FINANCIAL SERVICES CORPORATION OF THE MIDWEST, 10-K, 1998-06-05

FINANCIAL SERVICES CORPORATION OF THE MIDWEST
10-K, 1998-06-05
STATE COMMERCIAL BANKS

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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

Form 10-K

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

For the Fiscal year ended: March 31, 1998

Commission file number: 0-8673

FINANCIAL SERVICES CORPORATION OF THE MIDWEST
------------------------------------------------------
(Exact name of registrant as specified in its charter)

Delaware 36-2301786
- --------------------------------- -------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)

224 - 18th Street, Suite 202, Rock Island, Illinois 61201-8737
- --------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number: (309) 794-1120

Securities registered pursuant to Section 12(g) of the Act:

9.25% Class F Cumulative Convertible Preferred Stock

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

Indicate by check mark if no disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

The aggregate market value of the voting stock held by non-affiliates of the
registrant as of April 30, 1998 (excluding the reported beneficial ownership of
all directors, officers and beneficial owners of more than 5% of the
registrant's voting stock; however, this does not constitute an admission of
affiliate status for any of these holders) was $9,590,000. The Common Stock of
the registrant, which is the registrant's only voting stock, is not actively
traded or regularly quoted. However, for the reasons stated in Item 5 of this
Report, the amount shown is calculated on the basis of $120.00 per share for the
Common Stock. The number of shares outstanding of the registrant's Common Stock
as of April 30, 1998 was 260,424 shares of $.50 per share par value Common
Stock.

The exhibit index may be found on pages __ through __ herein.

<PAGE>

Part I

Item 1. Business

(a) Business Development

Financial Services Corporation of the Midwest ("FSCM") is a one-bank holding
company incorporated in 1973 under Delaware law and registered under the Bank
Holding Company Act of 1956, as amended (the "Holding Company Act"). FSCM's
principal place of business is located at 224 - 18th Street, Suite 202, Rock
Island, Illinois. FSCM owns all of the outstanding shares of THE Rock Island
Bank, National Association ("TRIB"), which has its principal place of business
in Rock Island, Illinois. In 1974, FSCM acquired all outstanding shares of TRIB,
then an Illinois state banking corporation. On November 1, 1995, TRIB became a
national bank and relocated its official office from Rock Island, Illinois to
Bettendorf, Iowa. TRIB's trade area includes both Iowa and Illinois Quad City
communities. TRIB is a member of the Federal Reserve System, and the Federal
Deposit Insurance Corporation ("FDIC") insures its deposits.

On April 13, 1998, FSCM entered into a merger agreement with Mercantile
Bancorporation Inc., St. Louis, Missouri ("Mercantile"). Under the agreement,
each of the 302,890 equivalent shares of FSCM's Common Stock would be exchanged
for 6.8573 shares, or a total of 2,077,000 shares, of Mercantile's Common Stock.
The exchange rate, which was established on March 25, 1998, represented a
purchase price of approximately $380 per share totaling $115 million. The
calculations of per share and total purchase prices are based on the $55.375
market price for Mercantile's Common Stock as reported by the New York Stock
Exchange on March 25, 1998 and are subject to daily market fluctuations.

The merger is subject to various conditions, including approval by FSCM
shareholders and regulatory authorities. It is currently anticipated that the
merger will be completed on or before September 30, 1998. Mercantile's assets
totaled approximately $30 billion at December 31, 1997 and, after the merger,
Mercantile's combined assets in the Quad Cities' market area will exceed $800
million.

(b) THE Rock Island Bank, N.A. Financial Information

March 31, March 31, March 31,
(Dollars in Thousands) 1998 1997 1996
- -------------------------------------------- --------- --------- ---------

Net interest income ........................ $ 19,056 $ 17,378 $ 14,921
Provision for possible credit losses ....... 3,430 2,630 1,905
Total other income ......................... 4,569 3,666 3,303
Total other expenses ....................... 10,801 10,613 10,084
Income taxes ............................... 3,096 2,835 2,087
-------- -------- --------
Net income ................................. $ 6,298 $ 4,966 $ 4,148
======== ======== ========
Total assets ............................... $514,177 $442,371 $386,818
======== ======== ========

FINANCIAL SERVICES CORPORATION OF THE MIDWEST

FSCM's investment in TRIB represented 89.12% of FSCM's parent company only total
assets of $45,088,000 as of March 31, 1998. FSCM's $10.0 million, 8.00% Notes
due November 1, 2008 ("1996 Notes"), which were issued in November 1996,
constituted 93.40% of FSCM's liabilities as of March 31, 1998.

FSCM's primary sources of cash flows are derived from dividend and tax payments
from TRIB. Certain regulatory provisions restrict the amount of dividends or
other funds paid to FSCM by TRIB. Income taxes are computed on a separate
company basis, and tax payments are paid to FSCM by TRIB in accordance with an
intercompany tax allocation agreement.

FSCM is a one-bank holding company registered under the Holding Company Act,
and, as such, it is subject to supervision by the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board"). Regulated areas with which
FSCM must comply include, but are not limited to: obtaining approval before any
acquisition, obtaining approval prior to any change in control, restrictions on
the types of financial activities in which FSCM may engage, maintenance of
prescribed capital adequacy standards, prohibitions of certain related
transactions, completion of various prescribed reports, and submission to
periodic examinations.
<PAGE>

THE ROCK ISLAND BANK, NATIONAL ASSOCIATION.

TRIB's trade area spans portions of Rock Island County and Henry County in
Illinois and Scott County in Iowa, which includes the greater Quad Cities
metropolitan area, encompassing the municipalities of Rock Island, Moline, East
Moline, Milan, Silvis, Colona and Green Rock, Illinois; and Bettendorf and
Davenport, Iowa. The total population of TRIB's trade area in 1996 was estimated
at 248,400. TRIB provides a wide variety of full-service commercial banking
products. These products are offered to individuals, service businesses,
industries, governmental units, financial institutions and other entities.
Locations at which these products may be obtained include TRIB's official office
located in Bettendorf, Iowa, its principal place of business in its downtown
Rock Island, Illinois office, four other offices (three of which have extended
hours), and its five on-premise and four off-premise automatic teller machines
("ATMs"). The retail banking services TRIB offers include accepting demand,
savings and time deposits in the forms of regular checking accounts, NOW
accounts, money market accounts, passbook savings, statement savings,
certificates of deposit and club accounts. Deposit customers are eligible for
debit ATM cards and Visa debit cards, which provide convenient access through
the six TRIB-owned ATMs as well as devices established by other financial
institutions that participate in the Illinois Transfer System, an electronic
funds transfer corporation, and CIRRUS, an international electronic transaction
interchange. Additionally, TRIB makes secured and unsecured commercial,
construction, mortgage and consumer loans and equipment leases and provides a
variety of trust services, including administration of estates, personal trust
and employee benefit programs.

TRIB is engaged in the highly competitive business of commercial banking. There
were approximately 19 banks and four savings institutions in the Quad Cities
metropolitan area as of June 30, 1997. Measured by total deposits, TRIB was the
second largest. TRIB's competitors include local, regional and national banking
and nonbanking entities that are not necessarily subject to the same regulatory
standards or restrictions.

As a national banking association, TRIB is subject to primary regulation by the
Office of the Comptroller of the Currency ("OCC"). All national banks are also
members of the Federal Reserve System and, to a limited extent, some regulations
promulgated by the Federal Reserve Board apply to TRIB. In addition, because the
FDIC insures TRIB's deposits up to $100,000, the FDIC has certain regulatory
powers with respect to TRIB. Iowa and Illinois usury laws impose certain
interest rate and fee restrictions on TRIB.

Monetary Policies and Economic Conditions

The monetary policies of regulatory authorities, including the Federal Reserve
Board, have a significant effect on the operating results of bank holding
companies and their subsidiary banks, including FSCM and TRIB. The Federal
Reserve Board regulates the national supply of bank credit. Among the means
available to the Federal Reserve Board to regulate such supply are open market
operations in U.S. government securities, changes in the discount rate on
depository institution borrowings, and changes in reserve requirements against
depository institution deposits. These means are used in varying combinations to
influence the growth and distribution of bank loans, investments, and deposits,
and their use may affect interest rates charged on loans or paid for deposits.

The laws and regulations to which FSCM and TRIB are subject are constantly under
review by Congress, regulatory agencies and state legislatures. These laws and
regulations may be changed dramatically in the future, which could affect the
ability of bank holding companies to engage in certain activities such as
nationwide banking, securities underwriting and insurance, as well as the amount
of capital that banks and bank holding companies must maintain, premiums paid
for deposit insurance and other matters directly affecting earnings. It is not
certain which changes will occur, if any, or the effect such changes will have
on the profitability of FSCM and TRIB, their ability to compete effectively, or
the composition of the financial services industry.

The banking industry is also affected by general economic conditions, such as
inflation, recession, unemployment and other factors. In addition, the business
of FSCM and TRIB could be affected by the economic conditions of the industries
in which the major employers in the Quad Cities metropolitan area are involved,
including John Deere & Co., the Federal Rock Island Arsenal, Genesis Medical
Center and Alcoa.

The foregoing references to applicable laws, statutes, regulations and
legislation are brief summaries thereof which do not purport to be complete and
are qualified in their entirety by reference to such statutes, regulations and
legislation.

Employees

As of March 31, 1998, FSCM's and TRIB's combined total number of employees was
222, of which 210 were considered to be full-time equivalent employees. No
employees are members of a collective bargaining unit. Management considers its
relations with employees to be good.
<PAGE>

Item 2. Properties

TRIB's official office was moved on November 1, 1995, to a one-story structure,
acquired in September 1995, located at 3120 Middle Road, Bettendorf, Iowa. The
7,711 square foot office was remodeled and furnished prior to its opening date,
and is presently staffed by approximately 20 full and part-time retail deposit
and loan personnel.

The downtown Rock Island, Illinois office, which was retained as a principal
office when the official office moved to Bettendorf, Iowa, is a six-story
structure owned by TRIB and located at the northwest corner of 3rd Avenue and
18th Street, Rock Island, Illinois. In May 1992, TRIB purchased the building
adjoining the downtown office to the north on 18th Street. The acquired
two-story building was subsequently remodeled and annexed to TRIB's downtown
office structure. In total, TRIB occupies approximately 29,500 square feet of
office space in the expanded downtown office, while FSCM occupies approximately
800 square feet of space. The remaining space of 17,750 square feet is available
for rental to other occupants and was fully leased as of March 31, 1998 to four
tenants.

TRIB also owns and operates four other offices. In Rock Island, Flatiron is
located within the city's business district at 1600-5th Avenue and Hilltop is
conveniently located near residential areas at 3411-18th Avenue. In East Moline,
the office is located on a business corridor with nearby residential areas at
680-42nd Avenue. All of these offices have walk-in lobby and drive-up access.
The Flatiron office contains approximately 2,230 square feet of space. During
fiscal 1996, a new 5,450 square foot one-story structure was constructed at the
Hilltop office site. The East Moline office is currently operating out of a
temporary facility. Additionally, TRIB occupies approximately 320 square feet of
office space at the Friendship Manor, a life care retirement home located at
1209-21st Avenue, Rock Island. This office is open during limited hours two days
per week and provides financial services primarily to residents and employees of
Friendship Manor.

In March 1997, TRIB purchased a two-story office building for $221 thousand. The
building encompasses 10,560 square feet and is located at 524-15th Street,
Moline, Illinois. During fiscal 1998, renovations of the building totaling $296
thousand were completed and approximately $376 thousand was invested to furnish
and equip the facility. Non-branch functions were transferred from Downtown Rock
Island to Moline, including computer remote job entry, proof of deposit, deposit
services, systems support, merchant credit card services, business development,
mail, purchasing, customer information systems, office security administration
and ancillary operations. In addition, a customer call center was established to
more effectively handle incoming customer telephone inquiries. The relocated
departments allowed lending support functions to expand at the Downtown Rock
Island Office.

In March 1998, two adjoining properties on East Kimberly Road in Davenport, Iowa
were purchased for $1,195,000. Management originally intended to open a
temporary office in an existing on-premise building in early fiscal 1999 while
building a new permanent office at the site. Due to the pending merger, these
plans are currently under reevaluation in order to avoid duplication with
existing Mercantile office locations within the Quad Cities Metropolitan area.

TRIB is currently limited to a total investment of $10 million in land and net
premises that can be acquired before approval from the OCC is necessary. As of
March 31, 1998, TRIB had $5.3 million invested in land and net premises. In
addition, covenants of the correspondent bank loan agreement and 1996 Notes
impose limitations. As of March 31, 1998, FSCM and TRIB's net fixed asset
investments were restricted to an amount not to exceed 3% of consolidated
assets, or approximately an additional investment of $8.9 million.

Item 3. Legal Proceedings

FSCM is not engaged in any legal actions or proceedings, and management knows of
no pending or threatened legal actions or proceedings involving FSCM. TRIB is
involved in legal actions in various stages of litigation and investigation.
After reviewing all actions pending or threatened involving TRIB, management
believes that such legal actions constitute ordinary routine litigation
incidental to TRIB's business and that the ultimate resolution of these matters
should not materially affect FSCM's consolidated financial position or
operations or that such legal actions are not material.

Item 4. Submission of Matters to a Vote of Security Holders

Not applicable.
<PAGE>

Part II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

(a) Market Information

The Common Stock of FSCM is not actively traded, and during the year ended March
31, 1998, there was no active market in which shares of Common Stock were
publicly traded. A price of $120.00 per share was used in the computation of the
aggregate market value of Common Stock held by non-affiliates set forth on the
cover page of this Annual Report on Form 10-K. This price was based on an
independent stock appraisal of FSCM Common Stock, as of December 31, 1997, on
transactions involving small block sizes on behalf of the 401(k) plan
participants. In March 1998, 16 shares of FSCM Common Stock were purchased at
$120 by the 401(k) plan. In May 1997, FSCM extended a Common Stock tender offer
in which 2,498 shares were tendered and acquired in August 1997 by FSCM for $90
per share in cash. Further, in November 1997, a sale of 100 shares of Common
Stock was made from Treasury Stock at $100 per share to a newly appointed
Director of TRIB's Board to satisfy regulatory stock ownership requirements.
Other private transactions, for which the sale price was not known by or
reasonably available to FSCM, may have occurred during fiscal 1998.

(b) Holders

As of April 30, 1998, FSCM had approximately 154 common shareholders.

Cash dividends on FSCM's Common Stock have been paid quarterly for the last two
fiscal years. The amounts per share and payment dates were as follows:

Fiscal Fiscal
Dividend Date 1998 1997
- ------------------------------------------ ------- ------
June 30 .................................. $0.500 $0.500
September 30 ............................. 0.625 0.500
December 31 .............................. 0.625 0.500
March 31 ................................. 0.625 0.500
------ ------
$2.375 $2.000
====== ======

Most of FSCM's cash flow and income is derived from dividends paid by TRIB on
its Common Stock. The ability of TRIB to pay dividends is limited by the
necessity to maintain adequate capital ratios in accordance with OCC guidelines.
Further, TRIB's dividends are limited to the sum of undivided profits from the
current year plus net profits from the preceding two years. However, there are
other circumstances under which the OCC can also prohibit dividend payments.

In addition, covenants on FSCM's 1996 Notes and correspondent bank loan
agreement restrict FSCM from paying Common Stock dividends in excess of 30% of
the prior fiscal year's consolidated net income. This would allow a dividend up
to a maximum of $6.40 per share that the Board of Directors could declare on
FSCM's Common Stock for the fiscal year ended March 31, 1999. However, before
paying dividends, consideration also must be given to FSCM's overall capital
position relative to assets and to minimum regulatory capital ratios.

Further, the payment of dividends by FSCM and TRIB is in the discretion of their
respective Board of Directors.
<PAGE>

Item 6. Selected Financial Data

Financial Services Corporation of the Midwest

Consolidated Selected Financial Data
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
Fiscal Years Ended March 31,
---------------------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Interest income ....................................... $ 39,125 $ 34,493 $ 30,271 $ 24,571 $ 22,024
Interest expense ..................................... 20,759 17,638 15,833 10,707 9,642
-------- -------- -------- -------- --------
Net interest income .................................. 18,366 16,855 14,438 13,864 12,382
Provision for credit losses .......................... 3,502 2,630 1,905 2,510 1,970
-------- -------- -------- -------- --------
Net interest income after provision
for credit losses ................................. 14,864 14,225 12,533 11,354 10,412
Other income ......................................... 4,620 3,673 3,304 3,149 3,515
Investment securities gains, net ..................... 182 -- 11 -- --
Other expense ........................................ 11,396 11,176 10,527 9,919 10,327
Income taxes ......................................... 2,710 2,465 1,768 1,516 1,267
-------- -------- -------- -------- --------
Net income ............................................ $ 5,560 $ 4,257 $ 3,553 $ 3,068 $ 2,333
======== ======== ======== ======== ========
Per Common Share:
Basic earnings ........................................ $ 24.92 $ 20.73 $ 16.87 $ 14.21 $ 10.07
Diluted earnings ..................................... 18.23 13.18 10.80 9.10 6.73
Book value ........................................... 112.82 118.30 100.60 88.18 76.21
Book value assuming conversion of
MCDs1 and Convertible Preferred Stock ............. 112.81 88.82 76.80 68.35 60.25
Cash dividends ....................................... 2.38 2.00 1.76 1.52 1.52
Period-end Balances:
Total assets ......................................... $518,046 $445,669 $386,967 $337,454 $304,075
Loans and leases, net ................................ 319,532 291,028 251,502 208,244 177,101
Securities ........................................... 135,672 122,280 90,423 71,822 79,939
Deposits ............................................. 408,995 361,891 301,818 271,611 250,774
Long-term debt ....................................... 25,000 10,000 4,500 5,000 5,000
MCDs1 ................................................ -- 1,250 1,250 1,250 1,250
Stockholders' equity ................................. 34,381 27,544 24,287 21,961 19,751
Earnings to Fixed Charge Ratios:
Consolidated:
Excluding interest on deposits .................... 3.43 2.60 2.30 2.72 2.60
Including interest on deposits .................... 1.40 1.38 1.33 1.43 1.37
Parent company only2 ................................. 1.38 1.27 1.26 1.04 --
Percentages:
Average equity to average assets ..................... 6.50% 6.34% 6.52% 6.71% 6.80%
Net income to average common equity .................. 20.17 19.03 17.49 17.24 13.79
Net income to average assets ......................... 1.17 1.05 0.99 0.99 0.83
<FN>
1 Mandatory convertible debentures ("MCDs").

2 The dollar amount of deficiency in earnings necessary to cover fixed charges
was $274 for the fiscal year ended March 31, 1994.
</FN>
</TABLE>
<PAGE>

Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations

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

Pending Merger

On April 13, 1998, Financial Services Corporation of the Midwest ("FSCM"),
entered into a merger agreement with Mercantile Bancorporation Inc., St. Louis,
Missouri ("Mercantile"). Under the agreement, each of the 302,890 equivalent
shares of FSCM's Common Stock would be exchanged for 6.8573 shares, or a total
of 2,077,000 shares, of Mercantile's Common Stock. The exchange rate, which was
established on March 25, 1998, represents a purchase price of approximately $380
per share totaling $115 million, or roughly 3.5 times FSCM's December 31, 1997
unaudited per share book value and 22 times FSCM's unaudited twelve-month per
share income for the period ending December 31, 1997. The calculations of the
per share and total purchase prices are based on the $55.375 market price for
Mercantile's Common Stock as reported by the New York Stock Exchange on March
25, 1998 and are subject to daily market fluctuations.

