<TABLE>
<CAPTION>

                                                    LAFAYETTE BANCORPORATION
                                                      FINANCIAL HIGHLIGHTS
 (Dollars in thousands, except
  per share data)                               1998              1997             1996              1995             1994
                                            --------------    --------------   --------------    --------------   --------------

 YEAR ENDED DECEMBER 31
<S>                                               <C>               <C>              <C>               <C>              <C>    
 Net interest income                              $17,762           $16,386          $14,203           $12,776          $12,635
 Noninterest income                                 4,916             4,168            3,422             2,790            2,580
 Noninterest expense                               13,610            12,557           11,191            10,220            9,689
 Net income                                         5,377             4,808            4,091             3,375            3,233


 PER COMMON SHARE (1)
 Net income                                         $2.26             $2.02            $1.72             $1.42            $1.36
 Cash dividends                                      0.56              0.51             0.42              0.33             0.30
 Book value                                         17.90             16.18            14.57             13.40            11.90


 AT DECEMBER 31
 Assets                                          $483,969          $439,029         $414,391          $372,265         $360,221
 Investment securities                             81,835            71,845           94,362            93,042           94,893
 Loans held for sale                               10,086             7,640            5,877             2,473                -
 Loans, total                                     353,828           312,227          268,940           228,643          224,680
 Deposits                                         395,546           355,195          341,550           308,652          296,763
 Shareholders' equity                              42,614            38,469           34,646            31,875           28,294


 AVERAGE BALANCES
 Assets                                          $455,268          $416,957         $377,623          $351,782         $338,537
 Investment securities                             76,928            80,606           91,802            90,749           88,697
 Loans held for sale                                6,095             5,522            4,989             1,092                -
 Loans, total                                     327,412           289,197          242,286           220,117          213,722
 Deposits                                         371,067           345,739          313,621           293,916          282,746
 Shareholders' equity                              40,814            36,530           33,133            30,125           27,684


 KEY RATIOS
 Return on average assets                           1.18%             1.15%            1.08%             0.96%            0.95%
 Return of average equity                          13.17%            13.16%           12.35%            11.20%           11.68%
 Efficiency ratio                                  58.46%            59.63%           61.66%            64.11%           62.33%

<FN>

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

</FN>
</TABLE>

<PAGE>13.2

                     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 fourteen  offices located in
Tippecanoe  and White  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, 1998,  1997,  and 1996,  and financial  condition as of
December 31, 1998 and 1997. This information  should be read in conjunction with
the  accompanying  consolidated  financial  statements  and footnotes  contained
elsewhere in this report.

                            MERGERS AND ACQUISITIONS

In  October,  1998,  the Bank signed a  definitive  agreement  to acquire  three
branches of Bank One, Indiana, NA located in DeMotte, Remington, and Rensselaer,
Indiana.  Under the terms of the  agreement,  the Bank will  acquire  all of the
deposits,   selected  loans,  and  all  physical  facilities  of  the  branches.
Intangibles  associated with this  transaction are expected to be  approximately
$13 million.  All required  regulatory  approvals  have been  received,  and the
transaction is expected to close in March,  1999. See footnote 18 for additional
information regarding this acquisition.

<PAGE>13.3

                              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.

<TABLE>
<CAPTION>

                                                                    For the years ended December 31,
                                                      1998          1997           1996          1995          1994
                                                  ---------------------------- ------------- ------------- -------------
              SUMMARY OF OPERATIONS
<S>                                                     <C>           <C>           <C>           <C>           <C>    
Interest income - tax equivalent  (1)                   $35,329       $32,415       $28,739       $26,267       $23,981
Interest expense                                         16,963        15,525        14,012        13,115        11,016
                                                  ---------------------------- ------------- ------------- -------------
  Net interest income - tax equivalent (1)               18,366        16,890        14,727        13,152        12,965
Tax equivalent adjustment (1)                              (604)         (504)         (524)         (376)         (330)
                                                  ---------------------------- ------------- ------------- -------------
  Net interest income                                    17,762        16,386        14,203        12,776        12,635
Provision for loan losses                                  (980)         (620)         (240)         (180)         (600)
Noninterest income                                        4,916         4,168         3,422         2,790         2,580
Noninterest expense                                      13,610        12,557        11,191        10,220         9,689
                                                  ---------------------------- ------------- ------------- -------------

Income before income taxes                                8,088         7,377         6,194         5,166         4,926
Income tax expense                                        2,711         2,569         2,103         1,791         1,693
                                                  ---------------------------- ------------- ------------- -------------

NET INCOME                                               $5,377        $4,808        $4,091        $3,375        $3,233
                                                  ============================ ============= ============= =============


               PER SHARE DATA (2)
Net income                                                $2.26         $2.02         $1.72         $1.42         $1.36
Cash dividends                                             0.56          0.51          0.42          0.33          0.30
Shareholders' equity, end of year                         17.90         16.18         14.57         13.40         11.90


        SELECTED ACTUAL YEAR-END BALANCES
Total assets                                           $483,969      $439,029      $414,391      $372,265      $360,221
Earning assets                                          449,359       406,954       378,345       333,153       323,904
Investment securities available-for-sale                 76,956        66,577        88,206        90,881        41,339
Investment securities held-to-maturity                    4,879         5,268         6,156         2,161        53,554
Loans held for sale                                      10,086         7,640         5,877         2,473             -
Loans                                                   353,828       312,227       268,940       228,643       224,680
Allowance for loan losses                                (4,241)       (3,464)       (3,198)       (3,200)       (3,309)
Total deposits                                          395,546       355,195       341,550       308,652       296,763
Noninterest-bearing demand deposits                      48,657        42,752        43,579        43,950        37,875
Interest-bearing demand deposits                         54,294        47,054        47,945        46,940        49,081
Savings deposits                                        116,014        96,974        87,938        77,287        67,607
Time deposits                                           176,581       168,415       162,088       140,475       142,200
Long-term borrowings                                     23,854        19,886         9,265         8,905         9,738
Shareholders' equity                                     42,614        38,469        34,646        31,875        28,294


            SELECTED AVERAGE BALANCES
Total assets                                           $455,268      $416,957      $377,623      $351,782      $338,537
Earning assets                                          422,772       387,277       348,218       323,495       313,684
Securities                                               76,928        80,606        91,802        90,749        88,697
Loans held for sale                                       6,095         5,522         4,989         1,092             -
Loans                                                   327,412       289,197       242,286       220,117       213,722
Allowance for loan losses                                (3,766)       (3,254)       (3,210)       (3,269)       (3,461)
Total deposits                                          371,067       345,739       313,621       293,916       282,746
Noninterest-bearing demand deposits                      39,312        35,728        35,655        35,822        33,622
Interest-bearing demand deposits                         48,777        47,945        45,086        45,614        46,757
Savings deposits                                        108,019        94,360        82,535        71,406        69,558
Time deposits                                           174,959       167,706       150,345       141,074       132,809
Long-term borrowings                                     22,101        13,940         8,458         9,216        10,289
Shareholders' equity                                     40,814        36,530        33,133        30,125        27,684


        RATIOS BASED ON AVERAGE BALANCES                                                                   
Loans to deposits (3)                                    88.24%        83.65%        77.25%        74.89%        75.59%
Return on average assets                                  1.18%         1.15%         1.08%         0.96%         0.95%
Return on average equity                                 13.17%        13.16%        12.35%        11.20%        11.68%
Dividend payout ratio                                    24.94%        24.98%        24.18%        23.05%        21.81%
Leverage capital ratio                                    8.82%         8.76%         8.59%         8.77%         8.27%
Efficiency ratio (4)                                     58.46%        59.63%        61.66%        64.11%        62.33%


                   OTHER DATA
Number of employees (FTE)                                   220           213           205           192           185
Average common shares outstanding (2)                 2,380,342     2,377,618     2,377,750     2,377,891     2,377,931
Cash dividends declared                                  $1,341        $1,201          $989          $778          $705


<FN>

(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.

</FN>
</TABLE>
<PAGE>13.4

The Corporation earned $5,377,000,  $4,808,000, and $4,091,000, or $2.26, $2.02,
and $1.72 per share for the years  ended  December  31,  1998,  1997,  and 1996,
respectively.  Net interest income growth accounted for a significant portion of
the 11.8% and 17.5% earnings increase the Corporation recorded in 1998 and 1997,
respectively.  Earnings  were  boosted in both years by  increased  net gains on
loans sold in the  secondary  mortgage  market,  in addition to  increased  fees
generated by the Bank's investment brokerage department.  Conversely, offsetting
a  portion  of  1998  and  1997  profits  were   increases   recognized  in  the
Corporation's provision for loan losses and salaries and employee benefits.

Return on average  assets  (ROA) was  1.18%,  1.15%,  and 1.08% for the  periods
ending December 31, 1998, 1997, and 1996, respectively,  while return on average
equity (ROE) was 13.17%, 13.16%, and 12.35% for those same time periods.

<PAGE>13.5

                               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 1994 through 1998. 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.

<PAGE>13.6
<TABLE>
<CAPTION>
                                                                          Years ended December 31,
                                                      1998                         1997                         1996
                                          ----------------------------  ---------------------------  ------------------------------
                                          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                               $55,973    $3,217    5.75%    $64,119  $3,857     6.02%    $71,716     $4,219      5.88%
    Tax-exempt (1)                         20,978     1,502    7.16%     17,160   1,185     6.91%     20,805      1,424      6.84%
    Unrealized loss on AFS securities         (23)       -                 (673)     -                  (719)        -   
                                          --------  -------   ------    -------- -------  -------    --------    -------    -------
      Total securities                     76,928     4,719    6.13%     80,606   5,042     6.26%     91,802      5,643      6.15%
  Loans (1)(2)
    Commercial                            153,030    13,916    9.09%    121,295  11,206     9.24%     89,545      8,493      9.48%
    Real estate                           129,380    11,012    8.51%    118,156  10,173     8.61%    102,257      8,772      8.58%
    Installment and other consumer         51,097     4,975    9.74%     55,254   5,311     9.61%     54,870      5,281      9.62%
    Other                                      -         -                   14       1     7.14%        603         32      5.31%
                                          --------  -------   -------   ------- -------   -------    --------    -------    -------
      Total loans                         333,507    29,903    8.97%    294,719  26,691     9.06%    247,275     22,578      9.13%

  Interest-bearing balances with
    other financial institutions              153         8    5.23%         -       -                    -          -
  Federal Home Loan Bank stock              1,464       117    7.99%      1,210      96     7.93%      1,106         87      7.87%
  Federal funds sold and overnight
       balances                            10,720       582    5.43%     10,742     586     5.46%      8,035        431      5.36%
                                          --------  -------  -------    ------- -------   -------    -------     -------    -------
  Total earning assets                    422,772   $35,329    8.36%    387,277 $32,415     8.37%    348,218    $28,739      8.25%
                                          =======   =======  =======    ======= =======   =======    =======    ========    =======

Noninterest earning assets
  Allowance for loan losses                (3,766)                       (3,254)                      (3,210)
  Premises and equipment                    6,417                         6,177                        5,752
  Cash and due from banks                  16,309                        15,520                       14,785
  Accrued interest and other assets        13,536                        11,237                       12,078
                                          -------                       --------                     -------
  Total assets                           $455,268                      $416,957                     $377,623
                                         ========                      =========                    ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities
  Deposits
    Interest-bearing demand deposits     $48,777       $610    1.25%    $47,945    $657    1.37%     $45,086       $831      1.84%
    Savings deposits                     108,019      4,339    4.02%     94,360   3,702    3.92%      82,535      3,134      3.80%
    Time deposits                        174,959      9,957    5.69%    167,706   9,578    5.71%     150,345      8,743      5.82%
                                        ---------  ---------  -------  -------- -------  -------    ---------  --------    -------
      Total interest-bearing deposits    331,755     14,906    4.49%    310,011  13,937    4.50%     277,966     12,708      4.57%
  Borrowed funds
    Short-term borrowings                 15,581        712    4.57%     15,129     711    4.70%      16,661        781      4.69%
    Long-term debt                        22,101      1,345    6.09%     13,940     877    6.29%       8,458        523      6.18%
                                        --------   ---------  -------  -------- --------  ------     --------   -------      -----
      Total borrowed funds                37,682      2,057    5.46%     29,069   1,588    5.46%      25,119      1,304      5.19%
                                        --------   ---------  -------  -------- --------  ------     --------   -------      -----
  Total interest-bearing liabilities     369,437    $16,963    4.59%    339,080 $15,525    4.58%     303,085    $14,012      4.62%
                                        ========   =========  =======  ======== ========  ======     ========   =======      ===== 

Noninterest-bearing liabilities
  Noninterest-bearing demand deposits   39,312                           35,728                       35,655
  Accrued interest and other liabilities 5,705                            5,619                        5,750
  Shareholders' equity                  40,814                           36,530                       33,133
                                        ------                           -------                      -------
  Total liabilities and                                                                                                    
    shareholders' equity              $455,268                         $416,957                     $377,623
                                      ========                         ========                     =========

Interest margin recap
  Net interest income and
    interest rate spread                           $18,366    3.76%             $16,890     3.79%                $14,727     3.63%
                                                   ========  ======             ========    ======               ========    ======
  Net interest income margin                                  4.34%                         4.36%                            4.23%
                                                             ======                         ======                           ======
<FN>
(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 $1,090 for 1998, $912 for 1997, and $928 for 1996.
</FN>
</TABLE>
<PAGE>13.7

Table 3 - Net Interest Earning Assets  illustrates net  interest-earning  assets
and liabilities for 1998, 1997, and 1996.

