proceeds from FHLB advances were $15.7
million in fiscal 1998,  and $7.0 million in fiscal 1997.  FHLB advances of $6.0
million and $4.5 million were repaid in fiscal 1998 and 1997 respectively.

               The  Company  may  borrow  funds  from the  FHLB of  Indianapolis
subject  to certain  limitations.  Based on the level of  qualifying  collateral
available to secure advances at December 31, 1998, the Company's borrowing limit
from the FHLB of  Indianapolis  was  approximately  $31.2  million,  with unused
borrowing capacity of $8.6 million at that date.

               The Company is required to maintain an average  daily  balance of
liquid  assets  as a  percentage  of  net  withdrawable  deposit  accounts  plus
short-term  borrowings  as  defined by OTS  regulations.  The  minimum  required
liquidity  ratio is currently 4.0%. At December 31, 1998 and 1997, the Company's
liquidity ratio was 16.1%, and 16.3% respectively.
<PAGE>
               The Company's  most liquid assets are cash and cash  equivalents,
which include highly liquid short-term  investments (such as money market mutual
funds) that are readily convertible to known amounts of cash. The level of these
assets  is  dependent  on  the  Company's  operating,  financing  and  investing
activities during any given period. At December 31, 1998 and 1997, cash and cash
equivalents totaled $9.1 million and $5.7 million, respectively.

               At  December  31,  1998,   the  Company  had   outstanding   loan
origination  commitments  of $2.9  million,  undisbursed  construction  loans in
process of  $569,000,  and  approved  but  unused  lines of credit  


                                       13
<PAGE>
extended to customers of $5.2 million. The Company anticipates that it will have
sufficient  funds  available  to meet its  current  loan  origination  and other
commitments.  Certificates  of deposit  scheduled  to mature in one year or less
from December 31, 1998 totaled $45.3 million. Based on the Company's most recent
experience and pricing strategy,  management believes that a significant portion
of such deposits will remain with the Company.

                  The OTS regulations require savings associations,  such as the
Bank, to meet two minimum capital standards:  a leverage ratio requirement of 4%
of core capital to such adjusted  total assets;  and a risk-based  capital ratio
requirement of 8% of core and supplementary  capital to total risk-based assets.
The Bank  satisfied  these minimum  capital  standards at December 31, 1998 with
tangible and leverage  capital  ratios of 7.52% and a total  risk-based  capital
ratio of 14.06%. In determining the amount of risk-weighted  assets for purposes
of  the  risk-based  capital  requirement,  a  savings  bank  must  compute  its
risk-based assets by multiplying its assets and certain  off-balance sheet items
by  risk-weights,  which  range from 0% for cash and  obligations  issued by the
United  States  Government  or its agencies to 100% for consumer and  commercial
loans, as assigned by the OTS capital regulations.  These capital  requirements,
which are applicable to the Bank only, do not consider  additional  capital held
at the Company level, and require certain adjustments to stockholder's equity to
arrive at the various regulatory capital amounts.

                  The  Bank  may  not  declare  or  pay  cash  dividends  on  or
repurchase  any of its shares of common stock if the effect  thereof would cause
equity to be reduced below  applicable  regulatory  capital  requirements or the
amount  required to be maintained  for the  liquidation  account  established in
connection  with the  Conversion.  In September 1998 the Bank paid a dividend of
$1.9 million to the Company.  Unlike the Bank, the Company is not subject to OTS
regulatory  restrictions  on the  payment  of  dividends  to  its  shareholders;
however,  it is  subject to the  requirements  of  Delaware  law.  Delaware  law
generally limits dividends to an amount equal to the excess of the net assets of
the Company (the amount by which total assets exceed total liabilities) over its
statutory capital, or if there is no such excess, to its profits for the current
and/or immediately preceding fiscal year.


Impact of Inflation and Changing Prices

               The consolidated  financial statements and related data presented
herein have been prepared in accordance with GAAP, which require the measurement
of  financial  position and  operating  results in terms of  historical  dollars
without  considering the changes in the relative  purchasing power of money over
time due to  inflation.  The impact of inflation  is reflected in the  increased
cost of the Company's operations. Unlike industrial companies, nearly all of the
assets and  liabilities  of the  Company are  monetary  in nature.  As a result,
interest  rates have a greater impact on the Company's  performance  than do the
effects of general levels of inflation.  Interest rates do not necessarily  move
in the same direction or to the same extent as the price of goods and services.


Impact of New Accounting Standards

               Accounting for Derivative Instruments and for Hedging Activities.
In June 1998, the FASB issued  Statement of Financial  Accounting  Standards No.
133 ("SFAS No. 133"),  entitled  "Accounting for Derivative  Instruments and for
Hedging  Activities."  SFAS No. 133  provides  a  comprehensive  and  consistent
<PAGE>
standard  for  the  recognition  and  measurement  of  derivatives  and  hedging
activities. The statement requires all derivatives to be recorded on the balance
sheet at fair value and establishes  special  accounting for the following three
different  types of  hedges:  hedges of  changes  in the fair  value of  assets,
liabilities or firm  commitments  (referred to as fair value hedges);  hedges of
the variable  cash flows of  forecasted  transactions  (cash flow  hedges);  and
hedges of foreign currency  exposures of net investments in foreign  operations.
Though the  accounting  treatment  and  criteria  for each of the three types of
hedges is unique, they all result in recognizing  offsetting changes in value or
cash flow of both the hedge and the hedged item in earnings in the same  period.
Changes in the fair value of derivatives that do not meet the criteria of one of
these three  categories  of hedges are included in earnings in the period of the
change.  SFAS No. 133 is effective for years  beginning after June 15, 1999, but
companies can early adopt as of the 


                                       14
<PAGE>
beginning of any fiscal quarter that begins after June 1998. Management does not
believe  that  adoption  of SFAS No.  133 will  have a  material  impact  on the
Company's consolidated financial condition or results of operations.

                Accounting  for  Mortgage-Backed  Securities  Retained after the
Securitization of Mortgage Loans Held for Sale by a Mortgage Banking Enterprise.
In October 1998, the FASB issued Statement of Financial Accounting Standards No.
134,   "Accounting   for   Mortgage-Backed   Securities   Retained   after   the
Securitization of Mortgage Loans Held for Sale by a Mortgage Banking Enterprise"
(SFAS No. 134"),  which is effective for the first fiscal quarter after December
15, 1998.  This statement  amends SFAS No. 65 "Accounting  for Certain  Mortgage
Banking   Activities."  This  statement  revises  the  accounting  for  retained
securities and beneficial  interests.  Management does not believe that adoption
of SFAS No.  134 will  have a  material  impact  on the  Company's  consolidated
financial condition or results of operations.

               The  foregoing  does not  constitute a  comprehensive  summary of
all-material  changes or developments  affecting the manner in which the Company
keeps  its  books  and   records   and   performs   its   financial   accounting
responsibilities.  It is  intended  only as a  summary  of  some  of the  recent
pronouncements  made by the FASB, which are of particular  interest to financial
institutions.


Year 2000 Readiness Disclosure

               General. The year 2000 ("Y2K") issues confronting the Company and
its suppliers,  customers,  customers'  suppliers and competitors centers on the
inability of computer systems to recognize the year 2000. Many existing computer
programs  and  systems  originally  were  programmed  with six digit  dates that
provided only two digits to identify the calendar year 1900 rather than the year
2000.

               Financial  institution  regulators  recently have increased their
focus  upon Y2K  compliance  issues  and have  issued  guidance  concerning  the
responsibilities  of senior  management  and  directors.  The Federal  Financial
Institutions  Examination  Council  ("FFIEC")  has  issued  several  interagency
statements  on  Y2K  Project  Management  Awareness.  These  statements  require
financial  institutions to, among other things,  examine the Y2K implications of
their  reliance on vendors and with respect to data  exchange and the  potential
impact of the Y2K  issue on their  customers,  suppliers  and  borrowers.  These
statements also require each federally regulated financial institution to survey
its exposure,  measure its risk and prepare a plan to address the Y2K issue.  In
addition,  the  federal  banking  regulators  have issued  safety and  soundness
guidelines to be followed by insured depository institutions,  such as the Bank,
to assure  resolution of any Y2K  problems.  The federal  banking  agencies have
asserted that Y2K testing and  certification is a key safety and soundness issue
in conjunction with regulatory exams and, thus, that an institution's failure to
address  appropriately  the  Y2K  issue  could  result  in  supervisory  action,
including the reduction of the institution's  supervisory ratings, the denial of
applications  for approval of mergers or acquisitions or the imposition of civil
money penalties.

             American  Savings,  FSB understands the importance of the Year 2000
(Y2K)  issue,  and the  bank is  currently  taking  steps  to  insure  a  smooth
transition into the next millenium.  The Senior  Management Team of the bank has
decided  to  follow  the  guidelines   established  by  the  Federal   Financial
Institutions  Examination  Council  (FFIEC)  for Y2K  preparation.  The bank has
intended to meet all deadlines  established  by the FFIEC,  and to-date the bank
has satisfied all requirements.

                  A Steering Committee  comprised of the bank's department heads
was  established in 1998 to oversee and report all the events  pertaining to the
Y2K project.  These  individuals are under the direct  supervision of the bank's
CEO and prepare regular reports to the Board of Directors.


                                       15
<PAGE>
               Risks. Like most financial service  providers,  the Y2K issue due
to its dependence on technology and date-sensitive data may significantly affect
the  Company  and its  operations.  Computer  software  and  hardware  and other
equipment,  both within and  outside the  Company's  direct  control,  and third
parties  with  whom  the  Company  electronically  or  operationally  interfaces
(including  without limitation its customers and third party vendors) are likely
to be  affected.  If computer  systems  are not  modified in order to be able to
identify  the  year  2000,  many  computer  applications  could  fail or  create
erroneous  results.  As a result,  many  calculations  which  rely on date field
information,  such  as  interest,  payment  or due  dates  and  other  operation
functions,  could generate results which are  significantly  misstated,  and the
Company  could  experience  an  inability  to  process   transactions,   prepare
statements or engage in similar  normal  business  activities.  Likewise,  under
certain  circumstances,  a failure to  adequately  address  the Y2K issue  could
adversely affect the viability of the Company's  suppliers and creditors and the
creditworthiness of its borrowers.  Thus, if not adequately  addressed,  the Y2K
issue could result in a significant  adverse impact on the Company's  operations
and, in turn, its financial condition and results of operations.

               The bank has adopted a five-phase  plan to insure Y2K  processing
success.  Many aspects required for the plan's success have been completed,  and
are currently undergoing minor improvement  adjustments.  The main categories of
the five-phase plan are as follows:

               1.   Awareness  During  this phase of the  American  Savings  Y2K
                    programs the senior  management  members attempted to gather
                    information relevant to the bank's Y2K scenario. Information
                    was gathered from a variety of sources  including  seminars,
                    numerous publications and external consultants.

               2.   Assessment  During  the  assessment  phase of the bank's Y2K
                    program each department of the bank-submitted information on
                    areas that  presented a potential  risk to the  institution.
                    Members of the Y2K Steering  Committee  identified the "date
                    sensitive"  systems  and  assigned  a  risk  rating  to  the
                    individual items. The areas classified as "mission critical"
                    receive a higher priority rating from the committee.

               3.   Renovation  Through out the  renovation  phase of bank's Y2K
                    program  systems  were  replaced  or  upgraded to insure Y2K
                    compliance.  The cost  associated  with this  phase were not
                    material during 1998 and a substantial change in 1999 is not
                    expected.

               4.   Testing American Savings  performed  internal testing on all
                    in-house  systems  and some  systems  under the  control  of
                    service  providers.  Proxy  tests  were  used  to  test  the
                    integrity of the banks core application  system.  The senior
                    management  of the  bank is  currently  satisfied  with  the
                    progress of the test results.

               5.   Contingency  American  Savings  has  begun  the  process  of
                    contingency planning for all mission critical systems of the
                    bank.  Members of the Steering  Committee intend to complete
                    the contingency planning process prior to the FFIEC deadline
                    in June for all mission  critical  systems.  Including those
                    systems  dependent  upon  third  party  vendors  or  service
                    providers.
<PAGE>
               The Company is expensing  all cost  associated  with training and
software as those costs are  incurred,  and such costs are being funded  through
operating cash flows.  Hardware cost will be capitalized  and expensed under our
fixed asset  guidelines.  The total cost of the Y2K  conversion  project for the
Company is  estimated  to be $65,000.  Expenses of  approximately  $40,000  were
incurred and expensed by the Company through December 31, 1998. The Company does
not expect significant  increases in future data processing costs related to Y2K
compliance.  While we believe  this amount will be  sufficient  to complete  the
requirements  of becoming  Y2K  compliant,  it is an  estimate.  As such we will
review  our budget  monthly to help  ensure  that we have  allocated  sufficient
resources to this  project.  Any  deviations to the  preliminary  budget will be
reported to the Board of Directors.