In late 1997, as part of the 1998 calendar year budgeting process, executive
management of FSCM struggled with the challenge of how to continue to grow
assets along with improving FSCM's financial performance. Management was
concerned with how FSCM would maintain or improve the current return on equity
and return on asset performance while continuing to meet the growth objective in
the strategic corporate plan, especially considering that FSCM's efficiency and
overhead ratios were better than Peer Group ratios. Additionally, management was
experiencing increased difficulty, given the national and local unemployment
trends, in finding, employing and retaining personnel for key mid- to upper-
management positions that were critical to FSCM's continued growth and financial
performance. (FSCM's Peer Group is defined as bank holding companies with
consolidated assets between $300 million and $500 million. The Peer Group
numbers presented here and throughout the report for comparisons are as of
December 31, 1997--the most recent date available.)

Consideration was given to various strategic alternatives, including the
utilization of proceeds from an initial public offering or the issuance of trust
preferred securities to finance an out-of-the-market bank acquisition or a de
novo bank start-up. However, executive management felt it was imperative that,
in evaluating these possible strategies, the market value of FSCM be determined
as a benchmark in measuring the impact of various alternatives on that market
value. After thoroughly analyzing the alternatives, in February 1998 the Board
came to the conclusion that a merger appeared to be in the best interests of the
shareholders of FSCM. Subsequently, an investment banking firm solicited offers
on behalf of FSCM. The Board determined that of the bids received, Mercantile's
bid was the most favorable to FSCM's stockholders from a financial point of
view. Mercantile's assets totaled approximately $30 billion at December 31, 1997
and, after the merger, Mercantile's combined assets in the Quad Cities' market
area will exceed $800 million.

Financial Overview

FSCM's strong financial performance was reflected in many of its key financial
amounts and ratios, hereafter presented.

- - Assets totaled $518,046,000 at March 31, 1998, an increase of $72,377,000,
or 16.24%, from March 31, 1997, which, compared to the previous year, had
increased $58,702,000, or 15.17%.
- - Stockholders' equity totaled $34,381,000 at March 31, 1998, an increase of
$6,837,000, or 24.82% from March 31, 1997 of $27,544,000, which, compared to
March 31, 1996 equity of $24,287,000 had increased $3,257,000 or 13.41%.
FSCM's capital levels remain above the minimum regulatory level established
for a "well-capitalized" financial institution.
- - Net income totaled $5,560,000 for the fiscal year ended March 31, 1998, an
increase of $1,303,000, or 30.61% from fiscal 1997 net income. Fiscal 1997
income, as compared to fiscal 1996, reflected an increase of $704,000, or
19.81%.
- - Earnings per diluted common share ("EPS") equaled $18.23 for fiscal 1998, an
increase between years of $5.05 per share, or 38.32%. Fiscal 1997 EPS of
$13.18 was $2.38 per share higher than fiscal 1996, reflecting an increase
of 22.04%.
<PAGE>

- - Fiscal 1998 book value, assuming conversion of all convertible instruments,
equaled $112.81 per share, an increase of $23.99 per share, or 27.01%.
Fiscal 1997 book value of $88.82 per share reflected an increase of $12.02
per share, or 15.65% from fiscal 1996.
- - Return on average assets equaled 1.17%, 1.05% and 0.99% for fiscal 1998,
1997 and 1996, respectively.
- - Return on average common equity equaled 20.17% for fiscal 1998 as compared
to 19.03% and 17.49% in fiscal 1997 and 1996, respectively.
- - The efficiency ratio, which measures operational performance by dividing
other expense by the sum of net interest income and other income, improved
to 49.58% for fiscal 1998 as compared to 54.44% in fiscal 1997 and 59.33% in
fiscal 1996. FSCM's Peer Group comparative ratio equaled 62.00%.

- - The overhead ratio divides the net of total other expense less other
income by net interest income. Fiscal 1998, 1997 and 1996 overhead ratios
equaled 36.89%, 44.51% ad 50.03%, respectively. A lower ratio reflects
better operational efficiency.

The following table presents a more detailed analysis of the increases in EPS
between fiscal 1998 and 1997 and between fiscal 1997 and 1996.
<TABLE>
Fiscal Years ended Fiscal Years ended
March 31, 1998 March 31, 1997
vs. March 31, 1997 vs. March 31, 1996
------------------ ------------------
<S> <C> <C>
Net income per diluted common share, prior year ......... $ 13.18 $ 10.80
Increase (decrease) from changes in:
Earning asset volume ............................... 7.79 6.54
Rates and other effects on net interest income ..... (3.08) 0.65
Provision for credit losses ........................ (2.66) (2.16)
Other income ....................................... 3.44 1.07
Other expense ...................................... (0.67) (1.94)
Income taxes ....................................... (0.72) (2.07)
--------- ---------
Subtotal ................................................ 17.28 12.89
Changes in weighted average common and contingently
issuable common shares outstanding .............. 0.95 0.29
--------- ---------
Net income per diluted common share ..................... $ 18.23 $ 13.18
========= =========
</TABLE>
As reflected in the table above, for fiscal 1998 versus 1997 and for fiscal 1997
versus 1996, growth in diluted EPS resulted primarily from increases in net
interest income and in other income that were only partially offset by increases
in provision for credit losses, other expense and income taxes. Further
information regarding the increase in net interest income is included in the
Average Balance and Interest Rate Analysis and Interest Variance Analysis
tables.

Other selected ratios of FSCM are presented below for the fiscal years ended
March 31, 1998, 1997 and 1996:

PERFORMANCE RATIOS

Fiscal Years Ended March 31,
-----------------------------
1998 1997 1996
------- ------- ------
Dividend payout ratio ........................ 9.55% 9.65% 10.43%
Average equity to average asset ratio ........ 6.50 6.34 6.52

Per share dividends declared on Common Stock equaled $2.38, $2.00 and $1.76 for
fiscal 1998, 1997 and 1996, respectively. The dividend payout ratio, which is
per share dividends divided by basic earnings per common share, indicates the
percentage of common shareholder investment returned to the shareholder as
opposed to reinvested into the business. Even though Common Stock dividends
increased during the last two fiscal years, the dividend payout ratios decreased
due to strong earning performance. A more comprehensive discussion of changes in
the asset and liability structure and earning performance that contributed to
the changes in the aforementioned ratios is presented in subsequent sections of
this discussion.
<PAGE>

Income Statement

Overview

The following table identifies the changes in income by major categories between
fiscal 1998 and 1997 and between fiscal 1997 and 1996:
<TABLE>
Fiscal Years ended Fiscal Years ended
March 31, 1998 March 31, 1997
(Dollars in Thousands) vs. March 31, 1997 vs. March 31, 1996
-------------------- ------------------ ------------------
<S> <C> <C>
Increase in interest income .................................................... $ 4,632 $ 4,222
Increase in interest expense ................................................... (3,121) (1,805)
------- -------
Increase in net interest income ................................................ 1,511 2,417
Increase in provision for credit losses ........................................ (872) (725)
Increase in other income ....................................................... 1,129 358
Increase in other expense ...................................................... (220) (649)
Increase in income taxes ....................................................... (245) (697)
------- -------
Increase in net income ......................................................... $ 1,303 $ 704
======= =======
</TABLE>
Net Interest Income

The increases between fiscal 1998 and 1997 and between fiscal 1997 and 1996 in
net interest income were due primarily to growth of $65,722,000 and $43,743,000
in average interest-earning assets between the respective periods. The decrease
in the net interest margins, which equaled 4.13% for fiscal 1998 and 4.45% for
fiscal 1997, was due primarily to the $961,000 decrease in fees on loans and
leases between fiscal 1998 and 1997, which is included in "interest and fees on
loans and leases." This decrease in fees was primarily the result of increased
deferral of loan fees that will be amortized into interest income over the lives
of the related loans. Fiscal 1996's margin equaled 4.31% and loan fees included
in interest income totaled $1,393,000. Average yield on interest-earning assets
for fiscal 1998, 1997 and 1996 equaled 8.80%, 9.10% and 9.03%, respectively, and
the average cost on interest-bearing liabilities for the same respective periods
equaled 5.19%, 5.16% and 5.26%. Peer Group comparisons for the net interest
margin, yield on interest-earning assets and cost on interest-bearing
liabilities equaled 4.67%, 8.44% and 3.77%, respectively.

AVERAGE BALANCE AND INTEREST RATE ANALYSIS
<TABLE>

(Dollars in Thousands) March 31, 1998 March 31, 1997 March 31, 1996
- ---------------------------------- ----------------------------- ---------------------------- --------------------------
Average Average Average Average Average Average
ASSETS Balance Interest Rate Balance Interest Rate Balance Interest Rate
- ---------------------------------- -------- --------- ------- -------- -------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-bearing deposits with
other financial institutions .. $ 3,419 $ 206 6.03% $ 4,331 $ 230 5.31% $ 715 $ 39 5.45%
Investment securities ............ 124,716 7,872 6.31 98,664 6,037 6.12 86,602 5,003 5.78
Federal funds sold ............... 11,937 662 5.55 9,709 514 5.29 17,360 1,021 5.88
Loans and leases, net1 ........... 304,716 30,385 9.97 266,362 27,712 10.40 230,646 24,208 10.50
-------- -------- ----- -------- -------- ------- -------
Total interest-earning assets .... 444,788 39,125 8.80 379,066 34,493 9.10 335,323 30,271 9.03
-------- -------- -------
Cash and due from banks .......... 15,756 13,247 11,618
Property and equipment ........... 5,478 5,659 4,787
Other assets ..................... 9,562 8,404 7,477
-------- -------- --------
Total assets .................... $475,584 $406,376 $359,205
======== ======== ========

<PAGE>

Savings deposits ................. $111,816 $ 3,691 3.30 $ 89,265 2,674 3.00 $ 74,394 1,834 2.47
Time deposits .................... 245,406 14,578 5.94 197,957 11,893 6.01 176,038 11,030 6.27
Federal funds purchased .......... 214 12 5.61 102 6 5.88 169 10 5.92
Securities sold under
agreements to repurchase ...... 27,336 1,345 4.92 45,079 2,349 5.21 43,120 2,375 5.51
Other short-term borrowings ...... 1,397 76 5.44 1,334 77 5.77 1,239 70 5.65
Long-term debt ................... 13,247 988 7.46 6,594 542 8.22 4,833 411 8.50
Mandatory convertible debentures . 861 69 8.01 1,250 97 7.76 1,250 103 8.24
-------- -------- -------- ------- -------- ------
Total interest-bearing
liabilities ................ 400,277 20,759 5.19 341,581 17,638 5.16 301,043 15,833 5.26
-------- ------- -------
Noninterest-bearing deposits ..... 38,184 33,239 29,676
Other liabilities ................ 6,232 5,801 5,070
-------- -------- --------
Total liabilities ............. 444,693 380,621 335,789
Stockholders' equity ............. 30,891 25,755 23,416
-------- -------- --------
Total liabilities and
stockholders' equity ....... $475,584 $406,376 $359,205
======== ======== ========
Net interest income .............. $ 18,366 $16,855 $14,438
======== ======= =======
Net interest margin (net
interest income divided
by average total interest-
earning assets) ........... 4.13% 4.45% 4.31%
====== ====== =====
<FN>
1 Nonaccruing loans and leases were included in the average balance. Loan and
lease fees of $487, $1,448, and $1,393 for the fiscal years ended March 31,
1998, 1997, and 1996, respectively, are included in interest income on loans
and leases.
</FN>
</TABLE>
INTEREST VARIANCE ANALYSIS
<TABLE>
Fiscal Years Fiscal Years
ended March 31, 1998 ended March 31, 1997
vs. March 31, 1997 vs. March 31, 1996
----------------------------- -----------------------------
Increase (Decrease) Increase (Decrease)
Due to change in(1) Due to change in(1)
----------------------------- -----------------------------
Average Average Total Average Average Total
(Dollars in Thousands) Balance Rate Change Balance Rate Change
- --------------------------------------- ------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Interest income:
Interest-bearing deposits with other
financial institutions .......... $ (48) $ 24 $ (24) $ 197 $ (6) $ 191
Investment securities .............. 1,594 241 1,835 697 337 1,034
Federal funds sold ................. 118 30 148 (450) (57) (507)
Loans and leases ................... 3,990 (1,317) 2,673 3,749 (245) 3,504
------- ------- ------- ------- ------- -------

Total interest income ........... 5,654 (1,022) 4,632 4,193 29 4,222
------- ------- ------- ------- ------- -------

Savings deposits ................... 676 341 1,017 367 473 840
Time deposits ...................... 2,851 (166) 2,685 1,373 (510) 863
Securities sold under agreements
to repurchase ................... (925) (79) (1,004) 108 (134) (26)
Short-term borrowings .............. 4 (5) (1) 5 2 7
Federal funds purchased ............ 7 (1) 6 (4) -- (4)
Long-term debt ..................... 547 (101) 446 150 (19) 131
Mandatory convertible debentures ... (30) 2 (28) -- (6) (6)
------- ------- ------- ------- ------- -------
Total interest expense .......... 3,130 (9) 3,121 1,999 (194) 1,805
------- ------- ------- ------- ------- -------

Change in net interest income ......... $ 2,524 $(1,013) $ 1,511 $ 2,194 $ 223 $ 2,417
======= ======= ======= ======= ======= =======

<PAGE>

<FN>
1 The change in interest due to the volume and rate has been allocated to the
change in average rate. Nonaccruing loans and leases were included in the
average balance. Loan and lease fees of $487, $1,448, and $1,393 for the
fiscal years ended March 31, 1998, 1997, and 1996, respectively, are
included in interest income on loans and leases.
</FN>
</TABLE>
Provision for Credit Losses

The amounts of the provisions for credit losses were $3,502,000, $2,630,000 and
$1,905,000 for the fiscal years ended March 31, 1998, 1997 and 1996,
respectively. The amounts of the provisions are based on management's continuous
assessment of the adequacy of the allowance for credit losses in relation to
nonperforming and outstanding total loans and leases. The provisions, stated as
a percentage of average assets, equaled 0.74%, 0.65% and 0.53% for the
respective fiscal years as compared to FSCM's Peer Group of 0.20%. Further
information is included in Loans and Direct Financing Leases.

Other Income

Other income increased $1,129,000, or 30.74%, between fiscal 1998 and 1997 to
equal $4,802,000 as compared to $3,673,000. Fiscal 1996 other income totaled
$3,315,000. The improvement in fiscal 1998's income was due to increases in each
of the income categories. Stated as a percentage of average assets, other income
equaled 1.01%, 0.90% and 0.92% for the respective fiscal years. FSCM's
comparative Peer Group ratio equaled 0.95%.

Trust fees rose to $583,000 in fiscal 1998 as compared to $458,000 and $322,000
for fiscal 1997 and 1996, respectively. During fiscal 1997, the trust department
made significant progress in increasing assets under management and thereby fee
income. The increased business represented not only a significant number of new
accounts, but also larger accounts and a better mix of managed versus custodial
relationships.

Net investment securities gains of $182,000 recognized in fiscal 1998 primarily
resulted from sales and call of $660,000 in stock of five regional financial
institutions that FSCM had purchased for investment purposes. The sales
generated pre-tax annualized returns on these investments ranging between 20% to
93%.

Loan servicing fees totaled $757,000, $730,000 and $680,000 for fiscal 1998,
1997 and 1996, respectively. Such fee income was generated from servicing
residential mortgage loan portfolios that totaled $201,451,000, $185,295,000 and
$165,003,000 at the respective year-ends. Almost all of the servicing portfolios
were comprised of loans originated by TRIB and subsequently sold on the
secondary market.

Gains on the sales of loans increased to $714,000 in fiscal 1998 from $345,000
in fiscal 1997 and $362,000 in fiscal 1996. The increase in fiscal 1998 gains
resulted from both the increased loans sold volume due to the national
refinancing boom caused by the lower interest rate environment and a change in
the method of calculating the basis of mortgage loans sold.

Service charges on deposit accounts totaled $1,231,000, $1,133,000 and
$1,065,000 for fiscal 1998, 1997 and 1996, respectively. The increase between
fiscal 1998 and 1997 was primarily the result of increased fees generated from
commercial business accounts.

Income from insurance commissions equaled $381,000, $233,000 and $294,000 for
fiscal 1998, 1997 and 1996, respectively. The fluctuations between years
primarily reflected adjustments to reserve for anticipated insurance rebates.

Other miscellaneous income totaled $954,000, $774,000 and $581,000 for fiscal
1998, 1997 and 1996, respectively. Primary components of the category include
fee income associated with merchant credit card processing which totaled
$284,000, $260,000 and $212,000 for the respective fiscal years and income
generated from surrender value increases on two key man life insurance policies
of $250,000, $213,000 and $188,000, respectively. Additionally, income from the
generation of syndicated financing arrangements equaled $173,000 and $102,000
for fiscal 1998 and 1997, respectively.

<PAGE>

Other Expense

Other expense equaled $11,396,000, $11,176,000 and $10,527,000 for the fiscal
years ended March 31, 1998, 1997 and 1996, respectively. The controlled increase
in expense resulted partially from a limited scope review of selected
departments' operational functions and system structures performed by a national
consulting firm during fiscal 1996. Stated as a percentage of average assets,
other expense equaled 2.40%, 2.75% and 2.93% for the respective fiscal years as
compared to the Peer Group ratio of 3.20%.

Salaries and employee benefits totaled $5,886,000, $6,071,000 and $5,904,000 for
the fiscal years ended March 31, 1998, 1997 and 1996, respectively. Netted
against fiscal 1998's and 1997's salaries and employee benefits were $1,621,000
and $286,000, respectively, of deferred direct loan origination costs that were
partially offset with deferred loan fees and will be amortized into loan
interest income over the lives of the related loans. Stated as a percentage of
average assets, personnel expense for the respective fiscal years equaled 1.24%,
1.49% and 1.64%. FSCM's Peer Group ratio equaled 1.70%. The number of full-time
equivalent employees as of March 31, 1998, 1997 and 1996 totaled 210, 182 and
175, respectively. The ratio of total assets per employee for fiscal year-end
1998, 1997 and 1996 equaled $2.47 million, $2.45 million and $2.21 million,
respectively. The growth in number of employees mirrored FSCM's asset growth and
provided for staffing of new and/or expanded services offered by FSCM.

For fiscal 1998, 1997 and 1996, net occupancy expense totaled $919,000, $852,000
and $801,000, respectively, and equipment expense for the respective periods
totaled $1,207,000, $984,000 and $947,000. Additional depreciation expense
associated with the remodeling and furnishing of the Hilltop, Bettendorf and
Moline Operations offices comprised the majority of the increases between years
in these expense categories. These combined expenses, stated as a ratio of
average assets, equaled 0.45%, 0.45% and 0.49% for the respective fiscal years
as compared to the Peer Group's ratio of 0.47%. Further information is included
in Premises, Furniture and Equipment.