<TABLE>
<CAPTION>

                                                                 1998                   1997                  1996
                                                         ---------------------  ---------------------  --------------------
<S>                                                                  <C>                    <C>                   <C>     
Average interest-earning assets.......                               $422,772               $387,277              $348,218
Average interest-bearing liabilities..                                369,437                339,080               303,085
                                                         ---------------------  ---------------------  --------------------

              Net interest-earning assets                             $53,335                $48,197               $45,133
                                                         =====================  =====================  ====================
</TABLE>

Table 4 - Volume and Rate Analysis  depicts the dollar effect of volume and rate
changes  from  1996  through  1998.   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>
<CAPTION>

                                          1998-1997                                   1997-1996
                           ------------------------------------------   ----------------------------------------
                                           Change        Change                         Change       Change 
                              Total        Due To        Due To            Total        Due To       Due To 
INTEREST INCOME              Change        Volume         Rate            Change        Volume        Rate  
                           ------------------------------------------   ----------------------------------------

<S>                           <C>           <C>            <C>             <C>          <C>           <C>   
Loans                         3,212         3,480          (268)           4,113        4,298         (185) 
Securities
  Taxable                      (640)         (439)         (201)            (362)        (457)          95  
  Tax-exempt                    317           272            45             (239)        (252)          13  
Interest-bearing balances with
other financial institutions      8             8             -                -            -            -  
FHLB stock                       21            20             1                9            8            1  
Federal funds sold and
  overnight balances             (4)           (1)           (3)             155          148            7  
                           ------------------------------------------    ----------------------------------------

Total interest income         2,914         3,340          (426)           3,676        3,745          (69)
                           ==========================================    ========================================

INTEREST EXPENSE

Interest-bearing DDA            (47)           11           (58)            (174)          50         (224)
Savings deposits                637           547            90              568          461          107 
Time deposits                   379           413           (34)             835          994         (159)
Short-term borrowings             1            21           (20)             (70)         (72)           2 
Long-term borrowings            468           498           (30)             354          345            9 
                           ------------------------------------------    ----------------------------------------

Total interest expense        1,438         1,490           (52)           1,513        1,778         (265)
                           ==========================================    ========================================

Net Interest income           1,476         1,850          (374)           2,163        1,967          196
                           ==========================================    ========================================
</TABLE>

Net interest income on a tax equivalent basis for 1998 was 8.7% higher than that
for 1997,  while the net interest  margin for 1998 was 4.34%,  or 2 basis points
lower than the prior year. Tax  equivalent net interest  income was 14.7% higher
in 1997 compared to 1996, as the net interest  margin  increased 13 basis points
to 4.36% from that of 1996.

There were a number of similarities between the events of 1998 and 1997 in terms
of growth the Corporation experienced,  as well as the interest rate environment
in which the Corporation  operated.  The most noticeable  difference between the
two years was that the interest rate  environment  declined at a more rapid pace
in 1998 than in 1997.  This  downward  trend in the  interest  rate  environment
resulted in earning  assets  repricing at a quicker pace and at a lower interest
rate than the  repricing and maturity of certain  interest-bearing  liabilities.
Overall, the increase in net interest-earning  asset volume during the year more
than adequately compensated for the general decline in yields, which resulted in
higher net interest income, but a lower net interest margin.

<PAGE>13.8

The increase in 1997 net interest income was due to the combination of increased
earning asset volume,  along with lower cost of funds due to the general decline
in interest  rates during the last half of 1997. The  Corporation  continued the
shift from  investment  securities  to loans,  and although  average  investment
securities  yields increased from the prior year,  management  enhanced earnings
through the higher yields  associated with loans.  Much like 1998, the 1997 loan
growth was supported with deposit growth, the shift from investment  securities,
and additional  long-term  debt. Also adding to 1997 net interest income was the
effect of lower  interest  rates paid on  interest-bearing  liability  accounts,
which  reduced  the  Corporation's  cost of funds 4 basis  points from the prior
year.

                   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.

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 are made to maximize recovery.

<PAGE>13.9
<TABLE>
<CAPTION>

                                       1998             1997            1996            1995            1994
                                 ---------------- --------------- ---------------  -------------- ---------------

<S>                                   <C>             <C>             <C>             <C>             <C>   
Balance at beginning of year          $3,464          $3,198          $3,200          $3,309          $3,459

Loans charged-off
  Commercial and agricultural            (37)           (126)           (202)           (294)           (796)
  Real estate                              0               0               0               0               0
  Installment                           (374)           (424)           (343)           (262)           (172)
                                 ---------------- --------------- ---------------  -------------- ---------------
               Total charge-offs        (411)           (550)           (545)           (556)           (968)
                                 ---------------- --------------- ---------------  -------------- ---------------

Charge-offs recovered
  Commercial and agricultural            124             126             250             190             179
  Real estate                              0               0               0               0               0
  Installment                             84              70              53              77              39
                                 ---------------- --------------- ---------------  -------------- ---------------
               Total recoveries          208             196             303             267             218
                                 ---------------- --------------- ---------------  -------------- ---------------

Net loans charged-off                   (203)           (354)           (242)           (289)           (750)
Current year provision                   980             620             240             180             600
                                 ---------------- --------------- ---------------  -------------- ---------------

Balance at end of year                $4,241          $3,464          $3,198          $3,200          $3,309
                                 ================ =============== ===============  ============== ===============

Loans at year end, excluding
  loans held for sale               $353,828        $312,227        $268,940        $228,643        $224,680

Ratio of allowance to loans
  at year end                          1.20%           1.11%           1.19%           1.40%           1.47%

Average loans                       $327,412        $289,197        $242,286        $220,117        $213,722

Ratio of net loans charged-off
  to average loans                     0.06%           0.12%           0.10%           0.13%           0.35%


                                             Allocation of allowance for loan losses at December 31,
                                      1998             1997            1996            1995            1994
                                 ---------------- --------------- ---------------  -------------- ---------------

Commercial and agricultural          $2,499          $1,200          $1,245            $942          $1,106
Real estate                             486             340              50              50              50
Installment                             570             560             550             550             550
Unallocated                             686           1,364           1,353           1,658           1,603
                                 ---------------- --------------- ---------------  -------------- ---------------
Total                                $4,241          $3,464          $3,198          $3,200          $3,309
                                 ================ =============== ===============  ============== ===============

</TABLE>
<PAGE>13.10

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>
<CAPTION>

                                                                           As of December 31,
                                             -------------------------------------------------------------------------------
                                                 1998             1997               1996            1995          1994
                                             -------------- ------------------  ---------------- ------------- -------------
<S>                                          <C>            <C>                 <C>               <C>          <C> 
Principal balance
  Nonaccrual                                        $1,468               $127              $178          $381          $474
  Restructured                                         197                350               482           661           761
  90 days or more past due                             775                505               735           796           228
                                             -------------- ------------------  ---------------- ------------- -------------

         Total nonperforming loans                  $2,440               $982            $1,395        $1,838        $1,463
                                             ============== ==================  ================ ============= =============

Nonperforming loans as a percent
   of loans                                          0.69%              0.31%             0.52%         0.80%         0.65%

Other real estate owned                                $22               $230              $116          $436        $1,092

OREO as a percent of loans                           0.01%              0.07%             0.04%         0.19%         0.49%

Allowance as a percent of
  nonperforming loans                              173.81%            352.75%           229.25%       174.10%       226.18%


For nonaccrual and restructured loans for the years ended December 31:
   Interest income under
      original terms                                  $146                $55               $74          $113           $95
   Interest income which
      was recorded                                      17                 27                56            50            51

</TABLE>
<PAGE>13.11

The consolidated provision for loan losses was $980,000,  $620,000, and $240,000
for 1998, 1997, and 1996,  respectively.  Although nonperforming loan totals and
delinquency  trends  have been  moving  upward  during the latter  part of 1998,
management  believes  the  level  of  nonperforming  loans  remains  at  a  very
manageable level as a percent of loans.

The allowance as a percent of loans had been declining in the two years prior to
the current year. Management's  identification of a specific area of risk, along
with the Corporation's  continued loan growth and increased  nonperforming  loan
totals  resulted in  management's  decision to increase the  provision  for loan
losses to $980,000 for 1998. With hog prices dropping  significantly  during the
latter part of the fourth quarter of 1998,  management  conducted an analysis of
the pork producer sector.  This review indicated the Corporation had extended in
excess of $8 million dollars to these hog-producing borrowers, and, as a result,
management allocated a specific reserve to these credits.

During 1998 there was a shift in the  allocation  of allowance  for loan losses.
This movement, primarily from the unallocated to the commercial and agricultural
category,  occurred  primarily due to the combination of higher  nonaccrual loan
balances and the  identification  of the potential  risks  associated  with pork
producer credits.

The  $380,000  increase  in the 1997  provision  for loan  losses was  primarily
attributed  to  the  13.2%  average  growth  experienced  in  the  overall  loan
portfolio.  The amount of future year provisions for loan losses will be subject
to adjustment based on future evaluations of the loan loss reserve adequacy.

While the  restructured  loan  category of  nonperforming  loan totals  declined
during 1998,  increases were realized in nonaccrual and 90 days or more past due
balances.   A  total  of  seven   commercial   borrowers   with  loans  totaling
approximately  $829,000 and three  mortgage loan  borrowers  with loans totaling
approximately $525,000 were added to the nonaccrual list in 1998. One commercial
loan totaling  $556,000  accounted for 67.1% of the $829,000 added to nonaccrual
status. A specific  reserve  allowance has been placed on each of these credits,
and management expects losses, if any, will approximate amounts reserved.  As of
December 31, 1998,  loans 90 days or more past due had  increased  $270,000,  or
53.5%,  from the prior year.  While  commercial  loan  balances in this category
declined  $65,000,  mortgage and indirect  installment  loan balances  increased
$183,000 and  $104,000,  respectively.  Management  will continue to monitor the
activity and performance of these loans.

Management believes five credits totaling  approximately $748,000 as of December
31, 1998 met the criteria for an impaired  loan.  The $556,000  commercial  loan
mentioned in the above  paragraph  accounted  for 89.5% of the increase from the
prior year. A specific  reserve  allocation  has been made in the  allowance for
loan losses for the excess of the loan  balance over the  estimated  future cash
flows in accordance with Statements of Financial Accounting Standard No. 114 and
118. Application of these accounting statements has not had a material effect on
Corporation's financial statements.