                                       16
<PAGE>
                   {LETTERHEAD COBITZ, VANDENBERG & FENNESSY}




                          INDEPENDENT AUDITORS' REPORT




The Board of Directors
AMB Financial Corp.

         We have audited the consolidated  statements of financial  condition of
AMB Financial  Corp. and  subsidiaries as of December 31, 1998 and 1997, and the
related consolidated  statements of income,  changes in stockholders' equity and
cash flows for each of the three years in the period  ending  December 31, 1998.
These consolidated  financial statements are the responsibility of the Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

         We conducted our audits in accordance with generally  accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable  assurance about whether the  consolidated  financial  statements are
free of material  misstatements.  An audit includes examining,  on a test basis,
evidence  supporting the amounts and disclosures in the  consolidated  financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
consolidated  financial  statement  presentation.  We  believe  that our  audits
provide 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 AMB
Financial Corp. and  subsidiaries at December 31, 1998 and 1997, and the results
of their  operations  and their  cash  flows for each of the three  years in the
period  ending  December  31,  1998,  in  conformity  with  generally   accepted
accounting principles.



/s/Cobitz, Vandenberg & Fennessy
--------------------------------
Cobitz, Vandenberg & Fennessy

January 29, 1999
Palos Hills, Illinois
<PAGE>
<TABLE>
<CAPTION>
                                                 AMB FINANCIAL CORP.
                                                  AND SUBSIDIARIES

                                   Consolidated Statements of Financial Condition

                                                                                              December 31,
                                                                                    -------------------------------
                                                                                          1998              1997
                                                                                    -------------      ------------
<S>                                                                                 <C>                   <C>         
Assets

Cash and amounts due from depository institutions                                   $   3,210,234         2,510,527   
Interest-bearing deposits                                                               5,887,182         3,176,428
                                                                                     ------------      ------------
   Total cash and cash equivalents                                                      9,097,416         5,686,955
Investment securities, available for sale,  at fair value (note 2)                      6,137,219         8,213,614
Trading securities (note 3)                                                             2,394,130         2,412,967
Mortgage-backed securities, available for sale, at fair value (note 4)                  2,649,380         3,494,035
Loans receivable (net of allowance for loan losses:
  1998 - $506,534, 1997 - $410,383) (note 5)                                           89,762,417        77,093,229
Real estate owned                                                                          23,369            27,481
Investment in limited partnership (note 6)                                              1,380,925             -
Stock in Federal Home Loan Bank of Indianapolis                                         1,334,200           725,400
Office properties and equipment - net (note 7)                                            427,823           471,730
Accrued interest receivable (note 8)                                                      594,942           533,509
Prepaid expenses and other assets (note 9)                                              3,111,101         1,136,860
                                                                                     ------------      ------------

   Total assets                                                                       116,912,922        99,795,780
                                                                                     ============      ============

Liabilities and Stockholders' Equity

Liabilities:
Deposits (note 10)                                                                     78,997,215        71,700,126
Borrowed money (note 11)                                                               21,683,000        12,000,000
Note payable                                                                            1,391,454             -
Advance payments by borrowers for taxes and insurance                                     567,098           383,237
Other liabilities (note 12)                                                               861,325           942,134
                                                                                     ------------      ------------
   Total liabilities                                                                  103,500,092        85,025,497
                                                                                     ------------      ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                 AMB FINANCIAL CORP.
                                                  AND SUBSIDIARIES

                                   Consolidated Statements of Financial Condition

                                                                                              December 31,
                                                                                    -------------------------------
                                                                                          1998              1997
                                                                                    -------------      ------------
<S>                                                                                 <C>                   <C>         
Stockholders' Equity:
Preferred stock, $.01 par value: authorized 100,000 shares; none outstanding                -                 -
Common stock, $.01 par value: authorized 1,900,000 shares; 1,124,125 shares
  issued and 869,829 shares outstanding at December 31, 1998 and 963,798 shares
  outstanding at  December 31, 1997                                                        11,241            11,241
Additional paid-in capital                                                             10,771,799        10,717,068
Retained earnings, substantially restricted                                             7,317,519         7,357,250
Accumulated other comprehensive income, net of income taxes                               113,856            71,061
Treasury stock, at cost (254,296 and 160,327 shares at December 31, 1998 and 1997)     (3,844,015)       (2,223,051)
Common stock acquired by Employee Stock Ownership Plan                                   (629,510)         (719,440)
Common stock awarded by Recognition and Retention Plan                                   (328,060)         (443,846)
                                                                                     ------------      ------------
  Total stockholders' equity (notes 16 and 17)                                         13,412,830        14,770,283
                                                                                     ------------      ------------

Commitments and contingencies (notes 18 and 19)

   Total liabilities and stockholders' equity                                       $ 116,912,922        99,795,780
                                                                                    =============      ============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       18
<PAGE>
<TABLE>
<CAPTION>
                                               AMB FINANCIAL CORP.
                                                 AND SUBSIDIARIES

                                        Consolidated Statements of Income


                                                                         Years Ended December 31,
                                                                ------------------------------------------------
                                                                    1998              1997               1996
                                                                -----------         ---------          ---------
<S>                                                             <C>                 <C>                <C>      
Interest income:
  Interest on loans                                             $ 7,027,445         6,003,470          4,949,491
  Interest on mortgage-backed securities                            204,014           257,542            230,175
  Interest on investment securities                                 443,942           583,012            520,663
  Interest on interest-bearing deposits                             212,488           222,787            214,295
  Dividends on Federal Home Loan Bank stock                          81,208            52,699             42,694
                                                                -----------         ---------          ---------
     Total interest income                                         7,969,097        7,119,510          5,957,318
                                                                -----------         ---------          ---------

Interest expense:
  Interest on deposits                                            3,474,206         3,099,417          2,760,774
  Interest on borrowings                                          1,096,056           693,214            194,431
                                                                -----------         ---------          ---------
     Total interest expense                                       4,570,262         3,792,631          2,955,205
                                                                -----------         ---------          ---------

     Net interest income before provision for loan losses         3,398,835         3,326,879          3,002,113
Provision for loan losses (note 5)                                  102,047            74,243            -
                                                                -----------         ---------          ---------
     Net interest income after provision for loan losses          3,296,788         3,252,636          3,002,113
                                                                -----------         ---------          ---------

Non-interest income:
  Loan fees and service charges                                     143,640            98,180            97,576
  Commission income                                                  55,416            77,811            57,491
  Unrealized gain (loss) on trading securities - net               (771,172)          560,809            46,484
  Gain on sale of trading securities                                 24,086            36,066             -
  Gain on sale of investment securities                              44,204            22,264            52,617
  Gain (loss) on sale of real estate owned                           (1,696)            4,908            27,821
  Gain on sale of deposit accounts (note 10)                         27,033             -                 -
  Loss from limited partnership (note 6)                            (10,529)            -                 -
  Deposit related fees                                              305,896           250,788           165,114
  Other income                                                      122,530            80,994            63,700
                                                                -----------         ---------         ---------
     Total non-interest income                                      (60,592)        1,131,820           510,803
                                                                -----------         ---------         ---------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                               AMB FINANCIAL CORP.
                                                 AND SUBSIDIARIES

                                        Consolidated Statements of Income


                                                                         Years Ended December 31,
                                                                ------------------------------------------------
                                                                    1998              1997               1996
                                                                -----------         ---------          ---------
<S>                                                             <C>                 <C>                <C>      
Non-interest expense:
  Staffing costs (notes 13 and 14)                                1,376,916         1,294,221         1,128,341
  Advertising                                                        98,036           126,016            79,967
  Occupancy and equipment expenses (note 7)                         309,385           353,116           334,286
  Data processing                                                   368,335           335,555           295,258
  Professional fees                                                 167,386           131,373           138,199
  Federal deposit insurance premiums                                 45,112            41,400           129,639
  SAIF special assessment                                              -                -               389,255
  Loss on disposition of fixed assets (note 7)                       28,798             -                 -
  Other                                                             485,415           404,848           361,532
                                                                -----------         ---------         ---------
     Total non-interest expense                                   2,879,383         2,686,529         2,856,477
                                                                -----------         ---------         ---------

Income before income taxes                                          356,813         1,697,927           656,439
  Income taxes (note 15)                                            152,171           674,874           214,286
                                                                -----------         ---------         ---------

     Net income                                                 $   204,642         1,023,053           442,153
                                                                ===========         =========         ========= 

Earnings per share -
     Basic                                                      $       .24              1.12               .43
     Diluted                                                    $       .24              1.10               .43

Dividends declared on common stock                              $       .29               .25               .12

</TABLE>

See accompanying notes to consolidated financial statements.

                                       19
<PAGE>
<TABLE>
<CAPTION>
                                                       AMB FINANCIAL CORP.
                                                        AND SUBSIDIARIES

                                   Consolidated Statements of Changes in Stockholders' Equity

                                               Three Years Ended December 31, 1998


                                                                                            Accumulated                   Common    
                                                            Additional                         Other                       Stock    
                                                 Common        Paid-in        Retained     Comprehensive     Treasury    Acquired   
                                                  Stock       Capital         Earnings        Income           Stock      by ESOP   
                                                  -----       -------         --------        ------           -----      -------   
<S>                                               <C>        <C>              <C>              <C>         <C>            <C>  
Balance at December 31, 1995                      $    -               -      6,242,782        70,721               -          -    

Comprehensive income:
  Net income                                                                    442,153                                             
  Other comprehensive income, net of tax:
    Unrealized holding loss during the year                                                   (88,335)                              
    Add: reclassification adjustment of
      losses included in net income                                                            48,000 
                                                                              ---------       -------                             

Total comprehensive income                                                      442,153       (40,335)                              
Net proceeds of common stock
   issued in stock conversion                     11,241      10,646,866                                                  (899,300) 
Purchase of treasury stock
  (56,206 shares)                                                                                            (724,718)              
Purchase of stock for RRP                                                                                                           
Amortization of award of RRP stock                                                                                                  
Contribution to fund ESOP loan                                    10,880                                                    89,930  
Dividends declared on common stock                                             (120,731)                                            
                                                  ------     ----------       ---------        ------      ----------     --------  
                                        
Balance at December 31, 1996                      11,241      10,657,746      6,564,204        30,386        (724,718)    (809,370) 

Comprehensive income:
Net income                                                                    1,023,053                                             
  Other comprehensive income, net of tax:
    Unrealized holding gain during the year                                                    54,600                               
    Less: reclassification adjustment of gains
      included in net income                                                                  (13,925) 
                                                                              ---------       -------                             
                                                           
Total comprehensive income                                                    1,023,053        40,675                               
Purchase of treasury stock
    (104,121 shares)                                                                                       (1,498,333)              
Tax benefit related to vested RRP stock                          17,000                                                             
Amortization of award of RRP stock                                                                                                  
Contribution to fund ESOP loan                                   42,322                                                     89,930  
Dividends declared on common stock                                             (230,007)                                            
                                                  ------     ----------       ---------       -------      ----------     --------  

Balance at December 31, 1997                      11,241     10,717,068       7,357,250        71,061      (2,223,051)    (719,440) 
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                                               <C>        <C>              <C>              <C>         <C>            <C>       
 Comprehensive income:
   Net income                                                                   204,642                                             
     Other comprehensive income, net of tax:
       Unrealized holding gain during the year                                                 49,076                               
       Less: reclassification adjustment of
         gains  included in net income                                                         (6,281)                              
                                                                              ---------        ------

Total comprehensive income                                                      204,642        42,795                               
Purchase of treasury stock
   (93,969 shares)                                                                                         (1,620,964)              
Amortization of award of RRP stock                                                                                                  
Contribution to fund ESOP loan                                   54,731                                                    89,930   
Dividends declared on common stock                                             (244,373)                                            
                                                  ------     ----------       ---------        ------      ----------     --------  

Balance at December 31, 1998                     $   11,241  10,771,799       7,317,519       113,856     (3,844,015)    (629,510)  
                                                 ==========  ==========       =========       =======     ==========     ========   
                                        

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                       Common                      
                                                        Stock                      
                                                      Acquired                     
                                                       by RRP               Total  
                                                       ------               -----                                                   
<S>                                               <C>                 <C>           
Balance at December 31, 1995                                 -          6,313,503     
                                                                                      
Comprehensive income:                                                                 
  Net income                                                              442,153     
  Other comprehensive income, net of tax:                                             
    Unrealized holding loss during the year                               (88,335)    
    Add: reclassification adjustment of                                               
      losses included in net income                                        48,000     
                                                                       ----------              
                                                                                      
Total comprehensive income                                                401,818     
Net proceeds of common stock                                                          
   issued in stock conversion                                           9,758,807     
Purchase of treasury stock                                                            
  (56,206 shares)                                                        (724,718)    
Purchase of stock for RRP                            (578,929)           (578,929)    
Amortization of award of RRP stock                     19,297              19,297     
Contribution to fund ESOP loan                                            100,810     
Dividends declared on common stock                                       (120,731)    
                                                  -----------          ----------              
                                                                                      
Balance at December 31, 1996                         (559,632)         15,169,857     
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                       Common                      
                                                        Stock                      
                                                      Acquired                     
                                                       by RRP               Total  
                                                       ------               ----- 
<S>                                               <C>                 <C>         
Comprehensive income:                                                             
Net income                                                              1,023,053 
  Other comprehensive income, net of tax:                                         
    Unrealized holding gain during the year                                54,600 
    Less: reclassification adjustment of gains                                    
      included in net income                                              (13,925)
                                                                       ---------- 
                                                                                       
Total comprehensive income                                              1,063,728 
Purchase of treasury stock                                                        
    (104,121 shares)                                                   (1,498,333)
Tax benefit related to vested RRP stock                                    17,000 
Amortization of award of RRP stock                    115,786             115,786 
Contribution to fund ESOP loan                                            132,252 
Dividends declared on common stock                                       (230,007)
                                                  -----------          ----------               
                                                                                  
Balance at December 31, 1997                         (443,846)         14,770,283 
                                                                                  
Comprehensive income:                                                             
   Net income                                                             204,642 
     Other comprehensive income, net of tax:                                      
       Unrealized holding gain during the year                             49,076 
       Less: reclassification adjustment of                                       
         gains  included in net income                                     (6,281)
                                                                       ---------- 
                                                                     
Total comprehensive income                                                247,437 
Purchase of treasury stock                                                        
   (93,969 shares)                                                     (1,620,964)
Amortization of award of RRP stock                    115,786             115,786 
Contribution to fund ESOP loan                                            144,661 
Dividends declared on common stock                                       (244,373)
                                                                       ---------- 
                                                                                       
Balance at December 31, 1998                         (328,060)         13,412,830 
                                                  ===========          ========== 
</TABLE>
    
          See accompanying notes to consolidated financial statements.