Data processing expense totaled $866,000, $707,000 and $569,000 for fiscal 1998,
1997 and 1996, respectively. In fiscal 1995, the data processing contract was
renewed, establishing a base number of accounts for specific fixed fees. During
the past three fiscal years, due to asset growth and the corresponding increase
in number of accounts, the tiered variable fees have risen. Included in fiscal
1998 were charges that pertained to the establishment of an online collection
system, commercial account cash management services, home delivery banking
services, commercial customer electronic access and an online report access
system. Enhancements were also made in the areas of information data
warehousing, trust operations systems and lease financing systems. Fiscal 1997
reflected several one-time charges associated with PC On-Line Banking, a Voice
Response Unit, custom combined statements and "zip + 4" statement addressing
service capabilities.

Advertising and business promotion expense totaled $621,000, $404,000 and
$400,000 for fiscal 1998, 1997 and 1996, respectively. In addition to launching
an image-focused advertising campaign, fiscal 1998 advertising and business
promotion expense included significant contributions made to local colleges and
the Quad City Botanical Center.

Other operating expense totaled $1,897,000, $2,158,000 and $1,906,000 for fiscal
1998, 1997 and 1996, respectively. Included in the decrease between fiscal 1998
and 1997 expense was a one-time charge of $118,000 in fiscal 1997 associated
with the $4,500,000, 8.50% Notes issued in 1992 redeemed by FSCM in November
1996 and the increased deferral of approximately $110,000 in direct loan
origination costs that will be amortized into interest income over the lives of
the related loans.

Income Taxes

Income taxes totaled $2,710,000, $2,465,000 and $1,768,000 for the fiscal years
ended March 31, 1998, 1997 and 1996, respectively. These tax levels equate to
effective tax rates of 32.77%, 36.67% and 33.23% for the respective fiscal
years. Included in taxes were amounts associated with various state taxing
authorities which totaled $195,000, $160,000 and $56,000, respectively. The
increased state income taxes primarily reflect the November 1995 establishment
of an Iowa office. The fluctuation in effective tax rates primarily reflected an
over-accrual of state taxes in fiscal 1997.
<PAGE>

Year 2000 Compliance

The Year 2000 issue is the result of limitations existing in certain computer
hardware and software components when processing date-related information due to
a past tendency of using two digits rather than four to represent a year within
a date field. If the issue remains uncorrected, at the turn of the century,
dates may be incorrectly interpreted as 1900 versus 2000, which would adversely
affect the accurate processing of date-related company and customer information.
Computers are a fundamental part of commercial banking in terms of information
storage and retrieval, check clearings, deposit postings, loan payment
processing, interest receivable and payable calculations, customer notice
generation, documentation preparation, etc. Regulatory authorities have
recognized this critical issue, and have mandated assessment, identification,
renovation or replacement, and solutions testing that must be adhered to within
specific timeframes.

FSCM has complied with regulatory instructions and timeframes and has assessed
the Year 2000 compliance status of all material computer software, firmware and
hardware used in the ordinary course of business. FSCM will continue to renovate
or replace non-compliant computer software, firmware, and hardware in order to
ensure that the testing of renovated or replaced items is substantially underway
by December 31, 1998. FSCM relies heavily on software provided by outside
suppliers. Therefore, management is monitoring the efforts of major suppliers to
become Year 2000 compliant within a timetable acceptable to FSCM. In addition,
FSCM is assessing the Year 2000 effect on the loan portfolio. Credit quality
could be unfavorably affected if borrowers experience business interruptions
that adversely impact their ability to repay debt obligations. Based on
information presently known to management, it is estimated that FSCM's cost of
implementing Year 2000 compliance will be immaterial.

Risk Management

Risk management encompasses many different types of risk, including credit risk,
liquidity risk and interest rate risk. Regulatory agencies have modified their
examination procedures to rate the exposure of financial institutions to risk by
the various types of risk, the direction of change in the risk, and management's
ability to monitor and control each type of risk.

Management's control of credit risk is discussed under the Loans and Direct
Financing Leases section of this report and a table of asset quality is included
for review and comparison.

Liquidity measures the ability to meet all present and future financial
obligations in a timely manner. FSCM's (parent company only) sources of
liquidity have historically been provided by cash distributions from TRIB, the
proceeds from long-term and short-term debt and/or equity issuances, and the
liquidation of assets. On a consolidated basis, additional sources of liquidity
include federal funds sold, retail deposits generated by the branch office
network, correspondent bank credit lines (including secured borrowings from the
Federal Home Loan Bank) and non-pledged investment securities. The sale of loans
also provides a source of liquidity. The amount of short-term assets, which are
generally considered liquid assets and earn a lower rate of interest than other
investment options, must be carefully monitored in terms of the overall funding
strategy to maintain an acceptable interest rate margin. FSCM's consolidated
statements of cash flows indicate that operating and financing activities are
net sources of liquidity and that investing activities use liquidity.

Computer simulation modeling is used as FSCM's primary method of quantifying and
evaluating interest rate risk. Asset and liability positions are managed with
the objective of minimizing the impact of market interest rate volatility on net
interest income. The Asset/Liability Committee meets every two weeks to review
various reports pertaining to asset/liability management, including dynamic and
static interest rate shock reports, liquidity reports, historic yield and rate
analysis, gap reports, market advertisements and competitive market interest
rates. In reviewing interest rate shock, an immediate 200 basis point change is
applied over a one-year time horizon based on actual and projected interest rate
sensitive asset and liability balances and maturities. The model uses cash flows
and repricing information from each individual loan and time deposit, plus
repricing assumptions on products without specific repricing dates. Significant
assumptions required in interest rate shock tests include prepayment risks and
the timing of changes in deposit rates compared with changes in money market
rates. Any change that results in income at risk is carefully reviewed and
measured as a percentage of net interest income to determine its impact and
whether it is within the acceptable range of risk. Simulation modeling is also
used in budgeting and product development to quantify the impact on net interest
income of various interest rate and balance assumptions.
<PAGE>

The following table presents the annualized effect of an immediate 200 basis
point increase in interest rates on net interest income on both a static (based
on March 31, 1998 balances only) and dynamic (includes budgeted growth volumes
for the next fiscal year) basis. Results of both shock tests reveal the
liability sensitive position of FSCM in that a 200 basis point increase in
interest rates results in earnings at risk and that a 200 basis point decrease
in interest rate results in more net interest income. Computations of the
prospective effects of hypothetical interest rate changes are based on numerous
assumptions. Actual results may differ from those projections set forth below.
Further, the computations do not contemplate any actions FSCM may undertake in
response to changes in interest rates. Because FSCM's primary source of
interest-bearing liabilities is customer deposits, FSCM's ability to manage the
types and terms of such deposits may be somewhat limited by customer maturity
preferences in FSCM's market area. The six-month historic monthly trends for
both tests indicate a decrease in liability sensitive position. The ratios are
within the Board of Directors' approved standards.

Dynamic Shock Static Shock
------------------------- ---------------------------
Net Interest Income Net Interest Income
As of March 31, 1998 ------------------------- ---------------------------
(Dollars in Thousands) Amount Change Change Amount Change Change
- ---------------------- -------- ------- ------ ------- ------- ------
+200 basis points .. $21,069 $ (49) (0.23%) $18,953 $ (408) (2.11%)
Base interest rate . 21,118 -- -- 19,361 -- --
- -200 basis points .. 21,601 483 2.29 20,083 722 3.73

Gap refers to the amount of interest rate sensitive assets in a particular time
period less the amount of comparable interest rate sensitive liabilities. The
following table presents FSCM's interest rate sensitivity as measured by a gap
analysis. Mortgage-backed agency investment securities are included in the below
table based on their estimated cash flow projections obtained from outside
sources. Savings deposits have been included in the table as maturing
immediately, although historical trends indicate that these accounts would not
necessarily immediately adjust to interest rate movements. The negative interest
rate sensitivity gap position indicates that within each period, more interest
sensitive liabilities are repricing than interest sensitive assets.

INTEREST RATE SENSITIVITY ANALYSIS
<TABLE>
After 6
After 3 Months After 1
By Repricing Dates Within Months But Year But After Non-
As of March 31, 1998 Three But Within Within Five Interest-
(Dollars in Thousands) Months Within 6 One year Five Years Bearing Total
- -------------------------------------------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investment securities ...................... $ 10,058 $ 1,239 $ 6,697 $ 100,484 $ 17,194 $ -- $ 135,672
Loans and leases ........................... 98,567 26,062 44,600 133,884 20,096 3,281 326,490
Other earning assets ....................... 10,072 -- 5,643 5,944 -- -- 21,659
Other assets ............................... -- -- -- 45 -- 34,180 34,225
--------- --------- --------- --------- --------- --------- ---------
Total assets ............................... 118,697 27,301 56,940 240,357 37,290 37,461 518,046
--------- --------- --------- --------- --------- --------- ---------
Cumulative assets .......................... 118,697 145,998 202,938 443,295 480,585 518,046 518,046
--------- --------- --------- --------- --------- --------- ---------
Liabilities and equity:
Savings deposits ........................... 118,091 -- -- -- -- -- 118,091
Time deposits .............................. 89,375 19,366 42,552 94,458 146 -- 245,897
Securities sold under agreements
to repurchase and short-term
borrowings ........................... 33,656 3,306 5,851 895 -- -- 43,708
Long-term debt ............................. -- -- -- -- 25,000 -- 25,000
Mandatory convertible debentures
Demand deposits ............................ -- -- -- -- -- 45,007 45,007
Other liabilities .......................... -- -- -- -- -- 5,962 5,962
Stockholders' equity ....................... -- -- -- -- 5,000 29,381 34,381
--------- --------- --------- --------- --------- --------- ---------
Total sources of funds ..................... 241,122 22,672 48,403 95,353 30,146 80,350 518,046
--------- --------- --------- --------- --------- --------- ---------
Cumulative sources of funds ................ 241,122 263,794 312,197 407,550 437,696 518,046 518,046
--------- --------- --------- --------- --------- --------- ---------
Interest rate sensitivity gap .............. (122,425) 4,629 8,537 145,004 7,144 (42,889) --
Cumulative interest rate
sensitivity gap .......................... (122,425) (117,796) (109,259) 35,745 42,889 -- --
</TABLE>
<PAGE>

Balance Sheet

Overview

Assets totaled $518,046,000 and $445,669,000 as of March 31, 1998 and 1997,
respectively. The increase of $72,377,000, or 16.24%, was distributed between
cash, which increased $8,480,000; interest-bearing deposits with other financial
institutions, which increased $11,628,000; investment securities, which
increased $13,392,000; federal funds sold, which increased $9,100,000; and net
loans and leases, which increased $28,504,000. The asset growth was primarily
funded by a $47,104,000 increase in deposits and a $15,000,000 advance from the
FHLB. Peer Group asset growth rate equaled 13.07%.

Investment Securities

Investment securities totaled $135,672,000 and $122,280,000 at March 31, 1998
and 1997, respectively. The portfolios were predominantly comprised of
mortgage-backed obligations of federal agencies with approximate weighted
average lives of just over three years. The investment portfolios' weighted
average yields equaled 6.31%, 6.12% and 5.78% for the fiscal years ended March
31, 1998, 1997 and 1996, respectively, as compared to FSCM's Peer Group yield of
6.58%.

During fiscal 1998, the $182,000 net investment securities gain resulted from
FSCM's $231,000 in gains from the sale and call of $660,000 in financial
institution stocks netted with $49,000 in losses from the sale of $11,501,000 in
U.S. Treasury and agency securities by TRIB when repositioning the portfolio.

INVESTMENT SECURITY ANALYSIS

March 31,
------------------------------
(Dollars in Thousands) 1998 1997 1996
- ------------------------------------------------ -------- -------- --------
Held-to-maturity:
U.S. Treasury ............................... $ -- $ 1,502 $ 6,033
U.S. Government agencies and corporations ... 10,972 15,963 18,980
State and political subdivisions ............ 2,313 2,320 2,326
Mortgage-backed obligations of federal
agencies .................................. 17,803 17,749 --
Other ....................................... 2,558 2,271 1,776
-------- -------- --------
Total .................................... $ 33,646 $ 39,805 $ 29,115
======== ======== ========
Available-for-sale:
U.S. Treasury ............................... $ 7,160 $ 11,883 $ 2,074
U.S. Government agencies and corporations ... 25,129 33,676 42,041
Mortgage-backed obligations of federal
agencies .................................. 67,625 35,515 17,193
Other ....................................... 2,112 1,401 --
-------- -------- --------
Total .................................... $102,026 $ 82,475 $ 61,308
======== ======== ========
<PAGE>

INVESTMENT SECURITY MATURITY ANALYSIS

<TABLE>
March 31, 1998
---------------------------------------------------------------------------------
After One But After Five But
Within One Year Within Five Years Within Ten Years After Ten Years
------------------ ----------------- ----------------- -----------------
(Dollars in Thousands) Amount Yield1 Amount Yield1 Amount Yield1 Amount Yield1 Total
- --------------------------------- -------- ------- -------- ------- ------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury ................... $ -- ---% $ 7,160 6.27% $ -- --% $ -- --% $ 7,160
U.S. Government
agencies and
corporations ................. 8,302 6.09 27,799 6.15 -- -- -- -- 36,101
State and political
subdivisions ............. -- -- 2,313 4.07 -- -- -- -- 2,313
Mortgage-backed
obligations of
federal agencies2 ............ 7,072 6.68 65,212 6.66 13,144 6.26 -- -- 85,428
Other3 .......................... 70 6.19 400 7.91 325 6.99 3,875 4.44 4,670
-------- ------- -------- ------- ------- ------- -------- ------- --------
Total ..................... $ 15,444 6.36% $102,884 6.44% $13,469 6.28% $ 3,875 4.44% $135,672
======== ======= ======== ======= ======= ======= ======== ======= ========
<FN>
1 The weighted average yields are calculated on the basis of the carrying
value and effective yields weighted for the scheduled maturity of each
security. The yield on tax-exempt obligations has not been computed on a tax
equivalent basis.

2 Maturities of mortgage-backed obligations were estimated based on
anticipated principal payments.

3 Securities with no stated maturity are included with securities with a
remaining maturity of ten years or more.
</FN>
</TABLE>
Loans and Direct Financing Leases

Loans and leases increased $30,020,000, or 10.13%, to total $326,490,000 at
March 31, 1998 versus $296,470,000 at March 31, 1997. Net loans and leases,
stated as a percentage of assets, equaled 61.68% and 65.30% as of March 31, 1998
and 1997, respectively, as compared to the Peer Group ratio of 63.09%. The
decrease between fiscal year-end ratios reflects a lower growth rate in fiscal
1998 of loans as compared to the 16.24% growth rate of assets for the same
period. The growth in loans and leases was concentrated in the consumer credit
area, primarily indirect paper, which increased $16,980,000 and totaled
$48,589,000 at fiscal 1998 year-end. Lease financing increased $3,895,000
between fiscal years to total $9,507,000. The $6,514,000 increase in residential
mortgage loans primarily reflects an increase in loans that are pending sale
into the secondary markets. Construction loans increased $4,595,000 as a result
of both residential and commercial real estate expansion and development
programs. Finally, the $1,759,000 increase in commercial mortgage loans was
completely offset by the $3,723,000 decrease in commercial loans.

LOANS AND LEASES DISTRIBUTION1
<TABLE>
March 31,
--------------------------------------------------------
(Dollars in Thousands) 1998 1997 1996 1995 1994
- ------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Commercial, financial
and agricultural ... $ 89,779 $ 93,502 $ 85,578 $ 74,234 $ 59,818
Direct financing leases 9,507 5,612 5,719 6,863 16,218
Real estate:
Residential mortgage 70,823(2) 64,309(2) 64,248(2) 58,486(2) 46,754(2)
Construction ....... 34,385 29,790 21,823 14,553 11,747
Commercial mortgage 73,407 71,648 62,746 51,529 40,116
Consumer .............. 48,589(3) 31,609(3) 15,851(3) 6,411(3) 6,192(3)
------- -------- -------- -------- --------
Total loans and
leases ........... $326,490 $296,470 $255,965 $212,076 $180,845
======== ======== ======== ======== ========
<PAGE>

<FN>
1 Unearned fees, costs and income on loans and leases are includes under their
respective related loan and lease category.

2 Includes first mortgages pending conclusion of their sale to secondary
market investors, home equity lines of credit, home improvement loans, and
consumer loans for which junior liens were taken as primary and secondary
sources of security.

3 Consumer loans, both direct and indirect, not secured by real estate
mortgages.
</FN>
</TABLE>
LOANS AND LEASES MATURITY ANALYSIS
<TABLE>

March 31, 1998
--------------------------------------------
After One
One Year But Within After
(Dollars in Thousands) or Less Five Years1 Five Years1 Total
- -------------------------------------- -------- ----------- ---------- --------
<S> <C> <C> <C> <C>
Commercial, financial and agricultural $ 50,300 $ 38,647 $ 832 $ 89,779
Direct financing leases .............. 2,454 6,014 1,039 9,507
Real estate:
Residential mortgage .............. 11,320 34,496 25,007 70,823
Construction ...................... 30,201 2,692 1,492 34,385
Commercial mortgage ............... 30,408 40,853 2,146 73,407
Consumer ............................. 2,179 35,873 10,537 48,589
-------- -------- -------- --------
Total loans and leases ......... $126,862 $158,575 $ 41,053 $326,490
======== ======== ======== ========
<FN>
1 The amount of loans and leases due after one year that had a pre-determined
interest rate was $189,852, and loans and leases that have floating or
adjustable interest rates were $9,776.
</FN>
</TABLE>

TRIB is an active originator of residential real estate mortgage loans sold on
the secondary market with the servicing rights retained. For fiscal 1998, 1997
and 1996, TRIB serviced portfolios totaled $201.5 million, $185.3 million and
$165.0 million, respectively.

TRIB's commercial and commercial real estate portfolios include loans to
businesses involved in a wide spectrum of activities with an emphasis in the
manufacturing, wholesale, retail, transportation, and hotel industries. Total
loans to any particular group of customers engaged in similar activities and
having similar economic characteristics did not exceed 10% of total loans and
leases as of March 31, 1998 and is in compliance with defined parameters for
concentrations of credit as established in TRIB's loan policy. Because a
majority of loans are made within TRIB's market area, the loan portfolio has an
element of risk due to this geographic concentration.

The Board of Directors of FSCM and TRIB continue to provide resources and affect
efforts to maintain satisfactory asset quality. FSCM's internal loan review
department performs loan reviews to monitor loan documentation, verify loan
collateral and check for compliance with established loan and lease policies. An
internal loan and lease watch list is maintained and continuously updated. In
addition, the loan review department works with TRIB's loan committee to
identify and evaluate marginal loans for corrective action.

