EXHIBIT 13


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

                            INTRODUCTION AND OVERVIEW

Lafayette Bancorporation  (Corporation) is a one-bank holding company located in
Lafayette,  Indiana. The Corporation's  wholly-owned subsidiary,  Lafayette Bank
and Trust  Company  (Bank),  conducts  business  in sixteen  offices  located in
Tippecanoe,  White,  and  Jasper  Counties,  Indiana.  The Bank is  engaged in a
variety of financial services,  including accepting deposits;  making commercial
and consumer loans; originating mortgage loans; providing personal and corporate
trust  services;  providing  investment  advisory and  brokerage  services;  and
providing auto, homeowners, and other insurance products.

The information in this Management's  Discussion and Analysis is presented as an
analysis of the major components of the  Corporation's  operations for the three
years ended December 31, 1999,  1998,  and 1997,  and financial  condition as of
December 31, 1999 and 1998. This information  should be read in conjunction with
the  accompanying  consolidated  financial  statements  and footnotes  contained
elsewhere in this report.  The tables contained in the  Management's  Discussion
and Analysis included dollar amounts expressed in thousands.

                            MERGERS AND ACQUISITIONS

In March 1999,  the Bank purchased  three  branches in Jasper  County,  Indiana,
located in the towns of DeMotte, Remington, and Rensselaer.

The fair value of assets acquired was $71,749,000,  which consisted primarily of
commercial  loans,  the  physical   facilities,   goodwill,   and  core  deposit
intangibles.  The fair value of  liabilities  assumed  was  $117,015,000,  which
consisted  primarily  of  customer  deposits.   Since  the  Bank  acquired  more
liabilities  than assets in the  transaction,  the Bank received  $45,266,000 of
cash as of the settlement date. See Note 18 for additional information regarding
this acquisition.


This  transaction  had a  significant  effect on the  Corporation's  results  of
operations  and statement of condition for the year ended December 31, 1999, due
to the size of the  acquisition and the approximate 9 1/2 months the Corporation
managed the purchased assets and liabilities.

                              RESULTS OF OPERATIONS

The major components of the  Corporation's  operating  results for the past five
years are summarized in Table 1 - Five Year Financial Summary.

<PAGE>

                      Table 1 - FIVE YEAR FINANCIAL SUMMARY
<TABLE>

                                                                                    For the years ended December 31,

                                                             1999           1998            1997           1996           1995
                                                        -------------- -------------- --------------- -------------- --------------
                    SUMMARY OF OPERATIONS

<S>                                                         <C>            <C>             <C>            <C>            <C>
Interest income - tax equivalent  (1)                        $45,196        $35,329         $32,415        $28,739        $26,267
Interest expense                                              21,543         16,963          15,525         14,012         13,115
                                                        -------------- -------------- --------------- -------------- --------------
  Net interest income - tax equivalent (1)                    23,653         18,366          16,890         14,727         13,152
Tax equivalent adjustment (1)                                   (806)          (604)           (504)          (524)          (376)
                                                        -------------- -------------- --------------- -------------- --------------
  Net interest income                                         22,847         17,762          16,386         14,203         12,776
Provision for loan losses                                     (1,060)          (980)           (620)          (240)          (180)
Noninterest income                                             5,125          4,916           4,168          3,422          2,790
Noninterest expense                                           17,534         13,610          12,557         11,191         10,220
                                                        -------------- -------------- --------------- -------------- --------------

Income before income taxes                                     9,378          8,088           7,377          6,194          5,166
Income tax expense                                             3,027          2,711           2,569          2,103          1,791
                                                        -------------- -------------- --------------- -------------- --------------

NET INCOME                                                    $6,351         $5,377          $4,808         $4,091         $3,375
                                                        ============== ============== =============== ============== ==============


                      PER SHARE DATA (2)

Net income                                                    $1.77          $1.50           $1.34          $1.14          $0.94
Cash dividends                                                 0.43           0.37            0.34           0.28           0.22
Shareholders' equity, end of year                             12.79          11.90           10.75           9.68           8.91


              SELECTED ACTUAL YEAR-END BALANCES

Total assets                                               $645,149       $483,969        $439,029       $414,391       $372,265
Earning assets                                              580,775        449,539         406,954        378,345        333,153
Investment securities available-for-sale                     79,722         76,956          66,577         88,206         90,881
Investment securities held-to-maturity                        4,712          4,879           5,268          6,156          2,161
Loans held for sale                                           3,174         10,086           7,640          5,877          2,473
Loans                                                       489,070        353,828         312,227        268,940        228,643
Allowance for loan losses                                    (4,618)        (4,241)         (3,464)        (3,198)        (3,200)
Total deposits                                              522,247        395,546         355,195        341,550        308,652
Noninterest-bearing demand deposits                          63,206         48,657          42,752         43,579         43,950
Interest-bearing demand deposits                             67,729         54,294          47,054         47,945         46,940
Savings deposits                                            161,573        116,014          96,974         87,938         77,287
Time deposits                                               229,739        176,581         168,415        162,088        140,475
FHLB advances                                                30,027         23,854          19,886          9,265          8,905
Note payable                                                 12,950              -               -              -              -
Shareholders' equity                                         45,785         42,614          38,469         34,646         31,875


                  SELECTED AVERAGE BALANCES

Total assets                                                $600,451       $455,268        $416,957       $377,623       $351,782
Earning assets                                               554,423        422,772         387,277        348,218        323,495
Securities                                                    98,489         76,928          80,606         91,802         90,749
Loans held for sale                                            5,967          6,095           5,522          4,989          1,092
Loans                                                        440,615        327,412         289,197        242,286        220,117
Allowance for loan losses                                     (4,319)        (3,766)         (3,254)        (3,210)        (3,269)
Total deposits                                               486,489        371,067         345,739        313,621        293,916
Noninterest-bearing demand deposits                           51,229         39,312          35,728         35,655         35,822
Interest-bearing demand deposits                              62,858         48,777          47,945         45,086         45,614
Savings deposits                                             157,618        108,019          94,360         82,535         71,406
Time deposits                                                214,784        174,959         167,706        150,345        141,074
FHLB advances                                                 23,359         22,101          13,940          8,458          9,216
Note payable                                                  10,863              -               -              -              -
Shareholders' equity                                          44,499         40,814          36,530         33,133         30,125

<PAGE>

               RATIOS BASED ON AVERAGE BALANCES

Loans to deposits (3)                                          90.57%         88.24%          83.65%         77.25%         74.89%
Return on average assets                                        1.06%          1.18%           1.15%          1.08%          0.96%
Return on average equity                                       14.27%         13.17%          13.16%         12.35%         11.20%
Dividend payout ratio                                          24.25%         24.94%          24.98%         24.18%         23.05%
Leverage capital ratio                                          5.42%          8.82%           8.76%          8.59%          8.77%
Efficiency ratio (4)                                           60.93%         58.46%          59.63%         61.66%         64.11%


                          OTHER DATA
Number of employees (FTE)                                        275            220             213            205            192
Average common shares outstanding (2                       3,580,981      3,581,080       3,578,356      3,578,488      3,578,629
Cash dividends declared                                       $1,540         $1,341          $1,201           $989           $778

</TABLE>

(1) Net interest  income has been presented on both a tax equivalent and non-tax
    equivalent  basis.  The tax equivalent  basis was calculated using a 34% tax
    rate for all periods presented.  The tax equivalent  adjustment reverses the
    tax equivalent  basis in order to present net interest  income in accordance
    with generally  accepted  accounting  principles (GAAP), as reflected in the
    consolidated financial statements.

(2) Per share data has been  retroactively  adjusted to reflect stock  dividends
    and splits.  Amounts do not consider the  dilutive  effect of stock  options
    outstanding.

(3) The loan to deposit ratio calculation excludes loans held for sale.

(4) The efficiency  ratio is calculated by dividing  noninterest  expense by the
 sum of net interest  income,  on a fully tax equivalent  basis, and noninterest
 income.


The Corporation earned $6,351,000,  $5,377,000, and $4,808,000, or $1.77, $1.50,
and $1.34 per share for the years  ended  December  31,  1999,  1998,  and 1997,
respectively.  The increase in net interest  income  accounted for a significant
portion of the 18.1% and 11.8% earnings increases recorded by the Corporation in
1999 and 1998,  respectively.  Earnings in 1999 were  enhanced by  increases  in
trust, NSF, and ATM fee income, while being partially offset by increases in net
realized  loss on  securities,  the  Corporation's  provision  for loan  losses,
salaries and benefits,  intangible  amortization,  and other  general  operating
expenses primarily  attributable to the acquisition of the three branch offices.
Net gains of loans sold in the secondary  mortgage  market and fees generated by
the  Bank's  investment  brokerage  department  aided  earnings  in 1998,  while
increases  in the  Corporation's  provision  for loan  losses and  salaries  and
benefits partially offset those revenue increases.

Return on average  assets  (ROA) was  1.06%,  1.18%,  and 1.15% for the  periods
ending December 31, 1999, 1998, and 1997, respectively,  while return on average
equity (ROE) was 14.27%, 13.17%, and 13.16% for those same time periods.
<PAGE>

                               NET INTEREST INCOME

Net  interest  income is the most  significant  component  of the  Corporation's
earnings.  Net  interest  income is the  difference  between  interest  and fees
realized on earning assets, primarily loans and securities, and interest paid on
deposits and other borrowed  funds.  The net interest  margin is this difference
expressed as a percentage  of average  earning  assets.  Net interest  income is
determined  by several  factors,  including  the  volume of  earning  assets and
liabilities, the mix of earning assets and liabilities, and the overall level of
interest  rates.  Although there are a certain number of these factors which can
be controlled by management policies and actions, certain other factors, such as
the general level of credit demand,  Federal Reserve Board monetary policy,  and
changes in tax laws are beyond the control of management. Tables 1 through 4 are
an integral  part in analyzing  the  components  of net interest  income and the
changes which have occurred  between the time periods  presented.  Table 1 shows
the  Corporation's net interest income from 1995 through 1999. Table 2 - Average
Balance   Sheets  and  Interest   Rates   represent  the  major   components  of
interest-earning  assets  and  interest-bearing   liabilities.   For  analytical
purposes,  interest  income  presented  in the table has been  adjusted to a tax
equivalent  basis  assuming  a 34% tax rate for all  years.  The tax  equivalent
adjustment  recognizes  the  income  tax  savings  when  comparing  taxable  and
tax-exempt assets.

               Table 2 - Average Balance Sheets and Interest Rates

<TABLE>
                                                                        Years ended December 31,

                                       1999                                    1998                             1997
                      -------------------------------------  --------------------------------------  -------------------------------
                        Average                   Average      Average                   Average      Average               Average
         ASSETS         Balance      Interest      Rate        Balance       Interest     Rate        Balance    Interest     Rate
                      ------------  -----------  ----------  ------------    ----------------------  ---------- ----------- --------
Interest earning assets

  Securities

<S>                      <C>           <C>          <C>         <C>           <C>           <C>       <C>          <C>        <C>
    Taxable              $66,538       $3,831       5.76%       $55,973       $3,217        5.75%     $64,119      $3,857     6.02%
    Tax-exempt (1)        33,438        2,317       6.93%        20,978        1,502        7.16%      17,160       1,185     6.91%
    Unrealized loss on                                             (23)
AFS securities           (1,487)            -                                      -                    (673)           -
                     ------------  -----------  ----------  ------------    ----------------------  ---------- ----------- ---------
    Total securities      98,489        6,148       6.24%        76,928        4,719        6.13%      80,606       5,042     6.26%

  Loans (1)(2)
    Commercial           251,732       21,951       8.72%       153,030       13,916        9.09%     121,295      11,206     9.24%
    Real estate          138,295       11,587       8.38%       129,380       11,012        8.51%     118,156      10,173     8.61%
    Installment and
      other consumer      56,555        5,000       8.84%        51,097        4,975        9.74%      55,254        5,311    9.61%
    Other                      -            -                         -            -        0.00%          14            1    7.14%

                     ------------  -----------  ----------  ------------    ----------------------  ---------- ----------- ---------
      Total loans        446,582       38,538       8.63%       333,507       29,903        8.97%     294,719      26,691      9.06%

  Interest-bearing balances
    with other financial
    institutions             344           18       5.23%           153            8        5.23%           -           -
  FHLB stock               1,808          145       8.02%         1,464          117        7.99%        1,210         96      7.93%
  Federal funds sold       7,200          347       4.82%        10,720          582        5.43%       10,742        586      5.46%
                     ------------  -----------  ----------  ------------    ----------------------  ---------- ----------- ---------
  Total earning assets   554,423      $45,196       8.15%       422,772       35,329        8.36%      387,277    $32,415      8.37%
                                   ===========  ==========                  ======================              ========== =========

Noninterest earning
assets

 Allowance for loan      (4,319)                                (3,766)                                (3,254)
 Premises and equipment   9,087                                  6,417                                  6,177
 Cash and due from banks 21,830                                 16,309                                 15,520
 Accrued interest and
  other assets           19,430                                 13,536                                 11,237
                      ------------                           ------------                            ----------
 Total assets          $600,451                               $455,268                               $416,957
                      ============                           ============                            ==========
<PAGE>

LIABILITIES AND SHAREHOLDERS' EQUITY

Interest-bearing liabilities

  Deposits
    Interest-bearing
      demand deposits   $62,858         $714       1.14%       $48,777          $610        1.25%     $47,945        $657      1.37%
    Savings deposits    157,618        5,994       3.80%       108,019         4,339        4.02%      94,360       3,702      3.92%
    Time deposits       214,784       11,316       5.27%       174,959         9,957        5.69%     167,706       9,578      5.71%
                    ------------  -----------  ----------  ------------    ----------------------  ----------  ----------- ---------
   Total interest-
  bearing deposits     435,260       18,024        4.14%       331,755        14,906        4.49%     310,011      13,937      4.50%

Borrowed funds

   Short-term
     borrowings         30,168        1,358        4.50%        15,581           712        4.57%     15,129          711      4.70%
   FHLB advances        23,359        1,412        6.04%        22,101         1,345        6.09%     13,940          877      6.29%
   Note payable         10,863          749        6.89%             -             -        0.00%          -            -      0.00%
                    ------------  -----------  ----------  ------------    ----------------------  ----------  ----------- ---------
    Total borrowed
        Funds           64,390        3,519        5.47%        37,682         2,057        5.46%     29,069        1,588      5.46%
                    ------------  -----------  ----------  ------------    ----------------------  ----------  ----------- ---------
Total interest-bearing
liabilities            499,650       $21,543       4.31%       369,437       $16,963        4.59%    339,080      $15,525      4.58%
                                  ===========  ==========                  ======================              =========== =========


Noninterest-bearing
  liabilities
  Noninterest-bearing
    demand deposits     51,229                                 39,312                                 35,728
  Accrued interest and
    other liabilities    5,073                                  5,705                                  5,619
  Shareholders' equity  44,499                                 40,814                                 36,530
                     -----------                           ------------                            ----------
Total liabilities and
 shareholders' equity $600,451                               $455,268                              $416,957
                     ============                          ============                            ==========


Interest margin recap

  Net interest income and
    interest rate spread             $23,653       3.84%                    $18,366        3.76%                  $16,890      3.79%
                                   ===========  ==========                  ======================             =========== =========
  Net interest income                              4.27%                                   4.34%                               4.36%
  margin                                        ==========                           =============                         =========
</TABLE>
<PAGE>

(1)   Interest income on tax-exempt  securities and loans has been adjusted to a
      tax equivalent  basis using a marginal  federal income tax rate of 34% for
      all years.

(2)   Nonaccrual  loans are included in average loan  balances and loan fees are
      included in interest  income.  Loan fees were $1,192 for 1999,  $1,090 for
      1998, and $912 for 1997.

Table 3 - Net Interest Earning Assets  illustrates net  interest-earning  assets
and liabilities for 1999, 1998, and 1997.

<TABLE>
                                          Table 3 - Net Interest-Earning Assets
                          illustrates net interest-earning assets and liabilities for 1999, 1998, and 1997.

                                                                 1999                   1998                  1997
<S>                                                     <C>                    <C>                   <C>
                                                        ---------------------  ---------------------  --------------------
Average interest-earning assets.......                               $554,423               $422,772              $387,277
Average interest-bearing liabilities..                                499,650                369,437               339,080
                                                         ---------------------  ---------------------  --------------------

              Net interest-earning assets                             $54,773                $53,335               $48,197
                                                         =====================  =====================  ====================
</TABLE>


Table 4 - Volume and Rate Analysis  depicts the dollar effect of volume and rate
changes  from  1997  through  1999.   Variances  which  were  not   specifically
attributable to volume or rate were allocated  proportionately  between rate and
volume  using  the  absolute  values  of  each as a  basis  for the  allocation.
Nonaccrual  loans were included in the average loan balances used in determining
the yields.

                                             Table 4 - Volume/Rate Analysis
<TABLE>

                                                1999-1998                                       1998-1997
                                 -----------------------------------------      ------------------------------------------
<S>                               <C>           <C>           <C>                 <C>          <C>            <C>
                                                 Change        Change                            Change        Change
                                    Total        Due To        Due To               Total        Due To        Due To
INTEREST INCOME                     Change       Volume         Rate               Change        Volume         Rate
---------------
                                 -----------------------------------------      ------------------------------------------

Loans                                  $8,635        $9,796      ($1,161)              $3,212        $3,480        ($268)
Securities
  Taxable                                 614           534           80                (640)          (439)       ( 201)
  Tax-exempt                              815           865          (50)                317            272           45

Interest-bearing balances with
 other financial institutions              10            10            -                   8              8            -
FHLB stock                                 28            28            -                  21             20            1
Federal funds sold and overnight
  balances                               (235)         (175)         (60)                 (4)            (1)          (3)
                                 -----------------------------------------      ------------------------------------------

Total interest income                  $9,867       $11,058      ($1,191)              $2,914        $3,340        ($426)
                                 =========================================      ==========================================
</TABLE>

<PAGE>

INTEREST EXPENSE
<TABLE>
<S>                                      <C>           <C>          <C>                 <C>             <C>         <C>
Interest-bearing DDA                     $104          $164         ($60)               ($47)           $11         ($58)
Savings deposits                        1,655         1,897         (242)                637            547           90
Time deposits                           1,359         2,140         (781)                379            413          (34)
Short-term borrowings                     646           657          (11)                  1             21          (20)
FHLB advances                              67            76           (9)                468            498          (30)
Note payable                              749           749            -                   -              -            -
                                 -----------------------------------------      ------------------------------------------

Total interest expense                 $4,580        $5,683      ($1,103)              $1,438        $1,490         ($52)
                                 =========================================      ==========================================

Net Interest income                    $5,287        $5,375         ($88)              $1,476        $1,850        ($374)
                                 =========================================      ==========================================
</TABLE>


Net  interest  income on a tax  equivalent  basis for 1999 was 28.8% higher than
that for 1998,  while the net  interest  margin for 1999 was  4.27%,  or 7 basis
points lower than the prior year. Tax  equivalent  net interest  income was 8.7%
higher in 1998  compared to 1997, as the net interest  margin  decreased 2 basis
points to 4.34% from that of 1997.