The $208,000 decrease in other real estate owned ("OREO") in 1998 related to the
sale of one parcel of property in February,  whereby the Corporation  recorded a
$43,000  gain.  As of December  31,  1998,  there were two parcels of other real
estate held by the Corporation with a remaining book value of $22,000.

<PAGE>13.12

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.

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, 1998,  the  Corporation  had loans  totaling  $803,000 on its
watch list which were not included in impaired or nonperforming loans.

<PAGE>13.13

                         NONINTEREST INCOME AND EXPENSE

A  listing  of  noninterest  income  and  expense  from  1996  through  1998 and
percentage  changes between years is included in Table 7 Noninterest  Income and
Expense.

<TABLE>
<CAPTION>

                                                                  % change                           % change
                                                 1998             from '97            1997           from '96           1996
                                            ----------------  ----------------- ------------------ ---------------------------------
<S>                                         <C>               <C>               <C>                <C>              <C>
Noninterest Income
Income from fiduciary activities                      $ 964              8.93%              $ 885         8.99%               $ 812
Service charges on deposit accounts                   1,309              4.39%              1,254        12.37%               1,116
Other operating income                                1,382              9.16%              1,266        24.98%               1,013

                                            ----------------  ----------------- ------------------ ------------- -------------------
                                                      3,655              7.34%              3,405        15.78%               2,941

Net gain on loan sales                                1,255             70.52%                736        84.92%                 398
Net realized gain on securities                           6            -77.78%                 27       -67.47%                  83
                                            ----------------  ----------------- ------------------ ------------- -------------------

         Total noninterest income                   $ 4,916             17.95%            $ 4,168        21.80%             $ 3,422
                                            ================  ================= ================== ============= ===================



                                                                  % change                           % change
                                                 1998             from '97            1997           from '96           1996
                                            ----------------  ----------------- ------------------ ---------------------------------
Noninterest Expense
Salaries and employee benefits                      $ 8,206              9.65%            $ 7,484        18.21%             $ 6,331
Occupancy expenses, net                                 891              1.02%                882         5.76%                 834
Equipment expenses                                    1,054              8.66%                970        -3.87%               1,009
Other operating expenses                              3,459              7.39%              3,221         6.76%               3,017
                                            ----------------  ----------------- ------------------ ------------- -------------------

         Total noninterest expense                 $ 13,610              8.39%           $ 12,557        12.21%            $ 11,191
                                            ================  ================= ================== ============= ===================
</TABLE>
<PAGE>13.14

Noninterest  income increased 18.0% to $4,916,000 in 1998 compared to $4,168,000
in 1997.  Primary  sources of  noninterest  income were  income  from  fiduciary
activities,  service  charges on  deposit  accounts,  and net gain on  secondary
market mortgage loan sales.

Income from fiduciary activities increased 8.9% during 1998. The majority of the
increase was attributed to the following: the general increase in overall market
values of trust assets,  an increase in the departmental  fee structure,  and an
increase in the number of high market value  accounts  obtained  throughout  the
year. Service charges on deposit accounts increased 4.4% due to the deposit base
growth and more accounts  being assessed fees,  predominately  early  withdrawal
fees on certificates of deposit. Other operating income rose 9.2% over the prior
year  primarily  due to two areas.  An  increase  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,  in addition to the
increase  posted in the ATM fee  income,  primarily  due to the first  full year
effect of surcharge  fees  assessed on all  non-bank  customers,  accounted  for
nearly all of the 9.2% increase in other operating income.

Net gain on  secondary  market  mortgage  loan sales  recorded a 70.5%  increase
compared to the prior year. The lower interest rate environment coupled with the
ongoing  strength  of the local  economy  gave rise to a 67.1%  increase  in the
dollar amount of loan  originations and a 66.2% increase in the dollar amount of
loans sold  during the year.  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 statements in this paragraph relating to the
secondary  market  mortgage  department and its  operations are  forward-looking
statements  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.

Noninterest  income during 1997 increased 21.8% compared to 1996. The same areas
of growth in 1998 occurred in 1997 as well. New accounts, an increase in the fee
structure,  and the exceptional  year in the stock market led to a 9.0% increase
in income from fiduciary  activities.  In a similar fashion,  service charges on
deposit accounts increased 12.4% due to an increase in the deposit fee structure
along with deposit  growth and a higher number of accounts  being assessed fees.
Other operating income rose 25.0% during 1997.  Again, a 64.3% increase in gross
investment  center fees, in addition to a 75.8%  increase in ATM income,  mainly
surcharge fees, was responsible for the majority of the overall increase.

Total noninterest expense rose 8.4% to $13,610,000 in 1998 compared to the 12.2%
increase  recorded in 1997.  As a  percentage  of total  average  assets,  total
noninterest expense was 2.9% and 3.0% for 1998 and 1997, respectively.  Salaries
and employee  benefits  increased  9.7% during the current  year.  The full year
effect of the additional  personnel  added in 1997 due to the Monticello  branch
acquisition,  along with the increases in commissions  paid to secondary  market
and Investment Center personnel as a result of increased production  contributed
to a  portion  of the  overall  increase  in 1998.  In  addition,  general  wage
increases  and a 38.5%  rise in  health  insurance  costs  in 1998  were  offset
somewhat  by a  reduction  in the  amount  of  expense  recorded  for  executive
management's stock appreciation rights.

Equipment expense increased 8.7% due to higher equipment  maintenance  costs, in
addition to expenses  associated  with bringing  certain  pieces of equipment in
compliance with Y2K requirements.

Other operating  expenses increased 7.4% mainly as a result of the Corporation's
increased marketing and advertising campaign.

Total noninterest expense increased 12.2% in 1997 compared to 1996 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.

<PAGE>13.15

Occupancy  expense  increased 5.8% during 1997,  primarily as a result of higher
depreciation  and  maintenance  and repair costs  associated with the first full
year of the Monticello branch.

Equipment  expense  decreased  3.9% in 1997 from the  prior  year as a result of
items that were fully  depreciated  in 1996 and were not replaced in 1997,  thus
causing lower depreciation expense.

Other operating expense increased 6.8% in 1997. In general,  overhead  expenses,
including goodwill,  were higher primarily as a result of the first full year of
operation of the Monticello branch that was acquired.

                                  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 33.5%, 34.8%, and 34.0% in 1998, 1997,
and 1996, 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, 1998 and 1997. For a
fair  and  consistent   presentation,   these  results   contain  all  necessary
restatements  in connection  with stock  dividends  that occurred in the periods
presented.

<PAGE>13.16
<TABLE>
<CAPTION>
                                                                     Quarter Ended
                                      -------------------------------------------------------------------------

                                         December          September             June              March
              1998                         31                 30                 30                 31        
              -----
                                      ----------------  -----------------  -----------------  -----------------

<S>                                          <C>                <C>                <C>                <C>      
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                      $0.52              $0.62              $0.56              $0.56  
 Diluted earnings per share                    $0.51              $0.60              $0.55              $0.55  

Weighted average shares (1)
 Weighted average shares                   2,380,427          2,380,448          2,380,448          2,380,082
 Diluted average shares                    2,433,662          2,434,496          2,429,507          2,422,370

  Stock price (2)                             $38.25             $37.27             $36.36             $31.36


              1997

Interest income                              $ 8,357            $ 8,138            $ 7,865            $ 7,551 
Interest expense                               4,070              3,943              3,766              3,746 
                                       ----------------  -----------------  -----------------  -----------------
  Net interest income                          4,287              4,195              4,099              3,805   
Provision for loan losses                        350                120                 90                 60   
Noninterest income                             1,250              1,090                952                876   
Noninterest expense                            3,377              3,137              3,111              2,932   
                                       ----------------  -----------------  -----------------  -----------------
  Income before income taxes                   1,810              2,028              1,850              1,689   
Income taxes                                     627                723                650                569   
                                       ----------------  -----------------  -----------------  -----------------
Net income                                   $ 1,183            $ 1,305            $ 1,200            $ 1,120   
                                       ================  =================  =================  =================

Net income per share
 Basic earnings per share                      $0.50              $0.55              $0.50              $0.47    
 Diluted earnings per share                    $0.49              $0.54              $0.50              $0.47    

Weighted average shares (1)
 Weighted average shares                   2,377,618          2,377,618          2,377,618          2,377,618
 Diluted average shares                    2,400,849          2,400,069          2,391,077          2,385,577

  Stock price (2)                             $28.86             $24.55             $21.90             $19.84

<FN>

(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.

</FN>
</TABLE>
<PAGE>13.17
                               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 1996 through 1998 and the maturity  distribution  at
December 31, 1998, 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.

<TABLE>
<CAPTION>

                                                                   At December 31,
                                                 ----------------------------------------------------
                                                             1998            1997               1996
                                                 ----------------- --------------- ------------------
<S>                                                       <C>             <C>               <C>
Securities available-for-sale
  U.S. Government & agencies                              $14,110         $21,906            $35,938
  States and political subdivisions                        23,637           9,981             17,480
  Corporate obligations                                     2,513             250              1,301
  Mortgage-backed and asset-backed                         36,696          34,440             33,487
                                                 ----------------- --------------- ------------------

      Total securities available-for-sale                 $76,956         $66,577            $88,206


Securities held-to-maturity
  States and political subdivisions                        $4,879          $5,268             $6,156

                                                 ----------------- --------------- ------------------
       Total securities held-to-maturity                   $4,879          $5,268             $6,156


                                                 ================= =============== ==================
                Total securities                          $81,835         $71,845            $94,362
                                                 ================= =============== ==================
</TABLE>

<TABLE>
<CAPTION>

                                            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                $3,028        6.00%     $3,071       5.96%       -        -          -        -   
  Federal agencies              2,008        5.73%      4,003       6.06%    2,000      5.79%       -        -   
  State and municipal (1)          -           -        2,352       6.81%    7,003      6.83%    14,282   7.14%  
  Corporate obligations         1,007        6.68%      1,506       6.00%       -        -          -        -   
  Mortgage-backed and 
      asset-backed                 -           -        6,545       7.17%    3,503      5.09%    26,648   6.27%  
                               =======                =======              ========             =======          
    Total available-for-sale   $6,043                 $17,477              $12,506              $40,930          
                               =======                =======              ========             =======          


Held-to-maturity
  State and municipal (1)        $140       6.06%        $616       6.97%   $2,657      8.03%    $1,466   8.77%  
                               =======                =======              ========             =======          
    Total held-to-maturity       $140                    $616               $2,657               $1,466          
                               =======                =======              ========             =======          

<FN>

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

</FN>
</TABLE>
<PAGE>13.18

The  majority  of the  securities  portfolio  is  comprised  of U.  S.  Treasury
securities,  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  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,  1998.  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,  exceed  10%  of the  Corporation's  shareholders'  equity  as of
December 31, 1998. 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  $81,835,000 and $71,845,000 as of December 31, 1998 and
1997,  respectively.  Although in 1998 the total  securities  balance  increased
approximately  $9,990,000,  or 13.9% from the prior year, the average balance of
securities actually decreased approximately  $3,678,000, or 4.6% during the year
primarily  because of funding the ongoing growth of the loan  portfolio.  During
1998, the markets  witnessed a significant  flight to quality which reduced U.S.
Government  and  agency  yields  anywhere  from 85 to 115  basis  points.  These
conditions  led to  the  change  in  securities  mix,  predominately  from  U.S.
Governments  and  agencies  to  states  and  political  subdivisions.   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,  which were not subject to the run-up in prices and  corresponding
reduction in yield.

As of December 31, 1998 and 1997, the security  portfolio held structured  notes
totaling  $1,995,000 and  $1,892,000,  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.