Generally, interest on loans is accrued and credited to income based on the
outstanding principal balance. The accrual of interest is discontinued when, in
management's opinion, the timely collection of principal and interest is
doubtful or to comply with regulatory requirements. Such loans are returned to
an accrual status when unpaid interest has been brought current and, in
management's opinion, the timely collections of principal and interest is no
longer doubtful.
<PAGE>

The allowance for credit losses is maintained at a conservative level to provide
for known and inherent risks in the credit portfolios. The allowance is based on
a continuous review of previous credit loss experience, current economic
conditions and the underlying collateral value pledged to support the credits.
In this regard, in the opinion of management, TRIB's allowance for credit losses
is maintained at a satisfactory level. Credits that are deemed uncollectible are
charged-off and deducted from the allowance. The provision for credit losses and
recoveries are added to the allowance. The $1,516,000 increase in the allowance
between fiscal year-ends 1998 and 1997 resulted from increased provisions for
credit losses and maintaining control of charge-offs.

ASSET QUALITY
<TABLE>
March 31,
-----------------------------------------------
(Dollars in Thousands) 1998 1997 1996 1995 1994
- -------------------------------------------- ------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Nonperforming loans and leases:
Nonaccrual loans and leases:
Commercial, financial and agricultural .. $ 270 $ 211 $ 339 $1,076 $ 147
Direct financing leases ................. 178 28 28 96 405
Real estate:
Residential mortgage ................. 1,881 2,047 388 419 258
Construction ......................... 445 112 51 -- --
Commercial mortgage .................. 444 115 427 1,020 848
Consumer ................................ 63 116 45 31 36
------ ------ ------ ------ ------
Total nonaccrual loans and leases . 3,281 2,629 1,278 2,642 1,694
Accruing loans and leases 90 days
or more past due ........................ 343 289 189 323 748
------ ------ ------ ------ ------
Total nonperforming loans
and leases ..................... 3,624 2,918 1,467 2,965 2,442
Other real estate owned .................... 68 594 457 378 341
------ ------ ------ ------ ------
Total nonperforming assets ........ $3,692 $3,512 $1,924 $3,343 $2,783
====== ====== ====== ====== ======
Allowance for credit losses ................ $6,958 $5,442 $4,463 $3,832 $3,744
====== ====== ====== ====== ======
Allowance as a percentage of
nonperforming loans and leases .......... 192.00% 186.50% 304.23% 129.24% 153.32%
Allowance as a percentage of
total loans and leases .................. 2.13 1.84 1.74 1.81 2.07
Nonperforming loans and leases and other
real estate owned as a percentage of
total loans and leases and other real
estate owned ............................ 1.13 1.18 0.75 1.57 1.54
Nonperforming loans and leases as a
percentage of total loans and leases .... 1.11 0.98 0.57 1.40 1.35
</TABLE>

Total nonaccrual loans increased $652 thousand for the fiscal year ended March
31, 1998. Nonaccrual commercial loans increased $59 thousand for the period as a
result of several small credits which are under bankruptcy or other
reorganization plans. Nonaccrual leases increased $150 thousand for the period
primarily as a result of one credit for $125 thousand. Possession of the leased
equipment has been secured by TRIB and will be re-marketed through the
manufacturer. Residential mortgage nonaccrual loans decreased $166 thousand due
primarily to the combination of successful resolution and charge-offs of
credits. TRIB is actively pursuing collection of a $500 thousand residential
mortgage nonaccrual credit related to a California property with an estimated
fair market value in excess of the nonaccrual balance. Nonaccrual construction
loans increased $333 thousand primarily due to two commercial credits related to
local real estate development projects for $208 thousand and $177 thousand,
respectively. Nonaccrual commercial mortgage loans increased $329 thousand for
the period. This increase was primarily related to one credit for $203 thousand.
TRIB is actively pursuing collection and resolution of this account. Nonaccrual
balances on consumer credits decreased $53 thousand for the period as a result
of effective control of problem credits and charge-offs.
<PAGE>

ANALYSIS OF THE ALLOWANCE
FOR CREDIT LOSSES
<TABLE>
Years Ended March 31,
----------------------------------------------
(Dollars in Thousands) 1998 1997 1996 1995 1994
- ----------------------------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Balance at beginning of period .... $5,442 $4,463 $3,832 $3,744 $3,639
Charge-offs:
Commercial, financial and
agricultural ................ 326 304 436 3,168 70
Direct financing leases ........ 341 205 129 201 2,345
Real estate:
Residential mortgage ........ 530 917 420 258 94
Construction ................ 400 1 -- 47 --
Commercial mortgage ......... -- 84 882 638 4
Consumer ....................... 818 494 118 86 24
------ ------ ------ ------ ------
Total ....................... 2,415 2,005 1,985 4,398 2,537
------ ------ ------ ------ ------
Recoveries:
Commercial, financial and
agricultural ................ 68 157 361 109 118
Direct financing leases ........ 76 42 173 1,634 406
Real estate:
Residential mortgage ........ 100 87 105 113 36
Construction ................ -- -- -- 47 --
Commercial mortgage ......... 39 5 28 48 108
Consumer ....................... 146 63 44 25 4
------ ------ ------ ------ ------
Total .................... 429 354 711 1,976 672
------ ------ ------ ------ ------
Net charge-offs ................... 1,986 1,651 1,274 2,422 1,865
Provision for credit losses ....... 3,502 2,630 1,905 2,510 1,970
------ ------ ------ ------ ------
Balance at end of period .......... $6,958 $5,442 $4,463 $3,832 $3,744
====== ====== ====== ====== ======
Ratio of net charge-offs during the
year to average loans and leases
outstanding during the year .... 0.65% 0.62% 0.55% 1.27% 1.08%
====== ====== ====== ====== ======
</TABLE>

The increase in charge-offs between fiscal 1998 and 1997 was primarily related
to consumer and construction credits. Charge-offs related to consumer credit
increased $324 thousand for the fiscal period. The increased level of consumer
credit charge-offs was proportionate to the growth of the consumer portfolio,
which continue to experience rapid growth, and national economic trends
associated with increases in consumer delinquency and bankruptcy. The $400
thousand charge-off in construction real-estate loans relates to a $208 thousand
nonaccrual local commercial condominium project.

FSCM's allowance for credit losses as a percentage of total loans and leases of
2.13% at fiscal 1998 year-end compares favorably to FSCM's Peer Group ratio of
1.35%. FSCM's fiscal 1998 ratio of allowance as a percentage of nonperforming
loans and leases of 192.00% is below FSCM's Peer Group ratio of 339.54%. FSCM's
net charge-offs as a percentage of average loans and leases outstanding for the
fiscal year 1998 was 0.65% compared to a Peer Group ratio of 0.20%.

Based on internal procedures, any known troubled credits as of March 31, 1998
have been specifically identified, regardless of whether past due 90 days or
more, or placed in nonaccrual status. Additionally, management continually
monitors historic loss performance of the loan and leases portfolio, local
economic conditions and collateral value pledged to support advances. As a
result of these evaluations, the following allocation of the allowance for
credit losses was made as of the dates indicated.
<PAGE>

ALLOCATION OF THE ALLOWANCE
FOR CREDIT LOSSES
<TABLE>
March 31, 1998 March 31, 1997 March 31, 1996 March 31, 1995 March 31, 1994
--------------- ---------------- ----------------- ---------------- -------------------
% of % of % of % of % of
Loans Loans Loans Loans Loans Loans
and and and and and and
Leases Leases Leases Leases Leases Leases
to Total to Total to Total to Total to Total
Balance at end of period Loans Loans Loans Loans Loans
applicable to: and and and and and
(Dollars in Thousands) Amount Leases Amount Leases Amount Leases Amount Leases Amount Lease
- -------------------------------- ------ -------- ------ -------- ------ ------ ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial,
financial and
agricultural ................ $1,678 27.5% $1,889 31.5% $1,720 33.4% $1,533 35.0% $1,443 33.1%
Direct financing
leases ...................... 213 2.9 116 1.9 115 2.3 126 3.2 641 9.0
Real estate:
Residential
mortgage ................. 1,378 21.7 1,125 21.7 499 25.1 425 27.6 117 25.9
Construction ................ 598 10.5 476 10.1 238 8.5 164 6.9 26 6.5
Commercial
mortgage ................. 924 22.5 855 24.2 794 24.5 1,342 24.3 1,118 22.1
Consumer ....................... 1,352 14.9 887 10.7 359 6.2 71 3.0 293 3.4
Unallocated .................... 815 N/A 94 N/A 738 N/A 171 N/A 106 N/A
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Total .......................... $6,958 100.0% $5,442 100.0% $4,463 100.0% $3,832 100.0% $3,744 100.0%
====== ===== ====== ===== ====== ===== ====== ===== ====== =====
</TABLE>

Premises, Furniture and Equipment

Premises, furniture and equipment totaled $6,662,000 and $5,496,000 as of March
31, 1998 and 1997, respectively. The increase between fiscal year-ends resulted
from acquisitions of $2,526,000 netted against depreciation of $1,360,000.

In March 1997, TRIB purchased a two-story office building for $221 thousand. The
building encompasses 10,560 square feet, excluding the basement storage area,
and is located at 524-15th Street, Moline, Illinois. During fiscal 1998,
renovations of the building totaling $296 thousand were completed and
approximately $376 thousand was invested to furnish and equip the facility.
Non-branch functions were transferred from Downtown Rock Island to Moline,
including computer remote job entry, proof of deposit, deposit services, systems
support, merchant credit card services, business development, mail, purchasing,
customer information systems, office security administration and ancillary
operations. In addition, a customer call center was established to more
effectively handle incoming customer telephone inquiries. The relocated
departments allowed lending support functions to expand at the Downtown Rock
Island Office.

The majority of the remaining furniture and equipment investments of $489
thousand and $419 thousand for fiscal 1998 and 1997, respectively, related to
computer hardware and software technological upgrades.

Deposits, Securities Sold Under Agreements to Repurchase and Other Short-Term
Borrowings

Deposits, repurchase agreements and other short-term borrowings totaled
$408,995,000, $41,925,000 and $1,783,000, respectively, as of March 31, 1998.
These balances compare to $361,891,000, $38,154,000 and $1,500,000,
respectively, as of the previous fiscal year end. The deposit growth primarily
resulted from the opening of several new noninterest-bearing demand accounts,
the transfer of a municipal account from repurchase agreements to a N.O.W.
account, the introduction of a tiered-rate money market product and successful
CD marketing campaigns. The short-term borrowings was totally comprised of
treasury, tax and loan deposits at both fiscal year-ends.
<PAGE>

Maturity distributions of time certificates of deposit in denominations of $100
thousand or more as of March 31, 1998 were as follows (dollars in thousands):

$100,000 AND MORE TIME DEPOSITS

March 31,
Time to Maturity 1998
- ------------------------------------------------------------- ---------
3 months or less ............................................ $29,894
Over 3 months through 6 months .............................. 3,135
Over 6 months through 12 months ............................. 7,695
Over 12 months .............................................. 12,897
-------
Total ....................................................... $53,621
=======

Short-term borrowings generally include repurchase agreements, interest-bearing
notes due to the U.S. Treasury, and federal funds purchased from correspondent
banks. The obligations to repurchase securities sold were reflected as a
liability in the consolidated balance sheets; the investments securing the
repurchase agreements remained classified as assets under investments.

FSCM considers short-term borrowings a reliable funding alternative which were
primarily comprised of managed corporate accounts and public funds. Balance and
rate information is reflected in the following table:

SHORT-TERM BORROWINGS

March 31,
-----------------------------
(Dollars in Thousands) 1998 1997 1996
- ----------------------------------------------- ------- ------- -------
Balance outstanding at fiscal year-end ........ $43,708 $39,654 $50,346
Maximum month-end balance ..................... 43,708 50,711 62,128
Average balance for the year .................. 28,947 46,515 44,528
Weighted average interest rate for the year ... 4.95% 5.23% 5.51%
Weighted average interest rate at year-end .... 5.15 4.87 5.29

Long-Term Debt

In January 1998, TRIB received a $15 million, ten-year, 5.72% fixed rate advance
from the Federal Home Loan Bank. Proceeds from the advance will be used to fund
longer term, fixed rate credit commitments.

FSCM's $10 million 8.00% fixed rate Notes issued in 1996 ("1996 Notes") are due
November 1, 2008; however, a $750 thousand annual mandatory principal redemption
commences November 1, 2000 and continues through November 1, 2007. FSCM may
redeem any or all of the 1996 Notes at any time with a 15-day notice. Any
redemption prior to November 1, 1998 will be at 103% of the principal amount so
redeemed.

FSCM also has a $10 million unrestricted line of credit available from a
correspondent bank, none of which was in use at fiscal 1998 year-end. Footnote
Eight of the Consolidated Financial Statements includes information regarding
covenants of the 1996 Notes and correspondent bank line.

Mandatory Convertible Debentures

In November and December 1997, holders of the $1,250,000 of mandatory
convertible debentures ("MCDs") exercised their options to convert the MCDs into
a total of 50,000 shares of FSCM Common Stock.

Stockholders' Equity

Consistent with strategic objectives and goals, FSCM has maintained a strong
capital base that provided a solid foundation for anticipated future asset
growth, and promoted depositor and investor confidence. Capital management is a
continuous process to ensure that capital is provided for current needs and
anticipated growth. FSCM's strong capital position has enabled it to profitably
expand its asset and deposit bases while maintaining capital ratios at levels
comparable to other quality banking organizations and in excess of regulatory
standards.

Stockholders' equity increased $6,837,000, or 24.82%, to total $34,381,000 at
March 31, 1998 versus equity of $27,544,000 at March 31, 1997, as compared to
either the 16.24% growth rate of FSCM's assets or to Peer Group equity growth
rate of 14.02%. Partially offsetting increases in net income and in cash
dividends declared contributed to the increase in stockholders' equity. Net
income totaled $5,560,000 in fiscal 1998 as opposed to $4,257,000 and $3,553,000
in fiscal 1997 and 1996, respectively. Cash dividends declared for the
respective fiscal years equaled $1,089,000, $949,000 and $906,000. The rise in
fiscal 1998 dividends reflects, in part, the quarterly per share Common Stock
dividend rate that increased in September 1997 from $0.500 per share to $0.625
per share.
<PAGE>

As of July 1, 1997, FSCM issued stock options under the 1996 Combined Incentive
and Nonstatutory Stock Option Plan to two members of TRIB's executive
management. The options, for a total of 800 shares of FSCM Common Stock, were
20% immediately exercisable at a purchase price of $100 per common share. The
remaining shares vest on the anniversary date of issuance at a rate of 20% per
year and terminate seven years after issuance if not exercised. No shares of
Common Stock were issued under options exercised during fiscal 1998.

In July 1997, FSCM reclassified the $5 million Class A Cumulative Convertible
Preferred Stock to Class F Cumulative Convertible Preferred Stock ("Class F
Preferred Stock"). On July 10, 1997, FSCM redeemed all of the Class F Preferred
Stock at a redemption price of $100 per share as provided in the terms of the
indenture for the Class F Preferred Stock. Funding for the retirement of the
Class F Preferred Stock was provided through the issuance of $5 million of new
9.25% Class A Cumulative Convertible Preferred Stock ("Class A Preferred
Stock"). All of the Class A Preferred Stock was issued to principal shareholders
of FSCM who are also executive officers and directors of FSCM and TRIB.

FSCM's Common Stock tender offer totaled $253,000 and terminated in August 1997.
A total of 2,498 shares of Common Stock were tendered and acquired in the tender
offer for $90 per share cash.

In November 1997 a sale of 100 shares of Common Stock was made from Treasury
Stock at $100 per share to a newly appointed Director of TRIB's Board to satisfy
regulatory stock ownership requirements.

The November and December 1997 conversions of the MCDs into 50,000 shares of
Common Stock increased capital by the $1,250,000 face value of the MCDs.

On December 31, 1997, holders of the $500,000 in Class B Preferred Stock and
$1,020,000 in Class C Preferred Stock also exercised conversion options to
receive a total of 11,111 and 24,000 shares, respectively.

Unrealized gains and losses on available-for-sale securities are included as a
separate component of stockholders' equity, net of the related income tax
effect. The amounts equaled a $791 thousand gain as of March 31, 1998 and a $568
thousand loss as of March 31, 1997. The increase was primarily due to movement
in the stock and bond markets between fiscal year-ends.

FSCM's capital position, as detailed in its capital ratios, exceeds the
regulatory capital minimums established for well-capitalized financial
institutions. The following table details the components and percentages of
FSCM's regulatory risk weighted capital ratios as of the indicated dates.
<TABLE>

Minimum Capital Required To Be Categorized As:
-------------------------------------------------------------
Actual Adequately Capitalized Well Capitalized
----------------- ---------------------- -------------------
(Dollars in Thousands) Amount Ratio Amount Ratio Amount Ratio
- ------------------------------------ ------- ------ ------- ----- ------- ------
<S> <C> <C> <C> <C> <C> <C>
As of March 31, 1998:
Total Capital (to Risk
Weighted Assets) ............... $47,638 13.28% $28,697 8.00% $35,871 10.00%
Tier I Capital (to Risk
Weighted Assets) .............. 33,124 9.23 14,348 4.00 21,523 6.00
Tier I Capital (to Average
Assets) ...................... 33,124 6.98 18,973 4.00 23,716 5.00
As of March 31, 1997:
Total Capital (to Risk
Weighted Assets) ............... $42,840 13.50% $25,381 8.00% $31,726 10.00%
Tier I Capital (to Risk
Weighted Assets) .............. 27,606 8.70 12,690 4.00 19,035 6.00
Tier I Capital (to Average
Assets) ........................ 27,606 6.79 16,258 4.00 20,322 5.00
</TABLE>

Impact of Inflation and Changing Prices

The financial statements and related data presented herein have been prepared in
accordance with generally accepted accounting principles, which require the
measurement of financial position and operating results in terms of historical
dollars without considering changes in the relative purchasing power of money
over time due to inflation.

Unlike most industrial companies, virtually all of the assets and liabilities of
a financial institution are monetary in nature. As a result, interest rates have
more impact on a financial institution's performance than the effect of general
levels of inflation. Interest rates do not necessarily move in the same
direction or in the same magnitude as the prices of goods and services.
<PAGE>

Impact of Recently Issued Statements of Financial Accounting Standards

The Financial Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income;" SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related Information;"
and SFAS No. 132, "Employers' Disclosures about Pension and Other Postretirement
Benefits." FSCM will be required to adopt these Statements in future periods.
Note 1(n) to the Consolidated Financial Statements includes discussion of these
Statements.

Price Range of Common Stock

The Common Stock of FSCM is not actively traded, and during the year ended March
31, 1998, there was no active market in which shares of Common Stock were
publicly traded. An independent stock appraisal dated as of December 31, 1997
valued FSCM Common Stock at $120 per share on transactions involving small FSCM
Common Stock block sizes on behalf of the 401(k) plan participants. In March
1998, 16 shares of FSCM Common Stock were purchased at $120 by the 401(k) plan.
In May 1997, FSCM extended a Common Stock tender offer in which 2,498 shares
were tendered and acquired by FSCM for $90 per share in cash. Further, in
November 1997, a sale of 100 shares of Common Stock was made from Treasury Stock
at $100 per share to a newly appointed Director of TRIB's Board to satisfy
regulatory stock ownership requirements. Other private transactions, for which
the sale price was not known or reasonably available, may have occurred during
fiscal 1998.