                                       20
<PAGE>
<TABLE>
<CAPTION>
                                                    AMB FINANCIAL CORP.
                                                     AND SUBSIDIARIES

                                           Consolidated Statements of Cash Flows

                                                                                      Years Ended December 31,
                                                                        -------------------------------------------------
                                                                               1997              1996              1995
                                                                        -------------       -----------      -----------
<S>                                                                      <C>                   <C>                <C>  
Cash flows from operating activities:
  Net income                                                             $     204,642         1,023,053          442,153
   Items not requiring (providing) cash:
     Depreciation                                                              136,566           153,426          139,808
     Amortization of cost of stock benefit plans                               205,716           205,716          120,107
     Amortization of premiums and accretion of discounts                        13,773             1,858             (434)
     Net gain on sale of securities                                            (68,290)          (58,330)         (52,617)
     Net (gain) loss on sale of real estate owned                                1,696            (4,908)         (27,821)
     Provision for loan losses                                                 102,047            74,243              -
     Loss on disposition of fixed assets                                        28,798               -                -
     Loss from limited partnership                                              10,529               -                -
     Gain on sale of deposits                                                  (27,033)              -                -
     Unrealized (gain) loss on trading securities                              771,172          (560,809)         (46,484)
     Purchase of trading securities                                           (852,648)       (1,957,532)        (493,016)
     Proceeds from sale of trading securities                                  124,399           680,940              -
     Increase (decrease) in deferred income on loans                           (76,687)          (25,349)          23,507
     Increase (decrease) in accrued and deferred income taxes                 (591,282)          347,337          (50,221)
     Increase in accrued interest receivable                                   (61,433)          (80,554)         (66,322)
     Increase (decrease) in accrued interest payable                            24,206            (8,163)          24,739
     Increase in deferred compensation                                          61,581            79,320           71,069
     Other, net                                                                 (8,354)         (188,048)          41,548
                                                                         -------------       -----------      -----------

Net cash provided by (for) operating activities                                   (602)         (317,800)         126,016
                                                                         -------------       -----------      -----------

Cash flows from investing activities:
     Proceeds from sales of investment securities                            2,793,760         4,014,689          132,617
     Proceeds from maturities of investment securities                       2,875,000           750,000        1,000,000
     Purchase of investment securities                                      (3,492,968)       (3,996,048)      (3,056,153)
     Proceeds from repayments of mortgage-backed securities                    847,014           569,678          481,548
     Purchase of mortgage-backed securities                                        -                 -         (3,034,420)
     Purchase of Federal Home Loan Bank stock                                 (608,800)         (179,800)             -
     Purchase of life insurance policies                                    (1,515,000)              -                -
     Purchase of loans                                                     (14,487,063)       (6,872,966)       (4,647,821)
     Loan disbursements                                                    (25,987,142)      (19,852,423)      (22,901,235)
     Loan repayments                                                        27,756,288        16,884,296        14,800,656
     Proceeds from sale of real estate owned                                    25,785           102,702            25,823
     Property and equipment expenditures, net                                 (121,457)         (114,553)          (41,467)
                                                                         -------------       -----------      ------------

Net cash provided for investing activities                                 (11,914,583)       (8,694,425)      (17,240,452)
                                                                         -------------       -----------      ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                    AMB FINANCIAL CORP.
                                                     AND SUBSIDIARIES

                                           Consolidated Statements of Cash Flows

                                                                                      Years Ended December 31,
                                                                        -------------------------------------------------
                                                                               1997              1996              1995
                                                                        -------------       -----------      -----------
<S>                                                                      <C>                   <C>                <C> 
Cash flows from financing activities:
     Net proceeds from sale of common stock                                        -                 -           9,758,807
     Deposit receipts                                                      151,006,489       142,882,643       122,368,827
     Deposit withdrawals                                                  (143,773,817)     (134,005,401)     (123,874,056)
     Sale of deposit accounts                                               (2,676,263)              -                -
     Interest credited to deposits                                           2,767,713         2,411,887         2,328,069
     Proceeds from borrowed money                                           15,683,000         7,000,000         8,500,000
     Repayment of borrowed money                                            (6,000,000)       (4,500,000)       (2,000,000)
     Increase (decrease) in advance payments by 
          borrowers for taxes and insurance                                    183,861            71,024           (12,283)
     Purchase of treasury stock                                             (1,620,964)       (1,498,333)         (724,718)
     Purchase of RRP stock                                                         -                 -            (578,929)
     Dividends paid on common stock                                           (244,373)         (230,007)         (120,731)
                                                                         -------------       -----------      ------------

Net cash provided by financing activities                                   15,325,646        12,131,813        15,644,986
                                                                         -------------       -----------      ------------

Net change in cash and cash equivalents                                      3,410,461         3,119,588        (1,469,450)
Cash and cash equivalents at beginning of year                               5,686,955         2,567,367         4,036,817
                                                                         -------------       -----------      ------------

Cash and cash equivalents at end of year                                 $   9,097,416         5,686,955         2,567,367
                                                                         =============       ===========      ============ 

Supplemental disclosure of cash flow information: 
Cash paid during the year for:
    Interest                                                             $   4,546,056         3,800,794         2,930,466
    Income taxes                                                               739,521           310,609           265,709
  Non-cash investing activities:
    Transfer of loans to real estate owned                               $      23,369           113,496                 -
</TABLE>

See accompanying notes to consolidated financial statements.

                                       21
<PAGE>
                               AMB FINANCIAL CORP.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


1)       Summary of Significant Accounting Policies
         ------------------------------------------

         AMB  Financial  Corp.   (the  "Company")  is  a  Delaware   corporation
         incorporated  on November  23,  1993 for the  purpose of  becoming  the
         savings  and  loan  holding  company  for  American  Savings,  FSB (the
         "Bank"). On March 29, 1996, the Bank converted from a mutual to a stock
         form of  ownership,  and  the  Company  completed  its  initial  public
         offering,  and, with a portion of the net proceeds  acquired all of the
         issued and outstanding capital stock of the Bank (the "Conversion").

         The  accounting   and  reporting   policies  of  the  Company  and  its
         subsidiaries conform to generally accepted accounting principles and to
         general  practice  within  the  thrift  industry.  The  preparation  of
         financial  statements in conformity with generally accepted  accounting
         principles  requires  management to make estimates and assumptions that
         affect the reported amounts of assets and liabilities and disclosure of
         contingent  assets  and  liabilities  at  the  date  of  the  financial
         statements and the reported  amounts of revenue and expenses during the
         reporting period. Actual results could differ from those estimates. The
         following is a description of the more  significant  policies which the
         Bank follows in preparing and  presenting  its  consolidated  financial
         statements.

         Principles of Consolidation
         ---------------------------

         The  accompanying  consolidated  financial  statements  consist  of the
         accounts of the  Company,  and its wholly  owned  subsidiary,  American
         Savings FSB, the Bank's wholly owned  subsidiary,  NIFCO,  Inc. and the
         wholly  owned  subsidiary  of  NIFCO,  Inc.,  Ridge  Management,   Inc.
         Significant intercompany balances and transactions have been eliminated
         in consolidation.

         Industry Segments
         -----------------

         The Company  operates  principally in the banking  industry through its
         subsidiary bank. As such,  substantially all of the Company's revenues,
         net income, identifiable assets and capital expenditures are related to
         banking operations.

         Investment  Securities and  Mortgage-Backed  Securities,  Available for
         Sale

         Investment securities and mortgage-backed securities available for sale
         are recorded in  accordance  with  Statement  of  Financial  Accounting
         Standards ("SFAS") No. 115 "Accounting for Certain  Investments in Debt
         and  Equity  Securities".  SFAS  115  requires  the use of  fair  value
         accounting for securities available for sale or trading and retains the
         use of the amortized  cost method for  investments  the Company has the
         positive intent and ability to hold to maturity.

         SFAS 115 requires the classification of debt and equity securities into
         one of three  categories:  held to  maturity,  available  for sale,  or
<PAGE>
         trading.  Held to maturity  securities are measured at amortized  cost.
         Unrealized  gains and  losses on trading  securities  are  included  in
         income.  Unrealized  gains and losses on available for sale  securities
         are  excluded  from  income  and  reported  net of taxes as a  separate
         component of stockholders' equity.

         The Company has currently  designated all of its investment  securities
         and mortgage-backed  securities as available for sale, and has recorded
         these  investments at their current fair values.  Unrealized  gains and
         losses are recorded in a valuation  account  which is included,  net of
         income taxes, as a separate  component of stockholders'  equity.  Gains
         and losses on the sale of securities are determined  using the specific
         identification method and are reflected in earnings when realized.

                                       22
<PAGE>
1)       Summary of Significant Accounting Policies (continued)

         Trading Securities
         ------------------

         Trading  account   securities  are  carried  at  fair  value,  and  net
         unrealized   gains  and  losses  are  reflected  in  the   consolidated
         statements of income.

         Loans Receivable and Related Fees
         ---------------------------------

         Loans are stated at the principal amount  outstanding,  net of loans in
         process,  deferred fees and the allowance for losses. Interest on loans
         is credited to income as earned and accrued only if deemed collectible.
         Loans  are  placed  on  nonaccrual  status  when,  in  the  opinion  of
         management,  the full timely  collection of principal or interest is in
         doubt. As a general rule, the accrual of interest is discontinued  when
         principal  or interest  payments  become 90 days past due or earlier if
         conditions  warrant.  When a  loan  is  placed  on  nonaccrual  status,
         previously  accrued  but unpaid  interest  is charged  against  current
         income.

         Loan origination fees are being deferred in accordance with SFAS No. 91
         "Accounting   for   Nonrefundable   Fees  and  Costs   Associated  with
         Originating  or  Acquiring  Loans and Initial  Direct Costs of Leases".
         This  statement  requires  that loan  origination  fees and direct loan
         origination  costs for a completed loan be netted and then deferred and
         amortized into interest income as an adjustment of yield.

         The Company has adopted the  provisions of SFAS No. 114  "Accounting by
         Creditors  for  Impairment of a Loan" and SFAS No. 118  "Accounting  by
         Creditors  for   Impairment  of  a  Loan  -  Income   Recognition   and
         Disclosures"  which impose certain  requirements  on the measurement of
         impaired loans. These statements apply to all loans that are identified
         for evaluation except for large groups of  smaller-balance  homogeneous
         loans that are  collectively  evaluated  for  impairment.  These  loans
         include, but are not limited to, credit card,  residential mortgage and
         consumer installment loans.

         Under these statements,  of the remaining loans which are evaluated for
         impairment  (a loan is  considered  impaired  when,  based  on  current
         information  and events,  it is probable that a creditor will be unable
         to collect all amounts due  according to the  contractual  terms of the
         loan agreement),  there were no material amounts of loans which met the
         definition of an impaired loan during the year ended  December 31, 1998
         and no loans to be evaluated for impairment at December 31, 1998.