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,  1998,
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 change which occurred in the unrealized gain/loss on securities between 1998
and 1997 was a result of the swing in the interest rate environment  during that
time period,  in  conjunction  with the change in the  portfolio  mix. It is not
likely the  Corporation  will  realize any losses in the  security  portfolio to
satisfy loan growth or liquidity  needs,  and 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>13.19
                                      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, 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>
<CAPTION>

                                                                            At December 31,
                                         -------------------------------------------------------------------------------------------

                                               1998              1997             1996              1995                1994
                                         ----------------- ----------------- ---------------- ------------------ -------------------

<S>                                              <C>               <C>               <C>                <C>                 <C>    
Commercial and agricultural                      $115,198          $112,586          $96,276            $75,317             $74,303
Real estate - construction                         28,043            17,117           12,194             10,472               6,384
Real estate - mortgage                            160,655           127,574          104,547             87,637              77,662
Installment                                        49,932            54,950           54,924             55,217              57,337
Other                                                   0                 0              999                  0               8,994
                                         ----------------- ----------------- ---------------- ------------------ -------------------

  Total loans                                    $353,828          $312,227         $268,940           $228,643            $224,680
                                         ================= ================= ================ ================== ===================
</TABLE>

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

                                               1998              1997             1996              1995                1994
                                         ----------------- ----------------- ---------------- ------------------ -------------------
<S>                                                <C>               <C>              <C>                <C>                 <C>   
Commercial and agricultural                        32.56%            36.06%           35.80%             32.94%              33.07%
Real estate - construction                          7.93%             5.48%            4.54%              4.58%               2.84%
Real estate - mortgage                             45.40%            40.86%           38.87%             38.33%              34.57%
Installment                                        14.11%            17.60%           20.42%             24.15%              25.52%
Other                                               0.00%             0.00%            0.37%              0.00%               4.00%

                                         ================= ================= ================ ================== ===================
  Total loans                                      100.0%            100.0%           100.0%             100.0%              100.0%
                                         ================= ================= ================ ================== ===================

</TABLE>

As mentioned  throughout,  the Corporation's loan portfolio continued its growth
during 1998. Total loans increased $41,601,000, or 13.3% in 1998, while 1997 saw
an increase of $43,287,000, or 16.1%. The real estate-mortgage category posted a
$33,081,000,  or 25.9% increase and the real estate-construction  portion of the
portfolio  increased  $10,926,000,  or 63.8% over the prior year.  The growth in
these two loan areas can be attributed mainly to the ongoing economic  expansion
and  prosperity the Greater  Lafayette area continues to experience.  Tippecanoe
County  also  continues  to enjoy one of the  lowest  unemployment  rates in the
state.

<PAGE>13.20

In an effort to control the level of net charge-offs recorded in the installment
loan area,  management did not aggressively  pursue the indirect automobile line
of business during 1998. As a result,  total installment loan balances decreased
$5,018,000,  or 9.1% from one year ago, and indirect loan net  charge-offs  also
declined  to $127,000 in 1998,  compared to $257,000 in 1997.  As loan  balances
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,
1998, 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,  1998.  These loans carry a lower  degree of risk
because of the nature of the loan, as evidenced by the fact there have been zero
net charge-offs for this loan type over the last five years. 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.  As previously
mentioned,  the indirect lending  function  continues to be the most significant
portion of the consumer loan portfolio.  A specific  policy  pertaining to these
loan  types,  including  separate  reporting  requirements,  are  in  place  for
monitoring  purposes.   Total  indirect  loan  balances  declined  approximately
$6,200,000 to $31,800,000 as of December 31, 1998.

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>
<CAPTION>

                                                                      Loan Maturities at December 31, 1997
                                                      ----------------------------------------------------------------------
                                                          1 Year            1 - 5             Over 5
                                                         and Less           Years             Years             Total
                                                      --------------- ------------------ ----------------- -----------------
<S>                                                          <C>                <C>                <C>             <C>     
Commercial and agricultural                                  $50,459            $58,430            $6,309          $115,198
Real estate - construction                                    25,917              1,696               430            28,043

                                                      =============== ================== ================= =================
          Total selected loans                               $76,376            $60,126            $6,739          $143,241
                                                      =============== ================== ================= =================


Sensitivity to Changes in Interest Rates

  Fixed rates                                                                   $12,984            $6,374
  Variable rates                                                                 47,142               365

                                                                      ------------------ -----------------
                Total selected loans                                            $60,126            $6,739
                                                                      ================== =================

</TABLE>
<PAGE>13.21

                                    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.  The
Corporation  posted a record year in deposit  growth.  Total deposits  increased
$40,351,000,  or 11.4% in 1998, compared to $13,645,000, or 4.0% in 1997. Aiding
the growth in deposit  totals were the number of new accounts  opened during the
year. On a net basis,  the Corporation  gained more than 2,200 deposit  accounts
during 1998.  Given the deposit growth over the years,  overall  deposit mix has
not changed significantly. 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.

<TABLE>
<CAPTION>

                                   1998                            1997                          1996
                              ------------------------------- ------------------------------ -----------------------------
                                 Average         Average         Average         Average        Average        Average
                                 Balance           Rate          Balance          Rate          Balance         Rate
                              --------------- --------------- --------------- -------------- -------------- --------------

<S>                                  <C>               <C>           <C>              <C>          <C>             <C>
Noninterest-bearing                  $39,312                         $35,728                       $35,655
Interest-bearing demand               48,777           1.25%          47,945          1.37%         45,086          1.84%
Savings deposits                     108,019           4.02%          94,360          3.92%         82,535          3.80%
Time deposits                        174,959           5.69%         167,706          5.71%        150,345          5.82%

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

       Total deposits               $371,067           4.02%        $345,739          4.03%       $313,621          4.05%
                              =============== =============== =============== ============== ============== ==============

</TABLE>

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

                                   1998                            1997                          1996
                              ---------------                 ---------------                --------------
<S>                                   <C>                             <C>                          <C>    
3 months or less                      $9,273                          $7,015                       $15,390
3 through 6 months                     4,287                           2,423                         3,223
6 through 12 months                    4,230                           3,676                         3,777
Over 12 months                        10,438                          11,648                         4,850
                              ===============                 ===============                ==============
            Total                    $28,228                         $24,762                       $27,240
                              ===============                 ===============                ==============
</TABLE>
<PAGE>13.22

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 $500,000,  $2,000,000,  and $8,300,000 as of
December  31,  1998,  1997,  and  1996,   respectively.   The  increase  in  the
Corporation's deposit base over the past few years led to the reduction in these
fund types.

                                   BORROWINGS

Aside from the core deposit base and large denomination  certificates of deposit
mentioned above, the 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.

<TABLE>
<CAPTION>
                                                                               As of December 31,
                                                                 ------------------------------------------------

                                                                     1998             1997              1996
                                                                 -------------    --------------    -------------

<S>                                                                   <C>               <C>              <C>    
Repurchase agreements outstanding                                     $15,788           $17,340          $23,497
Treasury tax and loan open-end note                                       614             3,032            1,024
                                                                 -------------    --------------    -------------

                Total short-term borrowings                           $16,402           $20,372          $24,521
                                                                 =============    ==============    =============


Average balance of repurchase agreements
  during year                                                         $14,671           $13,926          $15,143

Maximum month-end balance of repurchase
  agreements during year                                               17,223            17,621           23,497

Weighted-average interest rate of
  repurchase agreements during year                                     4.47%             4.67%            4.61%

Weighted-average interest rate of
  repurchase agreements at end of year                                  4.20%             4.98%            4.47%

</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 open-end note as of December 31, 1998,  1997, and
1996. 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.  Long-term debt,
consisting of FHLBI borrowings, as of December 31, 1998 and 1997 was $23,854,000
and $19,886,000,  respectively. Along with the annual mortgage advance principal
repayments,   the  Corporation  increased  its  borrowings  from  the  FHLBI  by
$4,800,000  during  1998  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.   Additional   information  regarding
short-term  borrowings  and long-term  debt can be found in Note 7 and Note 8 of
the consolidated financial statements.

<PAGE>13.23

           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 statements in this paragraph relating to the parent company
receiving  dividends from the  subsidiary  bank are  forward-looking  statements
which may or may not be accurate due to the  impossibility of predicting  future
economic and business events.

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 long-term  borrowings from the FHLBI.
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 1998 and 1997.

<TABLE>
<CAPTION>
                                                               1998                                    1997
                                             --------------------------------------  --------------------------------------
                                                Average      Increase/(decrease)        Average      Increase/(decrease)
                                                Balance        Amount      Percent      Balance        Amount     Percent
                                             -------------- ------------- ------------------------- -----------------------
FUNDING USES
<S>                                               <C>            <C>        <C>           <C>            <C>        <C>   
  Loans, total                                    $333,507       $38,788    13.16%        $294,719       $47,444    19.19%
  Taxable securities                                55,973        (8,146)  -12.70%          64,119        (7,597)  -10.59%
  Tax-exempt securities                             20,978         3,818    22.25%          17,160        (3,645)  -17.52%
  Interest-bearing balances with
    other financial institutions                       153           153         -               -             -         -
  Federal Home Loan Bank stock                       1,464           254    20.99%           1,210           104     9.40%
  Federal funds sold                                10,720           (22)   -0.20%          10,742         2,707    33.69%

                                             -------------- ------------- ---------  -------------- ------------   -------
                 Total uses                       $422,795       $34,845     8.98%        $387,950       $39,013    11.18%
                                             ============== ============= =========  ============== ============   =======

FUNDING SOURCES
  Noninterest-bearing deposits                     $39,312        $3,584    10.03%         $35,728           $73     0.20%
  Interest-bearing demand                           48,777           832     1.74%          47,945         2,859     6.34%
  Savings deposits                                 108,019        13,659    14.48%          94,360        11,825    14.33%
  Time deposits                                    174,959         7,253     4.32%         167,706        17,361    11.55%
  Short-term borrowings                             15,581           452     2.99%          15,129        (1,532)   -9.20%
  Long-term borrowings                              22,101         8,161    58.54%          13,940         5,482    64.81%

                                             -------------- ------------  --------   -------------- -------------  --------
               Total sources                      $408,749       $33,941     9.06%        $374,808       $36,068    10.65%
                                             ============== ============= =========  ============== =============  ========

</TABLE>
<PAGE>13.24

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.

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, 1998.

               -----------------------  Net Portfolio Value --------------------

  Change           Dollar                    Dollar                  Percentage
 in Rates          Amount                    Change                    Change

  + 200          $ 26,144                 $ (21,086)                   (44.65) %
  + 100            36,423                   (10,807)                   (22.88)
   Base            47,230                         -                        -
  - 100            56,302                     9,072                     19.21
  - 200            65,016                    17,786                     37.66

The above  table  indicates  that as of December  31,  1998,  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, 1998,  the  Corporation's
estimated changes in NPV were within the approved guidelines  established by the
Board of Directors.

<PAGE>13.25

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.

                                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).

<PAGE>13.26

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  initiate  regulatory  action.  If an
institution is only adequately  capitalized,  regulatory approval is required to
accept brokered deposits.  If  undercapitalized,  capital  distributions,  asset
growth, and expansion is limited,  in addition to the institution being required
to submit a capital restoration plan.

Management believes the Corporation and Bank met all the capital requirements as
of December 31, 1998,  and the Bank was  well-capitalized  under the  guidelines
established by the banking  regulators.  To be  well-capitalized,  the Bank must
maintain  the prompt  corrective  action  capital  guidelines  described  above.
Consolidated  capital  amounts  and  ratios  are  presented  in Table 15 Capital
Ratios.  Bank capital levels are  materially  consistent  with the  consolidated
ratios.

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  $4,097,000,  or 10.6% in 1998  compared to the
$3,602,000,  or 10.3%  increase  posted in 1997. The amount of dividends paid by
the Corporation  increased to $1,341,000,  or 11.7% above the prior year amount.
The  increased  dollar  dividend  payout,  in  addition to the  continued  stock
dividends  declared  in the past  few  years,  reflect  management's  effort  to
increase  the  value  and  return  of  each  shareholder's   investment  in  the
Corporation.