Factors That May Affect Future Results

This Annual Report on Form 10-K contains certain forward-looking information,
and actual results may differ materially from such information. Factors that may
cause actual results to differ materially from the forward-looking information
contained herein include the outcome of the pending merger agreement, policies
of the Board of Governors of the Federal Reserve System regarding interest rates
and other economic factors, the accuracy of management's estimates of the
provisions for credit losses, competition, regulatory changes and conditions,
and general and regional economic conditions.
<PAGE>

Item 8. Financial Statements and Supplementary Data

FINANCIAL SERVICES CORPORATION OF THE MIDWEST

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

Independent Auditor's Report..........................................

Consolidated Balance Sheets at March 31, 1998 and 1997 ...............

Consolidated Statements of Income for the Years
Ended March 31, 1998, 1997 and 1996 ...............................

Consolidated Statements of Stockholders' Equity for the
Years Ended March 31, 1998, 1997 and 1996...........................

Consolidated Statements of Cash Flows for the Years
Ended March 31, 1998, 1997 and 1996 ................................

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

<PAGE>

MCGLADREY & PULLEN, LLP
Certified Public Accountants and Consultants

INDEPENDENT AUDITOR'S REPORT

To the Board of Directors
Financial Services Corporation of the Midwest
Rock Island, Illinois

We have audited the accompanying consolidated balance sheets of Financial
Services Corporation of the Midwest and subsidiary as of March 31, 1998 and
1997, and the related consolidated statements of income, stockholders' equity,
and cash flows for the years ended March 31, 1998, 1997 and 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Financial Services
Corporation of the Midwest and subsidiary as of March 31, 1998 and 1997, and the
results of their operations and their cash flows for the years ended March 31,
1998, 1997 and 1996 in conformity with generally accepted accounting principles.

/s/ McGladrey & Pullen, LLP

Davenport, Iowa
April 24, 1998

<PAGE>

Financial Services Corporation of the Midwest
Consolidated Balance Sheets
March 31, 1998 and 1997
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
1998 1997
-------- --------
<S> <C> <C>
Assets
Cash and due from banks (note 3) ................................................... $ 24,786 $ 16,306
Interest-bearing deposits with other financial institutions ........................ 11,759 131
Investment securities:
Held-to-maturity (approximate market value 1998 - $33,928; 1997 -
$39,502) (note 4) .............................................................. 33,646 39,805
Available-for-sale (amortized cost 1998 - $100,827; 1997 - $83,336) (note 4) ..... 102,026 82,475
Federal funds sold ................................................................. 9,900 800
Loans and direct financing leases (note 5) ......................................... 326,490 296,470
Less: Allowance for credit losses .................................................. (6,958) (5,442)
-------- --------
Net loans and leases ..................................................... 319,532 291,028
Premises, furniture and equipment, net (note 6) .................................... 6,662 5,496
Accrued interest receivable ........................................................ 3,305 2,969
Other assets ....................................................................... 6,430 6,659
-------- --------
Total assets ............................................................. $518,046 $445,669
======== ========
Liabilities and Stockholders' Equity
Liabilities:
Deposits (note 7):
Noninterest-bearing demand ....................................................... $ 45,007 $ 36,785
Interest-bearing:
N.O.W. accounts ................................................................ 37,922 23,575
Savings ........................................................................ 38,112 37,777
Money market ................................................................... 42,057 38,862
Time ........................................................................... 245,897 224,892
-------- --------
Total deposits .................................................... 408,995 361,891
Accounts payable and accrued liabilities ........................................... 5,962 5,330
Securities sold under agreements to repurchase (note 8) ............................ 41,925 38,154
Other short-term borrowings (note 8) ............................................... 1,783 1,500
Long-term debt ..................................................................... 25,000 10,000
Mandatory convertible debentures (note 10) ......................................... -- 1,250
-------- --------
Total liabilities ....................................................... 483,665 418,125
-------- --------
Commitments and contingencies (note 15)
Stockholders' equity (notes 9, 10, and 16): Capital stock:
Preferred, no par value; authorized, 100,000 shares:
Class A Preferred Stock, stated value $1,000 per share;
authorized, 5,000 shares; issued and outstanding:
1998 - 5,000 shares; 1997 - 0 shares (note 12) ............................... 5,000 --
Class B Preferred Stock, stated value $500 per share;
authorized, 1,000 shares; issued and outstanding:
1998 - 0 shares; 1997 - 1,000 shares (note 12) ............................... -- 500
Class C Preferred Stock, stated value $425 per share;
authorized, 2,400 shares; issued and outstanding:
1998 - 0 shares; 1997 - 2,400 shares (note 12) ............................... -- 1,020
Class F Preferred Stock, stated value $100 per share;
authorized, 50,000 shares; issued and outstanding:
1998 - 0 shares; 1997 - 50,000 shares (note 12) .............................. -- 5,000
Common, par value $.50 per share; authorized, 600,000
shares; issued: 1998 and 1997 - 340,662 shares;
outstanding: 1998 - 260,424 shares; 1997 - 177,711 shares ..................... 170 170
Capital surplus .................................................................... 2,598 2,634
Net unrealized gain (loss) on available-for-sale securities, net of taxes .......... 791 (568)
Retained earnings .................................................................. 28,473 24,002
Treasury stock, 1998 - 80,238 shares; 1997 - 162,951 shares (note 13) ............. (2,651) (5,214)
-------- --------
Total stockholders' equity .............................................. 34,381 27,544
-------- --------
Total liabilities and stockholders' equity .............................. $518,046 $445,669
======== ========
</TABLE>
See accompanying notes to consolidated financial statements ...................
<PAGE>

Financial Services Corporation of the Midwest
Consolidated Statements of Income
Years Ended March 31, 1998, 1997 and 1996
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Interest income:
Interest and fees on loans and leases ........................................ $ 30,385 $ 27,712 $ 24,208
Interest on investment securities ............................................ 7,872 6,037 5,003
Interest on federal funds sold ............................................... 662 514 1,021
Interest on interest-bearing deposits with other financial institutions ...... 206 230 39
-------- -------- --------
Total interest income .................................................. 39,125 34,493 30,271
-------- -------- --------
Interest expense:
Interest on deposits ......................................................... 18,269 14,567 12,864
Interest on securities sold under agreements to repurchase ................... 1,345 2,349 2,375
Interest on other short-term borrowings ...................................... 88 83 80
Interest on notes long-term debt ............................................. 988 542 411
Interest on mandatory convertible debentures ................................. 69 97 103
-------- -------- --------
Total interest expense ................................................. 20,759 17,638 15,833
-------- -------- --------
Net interest income .................................................... 18,366 16,855 14,438
Provision for credit losses (note 5) ............................................ 3,502 2,630 1,905
-------- -------- --------
Net interest income after provision for credit losses ........................... 14,864 14,225 12,533
-------- -------- --------
Other income:
Trust fees ................................................................... 583 458 322
Investment securities gains, net ............................................. 182 -- 11
Loan servicing fees .......................................................... 757 730 680
Gain on sales of loans, net .................................................. 714 345 362
Service charges on deposit accounts .......................................... 1,231 1,133 1,065
Insurance commissions ........................................................ 381 233 294
Other ........................................................................ 954 774 581
-------- -------- --------
Total other income ..................................................... 4,802 3,673 3,315
-------- -------- --------
Other expense:
Salaries and employee benefits ............................................... 5,886 6,071 5,904
Occupancy, net ............................................................... 919 852 801
Equipment .................................................................... 1,207 984 947
Data processing .............................................................. 866 707 569
Advertising .................................................................. 621 404 400
Other operating .............................................................. 1,897 2,158 1,906
-------- -------- --------
Total other expense .................................................... 11,396 11,176 10,527
-------- -------- --------
Income before income taxes ............................................. 8,270 6,722 5,321
Income taxes (note 11) .......................................................... 2,710 2,465 1,768
-------- -------- --------
Net income ...................................................................... $ 5,560 $ 4,257 $ 3,553
======== ======== ========
Net income available for Common Stock ........................................... $ 4,992 $ 3,661 $ 2,955
======== ======== ========
Earnings per common share (note 19):
Basic ........................................................................ $ 24.92 $ 20.73 $ 16.87
======== ======== ========
Diluted ...................................................................... $ 18.23 $ 13.18 $ 10.80
======== ======== ========
Weighted average common shares outstanding ...................................... 200,359 176,644 175,123
======== ======== ========
Weighted average common and contingently
issuable common shares outstanding ........................................... 307,524 327,837 335,327
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>

Financial Services Corporation of the Midwest
Consolidated Statements of Stockholders' Equity
Years Ended March 31, 1997, 1996 and 1995
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
Net
Unrealized
Gain(Loss)
on
Preferred Stock Available-
------------------------------------ Common Capital For-Sale Retained Treasury
Class A Class B Class C Class F Stock Surplus Securities1 Earnings Stock
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1995................. $ --- $ 500 $1,020 $5,000 $ 170 $2,521 $ --- $18,047 $(5,297)
Net income ............................. --- --- --- --- --- --- --- 3,553 ---
Change in net unrealized gain (loss)
on available-for-sale securities1..... --- --- --- --- --- --- (422) --- ---
Sale of 1,500 shares of Treasury Stock.... --- --- --- --- --- 53 --- --- 48
Cash dividends declared:
Class B Preferred, $48.66 per share... --- --- --- --- --- --- --- (49) ---
Class C Preferred, $36.13 per share... --- --- --- --- --- --- --- (87) ---
Class F Preferred, $9.25 per share.... --- --- --- --- --- --- --- (462) ---
Common, $1.76 per share............... --- --- --- --- --- --- --- (308) ---
-------------------------------------------------------------------------------------
Balance at March 31, 1996................. --- 500 1,020 5,000 170 2,574 (422) 20,694 (5,249)
Net income ............................... --- --- --- --- --- --- --- 4,257 ---
Change in net unrealized gain (loss)
on available-for-sale securities1..... --- --- --- --- --- --- (146) --- ---
Sale of 1,100 shares of Treasury Stock.... --- --- --- --- --- 60 --- --- 35
Cash dividends declared:
Class B Preferred, $46.27 per share... --- --- --- --- --- --- --- (46) ---
Class C Preferred, $36.13 per share... --- --- --- --- --- --- --- (87) ---
Class F Preferred, $9.25 per share.... --- --- --- --- --- --- --- (463) ---
Common, $2.00 per share............... --- --- --- --- --- --- --- (353) ---
-------------------------------------------------------------------------------------
Balance at March 31, 1997................. --- 500 1,020 5,000 170 2,634 (568) 24,002 (5,214)
Net income .............................. --- --- --- --- --- --- --- 5,560 ---
Change in net unrealized gain (loss) on
available-for-sale securities1........ --- --- --- --- --- --- 1,359 --- ---
Redemption of Class F Preferred........... --- --- --- (5,000) --- --- --- --- ---
Issuance of Class A Preferred............. 5,000 --- --- --- --- --- --- --- ---
Purchase of 2,498 shares of Common
Stock................................. --- --- --- --- --- --- --- --- (253)
Conversion of mandatory convertible
debentures into 50,000 shares of
Common Stock.......................... --- --- --- --- --- (402) --- --- 1,652
Conversion of Class B Preferred Stock
into 11,111 shares Common Stock....... --- (500) --- --- --- 133 --- --- 367
Conversion of Class C Preferred Stock
into 24,000 shares Common Stock....... --- --- (1,020) --- --- 227 --- --- 793
Sale of 100 shares of Treasury Stock...... --- --- --- --- --- 6 --- --- 4
Cash dividends declared:
Class A Preferred, $68.09 per share... --- --- --- --- --- --- --- (340) ---
Class B Preferred, $35.79 per share... --- --- --- --- --- --- --- (36) ---
Class C Preferred, $27.09 per share... --- --- --- --- --- --- --- (65) ---
Class F Preferred, $3.30 per share.... --- --- --- --- --- --- --- (165) ---
Common, $2.38 per share............... --- --- --- --- --- ---- --- (483) ---
-------------------------------------------------------------------------------------
Balance at March 31, 1998................. $5,000 $ --- $ --- $ --- $ 170 $2,598 $ 791 $28,473 $(2,651)
=====================================================================================
<FN>
1 Net of taxes
</FN>
</TABLE>

See accompanying notes to consolidated financial statements.
<PAGE>

Financial Services Corporation of the Midwest
Consolidated Statements of Cash Flows
Years Ended March 31, 1998, 1997 and 1996
(Dollars in Thousands)
<TABLE>
1998 1997 1996
--------- -------- --------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income.............................................................................. $ 5,560 $ 4,257 $ 3,553
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization...................................................... 1,167 1,161 898
Provision for credit losses........................................................ 3,502 2,630 1,905
Gain on sale of investment securities, net......................................... (182) --- (11)
Investment amortization, net....................................................... 58 229 145
Loans originated for sale.......................................................... (78,048) (35,772) (51,287)
Proceeds on sales of loans......................................................... 74,782 44,930 49,996
Gain on sales of loans, net........................................................ (714) (345) (362)
Increase in accrued interest receivable............................................ (336) (316) (693)
Increase in accrued interest payable............................................... 619 75 633
Increase in other assets........................................................... (634) (1,146) (68)
Increase in other liabilities...................................................... 13 489 238
--------- -------- --------
Net cash provided by operating activities .............................................. 5,787 16,192 4,947
--------- -------- --------
Cash Flows from Investing Activities:
Net (increase) decrease in federal funds sold........................................... (9,100) 11,100 21,000
Net (increase) decrease in interest-bearing deposits with other
financial institutions............................................................... (11,628) 4,730 (4,663)
Purchase of investment securities held-to-maturity...................................... (288) (21,717) (18,403)
Proceeds from maturity and call of investment securities held-to-maturity............... 6,500 11,010 26,000
Purchase of investment securities available-for-sale.................................... (48,002) (31,858) (64,134)
Proceeds from maturity and call of investment securities available-for-sale............. 18,414 10,258 30,010
Proceeds from sales of investment securities available-for-sale......................... 12,168 --- 7,152
Net increase in loans and leases........................................................ (28,197) (50,969) (43,510)
Purchase of premises, furniture and equipment .......................................... (2,526) (753) (3,363)
Other investing activities, net......................................................... 526 (137) (79)
--------- -------- --------
Net cash used in investing activities................................................... (62,133) (68,336) (49,990)
--------- -------- --------
Cash Flows from Financing Activities:
Net increase in deposits................................................................ 47,104 60,073 30,207
Net increase in short-term borrowings................................................... 283 --- 1,134
Net increase (decrease) in securities sold under agreements to repurchase............... 3,771 (10,692) 15,475
Proceeds from long-term debt............................................................ 15,000 10,000 ---
Payments on long-term debt.............................................................. --- (4,500) (500)
Redemption of Class F Preferred Stock................................................... (5,000) --- ---
Proceeds from issuance of Class A Preferred Stock....................................... 5,000 --- ---
Purchase of Treasury Stock ............................................................. (253) --- ---
Sale of Treasury Stock.................................................................. 10 95 101
Cash dividends paid on Preferred Stock.................................................. (606) (596) (598)
Cash dividends paid on Common Stock..................................................... (483) (353) (308)
--------- -------- --------
Net cash provided by financing activities............................................... 64,826 54,027 45,511
--------- -------- --------
Net increase in cash and due from banks................................................. 8,480 1,883 468
Cash and due from banks at the beginning of the year.................................... 16,306 14,423 13,955
--------- -------- --------
Cash and due from banks at the end of the year.......................................... $ 24,786 $ 16,306 $ 14,423
========= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>

Financial Services Corporation of the Midwest
Notes to Consolidated Financial Statements
(Dollars in Thousands, Except Per Share Amounts)

(1) Summary of Significant Accounting Policies

Financial Services Corporation of the Midwest ("FSCM") is a bank holding company
incorporated in 1973 under Delaware law and registered under the Bank Holding
Company Act of 1956, as amended. In 1974, FSCM acquired all outstanding shares
of THE Rock Island Bank ("TRIB"), an Illinois chartered state commercial bank
serving both the Illinois and Iowa Quad Cities' communities since 1932. On
November 1, 1995, TRIB became a national bank known as THE Rock Island Bank,
National Association and relocated its head office from Rock Island, Illinois to
Bettendorf, Iowa.

The accounting and reporting policies conform to generally accepted accounting
principles and general practice within the banking industry. The preparation of
the consolidated financial statements requires management to make estimates and
assumptions that affect the reported amounts in the consolidated financial
statements and the accompanying notes. Actual results could differ significantly
from those estimates. Material estimates that are particularly susceptible to
significant change in the near-term relate to the determination of the allowance
for credit losses.

(a) Principles of Consolidation

The consolidated financial statements include the accounts of FSCM and
TRIB. All significant intercompany balances and transactions have been
eliminated in consolidation.

(b) Investment Securities

Investments consist principally of debt securities with fixed maturities.

Investments in debt and certain equity securities are classified in one of
three categories: held-to-maturity, trading and available-for-sale.
Held-to-maturity securities are carried at cost, adjusted for amortization
of premium to the call date or accretion of discount to the maturity date
using the interest method. Trading securities are carried at fair market
value with unrealized gains and losses included in earnings. At March 31,
1998 and 1997, there were no trading securities. Available-for-sale
securities are carried at fair value with unrealized gains and losses
included as a separate component of stockholders' equity, net of the
related income tax effect.

Realized gains or losses are determined using the specific identification
method.

Loans and leases are reported at their outstanding principal and adjusted
by deferred loan fees and costs, unearned income, and the allowance for
credit losses. The deferred loan fees or costs are amortized into interest
income as a yield adjustment, using the interest method over the life of
the related loan or lease. Unearned income on leases is recognized into
income monthly using the interest method. On all other loans, interest is
accrued daily on the principal balance outstanding.

The accrual of interest is discontinued when, in management's opinion, the
timely collection of principal and interest is doubtful. When interest
accrual is discontinued, all unpaid accrued interest is reversed. Interest
income is subsequently recognized only to the extent cash payments are
received in excess of any principal balance outstanding. Such loans are
returned to an accrual status when unpaid interest has been brought current
and, in management's opinion, the timely collection of principal and
interest is no longer doubtful.

(d) Allowance for Credit Losses

The allowance for credit losses is maintained at a level deemed appropriate
by management to provide for known and inherent risks in the loan and lease
portfolio. The allowance is based upon a continuing review of past loan and
lease loss experience, current economic conditions, and the underlying
collateral value. Loans and leases that are deemed uncollectible are
charged off and deducted from the allowance. The provision for credit
losses and recoveries are added to the allowance.
<PAGE>

Nonhomogeneous loans, primarily the commercial and commercial mortgage
loans as defined by generally accepted accounting principals, are
considered impaired when it is probable that all principal and interest
amounts due will not be collected in accordance with their contractual
terms. Generally, these loans are in nonaccrual and/or have been classified
as doubtful or loss by management. Loan impairment is measured based on the
discounted present value of expected future cash flows or the fair market
value of the loan's collateral if the loan is collateral dependent. The
portion of the allowance for credit losses is computed on the amount that
the recorded investment of an impaired loan exceeds the measured value.
Interest is recognized on impaired loans on a cash basis.