The growth  experienced  by the  Corporation,  predominately  through the branch
acquisition in mid-March  1999,  led to higher net interest  income in 1999. The
key element in the branch  acquisition  was the  successful  deployment of funds
obtained in that transaction.  Virtually all of the $45,266,000 cash received in
the branch  acquisition  had been  shifted  into the loan  portfolio,  primarily
commercial loans, as of June 30, 1999. Even though the interest rate environment
remained relatively low during the first half of the year, the yields associated
with  loans were at a higher  rate than any other  investment  alternative.  The
interest rate environment increased slightly during the latter half of the year,
with the most significant  increase of the year occurring on November 16th, when
the Federal Open Market  Committee (FOMC) raised interest rates 50 basis points.
However, the lower and more stable interest rate environment that existed during
the  first 10 1/2  months  led to a lower  net  interest  margin  for the  year.
Overall, the increase in net interest-earning  asset volume during the year more
than adequately compensated for the lower yields.

While the 1999 interest rate  environment  was stable for most of the year,  the
interest rate  environment  for 1998 was moving  downward to lower levels.  This
declining  trend in the interest  rate  environment  resulted in earning  assets
repricing at a faster pace and at a lower  interest  rate than the repricing and
maturity  of  certain  interest-bearing  liabilities,  which  led to a lower net
interest margin.  However, the increase in net interest-earning assets more than
offset the effect of declining  rates,  resulting  in an increased  net interest
income.


                   PROVISION FOR LOAN LOSSES AND ASSET QUALITY

The provision for loan losses represents charges made to earnings to maintain an
adequate  allowance  for loan losses.  The  allowance is maintained at an amount
believed to be sufficient to absorb  possible  losses that may be experienced in
the  credit  portfolio.   Factors  considered  in  establishing  an  appropriate
allowance  include:  a careful  assessment  of the  financial  condition  of the
borrower;  a realistic  determination  for the value and adequacy of  underlying
collateral; the condition of the local economy and the condition of the specific
industry of the borrower;  a comprehensive  analysis of the levels and trends of
loan categories; and a review of delinquent and classified loans.

The Corporation  maintains a comprehensive  loan review program to evaluate loan
administration,  credit  quality,  and loan  documentation.  This  program  also
includes  a  regular  review  of  problem  loan  reports,   delinquencies,   and
charge-offs.  The  adequacy of the  allowance  for loan losses is evaluated on a
quarterly basis.  This evaluation  focuses on specific loan reviews,  changes in
the type and  volume of the loan  portfolio  given the  current  and  forecasted
economic  conditions,  and historical loss experience.  Any one of the following
conditions  may  necessitate  a review of a specific  loan:  a question has been
raised whether the customer's cash flow or net worth are sufficient to repay the
loan; the loan has been criticized in a regulatory  examination;  the accrual of
interest  has been  suspended;  or  other  reasons  where  either  the  ultimate
collectibility  of the loan is in  question,  or the loan has other  special  or
unusual characteristics which require special monitoring.
<PAGE>


Activity in the  allowance for loan losses is reflected in Table 5 - Analysis of
Allowance  for Loan  Losses.  The recorded  values of loans and leases  actually
removed from the consolidated balance sheets are referred to as charge-offs and,
after  netting out  recoveries  on  previously  charged-off  assets,  become net
charge-offs.   The  Corporation's   policy  is  to  charge-off  loans  when,  in
management's  opinion,  the loan is  deemed  uncollectible,  although  concerted
efforts continue to be made to maximize recovery.


                 Table 5 - Analysis of Allowance for Loan Losses

<TABLE>
                                               1999              1998               1997               1996              1995
                                         ----------------- -----------------  ------------------ ----------------- -----------------

<S>                                        <C>               <C>                 <C>               <C>               <C>
Balance at beginning of year                   $4,241            $3,464              $3,198            $3,200            $3,309

Loans charged-off

  Commercial and agricultural                    (363)              (37)               (126)             (202)             (294)
  Real estate                                    (114)                0                   0                 0                 0
  Installment                                    (352)             (374)               (424)             (343)             (262)
                                         ----------------- -----------------  ------------------ ----------------- -----------------
           Total charge-offs                     (829)             (411)               (550)             (545)             (556)
                                         ----------------- -----------------  ------------------ ----------------- -----------------

Charge-offs recovered

  Commercial and agricultural                      49               124                 126               250               190
  Real estate                                      35                 0                   0                 0                 0
  Installment                                      62                84                  70                53                77
                                         ----------------- -----------------  ------------------ ----------------- -----------------
            Total recoveries                      146               208                 196               303               267
                                         ----------------- -----------------  ------------------ ----------------- -----------------

Net loans charged-off                            (683)             (203)               (354)             (242)             (289)
Current year provision                          1,060               980                 620               240               180
                                         ----------------- -----------------  ------------------ ----------------- -----------------

Balance at end of year                         $4,618            $4,241              $3,464            $3,198            $3,200
                                         ================= =================  ================== ================= =================

Loans at year end, excluding
  loans held for sale                        $489,070          $353,828            $312,227          $268,940          $228,643

Ratio of allowance to loans
  at year end                                    0.94%             1.20%               1.11%             1.19%             1.40%

Average loans                                $440,615          $327,412            $289,197          $242,286          $220,117

Ratio of net loans charged-off
  to average loans                               0.16%             0.06%               0.12%             0.10%             0.13%

</TABLE>

<TABLE>
                                                          Allocation of allowance for loan losses at December 31,
                                               1999              1998               1997               1996              1995
                                         ----------------- -----------------  ------------------ ----------------- -----------------

<S>                                                <C>               <C>                 <C>               <C>                 <C>
Commercial and agricultural                        $2,430            $2,499              $1,200            $1,245              $942
Real estate                                           293               486                 340                50                50
Installment                                           601               570                 560               550               550
Unallocated                                         1,294               686               1,364             1,353             1,658
                                         ----------------- -----------------  ------------------ ----------------- -----------------
    Total                                          $4,618            $4,241              $3,464            $3,198            $3,200
                                         ================= =================  ================== ================= =================
</TABLE>
<PAGE>

Nonperforming  assets  and  their  relative  percentages  to loan  balances  are
presented in Table 6 - Nonperforming  Assets.  The level of nonperforming  loans
and leases is an important  element in assessing  asset quality and the relevant
risk in the credit  portfolio.  Nonperforming  loans include  nonaccrual  loans,
restructured loans and loans delinquent 90 days or more. Loans are evaluated for
nonaccrual when payments are past due over 90 days.  Another element  associated
with  asset  quality  is  other  real  estate  owned  (OREO),  which  represents
properties acquired by the Corporation through loan defaults by customers.

<TABLE>
                                              Table 6 - Nonperforming Assets

                                                                          As of December 31,
                                             ------------------------------------------------------------------------------
                                                 1999             1998              1997            1996          1995
                                             -------------  -----------------  ---------------- ------------- -------------
Principal balance

<S>                                                  <C>              <C>                 <C>           <C>           <C>
  Nonaccrual                                         $622             $1,468              $127          $178          $381
  Restructured                                        114                197               350           482           661
  90 days or more past due                            584                775               505           735           796
                                             -------------  -----------------  ---------------- ------------- -------------

         Total nonperforming loans                 $1,320             $2,440              $982        $1,395        $1,838
                                             =============  =================  ================ ============= =============

Nonperforming loans as a percent
   of loans                                         0.27%              0.69%             0.31%         0.52%         0.80%

Other real estate owned                              $487                $22              $230          $116          $436

OREO as a percent of loans                          0.10%              0.01%             0.07%         0.04%         0.19%

Allowance as a percent of
  nonperforming loans                             349.85%            173.81%           352.75%       229.25%       174.10%


For nonaccrual and restructured loans
for the years ended December 31:

   Interest income under

      original terms                                  $53               $146               $55           $74          $113
   Interest income which
      was recorded                                     20                 17                27            56            50
</TABLE>



The  consolidated  provision  for loan  losses  was  $1,060,000,  $980,000,  and
$620,000  for  1999,  1998,  and  1997,  respectively.  Despite  gross  and  net
charge-offs  during  1999 being at their  highest  level in the last five years,
management  believes the  charge-off  levels to be  reasonable  for the size and
composition  of the  portfolio,  and that  overall  asset  quality  is good,  as
indicated  by the decline in  nonperforming  loan  totals and lower  delinquency
ratios at year-end, as further explained below.


In  connection  with the loans  acquired  in the  branch  acquisition,  a credit
valuation account was established by the Corporation. This account is a purchase
accounting  adjustment  and was recorded as a contra asset in the loan principal
balance  section of the balance sheet.  The purpose of this account is to absorb
losses realized with respect to the actual loans  purchased in the  transaction.
The balance of the credit valuation account was $562,000 at December 31, 1999.

<PAGE>

During the first half of 1999, the loan loss reserve process was refined,  which
included the  implementation  of a revised loan grading system,  a more detailed
analysis of impaired loans, and a more  comprehensive  watch list. This improved
process  also  led to the  Corporation  taking  a more  aggressive  approach  in
charging-off loans, as evidenced by approximately $476,000, or 70%, of the total
net charge-offs  during the year occurring by June 30, 1999. The majority of the
increased  charge-off  activity  during the year occurred in the  commercial and
mortgage loan portfolios.

Management increased the provision for loan losses to $1,060,000 for 1999 due to
loan growth and increased charge-offs.  Although the ratio of allowance to loans
at  year-end  declined  to .94%  (adjusted  to 1.06% with the  inclusion  of the
aforementioned  credit  valuation  balance),  the  allowance  as  a  percent  of
nonperforming  loans,  along with the  unallocated  portion of the allowance for
loan losses remain at satisfactory levels.

The  unallocated  portion of the  allowance for loan losses  increased  from the
prior year,  primarily due to the lower  nonaccrual  loan totals and the reduced
pork producer risks as a result of improved hog prices.

The $360,000  increase in the 1998  provision for loan losses was primarily as a
result of continued loan growth and increasing  nonperforming  loan totals.  The
combination of higher  nonaccrual  loan balances and the  identification  of the
potential  risks  associated  with pork  producer  credits led to a shift in the
allocation  of the  allowance  for  loan  losses  from  the  unallocated  to the
commercial and agricultural category.

Total  nonperforming  loans  declined  45.9% at December 31, 1999 as compared to
December 31, 1998.  Although three commercial loan borrowers with loans totaling
approximately  $69,000 were added to the nonaccrual  list,  eight borrowers were
removed  from  the  nonaccrual   list  as  a  result  of  charge-offs   totaling
approximately $276,000;  transferring assets to other real estate owned totaling
approximately $465,000; and pay-offs which totaled approximately $250,000. Loans
past due 90 days or more  declined  $191,000 due to one mortgage  loan  customer
bringing the credit to current status.

Management believes six credits totaling  approximately  $646,000 as of December
31, 1999 met the criteria for an impaired  loan. A specific  reserve  allocation
has been  made in the  allowance  for loan  losses  for the  excess  of the loan
balance  over the  estimated  discounted  future cash flows in  accordance  with
Statements of Financial  Accounting  Standards No. 114 and 118.  Application  of
these accounting  statements has not had a material effect on the  Corporation's
financial statements.

As  mentioned  above,  the  $465,000  increase  in 1999 in OREO  related  to the
foreclosure of three  properties  from two  customers.  As of December 31, 1999,
there were a total of five parcels of other real estate held by the  Corporation
with a remaining total book value of $487,000.

Management believes loans classified for regulatory purposes as loss,  doubtful,
substandard,  or special  mention  that are not  included  in  nonperforming  or
impaired  loans do not  represent or result from trends or  uncertainties  which
will have a material impact on future operating results,  liquidity,  or capital
resources.

In  addition  to loans  classified  for  regulatory  purposes,  management  also
designates certain loans for internal  monitoring  purposes in a watch category.
Loans may be placed on management's watch list as a result of delinquent status,
concern about the borrower's financial condition, or the value of the collateral
securing the loan, substandard classification during regulatory examinations, or
simply as a result of  management's  desire to monitor more closely a borrower's
financial condition and performance. Watch category loans may include loans with
loss  potential  that are still  performing  and  accruing  interest  and may be
current under the terms of the loan agreements;  however,  management may have a
significant  degree of  concern  about the  borrowers'  ability to  continue  to
perform  according  to the terms of the loans.  Loss  exposure on these loans is
typically evaluated based primarily upon the estimated  liquidation value of the
collateral  securing the loans.  Also,  watch category loans may include credits
which,  although  adequately  secured and performing,  reflect past  delinquency
problems or unfavorable financial trends exhibited by the borrowers.
<PAGE>

All watch list loans are subject to  additional  scrutiny  and  monitoring.  The
Corporation's  philosophy  encourages  loan officers to identify  borrowers that
should be monitored in this fashion and believes this process ultimately results
in the identification of problem loans in a more timely fashion.

As of December 31, 1999, the  Corporation  had loans totaling  $5,204,000 on its
watch list which were not included in impaired or nonperforming loans.

                         NONINTEREST INCOME AND EXPENSE

A  listing  of  noninterest  income  and  expense  from  1997  through  1999 and
percentage changes between years is included in Table 7 - Noninterest Income and
Expense.

                     Table 7 - NONINTEREST INCOME & EXPENSE
<TABLE>

                                                                   % change                          % change
                                                    1999           from '98            1998           from '97         1997
                                               ---------------- ---------------- ------------------ -------------------------------
Noninterest Income
<S>                                                     <C>              <C>                  <C>         <C>                 <C>
Income from fiduciary activities                        $1,134           17.63%               $964        8.93%               $885
Service charges on deposit accounts                      1,581           20.78%              1,309        4.39%              1,254
Other operating income                                   1,612           16.64%              1,382        9.16%              1,266

                                               ---------------- ---------------- ------------------ ------------ ------------------
                                                         4,327           18.39%              3,655        7.34%              3,405

Net gain on loan sales                                     942          -24.94%              1,255       70.52%                736
Net realized gain/(loss) on securities                   (144)        -2500.00%                  6      -77.78%                 27
                                               ---------------- ---------------- ------------------ ------------ ------------------

           Total noninterest income                     $5,125            4.25%             $4,916       17.95%             $4,168
                                               ================ ================ ================== ============ ==================
</TABLE>



<TABLE>
                                                                   % change                          % change
                                                    1999           from '98            1998           from '97         1997
                                               ---------------- ---------------- ------------------ -------------------------------
Noninterest Expense
<S>                                                     <C>              <C>                <C>           <C>               <C>
Salaries and employee benefits                          $9,836           19.86%             $8,206        9.65%             $7,484
Occupancy expenses, net                                  1,073           20.43%                891        1.02%                882
Equipment expenses                                       1,314           24.67%              1,054        8.66%                970
Other operating expenses                                 5,311           53.54%              3,459        7.39%              3,221
                                               ---------------- ---------------- ------------------ ------------ ------------------

          Total noninterest expense                    $17,534           28.83%            $13,610        8.39%            $12,557
                                               ================ ================ ================== ============ ==================
</TABLE>

Nearly all noninterest income and expense categories were significantly impacted
by the Jasper County branch acquisition,  as the Corporation  operated these new
locations for 9 1/2 months during 1999.


Noninterest  income  increased 4.3% to $5,125,000 in 1999 compared to $4,916,000
in 1998.  Primary  sources of  noninterest  income were  income  from  fiduciary
activities,  service  charges on  deposit  accounts,  and net gain on  secondary
market  mortgage loan sales.  Excluding the net loss on securities,  noninterest
income increased 7.2% to $5,269,000.
<PAGE>

Income from fiduciary  activities  increased  17.6% during 1999. The majority of
the increase was attributed to the  following:  another strong year in the stock
market gave rise to the increase in overall  market values of trust  assets,  an
adjustment in the departmental fee structure,  and an increasing  number of high
market value accounts obtained  throughout the year.  Service charges on deposit
accounts  increased  20.8%  during 1999.  Approximately  90% of the increase was
accounted for by the expansion  into the Jasper County market.  Other  operating
income rose 16.6% during the year primarily due to the  continuing  increases in
ATM fee income,  as total ATM transactions  increased 19.3% from the prior year.
Also, the secondary market mortgage  department  recorded an increase of $78,000
as a result of certain investor volume  incentives.  And while the Jasper County
market  contributed an approximate 10.0% increase in this category,  it was more
than offset by the 10.8% decline in gross fees recorded by the Bank's Investment
Center,  a full  service  brokerage  operation  offered  through  Raymond  James
Financial Services, Inc., member NASD/SIPC.

Net gain on secondary  market  mortgage  loan sales  declined  24.9% during 1999
compared to the previous year. The rising interest rate  environment  slowed new
home growth as well as refinancing  activities,  which led to an 11.2% reduction
in annual sales volume.  Any increase from the origination and sales of mortgage
loans is extremely  dependent upon the current interest rate environment as well
as customer  demand.  The  Corporation has been  developing  relationships  with
builders and real estate agents,  and, given a stable or declining interest rate
environment,  management  expects this area of activity to be a continued source
of significant income. The statement in this paragraph relating to the secondary
market  mortgage  department and its operations is a  forward-looking  statement
which may or may not be accurate due to the  impossibility of predicting  future
economic and business events, and the level of future interest rates.