At December 31, 1998, 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>13.27
<TABLE>
<CAPTION>

                                                  At December 31, 
                                           1998          1997     
                                       ------------  ------------ 
Tier 1 capital
<S>                                       <C>           <C>       
  Shareholders' equity                    $42,614       $38,469   
  Less:  Intangibles                         (806)         (908)  
  Add:  Unrealized loss on securities          42            90   
                                       ------------  ------------ 
  Total Tier 1 capital                    $41,850       $37,651   
                                       ============  ============ 

Total risk-based capital
  Tier 1 capital                          $41,850       $37,651   
  Allowance for loan losses                 4,241         3,464   
                                       ------------  -------------
  Total risk-based capital                $46,091       $41,115   
                                       ============  ============= 

Risk weighted assets                     $353,215      $310,170    
                                       ============  ============= 
Average assets, fourth quarter           $475,438      $430,555    
                                       ============  ============= 

Risk-based ratios
  Tier 1                                   11.85%        12.14%    
                                       ============  ============= 
  Total risk-based capital                 13.05%        13.26%    
                                       ============  ============= 

Leverage Ratios                             8.82%         8.76%    
                                       ============  ============= 
</TABLE>

As discussed  earlier and in Note 18, the Bank expects to acquire three branches
in March, 1999. Because this acquisition will reduce  consolidated and bank-only
capital levels, the Corporation plans to borrow  approximately $12 - $14 million
to contribute to the Bank to maintain the Bank's well-capitalized  status. While
management   expects  the  Bank  to  remain   well-capitalized   following   the
consummation  of  this  transaction,   the  Corporation's   capital  levels  may
temporarily drop below the minimum required level for capital adequacy purposes.
Management  will  monitor  the  Corporation's  consolidated  capital  level  and
anticipates the minimum required level for capital  adequacy  purposes to be met
by the  Corporation  prior to  December  31,  1999.  The  Federal  Reserve  Bank
considers  holding company  capital  adequacy in connection with any application
activity which requires their approval. Further, to the extent the Corporation's
capital levels fall below the well-capitalized category as anticipated,  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 statements in this  paragraph  relating to
capital levels of the Corporation and Bank are forward-looking  statements which
may or may  not be  accurate  due to  the  impossibility  of  predicting  future
economic and business events,  including the ability of the Corporation to raise
additional  capital,  if needed,  as well as other  factors  that are beyond the
control of the Corporation.

<PAGE>13.28

                                    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 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 operation expenses. Over the last
few years the  inflation  rate has been  relatively  low,  and its impact on the
balance sheets and increased levels of income and expense has been nominal.

                                    YEAR 2000

 The  Corporation's  Board of Directors and  management is aware of the possible
consequences  the Y2K may pose with regard to the computer  systems  utilized to
conduct  business  on a daily  basis.  A "Year 2000  Committee",  which  reports
monthly to the Board of Directors,  has prepared a detailed plan to address this
issue.  In  addition  to  developing  contingency  plans,  the  Corporation  has
conducted internal employee training,  as well as customer awareness seminars in
an effort  to not only  communicate  the Y2K  issue,  but also to  inform  these
individuals of the Corporation's  approach to address this issue. Testing of the
Corporation's  core processing  systems began early in the third quarter of 1998
and is scheduled  to be completed no later than the end of the first  quarter of
1999.

Because the Y2K issue could affect the ability of the Corporation's customers to
conduct their  business and  operations in a timely and  effective  manner,  the
result could adversely  impact the  Corporation.  The  Corporation's  ability to
process  loan and  deposit  transactions  could be  affected,  which could limit
sources of revenues and funding from customers, as well as impact the quality of
the  loan  portfolio.  In order  to  assess  the  potential  credit  risk in the
Corporation's  loan  portfolio,  a  comprehensive  review of all commercial loan
customers whose aggregate borrowings were $200,000 or greater was performed.  No
borrowers were classified as having a high credit risk.

While  management  does not believe the necessary steps involved to resolve this
issue will  significantly  impair  the  organization's  ability  to operate  and
conduct  business in a normal fashion,  the Corporation  does estimate the total
cost to  address  this issue to be  approximately  $1.6  million.  Approximately
one-half of the  estimated  $1.6 million has been  incurred  through  1998.  The
expenditures  related to this issue are comprised  primarily of system upgrades,
consisting  both of hardware and  software,  in addition to dedicated  personnel
costs.

The above discussion of Y2K issues includes numerous forward-looking  statements
reflecting  management's  current  assessment  and estimates with respect to the
Corporation's  Y2K  compliance  efforts  and the  impact  of Y2K  issues  on the
Corporation's  business  and  operations.  Various  factors  could cause  actual
results  to  differ  materially  from  those  contemplated  by such  assessment,
estimates and forward-looking statements, including many factors that are beyond
the control of the Corporation.  These factors included, but are not limited to,
representations by vendors and customers,  technological advancements,  economic
conditions, and competitive considerations.

<PAGE>13.29

                            LAFAYETTE BANCORPORATION

                        CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997 and 1996



<PAGE>13.30

                            LAFAYETTE BANCORPORATION
                               Lafayette, Indiana

                        CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997 and 1996


                                   CONTENTS


REPORT OF INDEPENDENT AUDITORS...............................................1

CONSOLIDATED FINANCIAL STATEMENTS

     CONSOLIDATED BALANCE SHEETS.............................................2

     CONSOLIDATED STATEMENTS OF INCOME.......................................3

     CONSOLIDATED STATEMENTS OF CHANGES IN
       SHAREHOLDERS' EQUITY..................................................4

     CONSOLIDATED STATEMENTS OF CASH FLOWS...................................5

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS..............................7

<PAGE>13.31

                         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,  1998 and 1997 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,  1998.  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,  1998  and  1997,  and the  results  of its
operations  and its cash flows for each of the three  years in the period  ended
December 31, 1998 in conformity with generally accepted accounting principles.




                                              /s/ Crowe, Chizek and Company LLP
                                              Crowe, Chizek and Company LLP

Indianapolis, Indiana
January 27, 1999


<PAGE>13.32


                            LAFAYETTE BANCORPORATION
                           CONSOLIDATED BALANCE SHEETS
                           December 31, 1998 and 1997
                          (Dollar amounts in thousands)

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


                                                                                           1998            1997
                                                                                           ----            ----
<S>                                                                                   <C>              <C>
ASSETS
Cash and due from banks                                                               $     17,368     $     16,901
Federal funds sold                                                                           1,400           14,000
                                                                                      ------------     ------------
     Total cash and cash equivalents                                                        18,768           30,901

Interest-bearing balances with other financial institutions                                    671                -
Securities available-for-sale                                                               76,956           66,577
Securities held-to-maturity (fair value
  $5,063 and $5,378)                                                                         4,879            5,268
Loans held for sale                                                                         10,086            7,640

Loans                                                                                      353,828          312,227
Less:  Allowance for loan losses                                                            (4,241)          (3,464)
                                                                                      ------------     ------------
     Net loans                                                                             349,587          308,763

Federal Home Loan Bank stock, at cost                                                        1,539            1,242
Premises, furniture and equipment, net                                                       7,953            6,183
Accrued interest receivable and other assets                                                13,530           12,455
                                                                                      ------------     ------------

                                                                                      $    483,969     $    439,029
                                                                                      ============     ============

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
     Noninterest-bearing deposits                                                     $     48,657     $     42,752
     Interest-bearing demand and savings deposits                                          170,308          144,028
     Interest-bearing time deposits                                                        176,581          168,415
                                                                                      ------------     ------------
         Total deposits                                                                    395,546          355,195

     Short-term borrowings                                                                  16,402           20,372
     Long-term debt                                                                         23,854           19,886
     Accrued interest payable and other liabilities                                          5,553            5,107
                                                                                      ------------     ------------
         Total liabilities                                                                 441,355          400,560

Shareholders' equity
     Common stock, no par value:  5,000,000 shares
       authorized; 2,394,035 and 2,173,570 shares issued;
       and 2,380,427 and 2,161,370 shares outstanding                                        2,394            2,174
     Additional paid-in capital                                                             32,620           24,555
     Retained earnings                                                                       7,747           11,927
     Accumulated other comprehensive income                                                    (42)             (90)
     Less:  Treasury stock, at cost (13,608 and 12,200 shares)                                (105)             (97)
                                                                                      ------------     ------------
         Total shareholders' equity                                                         42,614           38,469
                                                                                      ------------     ------------

                                                                                      $    483,969     $    439,029
                                                                                      ============     ============

</TABLE>

See accompanying notes.

<PAGE>13.33


                        CONSOLIDATED STATEMENTS OF INCOME
                  Years ended December 31, 1998, 1997 and 1996
              (Dollar amounts in thousands, except per share data)

<TABLE>
<CAPTION>

                                                                          1998             1997            1996
                                                                          ----             ----            ----
<S>                                                                   <C>             <C>              <C> 
Interest income
     Loans, including related fees                                    $     29,810    $     26,590     $     22,538
     Taxable securities                                                      3,217           3,857            4,219
     Tax exempt securities                                                     991             782              940
     Other                                                                     707             682              518
                                                                      ------------    ------------     ------------
                                                                            34,725          31,911           28,215

Interest expense
     Deposits                                                         14,906          13,937           12,708
     Short-term borrowings                                                     712             711              781
     Long-term debt                                                          1,345             877              523
                                                                      ------------    ------------     ------------
                                                                            16,963          15,525           14,012
                                                                      ------------    ------------     ------------

Net interest income                                                         17,762          16,386           14,203

Provision for loan losses                                                      980             620              240
                                                                      ------------    ------------     ------------

Net interest income after provision for loan losses                         16,782          15,766           13,963

Non-interest income
     Fiduciary activities                                                      964             885              812
     Service charges on deposit accounts                                     1,309           1,254            1,116
     Net realized gain on securities                                             6              27               83
     Net gain on loan sales                                                  1,255             736              398
     Other service charges and fees                                            727             645              454
     Other                                                                     655             621              559
                                                                      ------------    ------------     ------------
                                                                             4,916           4,168            3,422

Non-interest expense
     Salaries and employee benefits                                          8,206           7,484            6,331
     Occupancy, net                                                            891             882              834
     Equipment                                                               1,054             970            1,009
     Other                                                                   3,459           3,221            3,017
                                                                      ------------    ------------     ------------
         Total noninterest expenses                                         13,610          12,557           11,191
                                                                      ------------    ------------     ------------

Income before income taxes                                                   8,088           7,377            6,194

Income taxes                                                                 2,711           2,569            2,103
                                                                      ------------       ---------       ----------

Net income                                                            $      5,377      $    4,808      $     4,091
                                                                      ============      ==========      ===========

Basic earnings per share                                              $      2.26     $       2.02     $      1.72
                                                                      ===========     ============     ===========

Diluted earnings per share                                            $      2.21     $       2.00     $      1.72
                                                                      ===========     ============     ===========

</TABLE>

<PAGE>13.34

           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                  Years ended December 31, 1998, 1997 and 1996
              (Dollar amounts in thousands, except per share data)

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

<TABLE>
<CAPTION>

                                                                             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, 1996        $     1,646    $    12,288   $    18,013   $        17   $       (89)   $    31,875

    Comprehensive income
      Net income                                                   4,091                                      4,091
      Change in net unrealized
        gain/(loss) on securities
        available-for-sale                                                        (328)                        (328)
                                                                                                        -----------
          Total comprehensive
            income                                                                                            3,763

    20% stock dividend
      329,329 shares                    330          7,080        (7,410)                                         -
    Cash dividend
      ($.42 per share)                                              (989)                                      (989)
    Purchase 141 treasury
      Shares                                                                                      (3)            (3)
                                -----------    -----------   -----------   -----------   -----------    -----------

Balance, December 31, 1996            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
      ($.51 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
      ($.56 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
                                ===========    ===========   ===========   ============  ============   ===========

</TABLE>

<PAGE>13.35

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  Years ended December 31, 1998, 1997 and 1996
                          (Dollar amounts in thousands)