(e) Premises, Furniture and Equipment

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

(f) Other Real Estate

Other real estate represents property acquired through foreclosures or
settlements of loans or property that was subsequently sold on contract.
Property acquired is carried at the lower of the principal amount of the
loan outstanding or the estimated fair value of the property. The excess,
if any, of the principal balance over the fair value of the property at the
date acquired is charged against the allowance for credit losses.
Subsequent write-downs required on the basis of later fair value
evaluations, gains or losses on sales, and net expenses incurred in
maintaining such properties are included in other operating expenses.
Property subsequently sold on contract is carried at the contract balance
outstanding.

(g) Mortgage Servicing Rights

Residential mortgage loans serviced for others are not included in the
accompanying consolidated financial statements. The unpaid principal
balances of these loans as of March 31, 1998 and 1997 were $201,451 and
$185,295, respectively. Custodial escrow balances maintained for these
loans were $2,572 and $1,653 at the respective year-ends.

At March 31, 1998, $171 of originated mortgage servicing rights ("OMSR")
were capitalized and carried in other assets in the consolidated balance
sheets. The asset, carried at fair market value, related to $25,173 in
serviced residential mortgage loans originated and sold during fiscal 1998.
The remaining balance of the serviced loans also had servicing rights
associated with it; however, financial accounting standards do not permit
recognition of OMSR on loans sold and serviced prior to implementation. The
asset is amortized into servicing income in proportion to, and over the
period of, the estimated future net servicing income of the underlying
mortgage loans. OMSR are evaluated for impairment based on fair value
techniques and stratified by predominant risk characteristics. Any
resulting write-down is charged against servicing income.

(h) Insurance Commission Revenue

Revenue from insurance commissions on accident and health and credit life
insurance related to loans is recognized at the effective date of the
coverage because substantially all services related to earning the
commissions have been rendered. A provision is made for probable insurance
commission refunds due to policy cancellations based on prior experience
and is netted against insurance commission revenue.

(i) Income Taxes

FSCM and TRIB file a consolidated federal income tax return.

FSCM has a tax allocation agreement, which provides that TRIB pays a tax
liability to, or receives a tax refund from, FSCM computed as if TRIB had
filed a separate return.

Deferred federal income tax assets and liabilities are established for
differences between financial and taxable income and are measured using the
current marginal statutory tax rate. As changes in tax laws or rates are
enacted, deferred tax assets and liabilities are adjusted through the
provision for income taxes.

(j) Per Common Share Amounts

Basic earnings per common share is computed by dividing net income
available to common stockholders by the weighted-average number of common
shares outstanding during the year. Diluted earnings per common share
adjusts for the assumed conversion of all potentially dilutive securities.
<PAGE>

(k) Presentation of Cash Flows

For purposes of reporting cash flows, cash and cash equivalents are defined
as those amounts included in the consolidated balance sheets as "Cash and
Due from Banks." Cash flows for loans, deposits, short-term borrowings and
securities sold under agreements to repurchase are reported net.

(l) Trust Assets

Assets held for customers by the Trust department in fiduciary or agency
capacities are not included in the accompanying consolidated balance
sheets, as such items are not assets of FSCM.

(m) Reclassifications

Certain amounts in the 1997 and 1996 consolidated financial statements have
been reclassified to conform with 1998 presentations.

(n) New Accounting Standards

The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income." This Statement establishes standards for reporting of
comprehensive income in a full set of general-purpose financial statements.
The purpose of reporting comprehensive income is to disclose a measure of
all changes in equity recognized during the period. FSCM's comprehensive
income will differ from net income by the net change in net unrealized gain
(loss) on available-for-sale securities reflected in stockholders' equity.
This Statement is effective for fiscal years beginning after December 15,
1997; however, if FSCM had adopted this Statement as of April 1, 1997,
comprehensive income for the year ended March 31, 1998 would have been
$6,913.

SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," requires certain disclosures about an entity's operating
segments in annual and interim financial reports. This Statement is
effective for fiscal years beginning after December 15, 1997.

SFAS No. 132, "Employers' Disclosures about Pension and Other
Postretirement Benefits," standardized employers' disclosures about
pensions and other postretirement benefit plans, requires certain
additional information, and eliminates other existing disclosures. It does
not change the measurement or recognition of these benefit plans. This
Statement is effective for fiscal years beginning after December 15, 1997.

(2) Pending Merger

On April 13, 1998, FSCM's Board of Directors entered into a merger agreement
with Mercantile Bancorporation Inc., St. Louis, Missouri ("Mercantile"). Under
the agreement, each equivalent share of FSCM's Common Stock would be exchanged
for 6.8573 shares of Mercantile's Common Stock. The exchange rate, which was
established on March 25, 1998, represented a purchase price of approximately
$380 per common equivalent share, based on 302,890 equivalent shares, for a
total purchase price of approximately $115 million.

(3) Cash and Due from Banks

TRIB's required reserves as a member of the Federal Reserve System were $3,395
and $1,611 as of March 31, 1998 and 1997, respectively.
<PAGE>

(4) Investment Securities

The amortized costs and fair values of investment securities held-to-maturity
and available-for-sale as of March 31, 1998 and 1997 are summarized as follow.
<TABLE>

1998 1997
---------------------------------------- ------------------------------------------
Gross Gross
Unrealized Unrealized
Amortized ---------------- Fair Amortized ------------------- Fair
HELD-TO-MATURITY: Cost Gains Losses Value Cost Gains Losses Value
--------- ------- ------ --------- --------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury........................ $ --- $ --- $ --- $ --- $ 1,502 $ --- $ 1 $ 1,501
Obligations of U.S. government
agencies and corporations ......... 10,972 142 27 11,087 15,963 7 119 15,851
State and political subdivisions ..... 2,313 10 --- 2,323 2,320 --- 32 2,288
Mortgage-backed obligations
of federal agencies ............... 17,803 157 1 17,959 17,749 7 166 17,590
Other securities ..................... 2,558 1 --- 2,559 2,271 1 --- 2,272
-------- ------- -------- --------- -------- -------- -------- --------
Total ............................. $ 33,646 $ 310 $ 28 $ 33,928 $ 39,805 $ 15 $ 318 $ 39,502
======== ======= ======== ========= ======== ======== ======== ========

AVAILABLE-FOR-SALE:
U.S. Treasury ........................ $ 7,007 $ 153 $ --- $ 7,160 $ 11,983 $ --- $ 100 $ 11,883
Obligations of U.S. government
agencies and corporations ......... 25,024 105 --- 25,129 33,923 8 255 33,676
Mortgage-backed obligations
of federal agencies ............... 67,351 335 61 67,625 36,251 4 740 35,515
Other securities ..................... 1,445 667 --- 2,112 1,179 222 --- 1,401
-------- ------- -------- -------- -------- -------- -------- --------
Total ............................. $100,827 $ 1,260 $ 61 $102,026 $ 83,336 $ 234 $ 1,095 $ 82,475
======== ======= ======== ======== ======== ======== ======== ========
</TABLE>

The following table presents the amortized cost, estimated fair value, and
average yield at March 31, 1998 of available-for-sale and held-to-maturity
securities by contractual maturity dates, except for the maturities of mortgage
backed obligations that were based on anticipated cash flow projections.
Securities with no stated maturity date are included with securities with a
remaining maturity of ten years or more.
<TABLE>
Available-for-Sale Held-to-Maturity
---------------------------------------- ----------------------------------------
Amortized Fair Average Amortized Fair Average
Cost Value Yield Cost Value Yield
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Due in one year or less .................. $ 13,450 $ 13,469 6.27% $ 1,975 $ 1,988 7.03%
Due after one year through
five years ............................ 72,757 73,301 6.46 29,583 29,852 6.39
Due after five years through
ten years ............................. 13,175 13,144 6.26 325 325 6.99
Due after ten years ...................... 1,445 2,112 2.04 1,763 1,763 6.41
-------- -------- ------- -------- -------- -------
Total ................................. $100,827 $102,026 6.35% $ 33,646 $ 33,928 6.44%
======== ======== ======= ======== ======== =======
</TABLE>
As of March 31, 1998 and 1997, investment securities with carrying values of
$102,119 and $96,498, respectively, were pledged to secure public and trust
deposits, short-term borrowings and for other purposes as required or permitted
by law.

For the fiscal year ended March 31, 1998, investment security sales of $12,168
generated gross security gains and losses of $231 and $49, respectively, and,
during fiscal 1996, investment security sales of $7,152 generated gross security
gains of $11.
<PAGE>

(5) Loans and Direct Financing Leases

Loans and leases as of March 31, 1998 and 1997 are summarized as follows:

1998 1997
--------- ---------

Commercial, financial and agricultural ............. $ 89,611 $ 93,576
Direct financing leases ............................ 12,052 6,719
Real estate:
Residential mortgage ............................ 70,867 64,314
Construction .................................... 34,385 29,790
Commercial mortgage ............................. 73,373 71,607
Consumer, not secured by a real estate mortgage .... 48,308 31,567
Unearned fees and costs ............................ 439 4
Unearned income .................................... (2,545) (1,107)
--------- ---------
Total ........................................... $ 326,490 $ 296,470
========= =========

Direct financing leases are generally short-term equipment type leases. Future
minimum lease payments as of March 31, 1998 are as follows: 1999, $3,351; 2000,
$2,625; 2001, $2,192; 2002, $1,732; 2003, $993; and 2004 and beyond, $1,159.
Income on leases of $926, $840, and $947 is included in interest and fees on
loans and leases for the fiscal years ended March 31, 1998, 1997 and 1996,
respectively.

Changes in the allowance for credit losses for the fiscal years ended March 31,
1998, 1997 and 1996 are as follows:

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

Balance at beginning of year ............ $ 5,442 $ 4,463 $ 3,832
Provision for loan and lease losses ..... 3,502 2,630 1,905
Loans and leases charged off ............ (2,415) (2,005) (1,985)
Recoveries .............................. 429 354 711
------- ------- -------
Balance at end of year .................. $ 6,958 $ 5,442 $ 4,463
======= ======= =======

The table below summarizes nonaccrual loans, other real estate owned and
accruing loans and leases past-due 90 days or more as of March 31, 1998 and
1997:

1998 1997
------ ------

Nonaccrual loans and leases:
Commercial, financial and agricultural ............... $ 270 $ 211
Direct financing leases .............................. 178 28
Real estate
Residential mortgage ............................. 1,881 2,047
Construction ..................................... 445 112
Commercial mortgage .............................. 444 115
Consumer ............................................. 63 116
------ ------
Total nonaccrual loans and leases ............ 3,281 2,629
------ ------
Other real estate owned .................................. 68 594
------ ------
Accruing loans and leases past-due 90 days or more:
Commercial, financial and agricultural ............... -- 141
Direct financing leases .............................. 174 79
Real estate:
Residential mortgage ............................. 102 41
Construction ..................................... -- --
Consumer ......................................... 67 28
------ ------
Total accruing loans and lease past-due
90 days or more ..................................... 343 289
------ ------
Total ........................................ $3,692 $3,512
====== ======

As of March 31, 1998 and 1997, impaired loans, totaled $1,473 and $701,
respectively, for which $425 and $181, respectively, of the allowance for credit
losses was specifically allocated. The average impaired loans for the fiscal
years ended March 31, 1998, 1997 and 1996 totaled $1,103, $963 and $1,849,
respectively. The amount of interest which would have been earned if the
impaired loans had performed in accordance with their original terms and the
amount of interest income recognized on a cash basis was $100 and $51,
respectively, for fiscal 1998; $39 and $25, respectively, for fiscal 1997; and
$47 and $44, respectively, for fiscal 1996.
<PAGE>

Loans are made in the normal course of business to directors, executive officers
and principal holders of equity securities of FSCM and to affiliate companies in
which they have an equity interest. The terms of these loans, including interest
rates and collateral, are similar to those prevailing for comparable
transactions and do not involve more than a normal risk of collectibility.
Changes in such loans during the fiscal years ended March 31, 1998, 1997 and
1996 were as follows:

1998 1997 1996
------- ------- -------
Balance at beginning of year ............... $ 1,565 $ 86 $ 61
New loans and existing balances at date
of appointment(s) to director(s) ........ 1,719 1,979 709
Repayments ................................. (2,818) (500) (134)
Loans participated to other financial
institutions and other net changes ...... (215) -- (550)
------- ------- -------
Balance at end of year ..................... $ 251 $ 1,565 $ 86
======= ======= =======

Unused lines of credit, in excess of balances disclosed in the above table, in
the amount of $671 had been extended to directors and their related interests as
of March 31, 1998.

(6) Premises, Furniture and Equipment

Premises, furniture and equipment as of March 31, 1998 and 1997 are summarized
as follows:

1998 1997
------- -------
Land ......................................... $ 2,228 $ 1,340
Buildings and improvements ................... 7,746 6,974
Furniture and equipment ...................... 4,896 5,964
Less accumulated depreciation ................ (8,208) (8,782)
------- -------
Total ..................................... $ 6,662 $ 5,496
======= =======

Depreciation expense included in the accompanying consolidated statements of
income was $1,360, $1,210, and $1,033 for the fiscal years ended March 31, 1998,
1997 and 1996, respectively.

(7) Deposits

Time certificates of deposit in denominations of $100 or more as of March 31,
1998 and 1997 equaled $53,621 and $47,974, respectively.

The maturity distribution, as of March 31, 1998, for time deposits was as
follows: 1999, $151,293; 2000, $84,728; 2001, $5,927; 2002, $2,009 and 2003 and
beyond, $1,940.

(8) Securities Sold Under Agreements to Repurchase and Other Short-Term
Borrowings

Securities sold under agreements to repurchase are treated as financings. The
obligations to repurchase securities sold are reflected as a liability in the
consolidated balance sheets and the dollar amount of securities underlying the
agreements remains in investments. Control of the securities underlying the
agreements has been transferred to a correspondent bank that serves as a
third-party bailee on behalf of the account holders.

Certain information about securities sold under agreements to repurchase during
the fiscal years ended March 31, 1998, 1997 and 1996 are as follows:

1998 1997 1996
------- ------- -------
Maximum month-end balance ..................... $41,925 $48,531 $59,999
Average daily balance for the year ............ 27,336 45,079 43,120
Weighted average interest rate for the year ... 4.92% 5.21% 5.51%

Other short-term borrowings generally include federal funds purchased, which are
overnight transactions, and interest-bearing demand notes due to the U.S.
Treasury, which are generally called within several days. Other short-term
borrowings of $1,783 and $1,500 as of March 31, 1998 and 1997, respectively, are
comprised of interest-bearing demand notes due to the U.S. Treasury.

As of March 31, 1998 and 1997, FSCM had a variable rate $10,000 unrestricted
line of credit available from a correspondent bank, none of which was in use.
The line of credit is collateralized by a pledge of all of the stock of TRIB
owned by FSCM and bears interest at a rate charged by banks to their most
preferred customers ("prime") which was 8.50% at March 31, 1998.
<PAGE>

The most restrictive covenants under the correspondent bank loan agreement
require, among other things, that:

o FSCM must obtain approval to pay Common Stock dividends in excess of 30% of
prior year's consolidated net income;

o Approval is required for fixed asset investments exceeding $250 for FSCM or
outside TRIB's normal banking practices;

o FSCM must obtain approval before the incurrence of any additional debt and
TRIB can incur debt only in the normal course of business;

o FSCM must obtain approval prior to making any investments exceeding 4.95%
of its tangible net equity in other than short-term, cash management
investments made in the normal course of business (March 31, 1998 maximum
equaled $1,652);

o FSCM and TRIB cannot issue any new stock nor can FSCM repurchase any of its
stock from its directors or executive officers without prior approval;

o Mergers or acquisitions require approval;

o FSCM and TRIB must maintain ratios of total capital (Tier 1 and Tier 2) to
total assets not less than 6.00% and 7.50%, respectively (March 31, 1998
actual equaled 9.20% and 8.61%, respectively);

o TRIB must maintain a primary capital ratio not less than 5.50% (March 31,
1998 actual equaled 9.03%); and

o TRIB must maintain a return on average assets not less than 0.70% (March
31, 1998 actual equaled 1.33%).

Management believes that FSCM and TRIB were in compliance with all covenants as
of March 31, 1998.

(9) Long-Term Debt

Long-term debt as of March 31, 1998 and 1997 consisted of the following:

1998 1997
------- -------

8.00% Notes, due November 1, 2008, uncollateralized .... $10,000 $10,000
5.72% Federal Home Loan Bank ("FHLB") advance, due
January 12, 2008, secured .......................... 15,000 --
------- -------
Total ........................................ $25,000 $10,000
======= =======

FSCM's $10,000, 8.00% Notes were issued as of November 1, 1996 and were due in
twelve years. Interest on the uncollateralized fixed rate 8.00% Notes is payable
on the first of May and November. Mandatory redemptions in the amount of $750
are due on November 1, 2000 through 2007, inclusive. The remaining $4,000
matures on November 1, 2008. FSCM may redeem any or all of the Notes at any time
with a 15-day notice. Any redemption prior to November 1, 1998 shall be at 103%
of the principal amount so redeemed. The Notes are senior or on parity to any
other uncollateralized debt.

The most restrictive covenants under the 8.00% Notes require, among other
things, that:

o Fixed assets investments are limited to no greater than three percent of
total assets on a consolidated basis (March 31, 1998 actual equaled 1.29%);

o FSCM and TRIB must maintain tangible net worth of not less than $19,000 and
$23,000, respectively (March 31, 1998 actual equaled $33,387 and $39,627,
respectively); and

o Redemptions of Common and Preferred Stock are limited to the total of: a)
$6,000, plus b) 65% of the increase in retained earnings since June 30,
1996, plus c) proceeds from any capital stock issuance after June 30, 1996,
less d) total amount previously expended for all purchases or redemptions
of shares. As of March 31, 1998, the limitation of Common Stock and
Preferred Stock redemptions equaled $11,637.

Management believes that FSCM and TRIB were in compliance with all covenants as
of March 31, 1998.

The FHLB advance at March 31, 1998 consisted of a single, 5.72% fixed rate
advance that is due in ten years. At March 31, 1998, this debt was
collateralized by a pledge of $17,820 in investment securities.
<PAGE>

(10) Mandatory Convertible Debentures

Mandatory convertible debentures ("MCDs") as of March 31, 1998 and 1997 are
summarized as follows:

1998 1997
------- ------
MCDs issued March 31, 1989, due March 31, 2001 ........ $ -- $ 425
MCDs issued April 19, 1989, due March 31, 2001 ........ -- 825
------- ------
Total .............................................. $ -- $1,250
======= ======

In November and December 1997, holders of the MCDs exercised their conversion
options to exchange the $1,250 MCDs for a total of 50,000 shares of FSCM Common
Stock.