As  explained  in more  detail  in the  "Securities"  section,  the  Corporation
executed  two  bond  swaps  which  resulted  in  net  losses,  but  enabled  the
Corporation to generate higher yields and improve its asset/liability management
position.

Noninterest  income during 1998 increased 17.9% compared to 1997. The same areas
of growth that  occurred  in 1999  occurred in 1998 as well.  New  accounts,  an
increase in the fee structure,  and the exceptional year in the stock market led
to an 8.9% increase in income from fiduciary  activities.  In a similar fashion,
service charges on deposit accounts  increased 4.4% due to growth in the deposit
base and a higher number of accounts being assessed fees. Other operating income
rose 9.2% during 1998 due to higher gross investment center fees and ATM income.

Total noninterest expense rose 28.8% to $17,534,000 in 1999 compared to the 8.4%
increase  recorded in 1998.  However,  as a percentage of total average  assets,
total noninterest  expense remained constant at approximately  2.9% for 1999 and
1998.  Salaries and employee  benefits  increased  19.9% during 1999. The Jasper
County acquisition  accounted for approximately 70% of the $1,630,000  increase,
while the  remaining  portion was  attributable  to  additional  overtime  costs
associated with acquisition-related  activities, such as pre and post settlement
issues,  data conversion,  and training.  Additional  personnel and increases in
health insurance costs were also  contributing  factors in the remaining portion
of the increase.

Net  occupancy  expense rose 20.4%  during 1999  primarily as a result of higher
maintenance  costs and upward  adjustments  in branch rent  expense.  The Jasper
County market accounted for approximately 36% of the total $182,000 increase.

Equipment  expense   increased  24.7%  in  1999   predominately  due  to  higher
depreciation expense associated with the various technology upgrades implemented
during the year. In addition to laying the infrastructure foundation for network
systems,  the Corporation also installed new communication  systems,  an imaging
system,  teller  systems,  the equipment  necessary to operate the Jasper County
branches, and made ongoing upgrades for Y2K compliance.

Other  operating  expenses  increased  53.5% in 1999 when  compared to the prior
year.  In general,  most  overhead  expense  increases,  including  the $516,000
increase  in  the  intangible  amortization  expense,  was  attributable  to the
transition and ongoing  operational  costs  associated with the operation of the
newly acquired Jasper County branches.
<PAGE>
Total noninterest  expense increased 8.4% in 1998 compared to 1997 predominately
due to higher  salary  and  employee  benefit  costs.  The full  year  effect of
personnel  gained in the  Monticello  branch  acquisition,  in addition to added
personnel in the secondary market department, along with higher commissions paid
to secondary  market loan  originators and Investment  Center personnel were the
leading  factors  in this  category.  Higher  maintenance  costs  along  with an
increased  marketing and advertising  campaign were the most  significant  items
leading to the increases in equipment and other operating expenses during 1998.

                                  INCOME TAXES

The Corporation  records a provision for income taxes currently  payable,  along
with a provision  for those taxes  payable in the future.  Such  deferred  taxes
arise  from  differences  in timing of  certain  items for  financial  statement
reporting  rather than income tax reporting.  The major  difference  between the
effective tax rate applied to the Corporation's  financial  statement income and
the  federal  statutory  rate of 34% is the  result of  interest  on  tax-exempt
securities and loans.

The Corporation  had regular tax and alternative  minimum tax net operating loss
carryforwards which were fully utilized during 1998.

The Corporation's  effective tax rate was 32.3%, 33.5%, and 34.8% in 1999, 1998,
and 1997, respectively. Further tax information regarding the Corporation can be
found in Note 1 and Note 12 to the consolidated financial statements.

                             INTERIM FINANCIAL DATA

Table 8 - Interim  Financial Data is a detailed  summary on a quarterly basis of
the results of operations  for the years ended December 31, 1999 and 1998. For a
fair  and  consistent   presentation,   these  results   contain  all  necessary
restatements  in connection with stock splits and dividends that occurred in the
periods presented.

<TABLE>
                                              Table 8 - INTERIM FINANCIAL DATA

                                                                                 Quarter Ended

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

                                                       December          September             June              March
              1999                                        31                 30                 30                 31
              -----
                                                    ----------------  -----------------  -----------------  -----------------
<S>                                                         <C>                <C>                <C>                 <C>
Interest income                                             $11,947            $11,693            $11,267             $9,483
Interest expense                                              5,848              5,671              5,452              4,572
                                                    ----------------  -----------------  -----------------  -----------------
  Net interest income                                         6,099              6,022              5,815              4,911
Provision for loan losses                                       420                270                190                180
Noninterest income                                            1,221              1,359              1,349              1,196
Noninterest expense                                           4,904              4,473              4,500              3,657
                                                    ----------------  -----------------  -----------------  -----------------
  Income before income taxes                                  1,996              2,638              2,474              2,270
Income taxes                                                    564                888                824                751
                                                    ----------------  -----------------  -----------------  -----------------
Net income                                                   $1,432             $1,750             $1,650             $1,519
                                                    ================  =================  =================  =================
Net income per share
 Basic earnings per share                                     $0.40              $0.49              $0.46              $0.42
 Diluted earnings per share                                   $0.39              $0.48              $0.45              $0.41

Weighted average shares (1)
 Weighted average shares                                  3,585,221          3,581,221          3,579,033          3,578,501
 Diluted average shares                                   3,669,330          3,672,149          3,669,961          3,671,903

  Stock price (2)                                            $26.25             $26.83             $26.67             $27.33

<PAGE>

              1998

Interest income                                              $9,189             $8,794             $8,490             $8,252
Interest expense                                              4,370              4,387              4,177              4,029
                                                    ----------------  -----------------  -----------------  -----------------
  Net interest income                                         4,819              4,407              4,313              4,223
Provision for loan losses                                       440                180                180                180
Noninterest income                                            1,129              1,354              1,212              1,221
Noninterest expense                                           3,682              3,357              3,321              3,250
                                                    ----------------  -----------------  -----------------  -----------------
  Income before income taxes                                  1,826              2,224              2,024              2,014
Income taxes                                                    581                758                683                689
                                                    ----------------  -----------------  -----------------  -----------------
Net income                                                   $1,245             $1,466             $1,341             $1,325
                                                    ================  =================  =================  =================
Net income per share
 Basic earnings per share                                     $0.35              $0.41              $0.37              $0.37
 Diluted earnings per share                                   $0.34              $0.40              $0.37              $0.36

Weighted average shares (1)
 Weighted average shares                                  3,581,080          3,581,080          3,581,080          3,581,080
 Diluted average shares                                   3,660,862          3,635,234          3,630,245          3,623,108

  Stock price (2)                                            $25.50             $24.85             $24.24             $20.91

</TABLE>

(1)   - All share amounts have been restated to reflect stock dividend  activity
      in each of the periods presented.

(2)   - The stock  price  above  represents  the sales  price of the last actual
      trade in each respective quarter as adjusted for stock dividends.

                               FINANCIAL CONDITION

                                   SECURITIES

Securities  held-to-maturity  are  those  which  the  Corporation  has  both the
positive  intent and ability to hold to maturity,  and are reported at amortized
cost. Securities  available-for-sale  are those which the Corporation may decide
to sell if needed for liquidity,  asset/liability  management, or other reasons.
Securities  available-for-sale are reported at fair value, with unrealized gains
and  losses  included  as a  separate  component  of  equity,  net of  tax.  The
Corporation does not maintain any securities for trading purposes.

Table 9 - Securities and Securities  Maturity  Schedule  summarizes the carrying
values of  securities  from 1997 through 1999 and the maturity  distribution  at
December 31, 1999, by classification. Interest on tax-exempt securities has been
adjusted to a tax equivalent  basis using a marginal federal tax rate of 34% for
all years.


<PAGE>


                                           Table 9 - SECURITIES

<TABLE>
                                                                       At December 31,

                                                    -------------------------------------------------------
                                                               1999      1998            1997
                                                    --------------------------     -----------
Securities available-for-sale
<S>                                                          <C>      <C>             <C>
  U.S. Government & agencies                                 $5,005   $14,110         $21,906
  States and political subdivisions                          27,268    23,637           9,981
  Corporate obligations                                       1,973     2,513             250
  Mortgage-backed and asset-backed                           42,888    36,696          34,440
  Other securities                                            2,588         -               -
                                                    --------------------------     -----------
        Total securities available-for-sale                 $79,722   $76,956         $66,577

Securities held-to-maturity
  States and political subdivisions                          $4,712    $4,879          $5,268

                                                    --------------------------     -----------
         Total securities held-to-maturity                   $4,712    $4,879          $5,268
                                                    --------------------------     -----------
                 Total securities                           $84,434   $81,835         $71,845
                                                    ==========================     ===========
</TABLE>


<TABLE>
                                                                            SECURITIES MATURITY SCHEDULE

                                1 Year and Less            1 to 5 Years               5 to 10 Years             Over 10 Years
                            --------------------------------------------------------------------------------------------------------
Available-for-sale             Balance       Rate       Balance       Rate        Balance         Rate        Balance       Rate
------------------          --------------------------------------------------------------------------------------------------------
<S>                                 <C>       <C>        <C>          <C>        <C>              <C>           <C>         <C>
  U.S. Treasury                     $0        $0              -          -             $0            -             $0            -
  Federal agencies                   -         -          1,167       6.50%         3,838         6.40%             -            -
  State and municipal (1)          320     6.15%          2,740       4.86%         6,456         6.73%        17,752         7.35%
  Corporate obligations              -         -          1,973       7.00%             -             -             -            -
  Mortgage-backed and asset-backed   -         -          2,201       6.15%            603        5.47%        40,084         6.38%
  Other securities                   -         -              -          -           1,020        5.79%         1,568         5.97%

                             ------------              -----------               -----------               ------------
    Total available-for-sale      $320                   $8,081                    $11,917                    $59,404
                             ============              ===========               ===========               ============


Held-to-maturity
  State and municipal (1)        $200     6.86%            $840       7.88%          $2,575       7.96%        $1,097         8.91%

                             ------------              -----------               -----------               ------------
   Total held-to-maturity        $200                      $840                      $2,575                     $1,097
                             ============              ===========               ===========               ============
</TABLE>

(1) - Average rates were  calculated on a tax equivalent  basis using a marginal
federal income tax rate of 34%.
<PAGE>

The  majority  of the  securities  portfolio  is  comprised  of  federal  agency
securities,   state  municipal  securities  (tax-exempt),   mortgage-backed  and
asset-backed securities.

The securities  portfolio  carries varying degrees of risk.  Investments in U.S.
Treasury securities and federal agency securities have little or no credit risk.
Mortgage-backed and asset-backed  securities are substantially issues of federal
agencies.  Obligations  of  states  and  political  subdivisions  and  corporate
securities are the areas of highest  potential credit exposure in the portfolio.
This risk is minimized  through the purchase of high  quality  investments.  The
Corporation's   investment  policy  requires  that  obligations  of  states  and
political  subdivisions  and  corporate  bonds must have a rating of A or better
when purchased. The vast majority of these investments were rated A or better at
December  31,  1999.  The risk of  non-rated  municipal  bonds is  minimized  by
limiting  the amounts  invested and by  investing  in local  issues.  Management
believes the  non-rated  securities in the  Corporation's  portfolio are of high
quality.  No securities of an individual issuer,  excluding U.S.  Government and
its  agencies,  exceeded  10% of the  Corporation's  shareholders'  equity as of
December 31, 1999. The  Corporation  does not use off-balance  sheet  derivative
financial  instruments as defined in SFAS No. 119,  "Disclosure about Derivative
Financial Instruments and Fair Value of Financial Instruments."

Total  securities  were  $84,434,000 and $81,835,000 as of December 31, 1999 and
1998, respectively.  Although the total securities balance increased 3.2% during
1999,  the  average  balance  actually  increased  $21,561,000,  or 28.0%.  This
increase  in the  average  balance  was  mainly  attributed  to  the  short-term
investments  made with the  proceeds  received  in  connection  with the  branch
acquisition,  which were ultimately  utilized to fund the ongoing loan growth of
the Corporation. As U.S. Government and agency securities matured or were called
during the year,  their  proceeds were  reinvested  into other  sectors,  mainly
states  and  political   subdivisions  and   mortgage-backed   and  asset-backed
securities.  While the  states and  political  subdivision  securities  were not
subject to the run-up in prices and corresponding reduction in yield, adjustable
rate  mortgage-backed  and asset-backed  securities were purchased to strengthen
the Corporation's overall asset/liability position.

Management's   security  strategy  includes  utilizing  short-term   securities,
adjustable rate instruments,  and easily marketable securities primarily to fund
the continuing growth of the loan portfolio.  Tax-free and intermediate  taxable
bonds  are  used  to  further  enhance  earnings.   As  of  December  31,  1999,
approximately 94% of the total investment  security  portfolio was classified in
the available-for-sale category, which allows flexibility in the asset/liability
management  function.  Sell  strategies  are  executed,  on  occasion,  when the
interest  rate  environment  provides  the  opportunity  to  boost  the  overall
portfolio performance.  The increasing interest rate environment during the last
quarter  contributed to lower returns on bonds. In response to the interest rate
environment  that existed during this period,  management  executed two separate
bond swaps.  Although the swaps resulted in net losses, the transactions enabled
the  Corporation  to  improve  its  asset/liability  position,  in  addition  to
generating additional earnings through higher yields.


As of December 31, 1999 and 1998, the security  portfolio held structured  notes
totaling  $3,997,000 and  $1,995,000,  respectively.  The investment  policy has
specific guidelines  describing total holdings,  maturity,  and price volatility
parameters regarding these types of security  instruments.  All structured notes
are U.S. Government agency issues.

The change which occurred in the unrealized gain/loss on securities between 1999
and 1998 was a result of the swing in the interest rate environment  during that
time period,  in conjunction with the change in the portfolio mix.  Although the
Corporation did record net losses in its investment  activity during 1999, it is
not likely the  Corporation  will  realize  any  future  losses in the  security
portfolio to satisfy loan growth or liquidity needs. The change in equity due to
market value  fluctuations in the  available-for-sale  portfolio are not used in
the regulatory  capital  calculation.  This paragraph  includes  forward-looking
statements that are based on management's  assumptions regarding future economic
and business  conditions.  Such economic and business assumptions are inherently
uncertain and subject to risk and may prove to be invalid, causing management to
respond to the present circumstances and conditions.
<PAGE>
                                      LOANS

The loan portfolio  constitutes  the major earning asset of the  Corporation and
offers the best  alternative  for maximizing  interest  spread above the cost of
funds.  The  Corporation's  loan  personnel  have the authority to extend credit
under guidelines established and approved by the Board of Directors.  Any credit
which  exceeds the authority of the loan officer is forwarded to the Bank's loan
committee for approval.  The loan committee is comprised of various  experienced
loan  officers  and three  bank  directors  -- the  President,  and two  outside
directors,  one of which is the Chairman.  Each outside director participates on
this committee on a monthly  rotating  basis.  All credits which exceed the loan
committee's  lending  authority are presented to the full Board of Directors for
ultimate  approval or denial.  The loan  committee  not only acts as an approval
body to ensure consistent application of the Corporation's loan policy, but also
provides  valuable  insight  through  communication  and  pooling of  knowledge,
judgment, and experience of its members.

The Corporation's  primary lending area generally  includes  Tippecanoe,  White,
Jasper, and contiguous  counties in Northwest Indiana.  The Corporation  extends
out-of-area credit only to borrowers who are considered to be low risk, and only
on a very limited basis.

Table 10 - Loans Outstanding  reflects outstanding balances by loan type for the
past five years.  Additional  loan  information  is  presented  in Note 3 to the
consolidated financial statements.

<TABLE>
                          Table 10 - Loans Outstanding
                                                                              At December 31,

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

                                               1999              1998             1997              1996                1995
                                         ----------------- ----------------- ---------------- ------------------ -------------------
<S>                                              <C>               <C>              <C>                 <C>                 <C>
Commercial and agricultural                      $192,760          $115,198         $112,586            $96,276             $75,317
Real estate - construction                         47,375            28,043           17,117             12,194              10,472
Real estate - mortgage                            197,181           160,655          127,574            104,547              87,637
Installment                                        51,754            49,932           54,950             54,924              55,217
Other                                                   0                 0                0                999                   0
                                         ----------------- ----------------- ---------------- ------------------ -------------------

  Total loans                                    $489,070          $353,828         $312,227           $268,940            $228,643
                                         ================= ================= ================ ================== ===================
</TABLE>





<TABLE>
                                                           Composition of loan portfolio by type at December 31,

                                               1999              1998             1997              1996                1995
                                         ----------------- ----------------- ---------------- ------------------ -------------------
<S>                                                <C>               <C>              <C>                <C>                 <C>
Commercial and agricultural                        39.41%            32.56%           36.06%             35.80%              32.94%
Real estate - construction                          9.69%             7.93%            5.48%              4.54%               4.58%
Real estate - mortgage                             40.32%            45.40%           40.86%             38.87%              38.33%
Installment                                        10.58%            14.11%           17.60%             20.42%              24.15%
Other                                               0.00%             0.00%            0.00%              0.37%               0.00%

                                         ----------------- ----------------- ---------------- ------------------ -------------------
  Total loans                                      100.0%            100.0%           100.0%             100.0%              100.0%
                                         ================= ================= ================ ================== ===================
</TABLE>


The  Corporation's  continued  growth  of the  loan  portfolio  during  1999 was
assisted,  in large  part,  by the  expansion  into the  Jasper  County  market.
Approximately  54.0% of the $135,242,000 total loan growth,  including the loans
acquired at the date of acquisition,  occurred in the Jasper County market.  The
remaining  $62,228,000,  or  46.0% of the  growth,  took  place in the  existing
Tippecanoe and White County markets.