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

                                                                           1998              1997         1996
                                                                           ----              ----         ----
<S>                                                                 <C>                 <C>              <C>
Cash flows from operating activities
     Net income                                                       $      5,377      $     4,808      $    4,091
     Adjustments to reconcile net income to net
       cash from operating activities
         Depreciation                                                          646              631             693
         Unrealized loss on other real estate                                    -                -              64
         Net amortization of securities                                        311              271             302
         Provision for loan losses                                             980              620             240
         Net realized gain on securities                                        (6)             (27)            (83)
         Net realized (gain) loss on sale of
              Fixed assets                                                       -                -             (96)
              Other real estate                                                (43)              21               -
         Change in assets and liabilities
              Loans originated for sale                                    (86,291)         (52,206)        (30,502)
              Loans sold                                                    83,845           50,443          27,098
              Accrued interest receivable
                and other assets                                            (1,402)          (1,241)         (1,173)
              Accrued interest payable
                and other liabilities                                          446              698             668
                                                                      ------------     ------------    ------------
                  Net cash from operating activities                         3,863            4,018           1,302

Cash flows from investing activities
     Change in interest-bearing balances with
         other financial institutions                                         (671)               -               -
     Purchase of securities available-for-sale                             (54,270)         (19,798)        (41,957)
     Proceeds from sales of securities available-for-sale                    3,592           17,453          25,532
     Proceeds from maturities of securities
       available-for-sale                                                   40,176           24,155          18,349
     Purchase of securities held-to-maturity                                (2,532)          (2,370)         (4,013)
     Proceeds from maturities of securities
       held-to-maturity                                                      2,906            3,242               5
     Loans made to customers, net of payments collected                    (41,804)         (43,641)        (40,539)
     Purchase of Federal Home Loan Bank stock                                 (297)            (126)            (36)
     Property and equipment expenditures                                    (2,416)            (459)         (1,612)
     Proceeds from sale of fixed assets                                          -                -             125
     Proceeds from sales of other real estate                                  251              136             300
                                                                      ------------     ------------    ------------
         Net cash from investing activities                                (55,065)         (21,408)        (43,846)

</TABLE>
                             See accompanying notes.
<PAGE>13.36

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  Years ended December 31, 1998, 1997 and 1996
                          (Dollar amounts in thousands)

<TABLE>
<CAPTION>

                                                                           1998             1997           1996
                                                                           ----             ----           ----
<S>                                                                   <C>             <C>              <C>
Cash flows from financing activities
     Net change in deposit accounts                                   $     40,351    $     13,645     $     16,600
     Cash received in branch acquisition for
       liabilities assumed, net of assets acquired                               -               -           16,298
     Net change in short-term borrowings                                    (3,970)         (4,149)           5,429
     Proceeds from long-term debt                                            4,800          16,500            1,500
     Payments on long-term debt                                               (832)         (5,879)          (1,140)
     Common stock issued                                                        69               -                -
     Dividends paid                                                         (1,341)         (1,201)            (989)
     Purchase of treasury stock                                                 (8)             (5)              (3)
                                                                      ------------    ------------     ------------
         Net cash from financing activities                                 39,069          18,911           37,695
                                                                      ------------    ------------     ------------

Net change in cash and cash equivalents                                    (12,133)          1,521           (4,849)

Cash and cash equivalents at beginning of year                              30,901          29,380           34,229
                                                                      ------------    ------------     ------------

Cash and cash equivalents at end of year                              $     18,768    $     30,901     $     29,380
                                                                      ============    ============     ============

Supplemental disclosures of cash flow information
     Cash paid during the period for
         Interest                                                     $     16,824     $    15,477     $     13,877
         Income taxes                                                        2,939           2,757            1,992

Non-cash investing activity
     Loans transferred to other real estate                           $          -    $          -     $         99


</TABLE>

                            See accompanying notes.

<PAGE>13.37

                            LAFAYETTE BANCORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997 and 1996
         (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 12 branches located in Tippecanoe and White 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 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.  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>13.38

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 payments are past due over 90 days.  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.

The carrying values of impaired loans are periodically  adjusted to reflect cash
payments,  revised  estimates of future cash flows, and increases in the present
value  of  expected  cash  flows  due to the  passage  of  time.  Cash  payments
representing  interest  income are  reported as such.  Other cash  payments  are
reported as reductions in carrying  value,  while  increases or decreases due to
changes  in  estimates  of future  payments  and due to the  passage of time are
reported as bad debt expense, if reductions, or otherwise as interest income.

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.

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.

<PAGE>13.39

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (Continued)

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. Costs
after acquisition are expensed.

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:  Goodwill  and  core  deposit  intangibles  are  amortized  on  the
straight-line method over 15 years and are included in other assets. Intangibles
are assessed for  impairment  based on estimated  undiscounted  cash flows,  and
written down if necessary.

Stock Compensation:  Expense for employee  compensation under stock option plans
is based on 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 on 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>13.40

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.   The  accounting   standard  that  requires   reporting
comprehensive  income first applies for 1998, with prior information restated to
be comparable.

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.

New  Accounting  Pronouncements:  Beginning  January 1, 2000,  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.

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

<PAGE>13.41

NOTE 2 - SECURITIES

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

<TABLE>
<CAPTION>

                                                                       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            $     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>

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

<TABLE>
<CAPTION>

                                                                     Gross            Gross           Estimated
                                                   Amortized       Unrealized      Unrealized          Market
                                                     Cost             Gains          Losses             Value
Securities Available-for-Sale

<S>                                              <C>             <C>              <C>             <C>         
     U.S. Government and its agencies            $     21,946    $         25     $        (65)   $     21,906
     Obligations of states and political
       subdivisions                                     9,892              95               (6)          9,981
     Corporate obligations                                250               -                -             250
     Mortgage-backed and other
       asset-backed securities                         34,637              68             (265)         34,440
                                                 ------------    ------------     ------------    ------------

                                                 $     66,725    $        188     $       (336)   $     66,577
                                                 ============    ============     ============    ============

Securities Held-to-Maturity

     Obligations of states and political
       subdivisions                              $      5,268    $        118     $         (8)   $      5,378
                                                 ============    ============     ============    ============
</TABLE>

Gross  gains of $6,  $95 and  $175  and  gross  losses  of $0,  $68 and $92 were
realized on sales of securities available-for-sale.

<PAGE>13.42

NOTE 2 - SECURITIES (Continued)

The  amortized  cost and  estimated  market value of  securities at December 31,
1998, by contractual maturity,  are shown below.  Securities not due at a single
maturity date are shown separately.

<TABLE>
<CAPTION>

                                                        Available-for-Sale               Held-to-Maturity
                                                                     Estimated                       Estimated
                                                   Amortized           Market       Amortized         Market
                                                     Cost              Value          Cost             Value

<S>         <C>                                  <C>             <C>              <C>             <C>         
     Due in 1 year or less                       $      6,036    $      6,043     $        140    $        140
     Due after 1 year through
       5 years                                         10,837          10,932              616             624
     Due after five years through
       10 years                                         8,894           9,003            2,657           2,809
     Due after 10 years                                14,318          14,282            1,466           1,490
                                                 ------------    ------------     ------------    ------------
         Subtotal                                      40,085          40,260            4,879           5,063
     Mortgage-backed and other asset-
       backed securities                               36,940          36,696                -               -
                                                 ------------    ------------     ------------    ------------

         Total                                   $     77,025    $     76,956     $      4,879    $      5,063
                                                 ============    ============     ============    ============

</TABLE>

Securities with a carrying value of $19,747 and $21,807 at December 31, 1998 and
1997 were pledged to secure public deposits and repurchase agreements.  See Note
8 regarding additional securities pledges.

At December 31, 1998 and 1997, mortgage-backed securities include collateralized
mortgage  obligations  (CMO's)  and real  estate  mortgage  investment  conduits
(REMIC's)  with an  amortized  cost of  $18,000  and  $15,829  and fair value of
$17,721 and $15,658,  all of which are issued by U.S.  Government  agencies.  At
December 31, 1998 and 1997, approximately $10,782 and $11,646 are variable rate,
with the remainder fixed rate.

<PAGE>13.43

NOTE 3 - LOANS

Loans are comprised of the following as of December 31:

<TABLE>
<CAPTION>

                                                                                      1998             1997
                                                                                      ----             ----

<S>                                                                               <C>             <C> 
     Commercial and agricultural loans                                            $    115,198    $    112,586
     Real estate construction                                                           28,043          17,117
     Residential real estate loans                                                     160,655         127,574
     Installment loans to individuals                                                   49,932          54,950
                                                                                  ------------    ------------

                                                     Total                        $    353,828    $    312,227
                                                                                  ============    ============
</TABLE>

Non-performing loans consist of the following at December 31:
<TABLE>
<CAPTION>

                                                                                      1998             1997
                                                                                      ----             ----

<S>                                                                               <C>             <C>         
     Loans past due 90 days or more                                               $        775    $        505
     Non accrual loans                                                                   1,468             127
     Restructured loans                                                                    197             350
                                                                                  ------------    ------------

                                                     Total                        $      2,440    $        982
                                                                                  ============    ============
</TABLE>

Information regarding impaired loans is as follows:

<TABLE>
<CAPTION>
                                                                                      1998             1997
                                                                                      ----             ----
<S>                                                                              <C>              <C> 
     Year end impaired loans
         With no allowance for loan losses allocated                              $          -    $         19
         With allowance for loan losses allocated                                          748             108
     Amount of the allowance allocated                                                     145              30

     Average balance of impaired loans during the year                                     160             153
     Interest income recognized during impairment                                            -               -
     Cash-basis interest income recognized                                                   -               -

</TABLE>

The Bank had $720 and $0 loans on  non-accrual at December 31, 1998 or 1997 that
management did not deem to be impaired.

<PAGE>13.44

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, 1998                            $      4,280
     Change in persons included                                        (14)
     New loans                                                         700
     Loan payments                                                  (3,404)
                                                               ------------

     Balance as of December 31, 1998                          $      1,562
                                                              ============


NOTE 4 - ALLOWANCE FOR LOAN LOSSES

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

<TABLE>
<CAPTION>

                                                                      1998            1997             1996
                                                                      ----            ----             ----

<S>                                                              <C>              <C>             <C>         
     Balance, January 1                                          $      3,464     $      3,198    $      3,200
     Provision charged to operations                                      980              620             240
     Loans charged-off                                                   (411)            (550)           (545)
     Recoveries on loans previously charged-off                           208              196             303
                                                                 ------------     ------------    ------------

     Balance, December 31                                        $      4,241     $      3,464    $      3,198
                                                                 ============     ============    ============
</TABLE>

NOTE 5 - PREMISES, FURNITURE AND EQUIPMENT

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

<TABLE>
<CAPTION>

                                                                                      1998             1997
                                                                                      ----             ----

<S>                                                                               <C>             <C>         
     Land                                                                         $        789    $        789
     Buildings and improvements                                                          7,833           6,484
     Leasehold improvements                                                              1,296           1,081
     Furniture and equipment                                                             7,218           6,885
                                                                                  ------------    ------------
         Total                                                                          17,136          15,239
     Accumulated depreciation                                                           (9,183)         (9,056)
                                                                                  ------------    ------------

     Premises, furniture and equipment, net                                       $      7,953    $      6,183
                                                                                  ============    ============
</TABLE>

<PAGE>13.45

NOTE 6 - INTEREST-BEARING TIME DEPOSITS

Time  deposits of $100 or greater  totaled  $28,228 and $24,762 at December  31,
1998 and 1997.

At December 31, 1998, the scheduled maturities of time deposits are as follows:

   1999                                        $    104,254
   2000                                              34,618
   2001                                              13,205
   2002                                              10,804
   2003                                              13,475
   Thereafter                                           225
                                               ------------

               Total                           $    176,581
                                               ============


NOTE 7 - SHORT-TERM BORROWINGS

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

<TABLE>
<CAPTION>

                                                                                      1998             1997
                                                                                      ----             ----

<S>                                                                               <C>             <C>         
     Balance of repurchase agreements outstanding                                 $     15,788    $     17,340

     Balance of treasury tax and loan open-end note                                        614           3,032
                                                                                  ------------    ------------

         Total short-term borrowings                                              $     16,402    $     20,372
                                                                                  ============    ============
</TABLE>

At December  31,  1998 and 1997,  the  Corporation  had $446 and $715 in related
party repurchase agreements.