(11) Income Taxes

Income taxes for the fiscal years ended March 31, 1998, 1997 and 1996 are
summarized as follows:

1998 1997 1996
------- ------- -------
Federal:
Current ........................... $ 2,810 $ 2,670 $ 2,088
Deferred .......................... (275) (365) (376)
------- ------- -------
Total Federal taxes ............ 2,535 2,305 1,712
------- ------- -------
State:
Current ........................... 175 160 56
------- ------- -------
Total ......................... $ 2,710 $ 2,465 $ 1,768
======= ======= =======

Income taxes totaled $2,710 for 1998, $2,465 for 1997, and $1,768 for 1996
resulting in effective tax rates of 32.77%, 36.67%, and 33.23%, respectively.
The actual income taxes differ from the "expected" amounts (computed by applying
the U.S. federal corporate income tax rate of 35% for the years 1998, 1997 and
1996, to income before income taxes) for such years as follows:

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

Computed "expected" amounts ................... $ 2,895 $ 2,353 $ 1,862
Increase (decrease) resulting from:
Effect of graduated tax rate ............... (83) (67) (53)
Tax exempt interest income ................. (33) (32) (5)
Life insurance policies .................... (76) (64) (56)
State taxes net of federal benefit ......... 115 106 37
Over (under) accrual of provision, net ..... (108) 169 (17)
------- ------- -------
Total ................................... $ 2,710 $ 2,465 $ 1,768
======= ======= =======

The components of the net deferred income tax asset as of March 31,
1998 and 1997 are as follows:

1998 1997
------- -------
Allowance for credit losses .......................... $ 1,415 $ 900
Book depreciation in excess of tax depreciation ...... 565 443
Post-retirement benefits ............................. 46 46
Loan origination fees (costs), net ................... (323) (86)
Bonuses .............................................. 41 40
Deferred insurance fee income ........................ 262 276
Vacation accrual ..................................... 80 80
Prepaid expense ...................................... (66) (55)
Mortgage servicing rights ............................ (58) --
Net unrealized loss on available-for-sale
securities, net of taxes .......................... (408) 293
Investment securities ................................ (103) (44)
Other ................................................ 19 3
------- -------
Total .......................................... $ 1,470 $ 1,896
======= =======

FSCM had no valuation allowance for deferred tax assets as of March 31, 1998 or
1997. FSCM has a demonstrated record of profitability for the past ten years.
<PAGE>

(12) Preferred Stock

In December 1997, holders of FSCM's $500 Class B and $1,020 Class C Preferred
Stock exercised their options to convert the Preferred Stock into 11,111 and
24,000 shares, respectively, of FSCM's Common Stock.

In July 1997, FSCM reclassified the $5,000 Class A Cumulative Convertible
Preferred Stock to Class F Cumulative Convertible Preferred Stock ("Class F
Preferred Stock"). On July 10, 1997, FSCM redeemed the $5,000 9.25% Class F
Preferred Stock at a redemption price of $100 per share as provided in the terms
of the indenture for the Class F Preferred Stock.

Funding for the retirement of the Class F Preferred Stock was provided through
the issuance of $5,000 of new 9.25% Class A Cumulative Convertible Preferred
Stock ("Class A Preferred Stock"). All of the Class A Preferred Stock was issued
to principal shareholders of FSCM who are also executive officers and directors
of FSCM and TRIB. The Class A Preferred Stock has a stated value of $1,000 per
share. The stock pays quarterly cumulative dividends at a 9.25% per annum
payable on the last day of March, June, September and December. The Class A
Preferred Stock is immediately convertible into a total of 41,666 shares of FSCM
Common Stock at the direction of the holders of the Preferred Stock and has
priority over Common Stock with respect to dividends, liquidation and redemption
rights.

(13) Treasury Stock

In May 1997, FSCM extended a tender offer to all shareholders of FSCM's Common
Stock. The offer terminated on August 13, 1997 with a total of 2,498 shares of
Common Stock exchanged for $90 cash per share. The offer was funded, including
costs of $28, with cash on hand.

In March 1997 and 1996, FSCM sold 1,000 and 1,500, respectively, of Common Stock
from treasury to the 401(k) defined contribution retirement plan sponsored by
TRIB. The per share sale prices of $85.00 and $67.50 for the respective dates
were based on independent stock appraisals for transactions involving small
stock block sizes. Further, in January and November 1997, sales of 100 shares of
Common Stock each, were made from treasury to newly appointed Directors in order
to comply with regulatory requirements.

Additionally, shares were transferred from Treasury Stock for the conversions of
the MCDs and Class B and C Preferred Stock, totaling 50,000, 11,111 and 24,000,
respectively.

(14) Employee Benefit Plans

The 1996 Combined Incentive and Nonstatutory Stock Option Plan ("Plan") was
adopted by FSCM's Board of Directors on July 25, 1996 and ratified by its
stockholders at the Annual Meeting on August 22, 1996. The Plan provides for the
grant of options to acquire up to 20,000 shares of FSCM's Common Stock based on
terms to be determined by FSCM's Board of Directors or an appointed committee.
As of July 1, 1997, incentive stock options, as defined by Section 422 of the
Internal Revenue Code of 1986, were issued for a total of 800 shares of FSCM
Common Stock. As these were the only options issued, the number of shares
available under options at March 31, 1998 also equaled 800. The options had an
eight-year contractual life at an exercise price of $100 each, which was above
the $90 per common share market price at the time of issuance. Only 20% of the
options, equal to 160 shares of Common Stock, were exercisable immediately, an
additional 20% will vest each year on the annual anniversary date until 100%
vesting is reached. The estimated fair value of the options grant equaled $12.35
per option, based upon an option pricing model. Assumptions included in the
pricing model included a 2.08% dividend yield, a risk-free interest rate of
5.47%, expected option life of eight years, and expected volatility of 5.55%.

An employee savings plan covers substantially all employees of FSCM and its
subsidiary, TRIB. Under the plan, contributions of up to 2% of the participants'
wages were made by TRIB. Plan costs, which are charged to other expenses, were
$104, $92, and $41 for the years ended March 31, 1998, 1997, and 1996,
respectively. Effective as of April 1, 1998, TRIB's maximum matching
contribution rate increased to 3% from 2%.

FSCM provides certain health care and life insurance benefits for eligible
retired employees. In order to qualify for the benefits, a full-time employee
must, at retirement, be at least 55 years old and have completed a minimum of
ten years of service. The benefits consist of up to a sixty dollars per month
contribution by FSCM towards medical premium costs (up to seventy-five dollars
per month for existing retirees) and the payment of life insurance premiums for
coverage in the amount of two times the employee's salary at retirement. The
life insurance coverage is reduced for each year of retirement. FSCM has the
right to modify or terminate these benefits. Accrued post retirement benefit
liabilities included in other liabilities as of March 31, 1998 and 1997 equaled
$135. Net periodic post retirement benefit expense (credits) for the fiscal
years ended March 31, 1998, 1997 and 1996 were $10, $12, and $(20),
respectively.
<PAGE>

(15) Commitments and Contingencies

Financial Instruments with Off-Balance-Sheet Risk: In the normal course of
business, FSCM is a party to financial instruments with off-balance-sheet risk
to meet the financing needs of its customers. These financial instruments
include commitments to extend credit and letters of credit. These instruments
involve, to varying degrees, elements of credit and interest rate risk in excess
of the amounts recognized in the consolidated financial statements. FSCM's
exposure to credit loss in the event of nonperformance by the other party to the
financial instrument for commitments to extend credit, and to potential credit
loss associated with letters of credit issued, is represented by the contractual
amount of those instruments. FSCM uses the same credit policies in making
commitments and conditional obligations as it does for loan and other such
on-balance-sheet instruments. The amount of collateral obtained, if deemed
necessary upon extension of credit, is based on management's credit evaluation
of the party. Collateral held varies, but may include accounts receivable,
inventory, property and/or equipment.

Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements.

Letters of credit are conditional commitments that are primarily issued to
facilitate trade or support borrowing arrangements and generally expire in one
year or less. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending credit to customers.

As of March 31, 1998 and 1997, FSCM had $4,396 ad $4,662, respectively, of
irrevocable letters of credit outstanding and had commitments to lend of
approximately $63,414 and $40,978, respectively. Management anticipates no
material losses as a result of such transactions.

Concentrations of Credit Risk: Although FSCM has a diversified loan and lease
portfolio, the majority of the loans, commitments to extend credit, unused lines
of credit and outstanding letters of credit have been granted to customers
within FSCM's market area thus creating a substantial natural geographic
concentration of credit risk. The customers' ability to repay the credit is
influenced by the economic conditions of the area. FSCM's loan portfolio
consists of commercial and commercial mortgage loans extending across many
industry types, as well as to individuals. FSCM's leasing activities consisted
primarily of financing arrangements. As of March 31, 1998, total loans and
leases to any group of customers engaged in similar activities and having
similar economic characteristics did not exceed 10% of total loans and leases.
Outstanding letters of credit were granted primarily to commercial borrowers.

Contingencies: In the normal course of business, FSCM is involved in various
legal proceedings. In the opinion of management, any liabilities resulting from
such proceedings would not have a material adverse effect on the accompanying
financial statements.

(16) Dividends and Regulatory Capital and Ratios

In addition to the restriction on the payment of dividends by FSCM discussed in
Note 8, the ability of FSCM to pay dividends to its stockholders is dependent
upon the ability of TRIB to pay dividends to FSCM since FSCM has no other
significant source of income. TRIB is subject to regulation by the Office of the
Comptroller of the Currency and the Federal Deposit Insurance Corporation under
federal law and regulations, which limit the amount of dividends TRIB may pay to
FSCM. The amount of dividends TRIB could pay FSCM as of March 31, 1998, without
prior regulatory approval was $9,224, the statute limit of the sum of net
profits for the current year plus retained net profits of the preceding two
years.

Federal banking regulators (including the Federal Reserve Board that regulates
FSCM), have established, and monitor compliance with, capital adequacy
guidelines. These guidelines include the Tier 1 and total capital ratios that
compare adjusted capital to that of risk weighted assets. Additionally, the
leverage ratio is used to compare Tier 1 capital to total adjusted average
assets. A 3% minimum leverage ratio was established for the most highly rated
banks and bank holding companies. Most banking organizations, including FSCM and
TRIB, are expected to maintain a leverage ratio of 100 to 200 basis points above
this minimum depending on their financial condition. The capital guidelines
established three primary measurement categories into which institutions are
grouped; well-capitalized, adequately-capitalized and
less-than-adequately-capitalized. Classification of a bank in a
less-than-adequately-capitalized category can result in certain mandatory and
possibly additional discretionary actions by regulators that could have a
material effect on a financial institution's operations. As of March 31, 1998,
FSCM and TRIB were categorized as well-capitalized and met all capital adequacy
requirements. There are no conditions or events subsequent to March 31, 1998
that management believes have changed FSCM's or TRIB's status. The tables below
set forth FSCM's and TRIB's regulatory capital ratios as compared to the
standards as of March 31, 1998 and 1997.
<PAGE>

Financial Services Corporation of the Midwest:
<TABLE>
Minimum Capital Required To Be Categorized As:
----------------------------------------------
Actual Adequately Capitalized Well Capitalized
----------------- ---------------------- -------------------
Amount Ratio Amount Ratio Amount Ratio
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
As of March 31, 1998:
Total Capital (to Risk
Weighted Assets) ........................ $47,638 13.28% $28,697 8.00% $35,871 10.00%
Tier I Capital (to Risk
Weighted Assets) ....................... 33,124 9.23 14,348 4.00 21,523 6.00
Tier I Capital (to Average
Assets) ............................. 33,124 6.98 18,973 4.00 23,716 5.00
As of March 31, 1997:
Total Capital (to Risk
Weighted Assets) ........................ $42,840 13.50% $25,381 8.00% $31,726 10.00%
Tier I Capital (to Risk
Weighted Assets) ....................... 27,606 8.70 12,690 4.00 19,035 6.00
Tier I Capital (to Average
Assets) ................................. 27,606 6.79 16,258 4.00 20,322 5.00

THE Rock Island Bank, N.A.:

As of March 31, 1998:
Total Capital (to Risk
Weighted Assets)......................... $44,290 12.45% $28,466 8.00% $35,582 10.00%
Tier I Capital (to Risk
Weighted Assets) ....................... 39,812 11.19 14,233 4.00 21,349 6.00
Tier I Capital (to Average
. Assets) ......................... 39,812 8.44 18,868 4.00 23,585 5.00
As of March 31, 1997:
Total Capital (to Risk
Weighted Assets)......................... $39,795 12.65% $25,166 8.00% $31,458 10.00%
Tier I Capital (to Risk
Weighted Assets) ....................... 35,844 11.39 12,583 4.00 18,875 6.00
Tier I Capital (to Average
Assets).................................. 35,844 8.85 16,196 4.00 20,245 5.00
</TABLE>

(17) Supplemental Disclosures of Cash Flow and Other Information

Cash paid during the fiscal years ended March 31, 1998, 1997 and 1996 for:

1998 1997 1996
------- ------- -------
Interest ....................... $20,140 $17,563 $15,213
Income taxes ................... 3,448 2,656 1,855

During fiscal 1996 investment securities totaling $34,999 were reclassified from
held-to-maturity to available-for-sale. Loans totaling $7,746 were reclassified
from portfolio to held-for-sale during fiscal 1997.

(18) Fair Value of Financial Instruments

Fair value estimates were made as of March 31, 1998 and 1997, based on relevant
market information and other assumptions about financial instruments. Quoted
market prices, when available, were used as a measure of fair value. When quoted
market prices were not available, fair values were based on discounted cash flow
and other valuation techniques. These derived fair values, which were founded on
assumptions relative to the timing of future cash flows and the discount rates,
are inherently subjective in nature and involved matters of judgment. Changes in
these assumptions could significantly affect these estimates. The estimates
presented below are not necessarily indicative of the amounts FSCM could realize
in a current market exchange.
<PAGE>

<TABLE>

1998 1997
-----------------------------------------
Carrying Fair Carrying Fair
Value Value Value Value
-----------------------------------------
<S> <C> <C> <C> <C>
Financial Assets:
Cash and due from banks ...................... $ 24,786 $ 24,786 $ 16,306 $ 16,306
Interest-bearing deposits with other financial
institutions .............................. 11,759 11,753 131 131
Federal funds sold ........................... 9,900 9,900 800 800
Investment securities:
Held-to-maturity .......................... 33,646 33,928 39,805 39,502
Available-for-sale ........................ 102,026 102,026 82,475 82,475
Loans and leases, net ........................ 319,532 321,084 291,028 290,654
Accrued interest receivable .................. 3,305 3,305 2,969 2,969

Financial Liabilities:
Deposits:
Demand .................................... 45,007 45,007 36,785 36,785
N.O.W. accounts ........................... 37,922 37,922 23,575 23,575
Savings ................................... 38,112 38,112 37,777 37,777
Insured money market ...................... 42,057 42,057 38,862 38,862
Other time ................................ 245,897 246,535 224,892 224,834
Securities sold under agreements to repurchase 41,925 41,907 38,154 38,104
Other short-term borrowings .................. 1,783 1,783 1,500 1,500
Notes payable ................................ 25,000 24,850 10,000 10,000
Mandatory convertible debentures ............. -- -- 1,250 1,250
Accrued interest payable ..................... 3,556 3,556 2,937 2,937
</TABLE>

The estimated fair values of investment securities were generally based on
quoted market prices. For variable rate financial instruments, the carrying
amount was considered to be a reasonable estimate of fair value. For fixed-rate
financial instruments, the fair value was determined by discounting contractual
cash flows using rates which could have been earned for assets and liabilities
with similar characteristics issued as of the balance sheet date.

(19) Earnings Per Common Share Data

SFAS No. 128, "Earnings Per Share," was adopted by FSCM effective December 31,
1997. The Statement requires certain computation, presentation and disclosure
information for earnings per share. Prior period disclosures were not materially
impacted and have been restated to conform with the new requirements. The
following information was used to compute basic and diluted earnings per common
share for the fiscal years ended March 31, 1998, 1997, and 1996:

1998 1997 1996
--------- --------- ---------
Net income ............................... $ 5,560 $ 4,257 $ 3,553
Accrued preferred dividends .............. (568) (596) (598)
--------- --------- ---------
Basic earnings ........................ 4,992 3,661 2,955
MCDs interest expense, net of tax ........ 45 64 68
Accrued convertible preferred dividends .. 568 596 598
--------- --------- ---------
Diluted earnings ...................... $ 5,605 $ 4,321 $ 3,621
========= ========= =========
Weighted average common shares outstanding 200,359 176,644 175,123
Weighted average common shares
issuable upon conversion of:
MCDs1 ................................. 34,357 50,000 50,000
Common Stock options .................... 14 -- --
Class A Preferred Stock ................. 30,251 -- --
Class B Preferred Stock1 ................ 8,341 11,111 11,111
Class C Preferred Stock1 ................ 18,016 24,000 24,000
Class F Preferred Stock2 ................ 16,186 66,082 75,093
--------- --------- ---------
Weighted average common and contingently
issuable common shares outstanding .... 307,524 327,837 335,327
========= ========= =========

1 In November and December 1997, the MCDs, Class B and Class C Preferred
Stock were converted in 20,000, 11,111 and 24,000 shares, respectively.