While all loan categories have benefited from the Jasper County growth, which is
primarily  agriculturally  oriented,  the  commercial  and  agricultural  sector
increased $77,562,000,  or 67.3% - the largest of any loan category. In general,
the overall loan increase in the loan portfolio continued to be directly related
to the ongoing economic prosperity, particularly in the Tippecanoe market, where
the unemployment rate is below both the state and national averages.
<PAGE>

Total  installment loan balances  increased  slightly during 1999, as management
continued to monitor and control the indirect  automobile line of business in an
ongoing effort to reduce net charge-offs. As a result, indirect charge-offs were
reduced  $43,000  during the year to $84,000.  As loan totals have  continued to
escalate during the last few years, the loan portfolio has remained  diversified
by loan type,  borrower,  and industry.  As of December 31, 1999,  there were no
concentrations of credits in excess of 10.0%.

The real  estate-mortgage  category  remained  the  largest  segment of the loan
portfolio as of December 31, 1999. While the only real estate charge-offs in the
last five years  occurred  in 1999,  this loan type  continues  to carry a lower
degree of risk because of the nature of the loan. Management believes the degree
of risk assumed on any loan is commensurate with the interest rate assessed, and
is  thereby  able to  receive a higher  rate of return  on  commercial  and real
estate-construction loans as compared to residential real estate loans. Although
these loan types usually possess  increased  elements of risk, the Corporation's
lending  practices,  policies,  and procedures that are in place are intended to
mitigate certain risks associated with such loans.

Table 11 - Loan Liquidity and  Sensitivity to Changes in Interest Rates reflects
the maturity  schedule of commercial and agricultural  loans. Also indicated are
fixed  and  variable  rate  loans  maturing  after  one year  for the same  loan
categories.

<TABLE>
                                               Table 11 - Loan Liquidity

                                                                      Loan Maturities at December 31, 1999

                                                      ----------------------------------------------------------------------
                                                          1 Year            1 - 5             Over 5
                                                         and Less           Years             Years             Total
                                                      --------------- ------------------ ----------------- -----------------
<S>                                                          <C>                <C>                <C>             <C>
Commercial and agricultural                                  $87,125            $96,534            $9,101          $192,760
Real estate - construction                                    39,148              7,380               847            47,375

                                                      --------------- ------------------ ----------------- -----------------
          Total selected loans                              $126,273           $103,914            $9,948          $240,135
                                                      =============== ================== ================= =================
</TABLE>



<TABLE>
Sensitivity to Changes in Interest Rates

<S>                                                                             <C>                <C>
  Fixed rates                                                                   $18,526            $9,163
  Variable rates                                                                 85,388               785

                                                                      ------------------ -----------------
                Total selected loans                                           $103,914            $9,948
                                                                      ================== =================
</TABLE>


                                    DEPOSITS

The  Corporation  offers a wide variety of deposit  services to  individual  and
commercial customers,  such as noninterest-bearing and interest-bearing checking
accounts,  savings accounts, money market accounts, and certificates of deposit.
The deposit base provides the major  funding  source for earning  assets.  Total
deposits  grew  $126,701,000,   or  32.0%,  in  1999,  of  which   approximately
$109,008,000,  or 86.0% of the net  growth  occurred  as a result of the  Jasper
County  branch  acquisition.  Although  not  desirable,  it is  typical  for  an
institution  to  experience a certain  degree of deposit  run-off after a branch
acquisition  transaction  has been  consummated.  As of  December  31,  1999 the
Corporation  experienced an approximate 6.8% run-off in the deposits acquired in
this  new  market.  Time  deposits  remain  the  largest  single  source  of the
Corporation's funds.

A three year  schedule  of average  deposits  by type,  and  maturities  of time
deposits greater than $100,000 is presented in Table 12 - Deposit Information.
<PAGE>

<TABLE>
                                                                             Table 12 - Deposit Information

                                           1999                           1998                           1997
                                     Average         Average         Average        Average         Average        Average
                                     Balance            Rate         Balance           Rate         Balance           Rate

<S>                                  <C>                             <C>                            <C>
Noninterest-bearing                  $51,229                         $39,312                        $35,728
Interest-bearing demand               62,858           1.14%          48,777          1.25%          47,945          1.37%
Savings deposits                     157,618           3.80%         108,019          4.02%          94,360          3.92%
Time deposits                        214,784           5.27%         174,959          5.69%         167,706          5.71%

       Total deposits               $486,489           3.70%        $371,067          4.02%        $345,739          4.03%
</TABLE>




<TABLE>
                                                            Maturity Ranges of Time Deposits
                                                   with Balances of $100,000 or More at December 31,

                                                        1999                           1998                           1997
                                              ---------------                 --------------                 --------------
<S>                                                  <C>                             <C>                            <C>
3 months or less                                     $12,638                         $9,273                         $7,015
3 through 6 months                                     4,422                          4,287                          2,423
6 through 12 months                                    6,372                          4,230                          3,676
Over 12 months                                        15,233                         10,438                         11,648
                                                                              --------------                 --------------
                                              ---------------
            Total                                    $38,665                        $28,228                        $24,762
                                              ===============                 ==============                 ==============
</TABLE>

To provide temporary liquidity and as an alternative to borrowing federal funds,
the Corporation will acquire,  from time to time, large balance  certificates of
deposit,  generally  from public  entities,  for  short-term  time periods.  The
Corporation had such funds totaling $5,514,000,  $500,000,  and $2,000,000 as of
December 31, 1999, 1998, and 1997, respectively.

                                   BORROWINGS

Aside from the core deposit base and large denomination  certificates of deposit
mentioned above, the Corporation's  remaining funding sources include short-term
and  long-term  borrowings.  Short-term  borrowings  consist  of  federal  funds
purchased  from other  financial  institutions  on an  overnight  basis,  retail
repurchase  agreements  which  generally  mature  within  thirty days,  and U.S.
Treasury demand notes.
<PAGE>

                                           Table 13 - Short-term Borrowings
<TABLE>
                                                                                  As of December 31,
                                                                    ------------------------------------------------

                                                                        1999              1998             1997
                                                                    --------------    -------------    -------------

<S>                                                                       <C>              <C>              <C>
    Repurchase agreements outstanding                                     $24,645          $15,788          $17,340
    Treasury tax and loan open-end note                                     2,628              614            3,032
                                                                    --------------    -------------    -------------

                    Total short-term borrowings                           $27,273          $16,402          $20,372
                                                                    ==============    =============    =============


    Average balance of repurchase agreements
      during year                                                         $28,428          $14,671          $13,926

    Maximum month-end balance of repurchase
      agreements during year                                               33,192           17,223           17,621

    Weighted-average interest rate of
      repurchase agreements during year                                     4.36%            4.47%            4.67%

    Weighted-average interest rate of
      repurchase agreements at end of year                                  4.87%            4.20%            4.98%
</TABLE>

As  presented  in  Table  13  -  Short-term  Borrowings,   the  balance  of  the
Corporation's   short-term   borrowings  were  comprised  of  retail  repurchase
agreements  and a treasury tax and loan  open-end  note as of December 31, 1999,
1998,  and 1997.  For the years  presented,  the  retail  repurchase  agreements
accounted for substantially the entire outstanding balance.

The Bank became a member of the Federal Home Loan Bank of  Indianapolis  (FHLBI)
in 1992 and has the  authority  of the  Board of  Directors  to borrow up to $40
million.  All  current  and any  future  borrowings  are  secured  by a  blanket
collateral  pledge of the Bank's  U.S.  Government  and U.S.  Government  agency
securities, along with one-to-four family residential loans. FHLB advances as of
December 31, 1999 and 1998 were $30,027,000 and $23,854,000,  respectively.  The
Corporation  increased its net FHLB advance  borrowings during 1999 primarily to
fund the continued  loan growth.  The  attractive  interest rates along with the
fixed rate feature of the advances made this a more  desirable  source of funds,
as opposed to the short-term nature of certain repurchase agreement contracts.

The Corporation executed an unsecured long-term borrowing agreement on March 15,
1999 with The Northern Trust Company, located in Chicago,  Illinois. The purpose
of the note was to contribute additional capital to the subsidiary bank in order
for the subsidiary  bank to acquire the Jasper county  branches and maintain its
well-capitalized  capital  status.  The Corporation  made a $13,000,000  capital
contribution  to the subsidiary  bank on March 15, 1999.  Under the terms of the
agreement,  the Corporation is required to make quarterly  principal payments of
$350,000,  with a final balloon payment due March 31, 2006.  Interest is payable
monthly at an interest rate currently  indexed to the federal funds rate plus an
applicable margin determined by the Corporation's  existing capital ratios.  The
note is also subject to various covenants, including a defined minimum return on
average assets,  tangible net worth,  capital ratios,  indebtedness  ratio, loan
loss  allowance to loans  ratio,  and  nonperforming  asset  ratios.  Management
believes  the  Corporation  is in  compliance  with  all  covenants  of the loan
agreement as of December 31, 1999. The outstanding principal balance of the note
payable at December 31, 1999 was $12,950,000.  Additional  information regarding
short-term borrowings,  FHLB advances, and the note payable can be found in Note
7 and Note 8 of the consolidated financial statements.
<PAGE>

           QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk of the Corporation  encompasses  exposure to both liquidity risk and
interest rate risk and is reviewed  quarterly by the  asset/liability  committee
(ALCO) and the Board of Directors.

The  liquidity  of the parent  company is  dependent on the receipt of dividends
from the banking subsidiary.  Certain  restrictions exist regarding the transfer
of  funds  from  the  subsidiary  as  explained  in Note 14 to the  consolidated
financial  statements.  Management  expects that in the  aggregate,  the banking
subsidiary  will continue to have the ability to dividend  adequate funds to the
parent company.  The statement in this paragraph  relating to the parent company
continuing to receive  dividends from the subsidiary  bank is a  forward-looking
statement  which  may  or may  not be  accurate  due  to  the  impossibility  of
predicting  future economic and business events,  and in particular,  the future
profitability of the Corporation's banking subsidiary.

The  banking  subsidiary's  source of funding  is  predominantly  core  deposits
consisting of both commercial and individual deposits, maturities of securities,
repayments of loan principal and interest,  federal funds purchased,  securities
sold under  agreements to repurchase,  and FHLBI  advances.  The deposit base is
diversified  between  individual  and  commercial  accounts  which  helps  avoid
dependence on large  concentrations  of funds.  The Corporation does not solicit
certificates  of  deposit  from  brokers.  Table 14 - Funding  Uses and  Sources
details the main components of cash flows for 1999 and 1998.

<TABLE>
                                           Table 14 - Funding Uses and Sources

                                                              1999                                   1998
                                             --------------------------------------- --------------------------------------
                                                Average       Increase/(decrease)       Average      Increase/(decrease)
                                                              -------------------                    -------------------
                                                Balance        Amount      Percent      Balance        Amount     Percent
                                             -------------- ------------- ---------- -------------- ------------- ---------
FUNDING USES

<S>                                               <C>           <C>          <C>          <C>            <C>        <C>
  Loans, total                                    $446,582      $113,075     33.90%       $333,507       $38,788    13.16%
  Taxable securities                                66,538        10,565     18.88%         55,973       (8,146)   -12.70%
  Tax-exempt securities                             33,438        12,460     59.40%         20,978         3,818    22.25%
  Interest-bearing balances with
    other financial institutions                       344           191          -            153           153  #DIV/0!
  FHLB stock                                         1,808           344     23.50%          1,464           254    20.99%
  Federal funds sold and overnight balances          7,200       (3,520)    -32.84%         10,720          (22)    -0.20%
                                             -------------- ------------- ---------- -------------- ------------- ---------
                 Total uses                       $555,910      $133,115     31.48%       $422,795       $34,845     8.98%
                                             ============== ============= ========== ============== ============= =========

FUNDING SOURCES

  Noninterest-bearing deposits                     $51,229       $11,917     30.31%        $39,312        $3,584    10.03%
  Interest-bearing demand                           62,858        14,081     28.87%         48,777           832     1.74%
  Savings deposits                                 157,618        49,599     45.92%        108,019                  14.48%
  Time deposits                                    214,784        39,825     22.76%        174,959         7,253     4.32%
  Short-term borrowings                             30,168        14,587     93.62%         15,581           452     2.99%
  FHLB advances                                     23,359         1,258      5.69%         22,101         8,161    58.54%
  Note payable                                      10,863        10,863    #DIV/0!              -             -   #DIV/0!

                                             -------------- ------------- ---------- -------------- ------------- ---------
               Total sources                      $550,879      $142,130     34.77%       $408,749       $33,941     9.06%
                                             ============== ============= ========== ============== ============= =========
</TABLE>

The Corporation's  interest rate risk is measured by computing estimated changes
in net interest  income and the net portfolio value (NPV) of its cash flows from
assets and  liabilities  in the event of adverse  movements  in interest  rates.
Interest  rate risk  exposure is measured  using an  interest  rate  sensitivity
analysis to determine the change in NPV in the event of hypothetical  changes in
interest  rates.  Another  method also used to enhance  the  overall  process is
interest rate sensitivity gap analysis. This method is utilized to determine the
repricing characteristics of the Corporation's assets and liabilities.
<PAGE>

NPV represents  the market value of portfolio  equity and is equal to the market
value of assets minus the market value of liabilities.  This particular analysis
assesses the risk of loss in market risk sensitive instruments in the event of a
sudden and  sustained  1% - 2% increase  and  decrease in  interest  rates.  The
Corporation's  Board of  Directors  adopted an interest  rate risk policy  which
established  a 45% minimum and maximum  increase  and decrease in the NPV in the
event of a sudden and sustained 1% - 2% increase or decrease in interest rates.

The following table represents the Corporation's projected change in NPV for the
various rate shock levels as of December 31, 1999.
<TABLE>

                 -----------------------  Net Portfolio Value --------------------
     <S>                       <C>                      <C>                       <C>
      Change                     Dollar                    Dollar                  Percentage
     in Rates                    Amount                    Change                    Change

       + 200                   $ 19,059                 $ (24,522)                   (56.27) %
       + 100                     30,698                   (12,883)                   (29.56)
       Base                      43,581                         -                        -
       - 100                     57,891                    14,310                     32.84
       - 200                     72,172                    28,591                     65.60
</TABLE>

The above  table  indicates  that as of December  31,  1999,  the  Corporation's
estimated NPV would be expected to decrease in the event of sudden and sustained
increases in prevailing interest rates.  Conversely,  in the event of sudden and
sustained  decreases in prevailing  interest rates, the Corporation's  estimated
NPV would be expected to increase.  As of December 31, 1999,  the  Corporation's
estimated changes in NPV were outside the approved guidelines established by the
Board of Directors  and were  reported to the Board of Directors as an exception
to policy.  Management  does not  believe  the  violation  of policy  presents a
significant  risk to the  institution;  however,  management  will  continue  to
monitor this condition and will attempt to address this issue through strategies
implemented  by the  Corporation's  ALCO  committee.  The primary reason for the
change in the NPV during  1999 was a  combination  of the rising  interest  rate
environment that existed during the latter part of the year, in conjunction with
the  duration  and mix of the  Corporation's  assets and  liabilities.  During a
period  of  rising  interest  rates,   loan   refinancings  and  prepayments  on
mortgage-related  assets  tend to slow down  resulting  in longer  term  assets.
During 1999,  the duration of assets  increased more than four times the pace of
liabilities.

Computations of prospective  effects of  hypothetical  interest rate changes are
based on a number of assumptions,  including  relative levels of market interest
rates,  loan  prepayments and deposit decay rates, and should not be relied upon
as indicative of actual  results.  These  computations  do not  contemplate  any
actions  management may undertake in response to changes in interest rates.  The
NPV  calculation  is based on the net  present  value of  discounted  cash flows
utilizing certain prepayment assumptions and market interest rates.

Certain  shortcomings are inherent in the method of computing the estimated NPV.
Actual  results may differ from that  information  presented  in the table above
should market  conditions vary from the  assumptions  used in preparation of the
table  information.  If interest rates remain or decrease below current  levels,
the proportion of adjustable  rate loans in the loan portfolio could decrease in
future  periods due to refinancing  activity.  Also, in the event of an interest
rate change,  prepayment and early  withdrawal  levels would likely be different
from those assumed in the table.  Lastly, the ability of many borrowers to repay
their   adjustable   rate  debt  may  decline  during  a  rising  interest  rate
environment.

Used in conjunction  with the NPV analysis is the interest rate  sensitivity gap
analysis.  This  analysis  monitors  the  relationship  between the maturity and
repricing of  interest-earning  assets and  interest-bearing  liabilities  while
maintaining an acceptable interest rate spread. Interest rate sensitivity gap is
defined  as the  difference  between  the amount of  maturing  or  repricing  of
interest-earning  assets and  interest-bearing  liabilities  within specific and
defined  time  frames.  A positive  gap occurs when the amount of interest  rate
sensitive  assets  exceed the amount of  interest  rate  sensitive  liabilities.
Conversely,  a gap is  considered  negative  when the  amount of  interest  rate
sensitive  liabilities  exceed the interest rate  sensitive  assets.  Generally,
during a time of rising interest  rates, a negative gap would  adversely  affect
net interest income,  while a positive gap would enhance net interest income. On
the other hand,  during a time period of falling  interest rates, a negative gap
would  increase net  interest  income,  while a positive gap would  decrease net
interest  income.  It is the ALCO's  responsibility  to  maintain  a  reasonable
balance between the exposure to interest rate fluctuations and earnings.
<PAGE>

                                CAPITAL ADEQUACY

The Corporation and Bank are subject to various regulatory capital guidelines as
required by federal and state  banking  agencies.  These  guidelines  define the
various components of core capital and assign risk weights to various categories
of assets.

Tier 1 capital consists of  shareholders'  equity less goodwill and core deposit
intangibles,  as defined by bank  regulators.  The  definition of Tier 2 capital
includes the amount of allowance  for loan losses which does not exceed 1.25% of
gross  risk  weighted  assets.  Total  capital  is the sum of Tier 1 and  Tier 2
capital.