         Allowance for Loan Losses
         -------------------------

         The  determination  of the allowance for loan losses involves  material
         estimates that are susceptible to significant  change in the near term.
         The  allowance  for loan losses is  maintained  at a level  adequate to
         provide for losses through charges to operating expense.  The allowance
         is based  upon  past  loss  experience  and  other  factors  which,  in
         management's  judgement,  deserve  current  recognition  in  estimating
         losses.  Such other factors considered by management include growth and
         composition of the loan  portfolio,  the  relationship of the allowance
         for losses to outstanding loans and economic conditions.
<PAGE>
         Management  believes that the allowance is adequate.  While  management
         uses  available  information  to  recognize  losses  on  loans,  future
         additions  to the  allowance  may be  necessary  based  on  changes  in
         economic conditions.  In addition,  various regulatory agencies,  as an
         integral part of their  examination  process,  periodically  review the
         Bank's  allowance  for losses.  Such  agencies  may require the Bank to
         recognize  additions to the allowance based on their  judgements  about
         information available to them at the time of their examination.


                                       23
<PAGE>
1)       Summary of Significant Accounting Policies (continued)

         Real Estate Owned
         -----------------

         Real estate acquired through foreclosure or deed in lieu of foreclosure
         is carried at the lower of fair value minus  estimated costs to sell or
         the related loan  balance at the date of  foreclosure.  Valuations  are
         periodically  performed  by  management  and an  allowance  for loss is
         established  by a  charge  to  operations  if the  carrying  value of a
         property exceeds its fair value minus estimated costs to sell.

         Depreciation and Amortization
         -----------------------------

         Depreciation  of office  properties and equipment is accumulated on the
         straight line basis over  estimated  lives of the various  assets.  The
         cost of leasehold  improvements  is amortized  using the straight  line
         method over the term of the lease.

         Investment in Limited Partnership
         ---------------------------------

         The  investment  in limited  partnership  is recorded  using the equity
         method of accounting.  Losses due to impairment are recorded when it is
         determined that the investment no longer has the ability to recover its
         carrying  amount.  The  benefits  of low  income  housing  tax  credits
         associated with the investment are accrued when earned.

         Income Taxes
         ------------

         The Company  files a  consolidated  federal  income tax return with the
         Bank.  The  provision for federal and state taxes on income is based on
         earnings  reported in the financial  statements.  Deferred income taxes
         arise from the  recognition  of certain items of income and expense for
         tax purposes in years different from those in which they are recognized
         in the  consolidated  financial  statements.  Deferred  tax  assets and
         liabilities  are recognized for the estimated  future tax  consequences
         attributable to differences  between the financial  statement  carrying
         amount of existing  assets and  liabilities  and their  respective  tax
         bases. Deferred tax assets and liabilities are measured using tax rates
         in  effect  for the  year in  which  those  temporary  differences  are
         expected to be recovered or settled.  The effect of deferred tax assets
         and  liabilities  of a change in tax rates is  recognized in income for
         the period that includes the enactment date.

         Consolidated Statements of Cash Flows
         -------------------------------------

         For the purposes of reporting cash flows,  the Company has defined cash
         and  cash  equivalents  to  include  cash on  hand,  amounts  due  from
         depository institutions,  interest-bearing  deposits in other financial
         institutions and federal funds sold.



                                       24
<PAGE>
1)       Summary of Significant Accounting Policies (continued)

         Earnings per Share
         ------------------

         The Company  computes its earnings per share (EPS) in  accordance  with
         SFAS No. 128  "Earnings  per  Share".  This  statement  simplifies  the
         standards for computing EPS previously  found in Accounting  Principles
         Board Opinion No. 5 "Earnings  per Share" and makes them  comparable to
         international  EPS standards.  It replaces the  presentation of primary
         EPS with a presentation of basic EPS and fully diluted EPS with diluted
         EPS.

         Basic EPS,  unlike  primary EPS,  excludes  dilution and is computed by
         dividing   income    available   to   common    stockholders   by   the
         weighted-average  number of common shares  outstanding  for the period.
         Diluted  EPS  reflects  the  potential  dilution  that  could  occur if
         securities or other  contracts to issue common stock were  exercised or
         converted into common stock or resulted in the issuance of common stock
         that then shared in the earnings of the entity.

         The  following  presentation  illustrates  basic  and  diluted  EPS  in
         accordance with the provisions of SFAS 128:
<TABLE>
<CAPTION>
                                                                                          Years Ended December 31,
                                                                            ------------------------------------------------
                                                                                  1998              1997             1996
                                                                                 -------           -------         ---------
<S>                                                                          <C>                 <C>             <C>      
         Weighted average number of common shares
           outstanding used in basic EPS calculation                             917,240           995,455         1,111,025
         Reduction for common shares not yet
           released by Employee Stock Ownership Plan                             (71,944)          (80,937)          (83,935)
                                                                                 -------           -------         ---------
         Total weighted average common shares
           outstanding for basic computation                                     845,296           914,518         1,027,090
         Add common stock equivalents for shares
            issuable under Stock Option Plans                                     20,693            13,206           -
                                                                                --------          --------         ---------
         Weighted average number of shares outstanding
            adjusted for common stock equivalents                                865,989           927,724         1,027,090
                                                                                 =======           =======         =========

         Net income                                                         $    204,642         1,023,053           442,153
         Basic earnings per share                                           $        .24              1.12               .43
         Diluted earnings per share                                         $        .24              1.10               .43

</TABLE>

         EPS for prior periods has been  restated to comply with the  provisions
         of SFAS 128.

                                       25
<PAGE>
2)       Investment Securities, Available for Sale
         -----------------------------------------

         Investment  securities available for sale are recorded at fair value in
         accordance with SFAS 115. This portfolio is summarized as follows:
<TABLE>
<CAPTION>
                                                                             Gross              Gross
                                                       Amortized          Unrealized         Unrealized          Fair
                                                          Cost               Gains             Losses            Value
                                                     ------------          -------              -----          ---------
<S>                                                   <C>                   <C>                  <C>            <C>      
         December 31, 1998
         -----------------
         United States Government securities          $  5,770,284          137,421              7,106          5,900,599
         Municipal securities                               99,562            2,684                 -             102,246
         Marketable equity securities                      129,087            5,287                 -             134,374
                                                      ------------          -------              -----          ---------

                                                      $  5,998,933          145,392              7,106          6,137,219
                                                      ============          =======             ======          =========

         December 31, 1997
         -----------------
         United States Government securities          $  8,021,870           75,027              7,580          8,089,317
         Marketable equity securities                      122,371            1,926                  -            124,297
                                                      ------------          -------              -----          ---------

                                                      $  8,144,241           76,953              7,580          8,213,614
                                                      ============          =======              =====          =========
</TABLE>

         The  contractual  maturity of the above  investments  is  summarized as
         follows:
<TABLE>
<CAPTION>
                                                         December 31, 1998                     December 31, 1997
                                                      ---------------------------         -----------------------------
                                                       Amortized           Fair            Amortized             Fair
         Term to Maturity                                 Cost             Value              Cost               Value
         ----------------                             ----------        ---------          ---------          --------- 
<S>                                                   <C>                 <C>              <C>                <C>      
         Due in one year or less                      $  500,000          513,565          3,374,816          3,375,440
         Due after one year through five years         4,349,143        4,434,592          4,285,115          4,335,968
         Due after five years through ten years          921,141          952,442            361,939            377,909
         Due after ten years                              99,562          102,246              -                  -
         Marketable equity securities                    129,087          134,374            122,371            124,297
                                                      ---------         ---------          ---------          --------- 

                                                      $5,998,933        6,137,219          8,144,241          8,213,614
                                                      =========         =========          =========          =========
</TABLE>
<PAGE>

         During the current year, the Company sold  securities  realizing  gross
         proceeds of $2,793,760, with gross gains of $44,493 and gross losses of
         $289  realized  on those  sales.  Proceeds  from  sales  of  investment
         securities  available for sale during the years ended December 31, 1997
         and 1996 were  $4,014,689  and $132,617 with gross gains of $26,113 and
         $52,617 and gross  losses of $3,849 and $-0-  realized on those  sales.
         The change in net  unrealized  gains and losses during the current year
         of  $68,913,  net of the tax effect of  $27,565,  resulted in a $41,348
         credit to stockholders' equity.



                                       26
<PAGE>
3)       Trading Securities
         ------------------

         Trading  securities  are  accounted  for at their  current fair values.
         Trading  securities at December 31, 1998 consists of equity  securities
         (thrift  common stock mutual fund  investment  with a carrying value of
         $963,654,  an equity  mutual fund with a carrying  value of $57,128 and
         common stock with a carrying value of $1,277,098)  and debt  securities
         with a carrying  value of $96,250.  Trading  securities at December 31,
         1997 also  consists of equity  securities  (thrift  common stock mutual
         fund  investment  with a carrying  value of $1,324,494 and common stock
         with  a  carrying  value  of  $1,088,473).   The  adjustment  of  these
         securities  to  their  current  fair  values  has  resulted  in  a  net
         unrealized  loss of $771,172 for the year ended December 31, 1998 and a
         net  unrealized  gain of  $577,681  and  $46,484  for the  years  ended
         December 31, 1997 and 1996.  Proceeds from sales of trading  securities
         during the years ended  December  31, 1998 and 1997 were  $124,399  and
         $680,940  with gross gains of $24,086  and $37,410 and gross  losses of
         $-0- and $1,344 realized on those sales. There were no sales of trading
         securities during the year ended December 31, 1996.

4)       Mortgage-Backed Securities, Available for Sale
         ----------------------------------------------

         Mortgage-backed  securities  available  for sale are  recorded  at fair
         value in  accordance  with SFAS 115.  This  portfolio is  summarized as
         follows:
<TABLE>
<CAPTION>
                                                                            Gross              Gross
                                                      Amortized          Unrealized         Unrealized          Fair
                                                         Cost               Gains             Losses            Value
                                                     ----------           ------             ------          ---------
<S>                                                   <C>                  <C>                   <C>          <C>      
         December 31, 1998
         -----------------
           Participation Certificates:
             FHLMC      - Fixed rate                  $2,057,661           50,070                600          2,107,131
             FNMA       - Adjustable rate                 52,356              749                  -             53,105
             GNMA       - Adjustable rate                487,888            3,207              1,951            489,144
                                                      ----------           ------             ------          ---------

                                                      $2,597,905           54,026              2,551          2,649,380
                                                      ==========           ======             ======          =========


           Weighted average interest rate                   6.78%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                                                   <C>                  <C>                   <C>          <C>      
         December 31, 1997
         -----------------
           Participation Certificates:
             FHLMC      - Fixed rate                 $2,745,886           40,333                630          2,785,589
             FNMA       - Adjustable rate                68,573              362                  -             68,935
             GNMA       - Adjustable rate               630,513            8,998                  -            639,511
                                                     ----------          -------              -----          --------- 

                                                     $3,444,972           49,693                630          3,494,035
                                                     ==========          =======              =====          =========


           Weighted average interest rate                  6.88%

</TABLE>

         There were no sales of  mortgage-backed  securities  available for sale
         during the years ended December 31, 1998,  1997 and 1996. The change in
         net unrealized gains and losses during the current year of $2,412,  net
         of the tax effect of $965, resulted in a $1,447 credit to stockholders'
         equity.



                                       27
<PAGE>
5)       Loans Receivable
         ----------------

         Loans receivable are summarized as follows:
<TABLE>
<CAPTION>
                                                                              December 31,
                                                                     ------------------------------
                                                                          1998              1997
                                                                     ------------       -----------
<S>                                                                  <C>                 <C>       
         Mortgage loans:
              One-to-four family                                     $ 63,368,978        51,566,329
              Multi-family                                              2,446,043         4,010,299
              Nonresidential                                           10,370,172         8,375,953
              Construction                                              2,522,279         4,450,189
              Land                                                      1,226,881         1,264,206
                                                                      -----------       -----------

          Total mortgage loans                                         79,934,353        69,666,976
                                                                     ------------       -----------

         Other loans:
              Loans on deposit accounts                                   171,604           164,636
              Equity lines of credit                                    3,552,371         3,258,776
              Other consumer                                            1,667,732         1,681,178
                                                                     ------------       -----------

          Total other loans                                             5,391,707         5,104,590
                                                                     ------------       -----------

         Commercial business loans                                      5,607,204         4,915,827
                                                                     ------------       -----------

          Total loans receivable                                       90,933,264        79,687,393
                                                                     ------------       -----------

         Less:
              Loans in process                                            569,028         1,974,655
              Deferred loan fees, premiums and discounts - net             95,285           209,126
              Allowance for loan losses                                   506,534           410,383
                                                                     ------------       -----------

         Loans receivable, net                                       $ 89,762,417        77,093,229
                                                                     ============       ===========

         Weighted average interest rate                                      7.77%             8.08%
                                                                             ====              ====
</TABLE>
<PAGE>
         Activity in the allowance for loan losses is summarized as follows:
<TABLE>
<CAPTION>
                                                     Years Ended December 31,
                                           -------------------------------------------- 
                                              1998              1997              1996
                                           ---------          --------         --------
<S>                                         <C>                 <C>              <C>    
         Balance, beginning of year         $ 410,383           354,631          359,535
         Provision for loan losses            102,047            74,243            -
         Charge-offs                           (5,896)          (32,942)          (4,954)
         Recoveries                                 -            14,451               50
                                            ---------          --------         --------

         Balance, end of year               $ 506,534           410,383          354,631
                                            =========          ========         ========
</TABLE>
         Delinquent loans (loans having monthly payments past due ninety days or
         more and  non-accruing)  at  December  31,  1998 and 1997  amounted  to
         approximately $475,000 and $308,000 respectively.