<PAGE>13.46

NOTE 8 - LONG-TERM DEBT

Long-term debt outstanding at December 31 consists of the following:
<TABLE>
<CAPTION>

                                                                                      1998             1997
                                                                                      ----             ----
<S>                                                                              <C>                <C>
     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.                $ 10,354        $   8,386

     Federal  Home Loan  Bank  advances;  principal  payments  due at  maturity;
     various maturities during the year 2000, with final maturity June 17, 2008;
     interest payable monthly at various fixed interest rates from  4.96%-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.                                                                   13,500           11,500

                                                     Total                        $     23,854       $  19,886
                                                                                  ============       =========
</TABLE>

Annual principal payments required on long-term debt are as follows:

     1999                                                         $        827
     2000                                                               12,290
     2001                                                                  755
     2002                                                                  999
     2003                                                                3,026
     2004 and thereafter                                                 5,957
                                                                  ------------

         Total long-term debt                                     $     23,854
                                                                  ============

<PAGE>13.47

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, 1998 and 1997):
<TABLE>
<CAPTION>

                                                                                  1998               1997
                                                                                  ----               ----
<S>                                                                          <C>                <C>
     Change in benefit obligation:
         Beginning benefit obligation                                        $        11,252    $       10,091
         Service cost                                                                    612               511
         Interest cost                                                                   803               744
         Actuarial gain                                                                    -               316
         Benefits paid                                                                  (427)             (410)
                                                                             ---------------    --------------
         Ending benefit obligation                                                    12,240            11,252

     Change in plan assets, at fair value:
         Beginning plan assets                                                        14,675            12,352
         Actual return                                                                   951             2,733
         Employer contribution                                                             -                 -
         Benefits paid                                                                  (427)             (410)
                                                                             ---------------    --------------

         Ending plan assets                                                           15,199            14,675  
                                                                             ----------------   ----------------

     Funded status                                                                     2,959             3,423
     Unrecognized net actuarial (gain)/loss                                              (43)             (433)
     Unrecognized prior service cost                                                      22                23
     Unrecognized transition asset                                                      (933)           (1,083)
                                                                             ---------------    --------------
     Prepaid/ (accrued) benefit cost                                         $         2,005    $        1,930 
                                                                             ================   ===============

</TABLE>

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

                                                               1998               1997               1996
                                                               ----               ----               ----

<S>                                                        <C>               <C>                <C>           
     Service cost                                          $          612    $           511    $          505
     Interest cost                                                    803                743               691
     Expected return on plan assets                                (1,341)            (1,126)           (1,070)
     Amortization of prior service cost                                 2                  2                 2
     Amortization of transition asset                                (151)              (151)             (151)
     Recognized net actuarial (gain)/ loss                              -                  -                 7 
                                                           --------------    ---------------    ---------------
                                                           $          (75)   $           (21)   $          (16)
                                                           ==============    ===============    ==============


     Discount rate on benefit obligation                              6.75%             7.25%             7.50%
     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,  1998  and  1997,   the  plan's   assets   include   Lafayette
Bancorporation  common  stock of $1,038 and $783.  At December 31, 1998 and 1997
the plan's assets also included Lafayette Bank and Trust Company certificates of
deposit of $409 and $100.

<PAGE>13.48

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 $116, $106 and $73 for 1998,
1997 and 1996.

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 $858 and
$683 at December 31, 1998 and 1997. Deferred  compensation  expense was $90, $90
and $84 for 1998,  1997 and 1996. 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 $3,522 and $3,367 at December 31, 1998 and 1997.

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>13.49

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>
<CAPTION>

                                                                                      1998             1997
<S>                                                                              <C>              <C>
     Change in postretirement benefit obligation:
         Beginning benefit obligation                                             $        443    $        396
         Service cost                                                                       28              24
         Interest cost                                                                      31              28
         Unrecognized (gain)/loss                                                            -               7
         Benefits paid                                                                      (8)            (12)
                                                                                  ------------    ------------

         Ending benefit obligation                                                         494             443

     Unrecognized net gain                                                                 165             179
                                                                                  ------------    ------------

     Accrued benefit obligation                                                   $        659    $        622
                                                                                  ============    ============
</TABLE>

Components of net periodic postretirement benefit cost as of December 31:
<TABLE>
<CAPTION>

                                                                      1998            1997             1996
                                                                      ----            ----             ----

<S>                                                              <C>              <C>             <C>         
     Service cost                                                $         28     $         24    $         22
     Interest cost                                                         31               28              25
     Amortization of unrecognized (gain)/loss                             (14)             (15)            (16)
                                                                 ------------     ------------    ------------

         Benefit cost                                            $         45     $         37    $         31 
                                                                 ============     ============    =============

</TABLE>

For measurement purposes,  the annual rate of increase in the per capita cost of
covered health care benefits assumed was 11.5% for 1998, 1997 and 1996, with the
rate assumed to gradually decrease to 5.5% effective January 1, 2002. 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, 1998
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 1998, 1997 and
1996.

<PAGE>13.50

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 44,094 at $6.05
per share for 1998, and 45,085 at $6.65 per share for 1997,  69,166 at $7.32 per
share  for  1996.  In 1998,  prior to the  stock  dividend,  5,000  rights  were
exercised at $39 per share.  Compensation expense charged to operations in 1998,
1997 and 1996 was  $450,  $657 and $112 and is based on an  increase  in  market
value. The liability at December 31, 1998 and 1997 was $1,420 and $1,132.

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 available for grant to directors and management are shown
below:

<TABLE>
<CAPTION>
                                                1998            1995
                                                Plan            Plan             Total

  <S>                                     <C>              <C>             <C>   
  Directors                                     16,500           52,708          69,208
  Management                                    46,200           75,068         121,268
                                          ------------     ------------    ------------

       Totals                                   62,700          127,776         190,476 
                                          ============     ============    =============

</TABLE>

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.

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

<TABLE>
<CAPTION>

                                                 ----------1 9 9 8---------         -----------1 9 9 7------------
                                                                  Weighted                              Weighted
                                                                   Average                               Average
                                                                  Exercise                              Exercise
                                                    Options         Price              Options            Price

<S>                                                  <C>        <C>                      <C>       <C>           
Outstanding beginning of year                        117,432    $      18.75             87,142    $        17.58
Granted                                               23,492           33.44             30,976             22.00
Exercised                                             (3,102)          18.18                  -                  -
Forfeited                                                  -              -                (686)            17.90
                                                 -----------    -----------         -----------    --------------

Outstanding end of year                              137,822    $      21.27            117,432    $        18.75
                                                 ===========    ============        ===========    ==============

Exercisable at end of year                            68,163    $      17.79             54,667    $        17.27
                                                 ===========    ============        ===========    ==============

Weighted average fair value per
  option granted during the year                 $     5.28                         $      4.83

</TABLE>

<PAGE>13.51

Options  outstanding at December 31, 1998 have a weighted average remaining life
of 8.2 years, with exercise prices ranging from $17.15 to $34.55.

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 1998, 1997 and 1996,  respectively:  risk-free
interest rates of 5.6%, 6.6% and 6.5%; dividend yields of 2%; volatility factors
of the expected market price of the  Corporation's  common stock of .16, .16 and
 .05,  and a  weighted  average  expected  life of the  options of five years for
management options and two years for directors' options.

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

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

<TABLE>
<CAPTION>
                                                                      1998            1997             1996
                                                                      ----            ----             ----

<S>                                                              <C>              <C>             <C>         
     Pro forma net income                                        $      5,242     $      4,706    $      4,034
     Pro forma earnings per share
         Basic                                                   $       2.20     $      1.98     $       1.70
         Diluted                                                 $       2.15     $      1.96     $       1.69
</TABLE>

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

NOTE 12 - INCOME TAXES

Income taxes consist of the following:

<TABLE>
<CAPTION>
                                                                      1998            1997             1996
                                                                      ----            ----             ----

<S>                                                              <C>              <C>             <C>         
     Currently payable                                           $      3,096     $      2,626    $      2,165
     Deferred income taxes (benefit)                                     (385)             (57)            (62)
                                                                 ------------     ------------    ------------

         Total                                                   $      2,711     $      2,569    $      2,103
                                                                 ============     ============    ============

</TABLE>
<PAGE>13.52

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>
<CAPTION>

                                                                      1998            1997             1996
                                                                      ----            ----             ----

    <S>                                                          <C>              <C>             <C>
     Statutory rate applied to income before
       income taxes                                              $      2,750     $      2,508    $      2,106
     Add/(deduct)
         Tax exempt interest income                                      (337)            (303)           (301)
         State tax expense (net of federal benefit)                       358              405             346
         Other                                                            (60)             (41)            (48)
                                                                 ------------     ------------    ------------

              Total                                              $      2,711     $      2,569    $      2,103
                                                                 ============     ============    ============
</TABLE>

NOTE 12 - INCOME TAXES (Continued)

The net  deferred  tax asset  reflected  in the  consolidated  balance  sheet is
comprised of the following components as of December 31:

<TABLE>
<CAPTION>

                                                                                      1998             1997
                                                                                      ----             ----
    <S>                                                                          <C>              <C> 
     Deferred tax assets
         Allowance for loan losses                                                $        817    $        510
         Accrued stock appreciation rights                                                 562             448
         Accrued post-retirement benefit obligation                                        319             271
         Deferred compensation                                                             307             237
         Deferred loan fees                                                                 79             132
         Net operating loss carry-forward                                                    -              26
         Net unrealized loss on securities available-for-sale                               27              59
                                                                                  ------------    ------------
              Total tax assets                                                           2,111           1,683


     Deferred tax liabilities
         Depreciation                                                                     (219)           (220)
         Net pension benefit                                                              (794)           (765)
         Other                                                                            (216)           (169)
                                                                                  ------------    ------------
         Total deferred tax liabilities                                                 (1,229)         (1,154)

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

         Net deferred tax asset                                                   $        882    $        529
                                                                                  ============    ============

</TABLE>
<PAGE>13.53

NOTE 13 - PER SHARE DATA

In November  1998,  the  Corporation  issued  217,640  shares of common stock in
connection with a 10% stock dividend.  In November 1997, the Corporation  issued
197,597  shares of common  stock in  connection  with a 10% stock  dividend.  In
September  1996,  the  Corporation  issued  329,329  shares of  common  stock in
connection  with a 20% stock  dividend.  The  following  table  illustrates  the
computation of basic and diluted earnings per share.

<TABLE>
<CAPTION>

                                                                   1998            1997               1996
                                                                   ----            ----               ----
<S>                                                        <C>               <C>                <C> 
Basic earnings per share
     Net income                                            $        5,377    $         4,808    $        4,091
     Weighted average shares outstanding                        2,380,342          2,377,618         2,377,750
                                                           --------------    ---------------    --------------
         Basic earnings per share                          $         2.26    $          2.02    $         1.72
                                                           ==============    ===============    ==============


Diluted earnings per share
     Net income                                            $        5,377    $         4,808    $        4,091

     Weighted average shares outstanding                        2,380,342          2,377,618         2,377,750
     Diluted effect of assumed exercise
       of Stock Options                                            53,235             23,231             4,187
                                                           --------------    ---------------    --------------
         Diluted average shares outstanding                $    2,433,577    $     2,400,849    $    2,381,937
                                                           ==============    ===============    ==============

Diluted earnings per share                                 $         2.21    $          2.00    $         1.72
                                                           ==============    ===============    ==============
</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). Management believes the Corporation and
Bank meet all applicable capital adequacy requirements as of December 31, 1998.

Prompt  corrective  action  regulations  applicable  to the  Bank  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,  capital  distributions  are  limited,  as is asset growth and
expansion, and capital restoration plans are required.

As of December 31, 1998, 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.

<PAGE>13.54

The Corporation's  actual consolidated  capital amounts and ratios are presented
in the following  table (in  millions).  The Bank's actual  capital  amounts and
ratios are not materially different from the consolidated amounts below.