The minimum requirements under the capital guidelines are a 4.00% leverage ratio
(Tier 1 capital divided by average assets less intangible  assets and unrealized
gains/losses),  a 4.00% Tier 1 risk-based  capital ratio (Tier 1 capital divided
by risk-weighted  assets),  and a 8.00% total capital ratio (Tier 1 capital plus
Tier 2 capital divided by risk-weighted assets).

The Federal  Deposit  Insurance  Corporation  Improvement  Act of 1991  (FDICIA)
required federal  regulatory  agencies to define capital tiers. These tiers are:
well-capitalized,   adequately  capitalized,   undercapitalized,   significantly
undercapitalized, and critically undercapitalized,  although these terms are not
used to  represent  overall  financial  condition.  Under these  regulations,  a
"well-capitalized" institution must achieve a Tier 1 risk-based capital ratio of
at least 6.00%, and a total risk-based  capital ratio of at least 10.00%,  and a
leverage  ratio of at least  5.00% and not be under a capital  directive  order.
Failure to meet capital  requirements can result in the initiation of regulatory
action  by  the  appropriate  regulatory  agency.  If  an  institution  is  only
adequately  capitalized,  regulatory  approval is  required  to accept  brokered
deposits. If undercapitalized,  the institution may be required to limit capital
distributions,   limit  asset  growth  and  expansion,   and  submit  a  capital
restoration plan.

Consolidated  capital  amounts  and ratios are  presented  in Table 15 - Capital
Ratios.  Bank capital  ratios  appear in Note 14 of the  consolidated  financial
statements. In connection with the Bank's acquisition of the three Jasper County
branches on March 15, 1999, the consolidated  and bank-only  capital levels were
significantly  reduced. In response,  the Corporation  borrowed  $14,000,000 and
contributed $13,000,000 of capital to the Bank in order for the Bank to maintain
its  well-capitalized  status. As of December 31, 1999, the Bank was categorized
as well-capitalized under the regulatory framework for prompt corrective action.
However,  the Corporation was categorized as undercapitalized as of December 31,
1999,  as the total  capital  ratio was 7.99%;  slightly  below the 8%  minimum.
Although  slightly below the minimum,  no corrective  regulatory action has been
initiated,  and management anticipates the Corporation will return to adequately
capitalized  status in the first  quarter  of 2000.  The  Federal  Reserve  Bank
considers  holding company  capital  adequacy in connection with any application
activity which requires their approval. Further, since the Corporation's capital
levels are below the  well-capitalized  category,  the use of expedited  Federal
Reserve  Bank  procedures  in any  application  activity  which  requires  their
approval  will not be available to the  Corporation  until it once again becomes
well-capitalized.  The statement in this paragraph relating to the Corporation's
return to adequately capitalized status is a forward-looking statement which may
or may not be accurate due to the  impossibility  of predicting  future economic
and business events,  including the profitability of the Bank and the ability of
the Corporation to raise additional capital, if needed, as well as other factors
that are beyond the control of the Corporation.

Exclusive of the effect of the unrealized  gains/losses on securities component,
which  is  driven  by  the  interest   rate   environment,   the   Corporation's
shareholders'  equity  increased  $5,085,000,  or 11.9% in 1999  compared to the
$4,097,000,  or 10.6%  increase  posted in 1998. The amount of dividends paid by
the Corporation increased to $1,540,000,  which was $199,000, or 14.8% above the
prior year amount.  The increased  dollar  dividend  payout,  in addition to the
continued  stock splits and  dividends  declared in the past few years,  reflect
management's  continued  effort  to  increase  the  value  and  return  of  each
shareholder's investment in the Corporation.

At December 31, 1999, management was not aware of any current recommendations by
banking  regulatory  authorities  which, if they were to be  implemented,  would
have, or are reasonably  likely to have, a material effect on the  Corporation's
consolidated liquidity, capital resources or operations.
<PAGE>

                                         Table 15 - Capital Ratios
<TABLE>

                                                                          At December 31,
                                                                    1999                   1998
                                                            ---------------------  ---------------------
<S>                                                          <C>                   <C>
Tier 1 capital

  Shareholders' equity                                                   $45,785                $42,614
  Less:  Intangibles                                                    (13,737)                  (806)
  Add:  Unrealized loss on securities                                      1,956                     42
                                                            ---------------------  ---------------------
  Total Tier 1 capital                                                   $34,004                $41,850
                                                            =====================  =====================

Total risk-based capital
  Tier 1 capital                                                         $34,004                $41,850
  Allowance for loan losses                                                4,618                  4,241
                                                            ---------------------  ---------------------
  Total risk-based capital                                               $38,622                $46,091
                                                            =====================  =====================

Risk weighted assets                                                    $483,307               $353,215
                                                            =====================  =====================
Average assets, fourth quarter                                          $627,045               $475,438
                                                            =====================  =====================

Risk-based ratios

  Tier 1                                                                   7.04%                 11.85%
                                                            =====================  =====================
  Total risk-based capital                                                 7.99%                 13.05%
                                                            =====================  =====================

Leverage Ratios                                                            5.42%                  8.82%
                                                            =====================  =====================
</TABLE>



                                   INFLATION

For a  financial  institution,  effects  of price  changes  and  inflation  vary
considerably from an industrial organization. Changes in the prices of goods and
services are the primary determinant of an industrial company's profit,  whereas
changes in  interest  rates  have a major  impact on a  financial  institution's
profitability. Inflation affects the growth of total assets, but it is difficult
to assess its impact because neither the timing nor the magnitude of the changes
in the consumer price index directly coincide with changes in interest rates.

During periods of high inflation there are normally  corresponding  increases in
the money supply.  During such times,  financial  institutions  often experience
above average growth in loans and deposits. Also, general increases in the price
of goods and services will result in increased operating expenses. Over the last
few years the  inflation  rate has been  relatively  low,  and its impact on the
balance sheets and levels of income and expense has been nominal.


<PAGE>

                                   YEAR 2000

The Corporation  spent an estimated $1.6 million from mid-1997  through December
31, 1999 to address matters relating to Y2K, primarily comprised of hardware and
software  upgrades and related  personnel  costs.  The  Corporation  updated all
contingency  plans on an ongoing  basis and  performed  a test-run in the fourth
quarter to ensure all departments were equipped in the event  implementation  of
the contingency plans was necessary.  In the event customers desired to withdraw
large amounts of cash from their accounts,  the  Corporation  increased its cash
position in order to meet those needs.

Management  was on-site to monitor the date rollover at year-end 1999, and there
were  no  problems  encountered  with  any of  the  Corporation's  systems.  The
Corporation's  Board of  Directors  was  updated  in a timely  manner  as to the
results of the Y2K rollover.

The  Corporation  did not experience  any unusual cash requests from  customers,
either from the time leading up to December 31, 1999,  or in the first few weeks
of 2000.

While the true effects,  as they relate to any of the  Corporation's  customers,
may not be fully  known  until a future  date,  management  is not  aware of any
customers  who  have  encountered  any  problems  relating  to  the  Y2K  issue.
Therefore,   management   does  not  expect  any  remaining   uncertainties   or
contingencies with respect to Y2K.

<PAGE>






                            LAFAYETTE BANCORPORATION

                        CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 1999, 1998 and 1997


<PAGE>




                            LAFAYETTE BANCORPORATION

                               Lafayette, Indiana

                        CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 1999, 1998 and 1997

                                    CONTENTS

REPORT OF INDEPENDENT AUDITORS................................................

CONSOLIDATED FINANCIAL STATEMENTS

     CONSOLIDATED BALANCE SHEETS..............................................

     CONSOLIDATED STATEMENTS OF INCOME........................................

     CONSOLIDATED STATEMENTS OF CHANGES IN
       SHAREHOLDERS' EQUITY...................................................

     CONSOLIDATED STATEMENTS OF CASH FLOWS....................................

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS...............................



<PAGE>




                         REPORT OF INDEPENDENT AUDITORS

Board of Directors and Shareholders
Lafayette Bancorporation
Lafayette, Indiana

We have  audited  the  accompanying  consolidated  balance  sheets of  Lafayette
Bancorporation  as of December  31,  1999 and 1998 and the related  consolidated
statements of income, changes in shareholders' equity and cash flows for each of
the  three  years  in the  period  ended  December  31,  1999.  These  financial
statements  are  the  responsibility  of  the  Corporation's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in  all  material   respects,   the  financial  position  of  Lafayette
Bancorporation  as of  December  31,  1999  and  1998,  and the  results  of its
operations  and its cash flows for each of the three  years in the period  ended
December 31, 1999 in conformity with generally accepted accounting principles.

                                                 Crowe, Chizek and Company LLP

Indianapolis, Indiana
January 26, 2000


<PAGE>


                            LAFAYETTE BANCORPORATION

                           CONSOLIDATED BALANCE SHEETS
                           December 31, 1999 and 1998
                          (Dollar amounts in thousands)

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

                                                                                           1999            1998
                                                                                           ----            ----
ASSETS
<S>                                                                                   <C>              <C>
Cash and due from banks                                                               $     28,370     $     17,368
Federal funds sold                                                                           2,200            1,400
                                                                                      ------------     ------------
     Total cash and cash equivalents                                                        30,570           18,768

Interest-bearing balances with other financial institutions                                      -              671
Securities available-for-sale                                                               79,722           76,956
Securities held-to-maturity (fair value
  $4,709 and $5,063)                                                                         4,712            4,879
Loans held for sale                                                                          3,174           10,086
Loans                                                                                      489,070          353,828
Less:  Allowance for loan losses                                                            (4,618)          (4,241)
                                                                                      -------------    ------------
     Net loans                                                                             484,452          349,587

FHLB stock, at cost                                                                          1,897            1,539
Premises, furniture and equipment, net                                                      10,583            7,953
Intangible assets                                                                           13,747              827
Accrued interest receivable and other assets                                                16,292           12,703
                                                                                      ------------     ------------
         Total assets                                                                 $    645,149     $    483,969
                                                                                      ============     ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities

     Noninterest-bearing deposits                                                     $     63,206     $     48,657
     Interest-bearing demand and savings deposits                                          229,302          170,308
     Interest-bearing time deposits                                                        229,739          176,581
                                                                                      ------------     ------------
         Total deposits                                                                    522,247          395,546

     Short-term borrowings                                                                  27,273           16,402
     FHLB advances                                                                          30,027           23,854
     Note payable                                                                           12,950                -
     Accrued interest payable and other liabilities                                          6,867            5,553
                                                                                      ------------     ------------
         Total liabilities                                                                 599,364          441,355

Shareholders' equity
     Common stock, no par value:  5,000,000 shares
       authorized; 3,586,140 and 2,394,035 shares issued;
       and 3,586,140 and 2,380,427 shares outstanding                                        3,586            2,394
     Additional paid-in capital                                                             32,886           32,620
     Retained earnings                                                                      11,269            7,747
     Accumulated other comprehensive income                                                 (1,956)             (42)
     Less:  Treasury stock, at cost (13,608 shares in 1998)                                      -             (105)
                                                                                      ------------     ------------
         Total shareholders' equity                                                         45,785           42,614
                                                                                      ------------     ------------
              Total liabilities and shareholders' equity                              $    645,149     $    483,969
                                                                                      ============     ============
</TABLE>
                            See accompanying notes.

<PAGE>


                        CONSOLIDATED STATEMENTS OF INCOME
                  Years ended December 31, 1999, 1998 and 1997
             (Dollar amounts in thousands, except per share data)

--------------------------------------------------------------------------------
<TABLE>
                                                                          1999             1998            1997
                                                                          ----             ----            ----
Interest income
<S>                                                                   <C>             <C>              <C>
     Loans, including related fees                                    $     38,520    $     29,810     $     26,590
     Taxable securities                                                      3,831           3,217            3,857
     Tax exempt securities                                                   1,529             991              782
     Other                                                                     510             707              682
                                                                      ------------    ------------     ------------
         Total interest income                                              44,390          34,725           31,911

Interest expense
     Deposits                                                               18,024          14,906           13,937
     Short-term borrowings                                                   1,358             712              711
     Other borrowings                                                        2,161           1,345              877
                                                                      ------------    ------------     ------------
         Total interest expense                                             21,543          16,963           15,525
                                                                      ------------    ------------     ------------

Net interest income                                                         22,847          17,762           16,386

Provision for loan losses                                                    1,060             980              620
                                                                      ------------    ------------     ------------

Net interest income after provision for loan losses                         21,787          16,782           15,766

Non-interest income
     Fiduciary activities                                                    1,134             964              885
     Service charges on deposit accounts                                     1,581           1,309            1,254
     Net realized gain/(loss) on securities                                   (144)              6               27
     Net gain on loan sales                                                    942           1,255              736
     Other service charges and fees                                            923             727              645
     Other                                                                     689             655              621
                                                                      ------------    ------------     ------------
         Total noninterest income                                            5,125           4,916            4,168

Non-interest expense
     Salaries and employee benefits                                          9,836           8,206            7,484
     Occupancy, net                                                          1,073             891              882
     Equipment                                                               1,314           1,054              970
     Intangible amortization                                                   597              81               81
     Other                                                                   4,714           3,378            3,140
                                                                      ------------    ------------     ------------
         Total noninterest expenses                                         17,534          13,610           12,557
                                                                      ------------    ------------     ------------

Income before income taxes                                                   9,378           8,088            7,377

Income taxes                                                                 3,027           2,711            2,569
                                                                      ------------       ---------       ----------

Net income                                                             $     6,351      $    5,377      $     4,808
                                                                      =============     ==========       ==========

Basic earnings per share                                              $      1.77       $     1.50      $      1.34
                                                                      =============     ==========       ==========

Diluted earnings per share                                            $      1.73       $     1.47      $      1.33
                                                                      =============     ==========       ==========
</TABLE>
                            See accompanying notes.
<PAGE>


           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                  Years ended December 31, 1999, 1998 and 1997
              (Dollar amounts in thousands, except per share data)

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

                                                                             Accumulated
                                               Additional                       Other                       Total
                                   Common        Paid-in      Retained      Comprehensive    Treasury    Shareholders'
                                    Stock        Capital      Earnings         Income          Stock       Equity
                                    -----        -------      --------         ------          -----       ------

<S>                             <C>             <C>            <C>           <C>           <C>           <C>
Balance, January 1, 1997        $     1,976    $    19,368   $    13,705   $      (311)  $       (92)   $    34,646

    Comprehensive income
      Net income                                                   4,808                                      4,808
      Change in net unrealized
        gain/(loss) on securities
        available-for-sale                                                         221                          221
                                                                                                        -----------
          Total comprehensive
            income                                                                                            5,029

    10% Stock dividend
      197,597 shares                    198          5,187        (5,385)                                         -
    Cash dividends
      ($.34 per share)                                            (1,201)                                    (1,201)
    Purchase 185 treasury

      shares                                                                                      (5)            (5)
                                -----------    -----------   -----------   -----------   -----------    -----------

Balance, December 31, 1997            2,174         24,555        11,927           (90)          (97)        38,469

    Comprehensive income
      Net income                                                   5,377                                      5,377
      Change in net unrealized
        gain/ (loss) on securities
        available-for-sale                                                          48                           48
                                                                                                        -----------
          Total comprehensive
            income                                                                                            5,425

    Issue 2,825 shares under
     stock option plan                    2             67                                                       69
    10% Stock dividend
      217,640 shares                    218          7,998        (8,216)                                         -
    Cash dividends
      ($.37 per share)                                            (1,341)                                    (1,341)
    Purchase 188 treasury
      shares                                                                                      (8)            (8)
                                -----------    -----------   -----------   -----------   -----------    -----------

Balance, December 31, 1998            2,394         32,620         7,747           (42)         (105)        42,614

    Comprehensive income
      Net income                                                   6,351                                      6,351
      Change in net unrealized
        gain/ (loss) on securities
        available-for-sale                                                      (1,914)                      (1,914)
                                                                                                        ------------
          Total comprehensive
            income                                                                                            4,437

    Issue 11,884 shares under
     stock option plan                   12            266                                                      278
    3-2 stock split
      1,200,738 shares                1,201                       (1,201)                                         -
    Cash dividends
      ($.43 per share)                                            (1,540)                                    (1,540)
    Purchase 105 treasury
      shares                                                                                      (4)            (4)
    Retirement of 20,517
      Treasury shares                   (21)                         (88)                        109              -
                                ------------   -----------   ------------  -----------   -----------    -----------

Balance, December 31, 1999      $     3,586    $    32,886   $    11,269   $    (1,956)  $         -    $    45,785
                                ===========    ===========   ===========   ============  ===========    ===========
</TABLE>
                            See accompanying notes.
<PAGE>


                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  Years ended December 31, 1999, 1998 and 1997
                          (Dollar amounts in thousands)

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

                                                                           1999              1998            1997
                                                                           ----              ----            ----
Cash flows from operating activities

<S>                                                                      <C>            <C>              <C>
     Net income                                                          $   6,351      $     5,377      $    4,808
     Adjustments to reconcile net income to net
       cash from operating activities
         Depreciation                                                          948              646             631
         Net amortization                                                      726              311             271
         Provision for loan losses                                           1,060              980             620
         Net realized (gain)/loss on securities                                144               (6)            (27)
         Net realized (gain) loss on sale of
              other real estate                                                  -              (43)             21
         Change in assets and liabilities
              Loans originated for sale                                    (67,547)         (86,291)        (52,206)
              Loans sold                                                    74,459           83,845          50,443
              Accrued interest receivable
                and other assets                                            (1,947)          (1,402)         (1,241)
              Accrued interest payable
                and other liabilities                                        1,314              446             698
                                                                      ------------     ------------    ------------
                  Net cash from operating activities                        15,508            3,863           4,018

Cash flows from investing activities
     Change in interest-bearing balances with
         other financial institutions                                          671             (671)              -
     Purchase of securities available-for-sale                            (172,049)         (54,270)        (19,798)
     Proceeds from sales of securities available-for-sale                   56,027            3,592          17,453
     Proceeds from maturities of securities
       available-for-sale                                                  109,826           40,176          24,155
     Purchase of securities held-to-maturity                                (2,000)          (2,532)         (2,370)
     Proceeds from maturities of securities
       held-to-maturity                                                      2,160            2,906           3,242
     Loans made to customers, net of payments collected                    (78,085)         (41,804)        (43,641)
     Purchase of Federal Home Loan Bank stock                                 (358)            (297)           (126)
     Property and equipment expenditures                                    (3,578)          (2,416)           (459)
     Proceeds from sales of other real estate                                    -              251             136
                                                                      ------------     ------------    ------------
         Net cash from investing activities                                (87,386)         (55,065)        (21,408)
</TABLE>

                             See accompanying notes.