         For the years ended December 31, 1998 and 1997,  gross interest  income
         which would have been recorded had the non-accruing  loans been current
         in  accordance  with their  original  terms  amounted to  approximately
         $17,000 and $12,000 respectively.

         Loans to directors  and  executive  officers  aggregated  approximately
         $340,000 and $201,000 at December 31, 1998 and 1997 respectively.  Such
         loans are made on substantially  the same terms as those for other loan
         customers.


                                       28
<PAGE>
6)       Investment in Limited Partnership
         ---------------------------------

         The  investment  in limited  partnership  of $1,380,925 at December 31,
         1998  represents  a 39.60%  equity  in Pedcor  Investments  1997 - XXXI
         ("Pedcor"), a limited partnership organized to build, own and operate a
         56 unit  apartment  complex.  The Bank has  recorded  its equity in the
         losses of Pedcor in the amount of  $10,529  for the nine  months  ended
         December 31, 1998.  Condensed  financial  statements  for Pedcor are as
         follows:
<TABLE>
<CAPTION>
                                                                    December 31,
                                                                       1998
                                                                    -----------
Condensed statement of financial condition
<S>                                                                 <C>        
Assets

Cash                                                                $     1,800
Construction in progress                                              2,561,817
Land                                                                    112,000
Other                                                                       501
                                                                    -----------

  Total assets                                                        2,676,118

Liabilities

Notes payable - Bank                                                    983,000
Notes payable - Other                                                 1,500,191
Other liabilities                                                       219,516
                                                                    -----------
  Total liabilities                                                   2,702,707

Partners' equity                                                        (26,589)

  Total liabilities and partners' equity                            $ 2,676,118
                                                                    ===========

<CAPTION>

                                                                     Nine Months
                                                                        Ended
                                                                     December 31,
                                                                        1998
                                                                       --------
Condensed statement of operations
<S>                                                                    <C>     
Total revenues                                                         $  8,278
Total expenses                                                           34,867
                                                                       --------

  Net loss                                                             $(26,589)
                                                                       ========
</TABLE>
<PAGE>
7)       Office Properties and Equipment
         -------------------------------

         Office properties and equipment are summarized as follows:
<TABLE>
<CAPTION>
                                                         December 31,
                                                 ----------------------------
                                                    1998              1997
                                                 ----------       -----------
<S>                                              <C>                   <C>   
         Cost:
             Land -       Munster                $    40,669           40,669
                          Hammond                     33,300           33,300
                          East Chicago                -                 5,000
             Building -   Munster                    417,151          409,419
                          Hammond                    243,030          243,030
                          East Chicago                -                40,447
             Leasehold improvements - Dyer           148,096          148,096
             Furniture and equipment                 905,150          791,425
                                                  ----------       ----------
                                                   1,787,396        1,711,386

         Less accumulated depreciation:
             Building -   Munster                    385,442          375,366
                          Hammond                    229,916          222,748
                          East Chicago                -                12,732
             Leasehold improvements - Dyer            61,603           54,101
             Furniture and equipment                 682,612          574,709
                                                  ----------       ----------
                                                   1,359,573        1,239,656

         Net book value                          $   427,823          471,730
                                                  ==========        =========

</TABLE>

         Depreciation  of office  properties  and  equipment for the years ended
         December 31,  1998,  1997 and 1996  amounted to $136,566,  $153,426 and
         $139,808 respectively.

         The Bank has entered into a lease  agreement for its office location in
         Dyer,  Indiana.  The lease, which expires in 2000, carries an option to
         extend  for three  successive  renewals  of five  years  each.  Rent is
         payable  monthly and  adjusted  annually  based on the  consumer  price
         index.  Monthly rent at December 31, 1998 amounted to $3,176  including
         utilities.  The Bank is responsible for its proportionate share of real
         estate  taxes and  assessments  and for  maintaining  public  liability
         insurance  covering  the  premises.  Rent  expense  for the years ended
         December  31,  1998,  1997 and 1996  amounted to  $37,372,  $36,815 and
         $35,028 respectively.

         During the year ended  December 31, 1998, the Bank disposed of its East
         Chicago  facility.  The  property was donated at no cost to a local non
         profit organization.  The net book value of the property at the date of
         donation  amounted  to $28,798  and has been  recorded  as a loss.  All
         personal  property  associated with the office has been  transferred to
         other office locations.
<PAGE>
8)       Accrued Interest Receivable
         ---------------------------

         Accrued interest receivable is summarized as follows:
<TABLE>
<CAPTION>

                                                             December 31,
                                                      --------------------------
                                                        1998              1997
                                                      --------         --------
<S>                                                   <C>               <C>    
         Investment securities                        $ 74,596          102,343
         Mortgage-backed securities                     14,796           19,928
         Loans receivable                              529,930          423,274
         Allowance for uncollected interest            (24,380)         (12,036)
                                                      --------         --------

                                                      $594,942          533,509
                                                      ========         ========

</TABLE>

                                       30
<PAGE>
9)       Prepaid Expenses and Other Assets
         ---------------------------------

         Prepaid expenses and other assets consist of the following: 
<TABLE>
<CAPTION>
                                                                                    December 31,
                                                                          ----------------------------
                                                                              1998             1997
                                                                          -----------        --------- 
<S>                                                                       <C>                   <C>   
         Prepaid insurance premiums                                       $    31,853           45,430
         Prepaid pension cost                                                  58,463                -
         Other prepaid expenses                                                55,076           51,787
         Cash surrender value of life insurance policies (a)                2,584,902          976,771
         Deferred federal and state income tax benefit - net (b)              322,487                -
         Miscellaneous                                                         58,320           62,872
                                                                          -----------        --------- 

                                                                          $ 3,111,101        1,136,860
                                                                          ===========        =========
</TABLE>
         (a)      The Board of Directors has approved a non-qualified retirement
                  income plan which will provide  pre-retirement death benefits,
                  post-retirement  death  benefits,  and retirement  benefits to
                  senior  management  and the Board of  Directors.  The Bank has
                  purchased life insurance  policies on all individuals  covered
                  under the plan. The Bank is the owner and  beneficiary of each
                  policy.

                  During the current  year,  the Board of  Directors  approved a
                  second non-qualified  retirement plan for officers of the Bank
                  with  benefits  similar  to  the  first  plan.  An  additional
                  purchase of life  insurance  policies was authorized at a cost
                  of $1,515,000.

         (b)      The approximate tax effect of temporary  differences that give
                  rise to the  Company's  net deferred tax asset at December 31,
                  1998 under SFAS 109 is as follows:
<TABLE>
<CAPTION>
                                                                               Assets            Liabilities           Net
                                                                               ------            -----------           --- 
<S>                                                                         <C>                     <C>              <C>   
                  Loan fees deferred for financial
                      reporting purposes                                    $     24,272                   -          24,272
                  Accelerated book depreciation                                   30,818                   -          30,818
                  Deferred compensation                                          152,568                   -         152,568
                  Nondeductible incentive plan expense                             8,176                   -           8,176
                  Bad debt reserves established for
                      financial reporting purposes                               202,614                   -         202,614
                  Increases to tax bad debt reserves
                      since January 1, 1988                                            -             (95,406)        (95,406)
                  Unrealized gain on securities available for sale                     -             (75,905)        (75,905)
                  Unrealized loss on trading account securities                   65,598                   -          65,598
                  Other                                                            9,752                   -           9,752
                                                                            -------------           --------         -------
                                                                                
                                                                            $     493,798           (171,311)        322,487
                                                                            =============           ========         =======
</TABLE>
                                       31
<PAGE>
10)      Deposits
         --------

         Deposit accounts are summarized as follows:
<TABLE>
<CAPTION>
                                                                      December 31,
                                                             ----------------------------
                                                                 1998             1997
                                                             -----------      -----------
<S>                                                          <C>               <C>       
         Passbook accounts                                   $15,142,805       16,407,366
         Demand deposits and NOW accounts                      7,404,328        7,257,897
         Money market accounts                                 3,772,914        2,877,385
                                                             -----------      -----------

                                                              26,320,047       26,542,648
         Certificates of deposit by interest rate:
           3.01 - 4.00                                            -               257,275
           4.01 - 5.00                                         9,036,391        1,158,030
           5.01 - 6.00                                        39,205,712       25,073,809
           6.01 - 7.00                                         3,821,708       18,005,398
           7.01 - 8.00                                           607,698          657,764
           8.01 - 9.00                                             5,659            5,202
                                                             -----------      -----------

                                                             $78,997,215       71,700,126
                                                             ===========      ===========
</TABLE>

         The weighted  average rate on deposit accounts at December 31, 1998 and
         1997 was 4.48% and 4.65% respectively.

         During the current year, the Bank closed its East Chicago  facility and
         sold the related deposit accounts to Citizens  Financial  Services.  In
         the  transaction,  the Bank sold  approximately  $2,700,000  of deposit
         accounts at a one percent premium, realizing a profit of $27,033.

         A summary of certificates of deposit by maturity is as follows:
<TABLE>
<CAPTION>
                                                    December 31,
                                            ----------------------------
                                                1998             1997
                                            -----------       ---------- 
<S>                                         <C>               <C>       
         Within 12 months                   $45,333,909       36,441,807
         12 months to 24 months               5,005,048        6,685,024
         24 months to 36 months               1,072,985        1,625,298
         36 months to 48 months                 882,676          235,807
         Over 48 months                         382,550          169,542
                                            -----------       ---------- 

           Total                            $52,677,168       45,157,478
                                            ===========       ==========
</TABLE>
<PAGE>
         Interest expense on deposits consists of the following:
<TABLE>
<CAPTION>
                                                           Years Ended December 31,
                                              ---------------------------------------------
                                                  1998              1997             1996
                                              ----------         ---------        ---------
<S>                                           <C>                  <C>              <C>    
         Passbook accounts                    $  453,324           488,273          509,836
         NOW accounts                            127,794           143,687          137,192
         Money market accounts                    93,611            89,355           88,853
         Certificates of deposit               2,799,477         2,378,102        2,024,893
                                              ----------         ---------        ---------

           Total                              $3,474,206         3,099,417        2,760,774
                                              ==========         =========        =========
</TABLE>

         The aggregate  amount of deposit accounts with a balance of $100,000 or
         greater was  approximately  $13,100,000 and $10,500,000 at December 31,
         1998 and 1997,  respectively.  Deposits in excess of  $100,000  are not
         insured by the Federal Deposit Insurance Corporation.

                                       32
<PAGE>
11)      Borrowed Money
         --------------

         Borrowed  money consists of advances from the Federal Home Loan Bank of
         Indianapolis and is summarized as follows:
<TABLE>
<CAPTION>
                                                                                     December 31,
                                             Interest                     --------------------------------
         Maturity Date                         Rate                          1998                  1997
         --------------                       --------                    -----------            ---------                 
<S>                                            <C>                        <C>                    <C>      
         November 3, 1998                      5.87                       $         -            3,000,000
         December 7, 1998                      5.80                                 -            3,000,000
         December 6, 1999                      5.94                         1,000,000            1,000,000
         December 7, 1999                      5.05                         2,000,000                    -
         January 18, 2000                      5.53                         1,000,000                    -
         May 17, 2000                          5.85                         3,000,000            3,000,000
         July 25, 2000                         6.11                         2,000,000            2,000,000
         January 22, 2001                      5.56                         1,000,000                    -
         May 21, 2001                          5.90                         2,000,000                    -
         August 24, 2001                       5.71                         3,000,000                    -
         January 21, 2003                      5.68                         1,000,000                    -
         September 15, 2003                    5.26                         4,000,000                    -
         May 15, 2009                          5.93                           983,000                    -
         July 15, 2015                         5.91                           700,000                     -
                                                                          -----------            -----------

                                                                          $21,683,000            12,000,000
                                                                          ===========            ==========


         Weighted average interest rate                                          5.65%                 5.89%
                                                                                 ====                  ====
</TABLE>
         The Bank is required to maintain qualifying  collateral for the Federal
         Home Loan Bank of Indianapolis  representing  approximately 170 percent
         of  current  Bank  credit.  At  December  31,  1998,  the Bank met this
         requirement.  Assets which are eligible collateral for meeting the 170%
         coverage  requirement  include one-to-four family whole mortgage loans,
         government and agency securities including  mortgage-backed  securities
         insured or guaranteed by FHLMC,  FNMA and GNMA,  and high rated private
         mortgage-backed   securities.  The  mortgage  loans  must  not  include
         participations,  construction  loans,  loans which are not in the clear
         title of the  institution,  conventional  mortgages  with  more than 30
         years  remaining to maturity,  loans for more than 90% of the appraised
         value unless there is private or federal insurance, mortgages which are
         more than 60 days  delinquent,  or loans upon which any employee of the
         institution or the FHLB is personally liable.