<TABLE>
<CAPTION>
                                                                                            Minimum Required
                                                                                               To Be Well-
                                                                  Minimum Required          Capitalized Under
                                                                     For Capital            Prompt Corrective
                                                Actual            Adequacy Purposes        Action Regulations
                                            Amount   Ratio         Amount     Ratio          Amount     Ratio
1998

<S>                                       <C>           <C>     <C>                <C>    <C>             <C>  
Total capital to risk weighted assets     $    46.1     13.1%   $        28.2      8.0%   $      35.3     10.0%
Tier 1 capital to risk weighted assets         41.9     11.9             14.1      4.0           21.2      6.0
Tier 1 capital to average assets               41.9      8.8             19.0      4.0           23.8      5.0

1997

Total capital to risk weighted assets     $    41.1     13.3%   $        24.8      8.0%   $      31.0     10.0%
Tier 1 capital to risk weighted assets         37.7     12.1             12.4      4.0           18.6      6.0
Tier 1 capital to average assets               37.7      8.8             17.2      4.0           21.5      5.0

</TABLE>

The  Bank is also  subject  to  state  regulations  restricting  the  amount  of
dividends payable to the Corporation.  At December 31, 1998, the Bank had $7,331
of retained earnings available for dividends under these regulations.

As  discussed in Note 18, the Bank  expects to acquire  three  branches in March
1999. The acquisition will reduce consolidated  capital levels.  Management will
monitor consolidated  capital levels and anticipates  sufficient capital will be
maintained  by  December  31,  1999.  The  Corporation  expects  to  borrow  and
contribute   capital  to  the  Bank,   and  the  Bank  is   expected  to  remain
well-capitalized.

<PAGE>13.55

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 $219,  $188,  and $181 for
1998, 1997 and 1996.
Future minimum lease payments are as follows:

  1999                                                         $        230
  2000                                                                  213
  2001                                                                  149
  2002                                                                  142
  2003                                                                  117
  2004 through 2007                                                     232
                                                               ------------

      Total                                                    $      1,083
                                                               ============

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:

                                                   1998             1997
                                                   ----             ----

     Unused lines of credit                  $     43,239    $     33,686
     Commitments to make loans                     14,976           4,964
     Standby letters of credit                      2,759           2,189
     Commercial letters of credit                      59              78

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 $5,955 and $4,931 at  December  31,  1998 and 1997.  These
reserves do not earn interest.

<PAGE>13.56

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>
<CAPTION>

                                                -----------1 9 9 8---------        -----------1 9 9 7---------
                                                 Carrying            Fair           Carrying            Fair
                                                   Value             Value            Value             Value

<S>                                            <C>              <C>               <C>              <C> 
Financial assets
   Cash and cash equivalents                   $      18,768    $      18,768     $      30,901    $      30,901
   Interest-bearing balances with
     other financial institutions                        671              671                 -                -
   Securities available-for-sale                      76,956           76,956            66,577           66,577
   Securities held-to-maturity                         4,879            5,063             5,268            5,378
   Loans held for sale                                10,086           10,264             7,640            7,768
   Loans, net                                        349,587          351,685           308,763          310,115
   Federal Home Loan Bank stock                        1,539            1,539             1,242            1,242
   Accrued interest receivable                         4,592            4,592             4,359            4,359

Financial liabilities
   Deposits                                    $    (395,546)   $    (398,747)    $    (355,195)   $    (356,623)
   Short-term borrowings                             (16,402)         (16,402)          (20,372)         (20,372)
   Long-term debt                                    (23,854)         (24,527)          (19,886)         (20,076)
   Accrued interest payable                           (1,471)          (1,471)           (1,332)          (1,332)

</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 or deposits 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.  Federal  Home  Loan  Bank  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 long-term debt, 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>13.57

NOTE 17 - PARENT COMPANY STATEMENTS

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

<TABLE>
<CAPTION>

CONDENSED BALANCE SHEETS
December 31
                                                                                           1998            1997
                                                                                           ----            ----
<S>                                                                                   <C>              <C> 
ASSETS
Cash on deposit with subsidiary                                                       $      1,488     $        758
Investment in bank                                                                          42,463           38,576
Other assets                                                                                   559              720
                                                                                      ------------     ------------

                                                                                      $     44,510     $     40,054
                                                                                      ============     ============

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities                                                                                  1,896            1,585

Shareholders' equity                                                                        42,614           38,469
                                                                                      ------------     ------------

                                                                                      $     44,510     $     40,054
                                                                                      ============     ============

</TABLE>

<TABLE>
<CAPTION>

CONDENSED STATEMENTS OF INCOME
Years ended December 31
                                                                          1998             1997            1996
                                                                          ----             ----            ----

<S>                                                                   <C>             <C>              <C>
Operating income
     Dividends received from subsidiary bank                          $      1,850    $      1,714     $      1,570
     Interest income                                                            26              10                3
                                                                      ------------    ------------     ------------
                                                                             1,876           1,724            1,573

Operating expenses                                                             543             742              192
                                                                      ------------    ------------     ------------

Income before income taxes and equity in
  undistributed earnings of bank                                             1,333             982            1,381

Income tax benefit                                                             205             290               75
                                                                      ------------    ------------     ------------
Income before equity in undistributed earnings of bank                       1,538           1,272            1,456

Equity in undistributed earnings of bank                                     3,839           3,536            2,635
                                                                      ------------    ------------     ------------

Net income                                                                   5,377           4,808            4,091

Other comprehensive income, net of tax                                          48             221             (328)
                                                                      ------------    ------------     ------------

Comprehensive income                                                  $      5,425    $      5,029     $      3,763
                                                                      ============    ============     ============
</TABLE>

<PAGE>13.58

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997 and 1996
         (Dollar amounts in thousands, except share and per share data)

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

NOTE 17 - PARENT COMPANY STATEMENTS (Continued)

<TABLE>
<CAPTION>

CONDENSED STATEMENTS OF CASH FLOWS
Years ended December 31

                                                                          1998             1997            1996
                                                                          ----             ----            ----

<S>                                                                   <C>             <C>              <C>
Cash flows from operating activities
     Net income                                                       $      5,377    $      4,808     $      4,091
     Adjustments to reconcile net income to net cash
       from operating activities
         Amortization of deferred costs                                          6               6                6
         Equity in undistributed earnings of bank                           (3,839)         (3,536)          (2,635)
         Other assets and other liabilities                                    466             (36)             215
                                                                      ------------    ------------     ------------
              Net cash from operating activities                             2,010           1,242            1,677

Cash flows from financing activities
     Principal payments on long-term debt                                        -               -             (224)
     Common stock issued                                                        69               -                -
     Dividends paid                                                         (1,341)         (1,201)            (989)
     Purchase of treasury shares                                                (8)             (5)              (3)
                                                                      ------------    ------------     ------------
         Net cash from financing activities                                 (1,280)         (1,206)          (1,216)
                                                                      ------------    ------------     ------------

Net change in cash and cash equivalents                                        730              36              461

Cash and cash equivalents at beginning of year                                 758             722              261
                                                                      ------------    ------------     ------------

Cash and cash equivalents at end of year                              $      1,488    $        758     $        722
                                                                      ============    ============     ============

</TABLE>

NOTE 18 - BRANCH ACQUISITION

In October  1998,  the Bank  signed a  definitive  agreement  to  acquire  three
branches located in DeMotte, Remington, and Rensselaer, Indiana. Under the terms
of  the  agreement,   the  Bank  will  acquire  all  of  the  deposits  totaling
approximately $118 million,  selected loans totaling  approximately $60 million,
in addition to all physical  facilities  and certain other  assets.  Intangibles
associated with this purchase will be approximately $13 million. The transaction
has  received  all  required  regulatory  approvals  and is expected to close in
March, 1999.

In  September  1996,  the Bank  purchased a branch in  Monticello,  Indiana from
another institution.  The fair value of assets acquired was $923, the fair value
of  liabilities  assumed was $18,114,  and the Bank received  $16,298 of cash at
settlement.  Goodwill and core deposit intangibles associated with this purchase
amounted to $893.

<PAGE>13.59

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997 and 1996
         (Dollar amounts in thousands, except share and per share data)

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

NOTE 19 - OTHER COMPREHENSIVE INCOME

Other comprehensive income components and related taxes were as follows:

<TABLE>
<CAPTION>

                                                               1998               1997               1996
                                                               ----               ----               ----

<S>                                                        <C>               <C>                <C>
Unrealized holding gains and losses on
     available-for-sale securities                         $           85    $           394    $         (460)
Less:  reclassification adjustments for gains
      and losses later recognized in income                            (6)               (27)              (83)
                                                           --------------    ---------------    --------------
Net unrealized gains and losses                                        79                367              (543)
Tax effect                                                            (31)              (146)             (215)
                                                           --------------    ---------------    --------------

Other comprehensive income                                 $           48    $           221    $         (328)
                                                           ===============   ===============    ==============

</TABLE>

NOTE 20 - SEGMENT INFORMATION

The Corporation's operations include three primary segments:  banking,  mortgage
banking,  and trust.  Through its banking  subsidiary's  thirteen  locations  in
Tippecanoe 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>13.60
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997 and 1996
         (Dollar amounts in thousands, except share and per share data)

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

NOTE 20 - SEGMENT INFORMATION (Continued)

<TABLE>
<CAPTION>

1998                                                              Mortgage                               Total
                                                Banking            Banking            Trust            Segments

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


1996                                                              Mortgage                               Total
                                                Banking            Banking            Trust            Segments

     Net interest income                    $        13,863    $          346     $            -    $        14,209
     Net gain on loan sales                               -               398                  -                398
     Other revenue                                    2,209                 3                812              3,024
     Noncash items:
         Depreciation                                   657                13                 23                693
         Provision for loan loss                        240                 -                  -                240
     Segment profit                                   5,858               357                168              6,383
     Segment assets                                 407,807             5,993                130            413,930


</TABLE>

<PAGE>13.61

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997 and 1996
         (Dollar amounts in thousands, except share and per share data)

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

NOTE 20 - SEGMENT INFORMATION (Continued)

Significant  segment  totals  are  reconciled  to the  financial  statements  as
follows:

<TABLE>
<CAPTION>

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

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

                                              Reportable                          Consolidated
1996                                           Segments             Other            Totals
----                                           --------             -----            ------

     Net interest income                    $        14,209    $           (6)    $       14,203
     Provision for loan loss                            240                 -                240
     Net gain on loan sales                             398                 -                398
     Other revenue                                    3,024                 -              3,024
     Profit                                           6,383            (2,292)             4,091
     Assets                                         413,930               461            414,391

</TABLE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998, 1997 and 1996
         (Dollar amounts in thousands, except share and per share data)

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

NOTE 20 - SEGMENT INFORMATION (Continued)

Amounts included in the "other" column are as follows.

<TABLE>
<CAPTION>

                                                               1998               1997               1996
                                                               ----               ----               ----

<S>                                                        <C>               <C>                <C>
Income:
     Holding company net interest
       income (expense)                                    $           26    $            10    $           (6)

Profit:
     Holding company net interest
       income (expense)                                                26                 10                (6)    
     Holding company expenses                                        (543)             (742)              (183)
     Income tax expense                                            (2,711)            (2,569)           (2,103)


Assets:
     Holding company assets                                           559                719               461

<PAGE>
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,  1998,  there were  2,380,427  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.

                             Price Per Share              Dividend
                          High            Low             Declared
                          -------------------             --------
1998
First Quarter            $34 9/16       $28 7/8            $  .12
Second Quarter            36 3/8         31 3/4               .12
Third Quarter             37 1/4         33 7/16              .12
Fourth Quarter            40 3/4         36                   .20

1997
First Quarter             19 7/8         19 1/4            $  .10
Second Quarter            21 7/8         19 7/8               .11
Third Quarter             24 1/2         21 7/8               .11
Fourth Quarter            28 7/8         24 1/2               .19

Data  adjusted  for all  stock  dividends,  including  a 10% stock  dividend  to
shareholders of record on September 30, 1998, paid on November 2, 1998.

</TABLE>