<PAGE>
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                  Years ended December 31, 1999, 1998 and 1997
                          (Dollar amounts in thousands)

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

                                                                           1999             1998             1997
                                                                           ----             ----             ----
Cash flows from financing activities
<S>                                                                   <C>             <C>              <C>
     Net change in deposit accounts                                   $      9,686    $     40,351     $     13,645
     Cash received in branch acquisition for
       liabilities assumed, net of assets acquired                          45,266               -                -
     Net change in short-term borrowings                                    10,871          (3,970)          (4,149)
     Proceeds from other borrowings                                         30,000           4,800           16,500
     Payments on other borrowings                                          (10,877)           (832)          (5,879)
     Common stock issued                                                       278              69                -
     Dividends paid                                                         (1,540)         (1,341)          (1,201)
     Purchase of treasury stock                                                 (4)             (8)              (5)
                                                                      -------------   -------------    -------------
         Net cash from financing activities                                 83,680          39,069           18,911
                                                                       ------------    ------------     ------------

Net change in cash and cash equivalents                                     11,802         (12,133)           1,521

Cash and cash equivalents at beginning of year                              18,768          30,901           29,380
                                                                      ------------    ------------     ------------

Cash and cash equivalents at end of year                              $     30,570    $     18,768     $     30,901
                                                                      ============    ============     ============

Supplemental disclosures of cash flow information
     Cash paid during the period for
         Interest                                                     $     20,765     $    16,824     $     15,477
         Income taxes                                                        3,168           2,939            2,757

Non-cash investing activity
     Loans transferred to other real estate                           $        465    $          -     $          -

Non-cash financing activity
     See Note 18 regarding branch acquisition in 1999
</TABLE>
                            See accompanying notes.
<PAGE>


                            LAFAYETTE BANCORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 1999, 1998 and 1997
         (Dollar amounts in thousands, except share and per share data)

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

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations and Principles of Consolidation: The consolidated financial
statements  include the accounts of Lafayette  Bancorporation  (Corporation) and
its  wholly-owned  subsidiary,  Lafayette Bank and Trust Company  (Bank),  after
elimination of significant intercompany transactions and accounts.

The  Corporation  provides  financial  services  to  its  customers,   primarily
commercial  and retail banking and trust  services,  with  operations  conducted
through its main office and 15 branches located in Tippecanoe, White, and Jasper
Counties in Indiana.  The majority of the Corporation's  revenue is derived from
commercial and retail business lending activities and investments.  Although the
overall  loan  portfolio is  diversified,  the economy of  Tippecanoe  County is
heavily dependent on Purdue University, one of the area's largest employers, and
the economy of White and Jasper County is heavily  dependent on the agricultural
industry.  The  majority of the Bank's  loans are  secured by specific  items of
collateral including business assets, real property and consumer assets.


Use of Estimates:  Management  must make estimates and  assumptions in preparing
financial   statements  that  affect  the  amounts   reported  therein  and  the
disclosures  provided.  These estimates and assumptions may change in the future
and future  results could differ from these  estimates.  Estimates that are more
susceptible  to change in the near term include the  allowance  for loan losses,
the fair value of certain  securities and other financial  instruments,  and the
determination and carrying value of impaired loans.


Securities:  Securities  are  classified  as  held-to-maturity  and  carried  at
amortized cost when  management has the positive intent and ability to hold them
to maturity.  Securities are classified as available-for-sale when they might be
sold before maturity.  Securities available-for-sale are reported at fair value,
with unrealized gains or losses included in other comprehensive income.

Realized  gains or losses  are  determined  based on the  amortized  cost of the
specific security sold.  Interest and dividend income,  adjusted by amortization
of purchase premium or discount, is included in earnings.

Loans Held for Sale: The Bank sells certain  fixed-rate  first mortgage loans in
the secondary market on a servicing-released basis. Mortgage loans held for sale
are carried at the lower of cost or  estimated  market  value  determined  on an
aggregate basis.

<PAGE>

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)


Loans: Interest on real estate, commercial and most installment loans is accrued
over the term of the loans based on the principal  outstanding.  The recognition
of interest income is discontinued when, in management's  judgment, the interest
will not be  collectible  in the normal course of business.  Loans are evaluated
for non-accrual when the loan is impaired or payments are past due over 90 days.
Interest  received is recognized on the cash basis or cost recovery method until
qualifying  for  return  to  accrual   status.   Accrual  is  resumed  when  all
contractually   due  payments  are  brought  current  and  future  payments  are
reasonably  assured.  The Bank  defers  loan fees,  net of certain  direct  loan
origination  costs.  The net amount deferred is reported in the balance sheet as
part of loans and is recognized  into interest  income over the term of the loan
using a method which approximates a level-yield.


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

Loan  impairment is recognized if a loan's full  principal or interest  payments
are not expected to be received.  Loans considered to be impaired are reduced to
the present value of expected  future cash flows using the loans'  existing rate
or to the fair value of  collateral  if  repayment  is expected  solely from the
collateral,  by  allocating a portion of the  allowance  for loan losses to such
loans.  Smaller-balance homogeneous loans are evaluated for impairment in total.
Such loans include  residential  real estate loans secured by one to four family
residences and installment loans to individuals for household,  family and other
personal   expenditures.   Commercial  and  agricultural   loans  are  evaluated
individually for impairment.

Premises, Furniture and Equipment:  Premises, furniture and equipment are stated
at cost less accumulated  depreciation.  Depreciation expense is recognized over
the  estimated  useful  lives of the assets,  principally  on the  straight-line
method.

Foreclosed  Assets:  Assets acquired  through or instead of loan foreclosure are
initially  recorded at fair value when acquired,  establishing a new cost basis.
If fair value  declines,  a valuation  allowance  is recorded  through  expense.
Holding costs after acquisition are expensed.

<PAGE>

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (Continued)

Long-term Assets:  These assets are reviewed for impairment when events indicate
their carrying  amounts may not be  recoverable  from future  undiscounted  cash
flows. If impaired, the assets are recorded at discounted amounts.

Repurchase  Agreements:   Substantially  all  repurchase  agreement  liabilities
represent amounts advanced by various customers. Securities are pledged to cover
these liabilities,  which are not covered by federal deposit insurance. The Bank
retains possession of and control over pledged securities.

Intangibles: Intangibles include goodwill and core deposit intangibles. Goodwill
is amortized on the  straight-line  method over 15 to 25 years, and core deposit
is amortized on an accelerated  method over 10 years.  Intangibles  are assessed
for impairment based on estimated  undiscounted  cash flows, and written down if
necessary.

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

Income Taxes: Deferred tax liabilities and assets are determined at each balance
sheet date.  They are  measured by applying  enacted tax laws to future  taxable
income or expense resulting from differences in the financial  statement and tax
basis of assets and  liabilities.  Valuation  allowances  are  established  when
necessary to reduce  deferred tax assets to the amount  expected to be realized.
Income tax expense is the tax payable or refundable for the period plus or minus
the change during the period in deferred tax assets and liabilities.

Earnings  Per  Share:  Basic  earnings  per share is net  income  divided by the
weighted average number of common shares outstanding during the period.  Diluted
earnings per share includes the dilutive effect of additional  potential  common
shares  issuable  under stock  options.  Earnings  and  dividends  per share are
restated  for all stock  splits and  dividends  through the date of issue of the
financial statements.

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

<PAGE>

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Financial Instruments: Financial instruments include credit instruments, such as
commitments to make loans and standby letters of credit, issued to meet customer
financing  needs.  The face amount for these items  represents  the  exposure to
loss, before considering customer collateral or ability to repay.

Fair Values of Financial  Instruments:  Fair values of financial instruments are
estimated using relevant market information and other assumptions, as more fully
disclosed separately.  Fair value estimates involve uncertainties and matters of
significant  judgment regarding interest rates,  credit risk,  prepayments,  and
other factors,  especially in the absence of broad markets for particular items.
Changes in assumptions or in market  conditions could  significantly  affect the
estimates.

Loss  Contingencies:  Loss  contingencies,  including  claims and legal  actions
arising in the ordinary course of business, are recorded as liabilities when the
likelihood  of loss is probable and an amount or range of loss can be reasonably
estimated. Management does not believe there are now such matters that will have
a material effect on the financial statements.

Comprehensive  Income:  Comprehensive  income  consists  of net income and other
comprehensive  income.  Other comprehensive income includes unrealized gains and
losses on securities  available for sale,  which are also recognized as separate
components of equity.

Dividend  Restriction:  Banking  regulations require maintaining certain capital
levels and may limit the dividends paid by the bank to the holding company or by
the holding company to shareholders.

Industry  Segments:  Internal  financial  information is primarily  reported and
aggregated  in three  lines of  business,  banking,  mortgage  banking and trust
services.

New  Accounting  Pronouncements:  Beginning  January 1, 2001,  a new  accounting
standard  will  require all  derivatives  to be  recorded at fair value.  Unless
designated  as hedges,  changes in these fair  values  will be  recorded  in the
income statement. Fair value changes involving hedges will generally be recorded
by offsetting  gains and losses on the hedge and on the hedged item, even if the
fair value of the hedged item is not otherwise recorded. This is not expected to
have a material effect,  but the effect will depend on derivative  holdings when
this standard applies.

Reclassifications:   Some  items  in  the  prior   financial   statements   were
reclassified to conform to the current presentation.

<PAGE>

NOTE 2 - SECURITIES

The amortized  cost and fair values of securities are as follows at December 31,
1999:
<TABLE>
                                                                         Gross          Gross
                                                      Amortized       Unrealized     Unrealized          Fair
                                                        Cost             Gains         Losses            Value

Securities Available-for-Sale

<S>                                              <C>             <C>              <C>             <C>
     U.S. Government and its agencies            $      5,207    $          -     $       (202)   $      5,005
     Obligations of states and political
       subdivisions                                    28,785              10           (1,527)         27,268
     Corporate obligations                              2,000               -              (27)          1,973
     Mortgage-backed and other
       asset-backed securities                         44,402              35           (1,549)         42,888
     Other securities                                   2,567              21                -           2,588
                                                 ------------    ------------     ------------    ------------
                                                 $     82,961    $         66     $     (3,305)   $     79,722
                                                 ============    ============     =============   ============
Securities Held-to-Maturity

     Obligations of states and political
       subdivisions                              $      4,712    $         40     $        (43)   $      4,709
                                                 ============    ============     =============   ============

The amortized  cost and fair values of securities are as follows at December 31,
1998:

                                                                       Gross          Gross
                                                    Amortized       Unrealized     Unrealized          Fair
                                                      Cost             Gains         Losses            Value

Securities Available-for-Sale

     U.S. Government and its agencies            $     14,039    $         76     $         (5)   $     14,110
     Obligations of states and political
       subdivisions                                    23,526             309             (198)         23,637
     Corporate obligations                              2,520               1               (8)          2,513
     Mortgage-backed and other
       asset-backed securities                         36,940              84             (328)         36,696
                                                 ------------    ------------     ------------    ------------

                                                 $     77,025    $        470     $       (539)   $     76,956
                                                 ============    ============     ============    ============


Securities Held-to-Maturity

     Obligations of states and political
       subdivisions                              $      4,879    $        186     $         (2)   $      5,063
                                                 ============    ============     ============    ============
</TABLE>


Gross  gains  of $35,  $6 and $95 and  gross  losses  of  $179,  $0 and $68 were
realized on sales of securities available-for-sale in 1999, 1998 and 1997.


<PAGE>

NOTE 2 - SECURITIES (Continued)

The  amortized  cost and  estimated  market value of  securities at December 31,
1999, by contractual maturity,  are shown below.  Securities not due at a single
maturity date are shown separately.
<TABLE>

                                                      Available-for-Sale                Held-to-Maturity

                                                   Amortized          Fair          Amortized          Fair
                                                     Cost             Value           Cost             Value
<S>                                             <C>             <C>              <C>             <C>
     Due in 1 year or less                       $        320    $        320     $        200    $        200
     Due after 1 year through
       5 years                                          5,969           5,880              840             847
     Due after five years through
       10 years                                        11,691          11,314            2,575           2,589
     Due after 10 years                                20,579          19,320            1,097           1,073
                                                 ------------    ------------     ------------    ------------
         Subtotal                                      38,559          36,834            4,712           4,709
     Mortgage-backed and other asset-
       backed securities                               44,402          42,888                -               -
                                                 ------------    ------------     ------------    ------------

         Total                                   $     82,961    $     79,722     $      4,712    $      4,709
                                                 ============    ============     ============    ============
</TABLE>

Securities with a carrying value of $28,206 and $19,747 at December 31, 1999 and
1998 were pledged to secure public deposits and repurchase agreements.  See Note
8 regarding additional securities pledges.

At December 31, 1999 and 1998, mortgage-backed securities include collateralized
mortgage  obligations  (CMO's)  and real  estate  mortgage  investment  conduits
(REMIC's)  with an  amortized  cost of  $20,256  and  $18,000  and fair value of
$19,144 and $17,721,  all of which are issued by U.S.  Government  agencies.  At
December 31, 1999 and 1998,  approximately $8,432 and $10,782 are variable rate,
with the remainder fixed rate.

<PAGE>

NOTE 3 - LOANS

Loans are comprised of the following as of December 31:

<TABLE>
<S>                                                                                     <C>              <C>
                                                                                        1999             1998
                                                                                        ----             ----
     Commercial and agricultural loans                                            $    192,760    $    115,198
     Real estate construction                                                           47,375          28,043
     Residential real estate loans                                                     197,181         160,655
     Installment loans to individuals                                                   51,754          49,932
                                                                                  ------------    ------------
                                                     Total                        $    489,070    $    353,828
                                                                                  ============    ============

Non-performing loans consist of the following at December 31:

                                                                                       1999             1998
                                                                                       ----             ----
     Loans past due 90 days or more                                               $        584    $        775
     Non accrual loans                                                                     622           1,468
     Restructured loans                                                                    114             197
                                                                                  ------------    ------------

                                                     Total                        $      1,320    $      2,440
                                                                                  ============    ============

Information regarding impaired loans is as follows:

                                                                                      1999             1998
                                                                                      ----             ----
     Year end impaired loans
         With no allowance for loan losses allocated                              $         70    $          -
         With allowance for loan losses allocated                                          576             748
     Amount of the allowance allocated                                                     151             145

     Average balance of impaired loans during the year                                     697             160
     Interest income recognized during impairment                                            3               -
     Cash-basis interest income recognized                                                   3               -
</TABLE>

The Bank had $14 and $720 loans on non-accrual at December 31, 1999 or 1998 that
management did not deem to be impaired.

<PAGE>

NOTE 3 - LOANS (Continued)

Certain directors and officers of the Corporation and Bank were customers of the
Bank in the  ordinary  course of  business.  Loan  activity  with these  related
parties is as follows:

     Balance as of January 1, 1999                              $      1,562
     Change in persons included                                           36
     New loans                                                            78
     Loan payments                                                      (687)
                                                                -------------
     Balance as of December 31, 1999                            $        989
                                                                ============


NOTE 4 - ALLOWANCE FOR LOAN LOSSES

The activity in the allowance for loan losses is as follows:
<TABLE>
                                                                      1999            1998             1997
                                                                      ----            ----             ----
<S>                                                              <C>              <C>             <C>
     Balance, January 1                                          $      4,241     $      3,464    $      3,198
     Provision charged to operations                                    1,060              980             620
     Loans charged-off                                                   (829)            (411)           (550)
     Recoveries on loans previously charged-off                           146              208             196
                                                                 ------------     ------------    ------------
     Balance, December 31                                        $      4,618     $      4,241    $      3,464
                                                                 ============     ============    ============
</TABLE>

NOTE 5 - PREMISES, FURNITURE AND EQUIPMENT

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

<TABLE>
                                                                                      1999             1998
                                                                                      ----             ----
<S>                                                                               <C>             <C>
     Land                                                                         $        870    $        789
     Buildings and improvements                                                          8,468           7,833
     Leasehold improvements                                                              1,296           1,296
     Furniture and equipment                                                             9,922           7,218
                                                                                  ------------    ------------
         Total                                                                          20,556          17,136
     Accumulated depreciation                                                           (9,973)         (9,183)
                                                                                  -------------   ------------
     Premises, furniture and equipment, net                                       $     10,583    $      7,953
                                                                                  ============    ============
</TABLE>

<PAGE>

NOTE 6 - INTEREST-BEARING TIME DEPOSITS

Time  deposits of $100 or greater  totaled  $38,665 and $28,228 at December  31,
1999 and 1998.

At December 31, 1999, the scheduled maturities of time deposits are as follows:

                  2000                             $    118,066
                  2001                                   53,022
                  2002                                   42,790
                  2003                                   13,122
                  2004                                    2,346
                  Thereafter                                393
                                                   ------------
                                    Total          $    229,739
                                                   ============


NOTE 7 - SHORT-TERM BORROWINGS

Short-term borrowings are comprised of the following at year end:


<TABLE>
                                                                                      1999             1998
                                                                                      ----             ----

<S>                                                                               <C>             <C>
     Balance of repurchase agreements outstanding                                 $     24,645    $     15,788
     Balance of treasury tax and loan open-end note                                      2,628             614
                                                                                  ------------    ------------
         Total short-term borrowings                                              $     27,273    $     16,402
                                                                                  ============    ============
</TABLE>

At December  31,  1999 and 1998,  the  Corporation  had $240 and $446 in related
party repurchase agreements.