         In connection  with the Company's  initial  public  offering,  the Bank
         established  an Employee  Stock  Ownership  Plan  (ESOP).  The ESOP was
         funded by the proceeds  from a loan from the Company.  The loan carries
         an  interest  rate of 6.07% and  matures in the year 2006.  The loan is
         secured by the shares of the Company  purchased with the loan proceeds.
         The Bank has committed to make  contributions to the ESOP sufficient to
         allow the ESOP to fund the debt service  requirements  of the loan.  At
         December 31, 1998, the balance of this loan amounted to $629,510.

                                       33
<PAGE>
12)      Other Liabilities
         -----------------

         Other liabilities include the following:
<TABLE>
<CAPTION>
                                                                                                      December 31,
                                                                                              ---------------------------
                                                                                                 1998               1997
                                                                                              ---------           -------
<S>                                                                                           <C>                  <C>   
         Accrued interest on deposits                                                         $  62,559            61,374
         Accrued interest on borrowings                                                          54,452            31,431
         Accrued bonus                                                                           45,000             -
         Accrued audit and accounting fees                                                       15,325            19,200
         Accrued real estate and personal property taxes                                         47,900            52,500
         Accrued federal and state income tax                                                    41,526           255,853
         Accrued pension cost                                                                     -                10,852
         Deferred federal and state income tax liability - net (a)                                -                25,938
         Deferred compensation (see note 13)                                                    381,420           319,839
         Miscellaneous accounts payable                                                         213,143           165,147
                                                                                               --------           -------

                                                                                              $ 861,325           942,134
                                                                                              =========           =======
</TABLE>
         (a)      The approximate tax effect of temporary  differences that give
                  rise to the  Company's  net deferred tax liability at December
                  31, 1997 under SFAS 109 is as follows:
<TABLE>
<CAPTION>
                                                                              Assets         Liabilities                Net
                                                                              ------         -----------                ---
<S>                                                                         <C>                                        <C>   
                  Loan fees deferred for
                     financial reporting purposes                           $  45,475                 -                45,475
                  Accelerated book depreciation                                16,900                 -                16,900
                  Deferred compensation                                       127,935                 -               127,935
                  Nondeductible incentive plan expense                          7,720                 -                 7,720
                  Bad debt reserves established
                     for financial reporting purposes                         164,155           164,155                     -

                  Increases to tax bad debt reserves
                     since January 1, 1988                                          -          (114,490)             (114,490)
                  Unrealized gain on securities available for sale                  -           (47,375)              (47,375)
                  Unrealized gain on trading account securities                     -          (231,073)             (231,073)
                  Other                                                         4,815                 -                 4,815
                                                                            ---------         ---------             ---------

                                                                            $ 367,000          (392,938)              (25,938)
                                                                            =========         =========             =========
</TABLE>

                                       34
<PAGE>
13)      Benefit Plans
         -------------

         The Bank participates in a  non-contributory  qualified defined benefit
         pension plan which covers all full-time  employees  having a minimum of
         twelve months of service, and who are at least twenty-one years of age.
         The present  funding policy is to make the minimum annual  contribution
         as required by applicable regulations.

         The  following  table sets forth the plan's  funded  status and amounts
         recognized in the Bank's consolidated  financial statements at December
         31.
<TABLE>
<CAPTION>
                                                                             1998               1997
                                                                          -----------        ---------
<S>                                                                       <C>                 <C>           
         Projected benefit obligation (actuarial present value
            of projected benefits attributed to employee service
            to date based on future compensation levels)                  $(1,141,297)        (913,624)     
         Plan assets at fair value                                          1,156,980        1,000,646      
                                                                          -----------        ---------      
         Plan assets in excess of  projected  benefit obligation               15,683           87,022      
         Unrecognized prior service cost                                       79,651           84,337      
         Unrecognized net (gain) loss                                        (122,261)        (273,295)     
         Unrecognized net transition obligation                                85,390           91,084      
                                                                          -----------        ---------      
                                                                                                            
         Prepaid (accrued) pension cost                                   $    58,463          (10,852)     
                                                                          ===========        =========      
</TABLE>
                                                                         
         Included in the  projected  benefit  obligation is an amount called the
         accumulated  benefit  obligation.  The accumulated  benefit  obligation
         represents  the  actuarial  present  value of  benefits  attributed  to
         employee service and compensation levels to date. At December 31, 1998,
         the accumulated benefit obligation was $955,981. The vested portion was
         $954,101.

         Net pension  expense for the years ended  December 31,  1998,  1997 and
         1996 is being accounted for per SFAS No. 87, "Employers' Accounting for
         Pensions" and includes the following components:
<TABLE>
<CAPTION>
                                                              Years Ended December 31,
                                                   --------------------------------------------
                                                     1998               1997             1996
                                                   --------           -------          -------
<S>                                                <C>                  <C>              <C>   
         Service cost                              $  40,233            30,648           42,713
         Interest cost                                67,636            66,579           63,953
         Actual return on assets                     (98,391)         (142,938)         (87,097)
         Net amortization and deferral                 2,780            98,758           33,052
                                                    --------           -------          -------

         Net pension expense                       $  12,258            53,047           52,621
                                                     =======           =======          =======

</TABLE>
<PAGE>
         The discount rate used in  determining  the actuarial  present value of
         the  projected  benefit  obligation  at the  beginning  of the  year to
         determine the net periodic  pension cost and at the end of the year for
         the present value of the benefit  obligation during 1998, 1997 and 1996
         was 7.5%.  The  expected  long-term  rate of return on assets  was 9.0%
         during  1998,  1997  and  1996,  and the  rate of  increase  in  future
         compensation was 3.5% in 1998, 1997 and 1996.

         The Bank has established two non-qualified  401(k) Plan for officers of
         the Bank. Both Plans provide participating  officers the opportunity to
         defer up to 6% of their  salary into a tax  deferred  accumulation  for
         future  retirement.  Under the first Plan,  the Bank was  authorized to
         match up to 50% (3% of salary) of this deferral. This Bank match ceased
         as of  December  31, 1997 and under the second  Plan,  there is no Bank
         matching  contribution.  In addition,  the Bank has also  established a
         Director Deferral Plan which provides participating  directors with the
         opportunity   to  defer  all  or  a  portion   of  their  fees  over  a
         predetermined   period.   All   deferred   non-qualified   401(k)  Plan
         contributions  and deferred  director  fees are credited  with interest
         from the Bank at the rate of 10% per year.

         Contributions  by the Bank to the 401(k)  Plan,  including  interest on
         accumulated funds was $34,798,  $36,282 and $29,178 for the years ended
         December 31, 1998, 1997 and 1996 respectively.



                                       35
<PAGE>
14)      Director, Officer and Employee Plans
         ------------------------------------

         Stock Option Plan. On October 23, 1996, the stockholders of the Company
         approved the AMB Financial  Corp. 1996 Stock Option and Incentive Plan.
         This  is an  incentive  stock  option  plan  for  the  benefit  of  the
         directors,  officers and  employees of the Company and its  affiliates.
         The number of options on shares of common  stock  authorized  under the
         Plan is 112,412, equal to 10.0% of the total number of shares issued in
         the Conversion. As of October 23, 1996, 100,042 options were granted at
         $12.75  per  share,  exercisable  at a rate of 20% per year  commencing
         October 23, 1997,  and  expiring ten years from the date of grant.  The
         following is an analysis of the stock  option  activity for each of the
         years in the three year period  ended  December  31, 1998 and the stock
         options outstanding at the end of the respective periods.
<TABLE>
<CAPTION>
                                                                                         Exercise Price
                                                                                -------------------------------
         Options                                       Number of Options        Per Share              Total
         -------                                       -----------------        ---------           -----------

<S>                                                         <C>                 <C>                 <C>         
         Outstanding at December 31, 1995                         0                                             
         Granted                                            100,042             $  12.75            $ 1,275,535 
         Exercised                                                0                                             
         Forfeited                                                0                                             
                                                            -------             --------            ----------- 
                                                                                                               
         Outstanding at December 31, 1996                   100,042                12.75              1,275,535 
         Granted                                                  0                                             
         Exercised                                                0                                             
         Forfeited                                                0                                             
                                                            -------             --------            ----------- 
                                                                                                               
         Outstanding at December 31, 1997                   100,042                12.75              1,275,535 
         Granted                                                  0                                             
         Exercised                                                0                                             
         Forfeited                                                0                                             
                                                            -------             --------            ----------- 
                                                                                                                
         Outstanding at December 31, 1998                   100,042             $  12.75            $ 1,275,535 
                                                            =======             ========            =========== 
                                                                                                                
         Exercisable at December 31, 1998                    40,016             $  12.75            $   510,204 
                                                            =======             ========            =========== 
                                                                                                                
         Options available for future                                                                           
           grants at December 1998                           12,370                                             
                                                            =======                                                     
</TABLE>
<PAGE>

         The Company has elected to follow  Accounting  Principles Board Opinion
         No. 25 "Accounting  for Stock Issued to Employees" (APB 25) and related
         Interpretations in accounting for its employee stock options. Under APB
         25, because the exercise price of the Company's  employee stock options
         equals the market price of the  underlying  stock on the date of grant,
         no compensation expense is recognized.

         The  Company  implemented  SFAS No.  123  "Accounting  for  Stock-Based
         Compensation"   during  1996.  The  Company  will  retain  its  current
         accounting  method  for  its  stock-based   compensation   plans.  This
         statement will only result in additional  disclosures  for the Company,
         and as such,  its  adoption  did not,  nor is it  expected  to have,  a
         material impact on the Company's  financial condition or its results of
         operations.


                                       36
<PAGE>
14)      Director, Officer and Employee Plans (continued)
         ------------------------------------------------

         The following  summarizes the pro forma net income as if the fair value
         method  of  accounting  for  stock-based  compensation  plans  had been
         utilized for the years ended December 31, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
                                                                                          Years Ended December 31,
                                                                              ----------------------------------------------
                                                                                  1998              1997              1996
                                                                              ----------         ---------           -------
<S>                                                                           <C>                <C>                 <C>    
         Net income (as reported)                                             $  204,642         1,023,053           442,153
         Pro forma net income                                                    138,428           956,839           431,117
         Diluted earnings per share (as reported)                                    .24              1.10               .43
         Pro forma diluted earnings per share                                        .16              1.03               .42
</TABLE>

         The pro forma results  presented above may not be representative of the
         effects reported in pro forma net income for future years.

         The fair value of the option  grants for the years ended  December  31,
         1998,  1997 and 1996 was estimated on the date of grant using the Black
         Scholes option value model,  with the following  assumptions:  dividend
         yield of  approximately  2.00%,  expected  volatility of 20%, risk free
         interest rate of 6.10% and an expected life of approximately 10 years.

         Employee Stock Ownership Plan. In conjunction with the Conversion,  the
         Bank formed an Employee Stock Ownership Plan ("ESOP").  The ESOP covers
         substantially  all employees  with more than one year of employment and
         who have  attained the age of 18. The ESOP  borrowed  $899,300 from the
         Company and purchased  89,930  common shares issued in the  Conversion.
         The Bank will make scheduled  discretionary  cash  contributions to the
         ESOP  sufficient to service the amount  borrowed.  In  accordance  with
         generally  accepted  accounting  principles,  the unpaid balance of the
         ESOP loan, which is comparable to unearned compensation, is reported as
         a reduction of stockholders' equity. Total contributions by the Bank to
         the ESOP which were used to fund principal and interest payments on the
         ESOP debt totaled  $134,207,  $139,741 and $132,084 for the years ended
         December 31, 1998, 1997 and 1996 respectively.

         On November 22, 1993, the AICPA issued  Statement of Position No. 93-6,
         "Employers'  Accounting  for  Employee  Stock  Ownership  Plans"  ("SOP
         93-6").  SOP 93-6 provides  guidance for accounting for all ESOPs.  SOP
         93-6 requires that the issuance or sale of treasury  shares to the ESOP
         be reported  when the  issuance  or sale  occurs and that  compensation
         expense be recognized  for shares  committed to be released to directly
         compensate  employees equal to the fair value of the shares  committed.
         In addition,  SOP 93-6  requires that  leveraged  ESOP debt and related
         interest expense be reflected in the employer's  financial  statements.
         Prior  practice  was to  recognize  compensation  expense  based on the
         amount  of the  employer's  contributions  to the  ESOP.  SOP  93-6  is
         effective  for fiscal years  beginning  after  December  31, 1992.  The
         application of SOP 93-6 results in fluctuations in compensation expense
         as a result of changes in the fair value of the Company's common stock;
         however,  any such compensation  expense fluctuations will result in an
         offsetting  adjustment to  additional  paid-in  capital.  For the years
         ended December 31, 1998, 1997 and 1996, additional compensation expense
         of  $54,731,  $42,322  and  $10,880  was  recognized  as  a  result  of
         implementation of this accounting principle.