<PAGE>

NOTE 8 - FHLB ADVANCES AND NOTE PAYABLE


FHLB  advances  and note  payable  outstanding  at  December  31  consist of the
following:
<TABLE>
<S>                                                                                   <C>              <C>
                                                                                      1999             1998
                                                                                      ----             ----
          Federal Home Loan Bank advances;  annual principal  payments;  various
          maturities with final maturity May 15, 2008;  interest payable monthly
          at various  fixed  interest  rates  from  5.45% - 6.82%;  secured by a
          blanket pledge of the Bank's  obligations  of the U.S.  Government and
          U.S. Government  agencies and one-to-four family residential  mortgage
          loans.                                                                 $     9,527       $   10,354

          Federal Home Loan Bank advances;  principal  payments due at maturity;
          various  maturities during the year 2000, with final maturity December
          16, 2000;  interest  payable  monthly at various fixed  interest rates
          from   4.05%-6.17%;   secured  by  a  blanket  pledge  of  the  Bank's
          obligations of the U.S.  Government and U.S.  Government  agencies and
          one-to-four family residential mortgage loans.                              20,500           13,500

                         Total FHLB advances                                          30,027           23,854

          Note payable to Northern Trust Company;  quarterly  principal payments
          of $350 required;  matures March 31, 2006; interest payable monthly at
          a variable rate,  which is currently  6.36% based on the Federal Funds
          rate plus an  applicable  margin based on the  Corporation's  existing
          capital  ratios;  obligation  is  unsecured  but  subject  to  various
          covenants,   including  defined  minimum  return  on  average  assets,
          tangible  net  worth,   capital   ratios,   loan  loss   allowance  to
          non-performing loans ratio, and maximum non-performing assets. At year
          end,the Corporation was in compliance with all covenants.                   12,950               -
                                                                                  ------------    ------------

                         Total                                                    $     42,977     $   23,854
                                                                                  =============   ============
</TABLE>

Annual principal payments required are as follows:

                 2000                               22,690
                 2001                                2,155
                 2002                                2,399
                 2003                                4,426
                 2004                                1,479
                 Thereafter                          9,828
                                               ------------
Total FHLB advances and notes payable         $     42,977
                                               ============


<PAGE>


NOTE 9 - EMPLOYEE BENEFIT PLANS

The following  sets forth the defined  benefit  pension plan's funded status and
amount  recognized in the balance  sheet at December 31 (amounts  computed as of
September 30, 1999 and 1998):
<TABLE>
<S>                                                                               <C>                <C>
                                                                                  1999               1998
                                                                                  ----               ----
     Change in benefit obligation:
         Beginning benefit obligation                                        $        12,240    $       11,252
         Service cost                                                                    647               612
         Interest cost                                                                   812               803
         Actuarial gain                                                                 (648)                -
         Benefits paid                                                                  (425)             (427)
                                                                             ----------------   --------------
         Ending benefit obligation                                                    12,626            12,240

     Change in plan assets, at fair value:

         Beginning plan assets                                                        15,199            14,675
         Actual return                                                                 1,829               951
         Employer contribution                                                             -                 -
         Benefits paid                                                                  (425)             (427)
                                                                             ----------------   --------------

         Ending plan assets                                                           16,603            15,199
                                                                             ---------------    --------------

     Funded status                                                                     3,977             2,959
     Unrecognized net actuarial gain                                                  (1,134)              (43)
     Unrecognized prior service cost                                                      20                22
     Unrecognized transition asset                                                      (782)             (933)
                                                                             ----------------   --------------
     Prepaid benefit cost                                                    $         2,081    $        2,005
                                                                             ===============    ==============
</TABLE>

The  components of pension  expense and related  actuarial  assumptions  were as
follows.
<TABLE>
<S>                                                       <C>                 <C>                   <C>

                                                               1999                 1998               1997
                                                               ----                 ----               ----

     Service cost                                          $          647    $           612    $          511
     Interest cost                                                    812                803               743
     Expected return on plan assets                                (1,386)            (1,341)           (1,126)
     Amortization of prior service cost                                 2                  2                 2
     Amortization of transition asset                                (151)              (151)             (151)
                                                           --------------    ---------------    --------------
                                                           $          (76)   $           (75)   $          (21)
                                                           ===============   ===============    ==============


     Discount rate on benefit obligation                              7.50%             6.75%             7.25%
     Long-term expected rate of return
       on plan assets                                                 9.25              9.25              9.25
     Rate of compensation increase                                    4.00              4.00              4.00
</TABLE>

At  December  31,  1999  and  1998,   the  plan's   assets   include   Lafayette
Bancorporation  common stock of $1,028 and $1,038. At December 31, 1999 and 1998
the plan's assets also included Lafayette Bank and Trust Company certificates of
deposit of $421 and $409.

<PAGE>



NOTE 9 - EMPLOYEE BENEFIT PLANS (Continued)

The  Bank  maintains  a  retirement  savings  plan  covering  substantially  all
employees.  The plan requires  employees to complete 1 year of service and be 21
years of age before entering the plan.  Employee  contributions are limited to a
maximum  of 15% of their  salary.  The plan  allows  for a  matching  percentage
determined annually by the Board of Directors of the first 4% of employee salary
contributions and an annual discretionary  contribution.  Participants are fully
vested in salary deferral  contributions  and employer  matching  contributions.
Total 401(k) contributions charged to expense were $140, $116 and $106 for 1999,
1998 and 1997.


The Bank  maintains  a  deferred  compensation  plan for the  benefit of certain
directors.  Under  the  plan,  the Bank  agrees,  in  return  for the  directors
deferring  the  receipt of a portion  of their  current  compensation,  to pay a
retirement  benefit  computed as the amount of the  compensation  deferred  plus
accrued interest at a variable rate. Accrued benefits payable totaled $1,049 and
$858 at December 31, 1999 and 1998.  Deferred  compensation  expense was $90 for
1999, 1998 and 1997. In conjunction with the plan formation,  the Bank purchased
life insurance on the directors.  The cash surrender  value of that insurance is
carried  as  an  other  asset  on  the  consolidated   balance  sheet,  and  was
approximately $3,678 and $3,522 at December 31, 1999 and 1998.

NOTE 10 - POSTRETIREMENT BENEFITS

The Bank sponsors a  postretirement  benefit plan which provides defined medical
benefits.  Retirees  contribute an amount equal to their  individual  applicable
premium to provide the  coverage,  less 30%,  which is paid monthly by the Bank.
Retirees must pay 100% of medical premiums for all dependent coverage.  The plan
is not funded and has no assets.


<PAGE>



NOTE 10 - POSTRETIREMENT BENEFITS (Continued)

The following sets forth the plan's benefit obligation and amounts recognized in
the balance sheet at December 31:

<TABLE>
<S>                                                                                     <C>              <C>
                                                                                        1999             1998
                                                                                        ----             ----
     Change in postretirement benefit obligation:
         Beginning benefit obligation                                             $        494    $        443
         Service cost                                                                       31              28
         Interest cost                                                                      34              31
         Benefits paid                                                                      (9)             (8)
                                                                                  -------------   ------------
         Ending benefit obligation                                                         550             494

     Unrecognized net gain                                                                 153             165
                                                                                  ------------    ------------
     Accrued benefit obligation                                                   $        703    $        659
                                                                                  ============    ============
</TABLE>


Components of net periodic postretirement benefit cost as of December 31:

<TABLE>
                                                                      1999            1998             1997
                                                                      ----            ----             ----
<S>                                                              <C>              <C>             <C>
     Service cost                                                $         31     $         28    $         24
     Interest cost                                                         34               31              28
     Amortization of unrecognized gain                                    (11)             (14)            (15)
                                                                 -------------    ------------    ------------

         Benefit cost                                            $         54     $         45    $         37
                                                                 ============     ============    ============
</TABLE>

For measurement purposes,  the annual rate of increase in the per capita cost of
covered health care benefits assumed was 11.5% for 1999, 1998 and 1997, with the
rate  assumed to decrease to 5.5% over the next two years.  The health care cost
trend is a significant  assumption.  However,  either an increase or decrease in
the assumed  health  care cost trend  rates by 1% in each year would  affect the
accumulated  postretirement  benefit  obligation as of December 31, 1999 and the
aggregate  service and interest cost  components of net periodic  postretirement
benefit cost for the year then ended by amounts not considered to be material.

The  weighted   average  discount  rate  used  in  determining  the  accumulated
postretirement benefit obligation was 7% for 1999, 1998 and 1997.

<PAGE>

NOTE 11 - STOCK APPRECIATION RIGHTS AND STOCK OPTION PLAN

The  Corporation  maintains  an  Officers'  Stock  Appreciation  Rights Plan for
granting rights to certain officers,  under which all available rights have been
granted.  Upon exercise of a stock  appreciation  right,  the holder may receive
cash equal to the excess of the fair market value of common stock at the date of
exercise over the option price. Stock appreciation  rights are vested at 20% per
year and must be exercised  within 10 years of grant. The plan expires May 2002.
Granted  rights  outstanding  were  fully-vested  and  consisted of 49,641 at an
option  price of $4.03 for 1999 and 44,094 at an option price of $6.05 for 1998.
In 1999,  prior to the 3-for-2  stock  split,  11,000  rights were  exercised at
$40.62 per share.  Compensation  expense charged to operations in 1999, 1998 and
1997 was $14,  $450,  and $657 and is based on an increase in market value.  The
liability at December 31, 1999 and 1998 was $1,053 and $1,420.

The Corporation has established two  nonqualified  stock option plans to provide
stock options to directors and key members of  management.  One plan was adopted
in 1995 ("1995 Plan") and the other in 1998 ("1998  Plan").  The total number of
shares of common stock remaining available for grant to directors and management
are shown below:

                                          1998            1995
                                          Plan            Plan            Total

                 Directors               6,766            7,182          13,948
                 Management             47,868            7,871          55,739
                                   ------------     ------------    ------------
                         Totals         54,634           15,053          69,687
                                   ============     ============    ============

All  shares  for both plans  were  available  for grant at a price  equal to the
market price of the stock at the date of grant.

Under the 1995 Plan,  options  granted to  directors at the  effective  date are
exercisable  any time after the date of grant,  and options granted to directors
elected after the effective date are exercisable after two years. Under the 1998
Plan,  options granted to directors at the effective date and directors  elected
after the effective date are  exercisable  after two years.  Options  granted to
management  under both plans become 20% exercisable  after one year and 20% each
subsequent  year.  Both plans are  effective  for five years and options must be
exercised within ten years from the date of grant.
<PAGE>

NOTE 11 - STOCK APPRECIATION RIGHTS AND STOCK OPTION PLAN (Continued)


A summary of the Corporation's  stock option activity,  and related  information
for the years ended  December 31,  follows  (adjusted  for stock  dividends  and
splits):
<TABLE>

                                                 ----------1 9 9 9---------         -----------1 9 9 8------------
                                                                  Weighted                              Weighted
                                                                   Average                               Average
                                                                  Exercise                              Exercise
                                                    Options         Price              Options            Price

<S>                                                  <C>        <C>                     <C>        <C>
Outstanding beginning of year                        206,752    $      14.18            176,176    $        12.50
Granted                                               13,485           27.17             35,238             22.29
Exercised                                            (15,605)          12.39             (4,662)            12.12
Forfeited                                             (8,871)          16.19                  -                  -
                                                 ------------   ------------        -----------    ---------------

Outstanding end of year                              195,761    $      15.12            206,752    $        14.18
                                                 ===========    ============        ===========    ==============

Exercisable at end of year                           122,099    $      13.20            102,245    $        11.86
                                                 ===========    ============        ===========    ==============

Weighted average fair value per
  option granted during the year                 $     4.38                         $      3.52
</TABLE>

Options  outstanding at December 31, 1999 have a weighted average remaining life
of 7.4 years, with exercise prices ranging from $11.43 to $27.17.

Pro forma  information  regarding  net  income and  earnings  per share has been
determined as if the  Corporation  had accounted for its stock options under the
fair value method. The fair value for these options was estimated at the date of
grant using a  Black-Scholes  option  pricing model with the following  weighted
average assumptions for the years 1999, 1998 and 1997,  respectively:  risk-free
interest rates of 5.4%, 5.6% and 6.6%; dividend yields of 2%; volatility factors
of the expected market price of the  Corporation's  common stock of .13, .16 and
 .16,  and a  weighted  average  expected  life of the  options of five years for
management options and two years for directors' options.

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

                                                                      1999            1998             1997
                                                                      ----            ----             ----

<S>                                                              <C>              <C>             <C>
     Pro forma net income                                        $      6,270     $      5,242    $      4,706
     Pro forma earnings per share
         Basic                                                   $       1.75     $      1.46     $       1.32
         Diluted                                                 $       1.71     $      1.43     $       1.30
</TABLE>

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

<PAGE>

NOTE 12 - INCOME TAXES

Income taxes consist of the following:
<TABLE>

                                                                      1999            1998             1997
                                                                      ----            ----             ----


<S>                                                              <C>              <C>             <C>
     Currently payable                                           $      3,004     $      3,085    $      2,626
     Deferred income taxes (benefit)                                      (50)            (385)            (57)
     Non-qualified stock option benefit
        allocated to additional paid-in capital                            73               11               -
                                                                 ------------     ------------    ------------


         Total                                                   $      3,027     $      2,711    $      2,569
                                                                 ============     ============    ============
</TABLE>

The  following is a  reconciliation  of statutory  federal  income taxes and the
amount  computed by applying the  statutory  rate of 34% to income before income
taxes:

<TABLE>
                                                                      1999            1998             1997
                                                                      ----            ----             ----
<S>                                                             <C>             <C>              <C>
     Statutory rate applied to income before
       income taxes                                              $      3,188     $      2,750    $      2,508
     Add/(deduct)
         Tax exempt interest income                                      (430)            (337)           (303)
         State tax expense (net of federal benefit)                       417              358             405
         Other                                                           (148)             (60)            (41)
                                                                 -------------    ------------    ------------

              Total                                              $      3,027     $      2,711    $      2,569
                                                                 ============     ============    ============
</TABLE>

The net  deferred  tax asset  reflected  in the  consolidated  balance  sheet is
comprised of the following components as of December 31:
<TABLE>
<S>                                                                                   <C>              <C>
                                                                                      1999             1998
                                                                                      ----             ----
     Deferred tax assets

         Allowance for loan losses                                                $      1,053    $        817
         Accrued stock appreciation rights                                                 417             562
         Accrued post-retirement benefit obligation                                        372             319
         Deferred compensation                                                             381             307
         Deferred loan fees                                                                 42              79
         Net unrealized loss on securities available-for-sale                            1,283              27
                                                                                  ------------    ------------
              Total tax assets                                                           3,548           2,111

     Deferred tax liabilities

         Depreciation                                                                     (280)           (219)
         Net pension benefit                                                              (825)           (794)
         Other                                                                            (255)           (216)
                                                                                  -------------   ------------
         Total deferred tax liabilities                                                 (1,360)         (1,229)

     Valuation allowance                                                                     -               -
                                                                                  ------------    ------------

         Net deferred tax asset                                                   $      2,188    $        882
                                                                                  ============    ============
</TABLE>

<PAGE>

NOTE 13 - PER SHARE DATA

The following table  illustrates  the computation of basic and diluted  earnings
per share.  Weighted  average  shares  outstanding  have been  restated  for all
periods for stock splits and dividends.
<TABLE>
<S>                                                        <C>              <C>                <C>


                                                                   1999            1998               1997
                                                                   ----            ----               ----
Basic earnings per share

     Net income                                            $        6,351    $         5,377    $        4,808
     Weighted average shares outstanding                        3,580,981          3,581,080         3,578,356
                                                           --------------    ---------------    --------------
         Basic earnings per share                          $         1.77    $           1.50   $         1.34
                                                           ==============    ================   ==============


Diluted earnings per share

     Net income                                            $        6,351    $         5,377    $        4,808
     Weighted average shares outstanding                        3,580,981          3,581,080         3,578,356
     Diluted effect of assumed exercise
       of Stock Options                                            84,109             79,782            35,009
                                                           --------------    ---------------    --------------
         Diluted average shares outstanding                     3,665,090          3,660,862         3,613,365
                                                           --------------    ---------------    --------------


Diluted earnings per share                                 $         1.73    $         1.47     $         1.33
                                                           ==============    ==============     ==============
</TABLE>


NOTE 14 - CAPITAL REQUIREMENTS

The Corporation and Bank are subject to various regulatory capital  requirements
administered by federal and state banking agencies.  Capital adequacy guidelines
and prompt  corrective  action  regulations  involve  quantitative  measures  of
assets,  liabilities,  and  certain  off-balance-sheet  items  calculated  under
regulatory  accounting  practices.  Capital amounts and classifications are also
subject  to  qualitative  judgements  by  regulators.  Failure  to meet  capital
requirements can initiate regulatory action.

Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require the  Corporation  and Bank to maintain  minimum  amounts and ratios (set
forth in the  following  table) of total and Tier 1 capital  (as  defined in the
regulations)  to  risk-weighted  assets (as defined),  and of Tier 1 capital (as
defined) to average assets (as defined).

Prompt  corrective  action  regulations  provide  five   classifications:   well
capitalized,    adequately    capitalized,    undercapitalized,    significantly
undercapitalized, and critically undercapitalized,  although these terms are not
used to  represent  overall  financial  condition.  If  adequately  capitalized,
regulatory   approval   is   required   to   accept   brokered   deposits.    If
undercapitalized,   the   institution   may  be   required   to  limit   capital
distributions, limit asset growth and expansion, and prepare capital restoration
plans.


<PAGE>


NOTE 14 - CAPITAL REQUIREMENTS (Continued)

On March 12, 1999 the Corporation's  wholly-owned subsidiary bank acquired three
branches in Jasper County, Indiana. As a result of this transaction consolidated
and bank-only capital levels were reduced.  The Corporation borrowed $14,000 and
contributed  $13,000  to the  Bank  in  order  for  the  bank  to  maintain  its
well-capitalized  status.  As of December 31, 1999, the Bank was  categorized as
well-capitalized under the regulatory framework for prompt corrective action. To
be  categorized  as  well-capitalized,  the Bank  must  maintain  minimum  total
risk-based,  Tier 1 risk-based,  and Tier 1 leverage  ratios as set forth in the
table.  The Corporation was categorized as  undercapitalized  as of December 31,
1999 as the total capital ratio was slightly  below the minimum  required  level
for  capital  adequacy  purposes.   Although  slightly  below  the  minimum,  no
corrective  regulatory  action has been  initiated,  and management  expects the
Corporation to become adequately capitalized in the first quarter of 2000.

The  actual  consolidated  capital  amounts  and  ratios  are  presented  in the
following table (in millions) for the Corporation and the Bank.
<TABLE>

                                                                                            Minimum Required To
                                                                   Minimum Required         Be Well-Capitalized
                                                                      For Capital         Under Prompt Corrective

                                                  Actual            Adequacy Purposes        Action Regulations
                                              Amount   Ratio         Amount     Ratio          Amount     Ratio

1999

<S>                                       <C>          <C>        <C>            <C>       <C>           <C>
Total capital to risk weighted assets
         Consolidated                     $    38.6      7.99%    $      38.7      8.00%   $     48.3     10.00%
         Lafayette Bank and Trust              50.2     10.33            38.9      8.00          48.6     10.00

Tier 1 capital to risk weighted assets
         Consolidated                          34.0      7.04            19.3      4.00          29.0      6.00
         Lafayette Bank and Trust              45.6      9.38            19.4      4.00          29.1      6.00

Tier 1 capital to average assets
         Consolidated                          34.0      5.42            25.1      4.00          31.4      5.00
         Lafayette Bank and Trust              45.6      7.22            25.2      4.00          31.5      5.00

1998

Total capital to risk weighted assets
         Consolidated                     $    46.1     13.05%  $        28.2      8.00%  $      35.3     10.00%
         Lafayette Bank and Trust              45.9     12.92            28.4      8.00          35.5     10.00

Tier 1 capital to risk weighted assets
         Consolidated                          41.9     11.85            14.1      4.00          21.2      6.00
         Lafayette Bank and Trust              41.7     11.73            14.2      4.00          21.3      6.00


Tier 1 capital to average assets
         Consolidated                          41.9      8.80            19.0      4.00          23.8      5.00
         Lafayette Bank and Trust              41.7      8.74            19.1      4.00          23.8      5.00
</TABLE>
<PAGE>

The  Bank is also  subject  to  state  regulations  restricting  the  amount  of
dividends payable to the Corporation.  At December 31, 1999, the Bank had $7,640
of retained earnings available for dividends under these regulations.

NOTE 15 - COMMITMENTS AND CONTINGENT LIABILITIES

The Bank leases branch  facilities  under  operating  leases expiring in various
years  through  2007.  Expense for leased  premises was $244,  $219 and $188 for
1999, 1998 and 1997. Future minimum lease payments are as follows:

       2000                              $        288
       2001                                       270
       2002                                       266
       2003                                       242
       2004                                       202
       Thereafter                                 212
                                         ------------
                     Total               $      1,480
                                         ============

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

At December 31,  off-balance  sheet financial  instruments whose contract amount
represents credit risk are summarized as follows:
<TABLE>
<S>                                                                             <C>             <C>
                                                                                      1999             1998
                                                                                      ----             ----

     Unused lines of credit                                                       $     59,753    $     43,239
     Commitments to make loans                                                          10,987          14,976
     Standby letters of credit                                                           4,235           2,759
     Commercial letters of credit                                                           21              59
</TABLE>

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

The cash  balance  required  to be  maintained  on hand or on  deposit  with the
Federal  Reserve  was $9,434 and $5,955 at  December  31,  1999 and 1998.  These
reserves do not earn interest.
<PAGE>

NOTE 16 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

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

                                                -----------1 9 9 9---------        -----------1 9 9 8---------
                                                 Carrying            Fair           Carrying            Fair
                                                   Value             Value            Value             Value

Financial assets

<S>                                            <C>              <C>               <C>              <C>
   Cash and cash equivalents                   $      30,570    $      30,570     $      18,768    $      18,768
   Interest-bearing balances with
     other financial institutions                          -                -               671              671
   Securities available-for-sale                      79,722           79,722            76,956           76,956
   Securities held-to-maturity                         4,712            4,709             4,879            5,063
   Loans held for sale                                 3,174            3,204            10,086           10,264
   Loans, net                                        484,452          479,127           349,587          351,685
   FHLB stock                                          1,897            1,897             1,539            1,539
   Accrued interest receivable                         6,833            6,833             4,592            4,592

Financial liabilities

   Deposits                                    $    (522,247)   $    (522,033)    $    (395,546)   $    (398,747)
   Short-term borrowings                             (27,273)         (27,273)          (16,402)         (16,402)
   FHLB advances                                     (30,027)         (29,602)          (23,854)         (24,527)
   Note payable                                      (12,950)         (12,950)                -                -
   Accrued interest payable                           (2,249)          (2,249)           (1,471)          (1,471)
</TABLE>

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.  The carrying  amount is  considered  to estimate fair value for cash and
short-term  instruments,   demand  deposits,   short-term  borrowings,   accrued
interest,  and  variable  rate loans,  deposits  and note  payable  that reprice
frequently and fully.  Securities  fair values are based on quoted market prices
or, if no quotes  are  available,  on the rate and term of the  security  and on
information  about the issuer.  For loans held for sale, the fair value of loans
held for sale is based on quoted market  prices.  For  commercial,  real estate,
consumer,  and other loans,  fair value is estimated by discounting  future cash
flows using the current  rates at which similar loans would be made to borrowers
with similar credit ratings and for the same remaining maturities. FHLB stock is
restricted  in nature and is not actively  traded on a secondary  market and the
carrying  amount is a  reasonable  estimate  of fair  value.  The fair  value of
fixed-maturity  certificates  of deposit is estimated  using the rates currently
offered for deposits of similar remaining  maturities.  For FHLB advances,  fair
value is estimated using rates  currently  available to the Corporation for debt
with  similar  terms and  remaining  maturities.  The  estimated  fair value for
off-balance  sheet  loan  commitments  approximates  carrying  value and are not
considered significant to this presentation.
<PAGE>

NOTE 17 - PARENT COMPANY STATEMENTS

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

CONDENSED BALANCE SHEETS
December 31
<TABLE>
                                                                                           1999            1998
                                                                                           ----            ----
<S>                                                                                 <C>                 <C>
ASSETS
Cash on deposit with subsidiary                                                       $      2,568     $      1,488
Investment in bank                                                                          57,350           42,463
Other assets                                                                                   490              559
                                                                                      ------------      -----------
                                                                                      $     60,408     $     44,510
                                                                                      ============     ============
LIABILITIES AND SHAREHOLDERS' EQUITY

Note payable                                                                          $     12,950     $         -
Other liabilities                                                                            1,673            1,896
Shareholders' equity                                                                        45,785           42,614
                                                                                      ------------     ------------
                                                                                      $     60,408     $     44,510
                                                                                      ============     ============
</TABLE>


CONDENSED STATEMENTS OF INCOME
Years ended December 31
<TABLE>
<S>                                                                       <C>              <C>             <C>
                                                                          1999             1998            1997
                                                                          ----             ----            ----
Operating income

     Dividends received from subsidiary bank                          $      2,960    $      1,850     $      1,714
     Interest income                                                            75              26               10
                                                                      ------------    ------------     ------------
                                                                             3,035           1,876            1,724
Operating expenses

     Interest expense                                                          749               -                -
     Other operating expenses                                                  125             543              742
                                                                      ------------    ------------     ------------
                                                                               874             543              742

Income before income taxes and equity in

  undistributed earnings of bank                                             2,161           1,333              982

Income tax benefit                                                             389             205              290
                                                                      ------------    ------------     ------------
Income before equity in undistributed earnings of bank                       2,550           1,538            1,272

Equity in undistributed earnings of bank                                     3,801           3,839            3,536
                                                                      ------------    ------------     ------------

Net income                                                                   6,351           5,377            4,808

Other comprehensive income, net of tax                                      (1,914)             48              221
                                                                      -------------   ------------     ------------

Comprehensive income                                                  $      4,437    $      5,425     $      5,029
                                                                      ============    ============     ============
</TABLE>

<PAGE>


NOTE 17 - PARENT COMPANY STATEMENTS (Continued)

CONDENSED STATEMENTS OF CASH FLOWS
Years ended December 31
<TABLE>
<S>                                                                 <C>              <C>            <C>
                                                                          1999             1998            1997
                                                                          ----             ----            ----
Cash flows from operating activities

     Net income                                                       $      6,351    $      5,377     $      4,808
     Adjustments to reconcile net income to net cash
       from operating activities
         Amortization of deferred costs                                          6               6                6
         Equity in undistributed earnings of bank                           (3,801)         (3,839)          (3,536)
         Other assets and other liabilities                                   (160)            466              (36)
                                                                      -------------   ------------     ------------
              Net cash from operating activities                             2,396           2,010            1,242

Cash flows from financing activities

     Proceeds from note payable                                             14,000               -                -
     Principal payments on note payable                                     (1,050)              -                -
     Capital contribution to subsidiary bank                               (13,000)              -                -
     Common stock issued                                                       278              69                -
     Dividends paid                                                         (1,540)         (1,341)          (1,201)
     Purchase of treasury shares                                                (4)             (8)              (5)
                                                                      -------------   ------------     ------------
         Net cash from financing activities                                 (1,316)         (1,280)          (1,206)
                                                                      -------------   ------------     ------------

Net change in cash and cash equivalents                                      1,080             730               36

Cash and cash equivalents at beginning of year                               1,488             758              722
                                                                      -------------   ------------     ------------
Cash and cash equivalents at end of year                              $      2,568    $      1,488     $        758
                                                                      ============    ============     ============
</TABLE>


NOTE 18 - BRANCH ACQUISITION

In March 1999, the Bank purchased three branches located in DeMotte,  Remington,
and Rensselaer, Indiana.


The fair value of assets acquired was $71,749 (consisting  primarily of goodwill
and core deposit  intangibles of $13,510,  and commercial  loans,  net of a $563
purchase  adjustment for credit quality),  the fair value of liabilities assumed
was $117,015 (consisting primarily of customer deposits),  and the Bank received
$45,266 of cash at settlement.

<PAGE>


NOTE 19 - OTHER COMPREHENSIVE INCOME

Other comprehensive income components and related taxes were as follows:
<TABLE>

<S>                                                            <C>                <C>                <C>
                                                               1999               1998               1997
                                                               ----               ----               ----

Unrealized holding gains and losses on
     available-for-sale securities                         $       (3,314)   $            85    $          394
Less:  reclassification adjustments for gains
      and losses later recognized in income                           144                 (6)              (27)
                                                           --------------    ---------------    --------------
Net unrealized gains and losses                                    (3,170)                79               367
Tax effect                                                          1,256                (31)             (146)
                                                           --------------    ---------------    --------------

Other comprehensive income                                 $       (1,914)   $            48    $          221
                                                           ===============   ================   ==============
</TABLE>

NOTE 20 - SEGMENT INFORMATION

The Corporation's operations include three primary segments:  banking,  mortgage
banking, and trust.  Through its banking  subsidiary's  locations in Tippecanoe,
Jasper  and White  Counties,  the  Corporation  provides  traditional  community
banking services, such as accepting deposits and making commercial,  residential
and consumer  loans.  Mortgage  banking  activities  include the  origination of
residential  mortgage  loans for sale on a servicing  released  basis to various
investors.  The  Corporation's  trust  department  provides  both  personal  and
corporate trust services.

The Corporation's  three reportable  segments are determined by the products and
services offered. Loans,  investments and deposits comprise the primary revenues
and expenses of the banking  operation,  net gains on loans sold account for the
revenues in the mortgage banking segment,  and trust administration fees provide
the primary revenues in the trust department.

The following segment  financial  information has been derived from the internal
profitability  reporting system utilized by management to monitor and manage the
financial  performance of the Corporation.  The accounting policies of the three
segments  are  the  same  as  those  described  in the  summary  of  significant
accounting  policies.  The Corporation  evaluates  segment  performance based on
profit or loss before  income  taxes.  The  evaluation  process for the mortgage
banking and trust segments include only direct expenses,  while certain indirect
expenses, including goodwill, are absorbed by the banking operation.


<PAGE>


NOTE 20 - SEGMENT INFORMATION (Continued)
<TABLE>
<S>                                       <C>                <C>                 <C>              <C>

1999                                                                  Mortgage                               Total
----                                                Banking            Banking            Trust            Segments

     Net interest income                    $        23,310    $          211     $            -    $        23,521
     Net gain on loan sales                               -               942                  -                942
     Other revenue                                    2,959                90              1,134              4,183
     Noncash items:
         Depreciation                                   868                42                 38                948
         Provision for loan loss                      1,060                 -                  -              1,060
     Segment profit                                   9,328               459                390             10,177
     Segment assets                                 641,132             3,325                202            644,659



1998                                                                  Mortgage                               Total
----                                                Banking            Banking            Trust            Segments

     Net interest income                    $        17,239    $          497     $            -    $        17,736
     Net gain on loan sales                               -             1,255                  -              1,255
     Other revenue                                    2,685                12                964              3,661
     Noncash items:
         Depreciation                                   594                27                 25                646
         Provision for loan loss                        980                 -                  -                980
     Segment profit                                   7,636               760                209              8,605
     Segment assets                                 473,019            10,224                167            483,410



1997                                                                  Mortgage                               Total
----                                                Banking            Banking            Trust            Segments

     Net interest income                    $        15,974    $          402     $            -    $        16,376
     Net gain on loan sales                               -               736                  -                736
     Other revenue                                    2,531                16                885              3,432
     Noncash items:
         Depreciation                                   588                21                 22                631
         Provision for loan loss                        620                 -                  -                620
     Segment profit                                   7,451               469                189              8,109
     Segment assets                                 430,357             7,796                157            438,310
</TABLE>



<PAGE>

NOTE 20 - SEGMENT INFORMATION (Continued)

Significant  segment  totals  are  reconciled  to the  financial  statements  as
follows:
<TABLE>
<S>                                        <C>                <C>                <C>
                                              Reportable                          Consolidated
1999                                           Segments             Other            Totals
----                                           --------             -----            ------

     Net interest income                    $        23,521    $         (674)    $       22,847
     Provision for loan loss                          1,060                 -              1,060
     Net gain on loan sales                             942                 -                942
     Other revenue                                    4,183                 -              4,183
     Profit                                          10,177            (3,826)             6,351
     Assets                                         644,659               490            645,149

                                              Reportable                          Consolidated
1998                                           Segments             Other            Totals
----                                           --------             -----            ------

     Net interest income                    $        17,736    $           26     $       17,762
     Provision for loan loss                            980                 -                980
     Net gain on loan sales                           1,255                 -              1,255
     Other revenue                                    3,661                 -              3,661
     Profit                                           8,605            (3,228)             5,377
     Assets                                         483,410               559            483,969

                                              Reportable                          Consolidated
1997                                           Segments             Other            Totals
----                                           --------             -----            ------

     Net interest income                    $        16,376    $           10     $       16,386
     Provision for loan loss                            620                 -                620
     Net gain on loan sales                             736                 -                736
     Other revenue                                    3,432                 -              3,432
     Profit                                           8,109            (3,301)             4,808
     Assets                                         438,310               719            439,029
</TABLE>


<PAGE>

NOTE 20 - SEGMENT INFORMATION (Continued)

Amounts included in the "other" column are as follows.
<TABLE>
<S>                                                      <C>                <C>                  <C>

                                                                   1999               1998               1997
                                                                   ----               ----               ----
Income:
     Holding company net interest
       income (expense)                                          $   (674)          $     26           $    10

Profit:
     Holding company net interest
       income (expense)                                              (674)                26                10
     Holding company expenses                                        (125)              (543)             (742)
     Income tax expense                                            (3,027)            (2,711)           (2,569)

Assets:
     Holding company assets                                           490                559               719
</TABLE>


STOCK INFORMATION


The common stock of Lafayette Bancorporation,  Lafayette,  Indiana, is traded on
the OTC Bulletin Board under the trading symbol of LAYB (Cusip No. 505893-10-7).
At the close of business on  December  31,  1999,  there were  3,586,140  shares
outstanding held by approximately 500 shareholders.

Management  does not have knowledge of the prices paid in all  transactions  and
has not verified the accuracy of those prices that have been  reported.  Because
of the lack of an established  market for the common shares of the  Corporation,
these  prices  would not  necessarily  reflect the prices which the shares would
trade in an active market.
<TABLE>
                                                      Price Per Share                    Dividend
                                                     High        Low                     Declared
1999
-----------------------------------------------------------------------------------------------------
<S>                                                 <C>        <C>                        <C>
First Quarter                                       $27 5/16   $25 1/2                     $ .09
Second Quarter                                       27 5/16    26                           .09
Third Quarter                                        27 1/2     25 11/16                     .10
Fourth Quarter                                       27 1/4     25                           .15

1998

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

First Quarter                                       $23 1/16   $19 1/4                     $ .08
Second Quarter                                       24 1/4     21 3/16                      .08
Third Quarter                                        24 7/8     22 5/16                      .08
Fourth Quarter                                       27 1/8     24                           .13
</TABLE>

<PAGE>

o    - Data  adjusted  for all stock splits and  dividends,  including a 3-for-2
     stock  split to  shareholders  of record on  September  30,  1999,  paid on
     November 1, 1999.

The following firms have transacted business in Lafayette  Bancorporation common
stock during the past year:

o        Chicago Corporation
o        City Securities Corporation
o        JJB Hilliard, WL Lyons, Inc.
o        McDonald & Company Securities, Inc.
o        Merrill Lynch
o        Monroe Securities, Inc.
o        Raymond James Financial Services, Inc.
         located at Lafayette Bank and Trust Company
o        Solomon Smith Barney

TRANSFER AGENT

Lafayette Bancorporation
133 North Fourth Street
P.O. Box 1130
Lafayette, IN  47902-1130