                                       37
<PAGE>
14)      Director, Officer and Employee Plans (continued)
         ------------------------------------------------

         Recognition and Retention  Plan. On October 23, 1996, the  stockholders
         of the Company  approved the AMB Financial Corp.  1996  Recognition and
         Retention  Plan ("RRP").  This plan was  established to award shares to
         directors  and to  employees  in key  management  positions in order to
         provide  them with a  proprietary  interest  in the Company in a manner
         designed to encourage  such  employees to remain with the Company.  The
         number of shares authorized under the Plan is 44,965,  equal to 4.0% of
         the total number of shares issued in the Conversion.  These shares were
         purchased in the open market during the quarter ended December 31, 1996
         at a total cost of $578,929. As of October 23, 1996, 43,616 shares were
         awarded and will vest at a rate of 20% per year commencing  October 23,
         1997, while 1,349 shares were reserved for future awards.

         The $578,929  contributed to the RRP is being amortized to compensation
         expense as the plan participants become vested in those shares. For the
         years ended December 31, 1998,  1997 and 1996,  $115,786,  $115,786 and
         $19,297 have been amortized to expense.  The unamortized cost, which is
         comparable  to deferred  compensation,  is  reflected as a reduction of
         stockholders' equity.



                                       38
<PAGE>
15)      Income Taxes
         ------------

         The Company has adopted  SFAS No. 109 which  requires a change from the
         deferred method to the liability method of accounting for income taxes.
         Under the liability  method,  deferred  income taxes are recognized for
         the tax consequences of "temporary  differences" by applying  statutory
         tax  rates  applicable  to  future  years to  differences  between  the
         financial  statement  carrying amounts and tax bases of existing assets
         and liabilities.

         Among the  provisions of SFAS 109 which will impact the Bank is the tax
         treatment of bad debt  reserves.  SFAS 109 provides that a deferred tax
         asset is to be  recognized  for the bad debt  reserve  established  for
         financial  reporting  purposes and requires a deferred tax liability to
         be recorded for increase in the tax bad debt reserve  since  January 1,
         1988, to effective  date of certain  changes made by the Tax Reform Act
         of 1986 to the calculation of savings institutions' bad debt deduction.
         Accordingly,   retained   earnings  at  December   31,  1998   includes
         approximately  $1,950,000  for which no  deferred  federal  income  tax
         liability has been recognized.

         The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
                                                 Years Ended December 31,
                                     ---------------------------------------------
                                        1998               1997            1996
                                     ---------           -------          --------
<S>                                   <C>                 <C>              <C>    
         Current                      $ 529,126           551,901          249,696
         Deferred (benefit)            (376,955)          122,973          (35,410)
                                      ---------           -------          -------

                                      $ 152,171           674,874          214,286
                                      =========           =======          =======

</TABLE>
         A reconciliation  of the statutory federal income tax rate to effective
income tax rate is as follows:
<TABLE>
<CAPTION>
                                                             Years Ended December 31,
                                                   -----------------------------------------
                                                    1997               1996             1995
                                                   -----               ----             ----
<S>                                                 <C>                <C>              <C>  
         Statutory federal income tax rate          34.0%              34.0%            34.0%
         State income taxes                          6.0                5.9              5.0
         Other                                       2.6                (.2)            (6.4)
                                                   -----               ----             ----

         Effective income tax rate                  42.6%              39.7%            32.6%
                                                   =====               ====             ====
</TABLE>
<PAGE>
         Deferred  income tax expense  (benefit)  consists of the  following tax
effects of timing differences:
<TABLE>
<CAPTION>
                                                                       Years Ended December 31,
                                                           ---------------------------------------------
                                                              1998              1997               1996
                                                           ---------          --------           -------
<S>                                                         <C>                  <C>               <C>   
         Loan fees                                          $  21,203            (3,775)           29,500
         Depreciation                                         (13,918)          (15,400)           (7,900)
         Deferred compensation                                (25,089)          (31,745)          (28,400)
         Book loan loss provision (in excess of)
           less than tax deduction                            (38,459)          (33,765)            1,500
         Recapture of bad debt reserve                        (19,084)            -                 -
         Unrealized gain on trading account securities       (296,671)          212,473            18,600
         Other, net                                            (4,937)           (4,815)          (48,710)
                                                            ---------          --------           -------

                                                            $(376,955)          122,973           (35,410)
                                                            =========          ========           =======
</TABLE>

                                       39
<PAGE>
16)      Regulatory Capital Requirements
         -------------------------------

         The  Bank  is  subject  to  various  regulatory  capital   requirements
         administered by the federal banking  agencies.  Failure to meet minimum
         total   requirements  can  initiate  certain   mandatory  and  possible
         additional  discretionary  actions by regulators  that, if  undertaken,
         could have a direct material effect on the Bank's financial statements.
         Under capital  adequacy  guidelines  and the  regulatory  framework for
         prompt  correction   action,   the  Bank  must  meet  specific  capital
         guidelines  that involve  quantitative  measures of the Bank's  assets,
         liabilities,  and certain  off-balance-sheet  items as calculated under
         regulatory  accounting  practices.   The  Bank's  capital  amounts  and
         classification  are  also  subject  to  quantitative  judgments  by the
         regulators about components, risk weightings, and other factors.

         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 the total  risk-based,  tangible  and core
         capital,  as defined in the  regulations.  Management  believes,  as of
         December   31,  1998,   that  the  Bank  meets  all  capital   adequacy
         requirements to which it is subject.

         The   Bank,   according   to   federal   regulatory    standards,    is
         well-capitalized  under the regulatory  framework for prompt corrective
         action.  To be  categorized  as adequately  capitalized,  the Bank must
         maintain  minimum total  risk-based,  tangible,  and core ratios as set
         forth in the  table.  There  are no  conditions  or events  since  that
         notification  that management  believes have changed the  institution's
         category.

         At December 31, 1998 and 1997, the Bank's regulatory equity capital was
        as follows:
<TABLE>
<CAPTION>
                                                                                                           To Be Well-
                                                                                                          Capitalized Under
                                                                            For Capital                   Prompt Corrective
                                                 Actual                  Adequacy Purposes                Action Provisions
                                      -----------------------        ----------------------           -----------------------
                                         Amount         Ratio           Amount        Ratio              Amount         Ratio
                                         ------         -----           ------        -----              ------         -----
<S>                                   <C>                <C>         <C>              <C>             <C>                <C>  
         December 31, 1998

         Tangible                     $ 8,481,608        7.52%       $ 1,691,000      1.50%           $ 2,819,000        2.50%
         Core                           8,481,608        7.52          3,383,000      3.00              5,638,000        5.00
         Risk-based                     8,973,142       14.06          5,104,000      8.00              6,380,000       10.00

         December 31, 1997

         Tangible                     $ 9,492,345        9.76%       $ 1,459,000      1.50%           $ 2,432,000        2.50%
         Core                           9,492,345        9.76          2,919,000      3.00              4,864,000        5.00
         Risk-based                     9,887,728       18.51          4,274,000      8.00              5,342,000       10.00
</TABLE>
 
                                      40

<PAGE>
16)      Regulatory Capital Requirements (continued)
         -------------------------------------------

<TABLE>
<CAPTION>

                                                      Tangible            Core           Risk-based
                                                      Capital            Capital           Capital
                                                    -----------         ---------        ----------
<S>                                                 <C>                 <C>               <C>      
         December 31, 1998
         -----------------

         Stockholders' equity                       $ 8,595,464         8,595,464         8,595,464
         Unrealized gain on securities
            available for sale, net of taxes           (113,856)         (113,856)         (113,856)
         General loss allowances                          -                -                506,534
         Direct equity investments                      -                 -                 (15,000)
                                                    -----------         ---------        ----------

         Regulatory capital computed                $ 8,481,608         8,481,608         8,973,142
                                                    ===========         =========         =========
</TABLE>
         A  reconciliation  of the Bank's equity capital at December 31, 1998 is
         as follows:
<TABLE>
<CAPTION>
<S>                                                                 <C>        
         Stockholders' equity                                       $13,412,830
         Less Company stockholders' equity not available
          for regulatory capital                                     (4,817,366)

         Stockholders' equity of the Bank                           $ 8,595,464
                                                                     ==========
<CAPTION>
                                                   Tangible            Core             Risk-based
                                                   Capital            Capital             Capital
                                                 -----------         ----------        ----------

<S>                                              <C>                 <C>               <C>      
         December 31, 1997
         -----------------

         Stockholders' equity                    $ 9,563,406         9,563,406         9,563,406
         Unrealized gain on securities
          available for sale, net of taxes           (71,061)          (71,061)          (71,061)
         General loss allowances                        -                -               410,383
         Direct equity investments                    -                  -               (15,000)
                                                 -----------         ----------        ----------

         Regulatory capital computed             $ 9,492,345         9,492,345         9,887,728
                                                 ===========         =========         =========
</TABLE>
<PAGE>

         A  reconciliation  of the Bank's equity capital at December 31, 1997 is
         as follows:
<TABLE>
<CAPTION>
<S>                                                                <C>         
         Stockholders' equity                                      $ 14,770,283
         Less Company stockholders' equity not available
          for regulatory capital                                     (5,206,877)

         Stockholders' equity of the Bank                          $  9,563,406
                                                                   ============

</TABLE>
                                       41
<PAGE>
17)      Stockholders' Equity
         --------------------

         As part of the Conversion,  the Bank established a liquidation  account
         for the benefit of all  eligible  depositors  who  continue to maintain
         their deposit  accounts in the Bank after  conversion.  In the unlikely
         event of a complete  liquidation of the Bank,  each eligible  depositor
         will be  entitled  to  receive  a  liquidation  distribution  from  the
         liquidation  account,  in the proportionate  amount of the then current
         adjusted balance for deposit accounts held, before  distribution may be
         made with respect to the Bank's capital stock. The Bank may not declare
         or pay a cash  dividend to the Company  on, or  repurchase  any of, its
         capital stock if the effect  thereof would cause the retained  earnings
         of the Bank to be reduced below the amount required for the liquidation
         account. Except for such restrictions, the existence of the liquidation
         account does not restrict the use or application of retained earnings.

         In  addition,  the Bank may not  declare  or pay cash  dividends  on or
         repurchase  any of its  shares of common  stock if the  effect  thereof
         would  cause  stockholders'  equity  to  be  reduced  below  applicable
         regulatory capital maintenance  requirements or if such declaration and
         payment would otherwise violate regulatory requirements.

         Unlike  the  Bank,  the  Company  is not  subject  to these  regulatory
         restrictions on the payment of dividends to its stockholders.  However,
         the  Company's  source of funds for future  dividends  may depend  upon
         dividends received by the Company from the Bank.



                                       42
<PAGE>
18)      Financial Instruments with Off-Balance Sheet Risk
         -------------------------------------------------

         The Bank is a party to various transactions with off-balance sheet risk
         in the normal  course of business.  These  transactions  are  primarily
         commitments  to  originate  loans  and to extend  credit on  previously
         approved  unused lines of credit.  These  financial  instruments  carry
         varying degrees of credit and  interest-rate  risk in excess of amounts
         recorded in the consolidated financial statements.

         Commitments  to originate  mortgage loans of $2,864,700 at December 31,
         1998  represent  amounts which the Bank plans to fund within the normal
         commitment  period of 60 to 90 days. Of this amount,  $2,396,700 are in
         fixed  rate  commitments  with  rates  ranging  from 6.50% to 9.50% and
         $468,000  are  in  adjustable  rate  commitments.  Because  the  credit
         worthiness  of each  customer is  reviewed  prior to  extension  of the
         commitment,  the Bank  adequately  controls  its  credit  risk on these
         commitments,  as it does for loans recorded on the balance  sheet.  The
         Bank conducts all of its lending  activities  in the Northwest  Indiana
         area. Management believes the Bank has a diversified loan portfolio and
         the concentration of lending activities in these local communities does
         not  result in an acute  dependency  upon  economic  conditions  of the
         lending region.

         The Bank has  approved,  but  unused,  home  equity  lines of credit of
         approximately  $2,430,000  at December 31,  1998.  Approval of lines of
         credit is based upon underwriting standards that generally do not allow
         total  borrowings,  including the line of credit,  to exceed 75% of the
         estimated fair value of the customer's home. In addition,  the Bank has
         approved but unused equity lines of credit on various  construction and
         commercial  projects of approximately  $2,000,000 at December 31, 1998.
         The Bank also has  approved  but unused  credit card lines of credit of
         approximately $765,000.

         The  Bank is  currently  participating  with  several  local  financial
         institutions   in   credit   enhancement   agreements   with  in  state
         municipalities  to guarantee the repayment on municipal  revenue bonds.
         The Bank has accepted credit risk on these various  municipal  projects
         in  the  amount  of  $1,750,000.   These  credit  enhancements  are  in
         cooperation  with the Federal Home Loan Bank of  Indianapolis  ("FHLB")
         and have pledging  requirements  as part of the  qualifying  collateral
         agreement with FHLB.

19)      Contingencies
         -------------

         The Bank is,  from time to time,  a party to  certain  lawsuits  in the
         ordinary  course of its  business,  wherein it  enforces  its  security
         interest.  Management,  based  upon  discussions  with  legal  counsel,
         believes  that the  Company  and the Bank are not  engaged in any legal
         proceedings of a material nature at the present time.

20)      Subsequent Event
         ----------------

         On January 28, 1999, the Company  declared a quarterly cash dividend of
         $.08  per  share,  totaling  $69,586,  payable  February  26,  1999  to
         shareholders of record as of February 12, 1999.

                                       43
<PAGE>
21)      Disclosures About the Fair Value of Financial Instruments
         ---------------------------------------------------------

         The following  methods and  assumptions  were used to estimate the fair
         value  of  each  class  of  financial   instruments  for  which  it  is
         practicable to estimate that value:

         Cash and cash equivalents:  For cash and interest-bearing deposits, the
         carrying amount is a reasonable estimate of fair value.

         Investment  securities:  Fair values for  securities  held to maturity,
         available  for sale or held for trade are based on quoted market prices
         as published in financial  publications  or on quotes from  third-party
         brokers.

         Mortgage-backed  securities: Fair values for mortgage-backed securities
         are based on the  lower of quotes  received  from  various  third-party
         brokers.

         Loans  receivable:  The fair values of  fixed-rate  one-to-four  family
         residential mortgage loans are based on quoted market prices of similar
         loans sold in conjunction with  securitization  transactions.  The fair
         values for other fixed and adjustable rate mortgage loans are estimated
         using  discounted  cash flow analyses,  using interest rates  currently
         being offered for loans with similar terms and  collateral to borrowers
         of similar credit quality.

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

         Borrowed money: Rates currently  available to the Company for debt with
         similar terms and remaining  maturities are used to estimate fair value
         of existing debt.

                                       44
<PAGE>
21)      Disclosures About the Fair Value of Financial Instruments (continued)
         ---------------------------------------------------------------------

         The estimated fair value of the Company's  financial  instruments as of
         December 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
                                                                       December 31, 1998
                                                                ------------------------------
                                                                   Carrying            Fair
                                                                    Amount             Value
                                                                ------------        ----------
<S>                                                             <C>                  <C>      
         Financial assets:
           Cash and cash equivalents                            $  9,097,416         9,097,416
           Investment securities, available for sale               6,137,219         6,137,219
           Trading securities                                      2,394,130         2,394,130
           Mortgage-backed securities, available for sale          2,649,380         2,649,380
           Loans receivable                                       89,762,417        91,079,000

         Financial liabilities:
           Deposits                                             $ 78,997,215        79,302,000
           Borrowed money                                         21,683,000        21,854,490


                                                                        December 31, 1997
                                                                ------------------------------
                                                                   Carrying            Fair
                                                                    Amount             Value
                                                                ------------        ----------
<S>                                                             <C>                  <C>      
         Financial assets:
           Cash and cash equivalents                            $  5,686,955         5,686,955
           Investment securities, available for sale               8,213,614         8,213,614
           Trading securities                                      2,412,967         2,412,967
           Mortgage-backed securities, available for sale          3,494,035         3,494,035
           Loans receivable                                       77,093,229        78,919,000

         Financial liabilities:
           Deposits                                             $ 71,700,126        71,838,000
           Borrowed money                                         12,000,000        11,920,560

</TABLE>

                                       45
<PAGE>
22)      Condensed Parent Company Only Financial Statements
         --------------------------------------------------

         The  following  condensed  statement  of  financial  condition,  as  of
         December 31, 1998 and 1997 and condensed  statements of income and cash
         flows for the years  ended  December  31,  1998 and 1997 and the period
         from March 29, 1996 to December 31, 1996 for AMB Financial Corp. should
         be read in conjunction with the consolidated  financial  statements and
         the notes thereto.
<TABLE>
<CAPTION>
                         Statement of Financial Condition
                         --------------------------------

                                                            December 31,
                                                 ------------------------------
                                                     1998              1997
                                                 ------------     -------------
<S>                                              <C>                    <C>    
         Assets
         ------

         Cash and cash equivalents               $    406,803           287,378
         Trading securities                         2,394,130         2,412,967
         Loans receivable                           1,723,471         2,726,824
         Equity investment in the Bank              8,988,925        10,144,323
         Prepaid expenses and other assets            335,245             1,458
                                                 ------------     -------------

                                                   13,848,574        15,572,950
                                                 ============     =============

         Liabilities and Stockholders' Equity
         ------------------------------------

         Liabilities:
         ------------
         Accrued taxes and other liabilities           42,283           221,750
                                                 ------------       -----------

         Stockholders' Equity:
         Common stock                                  11,241            11,241
         Additional paid-in capital                10,649,606        10,649,606
         Retained earnings                          7,317,519         7,357,250
         Treasury stock                            (3,844,015)       (2,223,051)
         Common stock awarded by RRP                 (328,060)         (443,846)
                                                  -----------       -----------

           Total stockholders' equity              13,806,291        15,351,200
                                                 ------------        ----------

                                                 $ 13,848,574        15,572,950
                                                 ============        ==========
</TABLE>

                                       46
<PAGE>
22)      Condensed Parent Company Only Financial Statements (continued)
         --------------------------------------------------------------
<TABLE>
<CAPTION>
                                                     Statement of Income
                                                     -------------------

                                                                                                               Period from
                                                                                                             March 29, 1996
                                                                       Years Ended December 31,              to December 31,
                                                                          1998            1997                    1996
                                                                       ---------       ---------             ---------------
<S>                                                                    <C>               <C>                     <C>    
         Net interest income                                           $ 152,693         161,293                 207,053
         Gain on sale of trading securities                               24,086          36,066                    -
         Unrealized gain (loss) on trading securities                   (771,172)        560,809                  46,484
         Non-interest expense                                           (270,859)       (201,164)               (159,960)
                                                                       ---------       ---------                --------

         Net income (loss) before income taxes and
           equity   in earnings of subsidiaries                         (865,252)        557,004                  93,577
         Benefit from (provision for)  income taxes                      325,292        (217,815)                (40,048)
                                                                       ---------       ---------                --------

         Net income (loss) before equity
           in earnings of subsidiaries                                  (539,960)        339,189                  53,529
         Equity in earnings of subsidiaries                              744,602         683,864                 302,801
                                                                       ---------       ---------                --------

           Net income                                                  $ 204,642       1,023,053                 356,330
                                                                       =========       =========                ========
</TABLE>



                                       47

<PAGE>
22)      Condensed Parent Company Only Financial Statements (continued)
         --------------------------------------------------------------
<TABLE>
<CAPTION>
                                                     Statement of Cash Flows
                                                     -----------------------

                                                                                                         Period from
                                                                                                        March 29, 1996
                                                                    Years Ended December 31,            to December 31,
                                                                      1998            1997                   1996
                                                                 ------------      ----------           -------------

<S>                                                              <C>                <C>                      <C>    
         Operating activities:
           Net income                                            $    204,642       1,023,053                356,330
           Equity in earnings of the Bank                            (744,602)       (683,864)              (302,801)
           Amortization of cost of stock benefit plan                 115,786         115,786                 19,297
           Gain on sale of trading securities                         (24,086)        (36,066)                 -
           Unrealized (gain) loss on trading securities
              held for trade                                          771,172        (560,809)               (46,484)
           Purchase of trading securities                            (852,648)     (1,957,532)              (493,016)
           Proceeds from sale of trading securities                   124,399         680,940                  -
           Increase in other assets                                  (333,787)         (1,458)                 -
           Increase (decrease) in accrued
              taxes and other liabilities                            (179,467)        180,944                 43,546
                                                                    ---------      ----------             ---------- 

         Net cash provided for operating activities                  (918,591)     (1,239,006)              (423,128)
                                                                    ---------       ---------             ---------- 
         Investing activities:
           Purchase of capital stock of the Bank                       -               -                  (5,329,053)
           Loan disbursements                                      (4,000,000)     (2,000,000)            (3,733,530)
           Loan repayments                                          5,003,353       2,203,353                803,353
                                                                    ---------       ---------             ---------- 

         Net cash provided by (for) investing activities            1,003,353         203,353             (8,259,230)
                                                                    ---------      ----------             ----------
         Financing activities:
           Net proceeds from sale of common stock                      -               -                  10,658,107
           Purchase of treasury stock                              (1,620,964)     (1,498,333)              (724,718)
           Purchase of RRP stock                                       -               -                    (578,929)
           Dividends received from Bank                             1,900,000       2,500,000               -
           Dividends paid on common stock                            (244,373)       (230,007)              (120,731)
                                                                   ----------      ----------            -----------

         Net cash provided by investing activities                     34,663         771,660              9,233,729
                                                                  -----------      ----------            -----------
         Net increase (decrease) in cash
           and cash equivalents                                       119,425        (263,993)               551,371
         Cash and cash equivalents at
           beginning of period                                        287,378         551,371                -
                                                                  -----------      ----------            -----------

         Cash and cash equivalents at  end of period              $   406,803         287,378                551,371
                                                                  ===========      ==========            ===========
</TABLE>
                                       48

<PAGE>
                               AMB Financial Corp.
                             Stockholder Information

        Annual Meeting

        The annual meeting of stockholders  will be held at 10:30 a.m., on April
        28, 1999,  at the  Company's  corporate  office,  located at 8230 Hohman
        Avenue, Munster, Indiana.

        Stock Listing

        The Company's stock is trading over the counter, on the NASDAQ Small Cap
        Market under the symbol "AMFC".

        Price Range of Common Stock and Dividends

        The table below shows the range of high and low bid prices and dividends
        paid in fiscal 1998. These prices do not represent  actual  transactions
        and do not include retail markups, markdowns or commissions.

               Quarter Ended               High           Low        Dividends
               -------------               ----           ---        ---------

              March 31, 1998 . . . . .   17.875          16.25          $0.07
              June 30, 1998  . . . . .   19.625          17.25          $0.07
              September 30, 1998 . . .    18.25          14.125         $0.07
              December 31, 1998  . . .    14.50          11.00          $0.08

        The  Board of  Directors  will  consider  the  payment  of  future  cash
        dividends based on the results of operations and financial  condition of
        the  Company,   tax   considerations,   industry   standards,   economic
        conditions,  regulatory  restrictions,  general  business  practices and
        other factors.  See Note 16 of the Notes to the  Consolidated  Financial
        Statements for information  regarding  limitations of the Bank's ability
        to pay dividends to the Company.

        As of December 31, 1998, the Company had 360  stockholders of record and
        869,829 outstanding shares of common stock.


        Shareholder General Inquiries                 Transfer Agent

        Clement B. Knapp, Jr., President              Registrar & Transfer Co.
        AMB Financial Corp.                           10 Commerce Drive
        8230 Hohman Ave.                              Cranford, New Jersey 07016
        Munster, Indiana  46321                       (800) 456-0596
        (219) 836-5870




                                       49
<PAGE>
                               AMB Financial Corp.
                              Corporate Information

        Corporate Office

        AMB Financial Corp.                    Telephone (219) 836-5870
        8230 Hohman Avenue                     Fax       (219) 836-5870
        Munster, IN  46321                     Web site  ambfinancial.com
        

        Directors of the Board                 AMB Financial Corp.
                                               Officers

        Clement B. Knapp, Jr.                  Clement B. Knapp, Jr.
        President since 1977.                  Chairman of the Board, President
        and Chief Executive Officer


        Ronald W. Borto                        Louis A. Green
        Director since 1986.                   Senior Vice-President

        Donald L. Harle                        Daniel T. Poludniak
        Director since 1995.                   Vice-President, Treasurer and
                                               Chief Financial Officer
        John C. McLaughlin
        Director since 1979.                   Denise L. Knapp
                                               Corporate Secretary
        John G. Pastrick
        Director since 1979.

        Robert E. Tolley
        Director since 1987.


        Independent Auditors                   Corporate Counsel / Local
        Cobitz, VandenBerg & Fennessy          Abrahamson, Reed & Adley.
        9944 S. Roberts Road Suite 202         Attorneys at Law
        Palos Hills, IL  60465                 200 Russell Street
                                               Hammond, IN 46320

                                               Corporate Counsel / Washington DC
                                               Silver, Freedman & Taff, L.L.P.
                                               1100 New York Ave., N.W.
                                               Washington, DC  20005-3934


                                       50
<PAGE>


Annual and Other Report

The  Company  is  required  to file an  annual  report on Form  10-KSB  with the
Securities and Exchange Commission. Copies of the Form 10-KSB, annual report and
the Company's quarterly reports may be obtained without charge by contacting:

        Dawn L. Behrens
        AMB Financial Corp.
        8230 Hohman Avenue
        Munster, Indiana 46321
        (219) 836-5870





                                       51