2 In July 1997, the Class A Cumulative Convertible Preferred Stock was
reclassified to Class F Cumulative Convertible Preferred Stock and redeemed
in its entirety. Funding for the redemption was provided through the
private placement of $5,000 in new Class A Cumulative Convertible Preferred
Stock. The new Class A Preferred Stock is immediately convertible, at the
option of the holders, into 41,666 shares of FSCM's Common Stock.
<PAGE>

(20) Parent Company Only Financial Information

Condensed financial information for FSCM was as follows:

Balance Sheets
March 31, 1998 1997
- -------------------------------------------------------------------------------

Assets
Cash and short-term investments ....................... $ 844 $ 734
Investment securities, available-for-sale
(amortized cost 1998-$1,445, 1997-$1,179) ........... 2,112 1,401
Loans.................................................. 1,440 1,453
Less: Allowance for credit losses .................. (72) --
-------- --------
Net loans ........................................ 1,368 1,453
Investment in TRIB .................................... 40,181 35,129
Due from TRIB ......................................... -- 35
Other assets .......................................... 583 511
-------- --------
Total ................................................. $ 45,088 $ 39,263
======== ========
Liabilities and Stockholders' Equity
Liabilities:
Accounts payable and accrued liabilities ........... $ 707 $ 469
Long-term debt ..................................... 10,000 10,000
Mandatory convertible debentures ................... -- 1,250
-------- --------
Total liabilities ............................ 10,707 11,719
-------- --------
Stockholders' equity:
Preferred Stock .................................. 5,000 6,520
Common Stock ..................................... 170 170
Capital surplus .................................. 2,598 2,634
Net unrealized loss on available-for-sale
securities, net of taxes ...................... 791 (568)
Retained earnings ................................ 28,473 24,002
Treasury Stock ................................... (2,651) (5,214)
-------- --------
Total stockholders' equity ................. 34,381 27,544
-------- --------
Total ...................................... $ 45,088 $ 39,263
======== ========

<PAGE>

<TABLE>

Statements of Income
Years Ended March 31, 1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating revenue:
Dividends received from TRIB ........................................... $ 2,312 $ 2,063 $ 1,813
Interest income:
Interest on loans ..................................................... 134 112 --
Interest on investment securities ..................................... 25 15 --
Investment securities gain .............................................. 231 -- --
Other income ............................................................ 23 21 44
-------- -------- --------
Total operating revenue .......................................... 2,725 2,211 1,857
-------- -------- --------
Operating expenses:
Professional fees ...................................................... 252 209 192
Provision for credit losses ............................................ 72 -- --
Other operating expenses ............................................... 343 354 252
Interest expense:
Interest on short-term borrowings ..................................... -- 24 --
Interest on long-term debt ............................................ 800 543 411
Interest on mandatory convertible debentures .......................... 69 97 103
-------- -------- --------
Total operating expenses ......................................... 1,536 1,227 958
-------- -------- --------
Net operating income ............................................. 1,189 984 899
Equity in undistributed earnings of TRIB .................................. 3,986 2,903 2,335
-------- -------- --------
Income before income tax benefit ........................................ 5,175 3,887 3,234
Income tax benefit ........................................................ 385 370 319
-------- -------- --------
Net income ................................................................ $ 5,560 $ 4,257 $ 3,553
======== ======== ========
</TABLE>
<PAGE>
<TABLE>

Statements of Cash Flows
Years Ended March 31, 1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income ................................................................ $ 5,560 $ 4,257 $ 3,553
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization ......................................... 57 164 53
Provision for possible credit losses .................................. 72 -- --
Gain on sale of investment securities ................................. (231) -- --
Equity in undistributed earnings of subsidiaries ...................... (3,986) (2,903) (2,335)
(Increase) decrease in other assets ................................... (94) (515) 183
Increase (decrease) in other liabilities .............................. 87 171 (171)
-------- -------- --------
Net cash provided by operating activities ................................. 1,465 1,174 1,283
-------- -------- --------
Cash Flows From Investing Activities:
Purchase of investment securities available-for-sale ...................... (927) (1,179) --
Proceeds from call of investment security
available-for-sale .................................................... 175 -- --
Proceeds from sales of investment securities
available-for-sale .................................................... 716 -- --
Net (increase) decrease in loans .......................................... 13 (1,453) --
Investment in TRIB ........................................................ -- (4,000) --
-------- -------- --------
Net cash used in investing activities ..................................... (23) (6,632) --
-------- -------- --------
Cash Flows From Financing Activities:
Proceeds from long-term debt .............................................. -- 10,000 --
Payments on long-term debt ................................................ -- (4,500) (500)
Cash dividends paid ....................................................... (1,089) (949) (906)
Redemption of Preferred Stock ............................................. (5,000) -- --
Proceeds from issuance of Preferred Stock ................................. 5,000 -- --
Treasury Stock purchase and costs ......................................... (253) -- --
Sale of Treasury Stock .................................................... 10 95 101
-------- -------- --------
Net cash provided by (used in) financing activities ....................... (1,332) 4,646 (1,305)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents ...................... 110 (812) (22)
Cash and cash equivalents at the beginning of the year .................... 734 1,546 1,568
-------- -------- --------
Cash and cash equivalents at the end of the year .......................... $ 844 $ 734 $ 1,546
======== ======== ========

</TABLE>
<PAGE>

Item 9. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure

None

Part III

Item 10. Directors and Executive Officers of the Registrant

(a) Executive Officers and Directors

The executive officers and directors of FSCM and TRIB as of April 30, 1998 are
as follows:
<TABLE>

Name Age Title
- --------------------- --- -------------------------------------------------------------------------------------------------
<S> <C> <C>

Douglas M. Kratz 46 Chairman of the Board, Chief Executive Officer and Chief Financial Officer of FSCM; Vice
Chairman of the Board of TRIB

Perry B. Hansen 50 President and Director of FSCM; Chairman of the Board and Chief Executive Officer of TRIB

John T. Kustes 47 Treasurer and Director of FSCM; Senior Vice President, Senior Operations Officer, Assistant
Secretary and Director of TRIB

Francis P. McCarthy 48 Director of FSCM; Director of TRIB

Jean M. Hanson 40 Vice President and Controller of FSCM

Richard J. Carlson 46 President, Chief Operating Officer and Director of TRIB

Donald P. Ackerman 64 Executive Vice President and Senior Lending Officer of TRIB
</TABLE>

Douglas M. Kratz has been Chief Executive Officer, Chief Financial Officer, and
a Director of FSCM and a Director of TRIB since 1985, and was appointed Vice
Chairman of the Board of TRIB in 1993. In January 1997, Mr. Kratz was appointed
Chairman of the Board of FSCM and relinquished his positions as President and
Secretary; he had served in these positions since 1985. In fiscal 1998, Mr.
Kratz became a director of First Financial Bancorp, Inc., a publicly held
unitary thrift holding company and parent of First Federal Savings Bank,
Belvidere, Illinois, for which he also serves as director. Mr. Kratz is also an
officer of Richey Corporation, Bettendorf, Iowa, a privately-held consulting
firm that provides services to various financial institutions and non-banking
industries, including FSCM. Mr. Kratz also holds official positions in several
other privately-held, non-banking entities. See "Item 13-Certain Relationships
and Related Transactions."

Perry B. Hansen has been Chief Executive Officer and a Director of TRIB and a
Director of FSCM since 1985. In January 1997, Mr. Hansen was appointed Chairman
of the Board of TRIB and President of FSCM. In February 1997, Mr. Hansen
relinquished his positions as President and Secretary of TRIB, he had served in
these positions since July 1985. Further, Mr. Hansen serves as director and
secretary of Merrill Merchants Bancshares, Inc., a privately held bank-holding
company for Merrill Merchants Bank, Bangor, Maine, for which he also serves as
director. Mr. Hansen also holds official positions in several other
privately-held, non-banking entities.

John T. Kustes is Senior Vice President and Senior Operations Officer of TRIB
and has held positions in TRIB's operations department in excess of the past
five years and has been a Director of FSCM and TRIB since March 1991. Mr. Kustes
has been an officer of FSCM since 1986 and currently serves as FSCM's Treasurer.

Francis P. McCarthy was elected to the Boards of Directors of TRIB and FSCM in
November 1996 and January 1997, respectively. Mr. McCarthy has been the
Executive Vice President of Linwood Mining & Minerals Corporation (a
privately-held corporation) in excess of five years. Further, Mr. McCarthy holds
executive positions with Midwest Metals, Superior Minerals, Monday Leasing,
Northern Marine Corporation and McCarthy-Bush Corporation, all of which are
privately-held entities.

Jean M. Hanson has been Controller of FSCM since December 1984. In December
1997, Mrs. Hanson was appointed to the additional title of Vice President of
FSCM and relinquished her positions as Vice President and Controller of TRIB,
which she had held since August 1995 and December 1984, respectively.

Richard J. Carlson joined TRIB as Senior Vice President - Loans in January 1994
and was appointed Chief Operating Officer and Senior Lending Officer in March
1995. Mr. Carlson was elected to the Board of Directors of TRIB in February 1997
and appointed President of TRIB in February 1997. Until his employment with
TRIB, Mr. Carlson had been employed as Vice President for Firstar Bank Cedar
Rapids, N.A., Cedar Rapids, Iowa, since February 1992.
<PAGE>

Donald P. Ackerman was Senior Vice President of TRIB from February 1992 until
March 1995 when he was appointed Executive Vice President and Commercial Loan
Manager. In January 1997, Mr. Ackerman was appointed Executive Vice President,
Senior Lending Officer and Commercial Loan Manager. In August 1997, Mr. Ackerman
relinquished the position of Commercial Loan Manager.

All of the Directors of FSCM and TRIB hold office until the next shareholders'
meeting and until their successors are duly elected and qualified or until their
earlier death, resignation or removal from office. The executive officers of
FSCM and TRIB are elected annually by the respective Boards of Directors and
hold office until their successors are appointed and qualified or until their
earlier death, resignation, or removal from office.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

As required by rules adopted by the Securities and Exchange Commission ("SEC")
under Section 16(a) of the Securities Exchange Act of 1934, FSCM's directors and
executive officers are required to file with the SEC reports regarding their
ownership of FSCM's capital stock and any subsequent changes in such ownership.
FSCM believes that during fiscal 1998, all of these filing requirements were
satisfied.

Item 11. Executive Compensation

The following tables show, for the fiscal years ended March 31, 1998, 1997 and
1996, compensation awarded to, paid to or earned by FSCM's Chief Executive
Officer and to the four most highly-compensted executive officers of FSCM or
TRIB whose salary and bonus exceeded $100,000 in fiscal 1998:

SUMMARY COMPENSATION TABLE
<TABLE>
Long-Term Compensation
----------------------
Awards
Annual Compensation ----------------------
Fiscal -------------------- Securities Underlying All Other
Director or Executive Officer Year Salary Bonus Options1 Compensation2
- ------------------------------------------------ ------ -------- -------- ---------------------- -------------
<S> <C> <C> <C> <C> <C>
Douglas M. Kratz 1998 $ --- $ --- --- $19,338
Chairman of the Board, Chief Executive Officer, 1997 --- --- --- 18,375
Chief Financial Officer of FSCM and 1996 --- --- --- 21,575
Vice Chairman of the Board of TRIB

Perry B. Hansen 1998 200,443 98,880 --- 19,338
President of FSCM, Chairman of the Board and 1997 189,758 46,865 --- 18,375
Chief Executive Officer of TRIB 1996 182,706 66,000 --- 21,575

John T. Kustes 1998 81,362 24,102 300 19,338
Treasurer and Director of FSCM and Senior 1997 77,939 11,588 --- 18,375
Vice President, Senior Operations Officer, 1996 75,507 16,380 --- 21,575
Assistant Secretary and Director of TRIB

Richard J. Carlson 1998 131,217 51,500 500 15,138
President, Chief Operating Officer and 1997 112,746 21,630 --- 9,525
Director of TRIB 1996 100,227 28,500 --- 10,900

Donald P. Ackerman 1998 105,741 41,364 --- 7,488
Executive Vice President and Senior 1997 108,298 14,958 --- 7,925
Lending Officer of TRIB 1996 97,721 14,140 --- 10,900
<FN>
1 As of July 1, 1997, incentive stock options were issued for a total of 800
shares of FSCM Common Stock. The options have an eight-year term with an
exercise price of $100 per share, which was greater than the $90 per share
market price at the time of issuance. Only 20% will vest each year on the
annual anniversary date of grant, beginning July 1, 1997 until 100% vesting
is reached.

2 Consists of compensation received from participation in director and
committee meetings.
</FN>
</TABLE>
<PAGE>

OPTIONS GRANTS IN LAST FISCAL YEAR
<TABLE>
Percentage of Total Grant Date
Number of Securities Granted to Employees Exercise Price Expiration Present
Name Underlying Options In Fiscal Year Per Share Date Value1
- ------------------ -------------------- -------------------- -------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Richard J. Carlson 500 62.50% $ 100 07/01/2005 $6,175

John T. Kustes 300 37.50% 100 07/01/2005 3,705
<FN>

1 The estimated fair value of the option grant equaled $12.35 per option,
based upon a Black-Scholes option pricing model. Assumptions incorporated in
the pricing model included a 2.08% dividend yield, a risk-free interest rate
of 5.47%, expected option life of eight years, and expected volatility of
5.55%.
</FN>
</TABLE>

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money Options
Shares Acquired Value Options at Fiscal Year-End At Fiscal Year-End
Name On Excise Realized Exercisable/Unexercisable Exercisable/Unexercisable1
- ------------------ --------------- -------- --------------------------- --------------------------
<S> <C> <C> <C> <C>
Richard J. Carlson --- $ --- 100 / 400 $ 2,000 / $ 8,000

John T. Kustes --- $ --- 60 / 240 $ 1,200 / $ 4,800
<FN>
1 Based upon per share March 31, 1998 market value and exercise price of
$120.00 and $100.00, respectively.
</FN>
</TABLE>

(f) Compensation of Directors

Directors receive fees of $350 per FSCM Board of Directors' meeting and $650 per
TRIB Board of Directors' meeting, regardless of attendance. Members of TRIB's
Loan Committee receive $50 per hour for attended meetings of this Committee.
<PAGE>

Item 12. Security Ownership of Certain Beneficial Owners and Management

The following table sets forth certain information as of April 30, 1998
regarding the beneficial ownership of FSCM's Common Stock and includes
information regarding FSCM's other classes of equity securities by each person
who is known by FSCM to beneficially own more than 5% of FSCM's Common Stock, by
each of FSCM's Directors, by each person named in the Summary Compensation Table
and by all Directors and executive officers as a group.
<TABLE>
Number of Shares of Common Percent of Outstanding
Name and Address of Beneficial Owner Stock Beneficially Owned(1)(2) Shares of Common Stock(2)
- ------------------------------------ ------------------------------ -------------------------
<S> <C> <C>
Douglas M. Kratz 88,152 (3) 31.3% (3)
224 - 18th Street, Suite 202, Rock Island IL 61201-8719

Perry B. Hansen 88,032 (4) 31.3% (4)
224 - 18th Street, Suite 202, Rock Island IL 61201-8719

Benjamin D. Farrar, Jr. 21,711 (5) 8.3% (5)
224 - 18th Street, Suite 202, Rock Island, IL 61201-8719

Marshall & Ilsley Corporation 20,211 7.8%
770 North Water Street, Milwaukee, WI 53202

John T. Kustes 1,734 (6) *
224 - 18th Street, Suite 202, Rock Island, IL 61201-8719

Francis P. McCarthy 736 (7) *
224 - 18th Street, Suite 202, Rock Island, IL 61201-8719

Richard J. Carlson 205 (8) *
224 - 18th Street, Suite 202, Rock Island, IL 61201-8719

Donald P. Ackerman 0 *
224 - 18th Street, Suite 202, Rock Island, IL 61201-8719

All executive officers and directors as a group (7 persons) 180,413 (9) 59.7% (2)
<FN>
* Less than one percent (1%).
</FN>
</TABLE>
(1) Unless otherwise indicated, each person or group has sole voting and
investment power with respect to all outstanding shares.

(2) The amount of shares beneficially owned and the percentage calculation for
each individual includes all shares of Common Stock that each such
individual may obtain upon the conversion of FSCM's Preferred Stock
presently outstanding. The percentage calculation for each individual is
based upon 260,424 shares of Common Stock outstanding at April 30, 1998,
plus all shares of Common Stock that each such individual may obtain upon
the conversion of Preferred Stock or stock options presently outstanding
that are vested or will vest within 60 days of April 30, 1998..

(3) Includes 2,500 shares of Class A Preferred Stock owned by Mr. Kratz that
are convertible into 20,833 shares of Common Stock.

(4) Includes 2,500 shares of Class A Preferred Stock owned by Mr. Hansen that
are convertible into 20,833 shares of Common Stock; 3,898 shares of Common
Stock held under TRIB's 401(k) plan on behalf of Mr. Hansen; and 499 shares
of Common Stock held by Smith Barney on behalf of Mr. Hansen as part of his
individual retirement plan.

(5) Mr. Farrar's family members own an additional 12,284 shares of Common
Stock, the beneficial ownership of which is disclaimed by Mr. Farrar.

(6) Includes 1,524 shares of Common Stock held under TRIB's 401(k) plan on
behalf of Mr. Kustes, and 60 shares of Common Stock subject to outstanding
vested options.

(7) Includes 436 shares of Common Stock directly owned by Mr. McCarthy and 300
shares owned by Mr. McCarthy's spouse.

(8) Includes 100 shares of Common Stock subject to outstanding vested options
owned by Mr. Carlson.

(9) Consists of the shares of Common Stock described in the above table and in
Footnotes 3, 4, 6, 7 and 8 (including shares that may be acquired upon the
conversion of Preferred Stock and the exercise of stock options) and an
additional 1,554 shares held under TRIB's 401(k) plan on behalf of Jean M.
Hanson.
<PAGE>

Item 13. Certain Relationships and Related Transactions.

Richey Corporation ("Richey") provides various services to FSCM and TRIB,
including services related to strategic planning, regulatory matters,
accounting, auditing, income taxes, and loan administration, pursuant to a
Services Agreement by and between Richey and FSCM dated March 23, 1995. Douglas
M. Kratz, Chairman of the Board and Chief Executive Officer of FSCM and Vice
Chairman of the Board of TRIB, is the Secretary and Treasurer of Richey. During
the fiscal year ended March 31, 1998, Richey received $201,177 under this
Agreement, plus a bonus of $98,684. During fiscal 1997, Richey received $193,316
under the Agreement, plus a bonus of $45,088.

FSCM and TRIB obtain a portion of their insurance through Ben Farrar & Company,
Inc. This agency is owned by Messrs. Benjamin D. Farrar, III and Thomas A.
Farrar, sons of Benjamin D. Farrar, Jr., the former Chairman of the Board of
FSCM and TRIB. During the years ended March 31, 1998 and 1997, FSCM and TRIB
paid to Ben Farrar & Company, Inc. insurance premiums of $35,941 and $26,802,
respectively.

Englehart Corporation, owned by Messrs. Hansen and Kratz, provided air charter
services to FSCM and TRIB during the fiscal years ended March 31, 1998 and 1997
totaling $24,720 and $19,205, respectively. Englehart's hourly rate of $350 has
been determined to be competitive with fees being charged by other private
aviation companies. Further, during fiscal 1998, TRIB paid Englehart $12,849 for
the utilization of an accountant to complete a specific project. The rate paid
was comparable to Englehart's cost.

TRIB has had, and expects to have in the future, banking transactions, including
loans, in the ordinary course of business with executive officers and Directors
of FSCM and TRIB or with an affiliate of such person. Such transactions have
been and will be made on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions with
unrelated persons and do not and will not involve more than normal risk of
collectibility. The dollar amounts outstanding owed to TRIB of these loans made
to all of the executive officers and Directors and their affiliates was $251,000
and $1,565,000 as of March 31, 1998 and 1997, respectively.

All future and ongoing transactions between TRIB and executive officers and
directors of FSCM and TRIB and their affiliates will be on terms no more
favorable than could be obtained from unaffiliated parties and will be approved
by a majority of the Directors of TRIB not interested in the transaction.

Part IV

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

The following exhibits are filed herewith or are incorporated herein by
reference, as indicated in the description of each exhibit:

(a) Exhibits.

2.1 Agreement and Plan of Merger dated April 13, 1998 by and among Mercantile
Bancorporation, Inc., Ameribanc, Inc. and Financial Services Corporations
of the Midwest filed as Exhibit 2.1 to Form 8-K dated April 13, 1998,
which is incorporated herein by reference.

2.2 Form of Voting Agreement dated April 13, 1998 by and between Mercantile
Bancorporation Inc. and four executive officer/directors of Financial
Services Corporation of the Midwest filed as Exhibit 2.2 to Form 8-K
dated April 13, 1998, which is incorporated herein by reference.

3.1 Certificate of Incorporation of FSCM in effect on the date hereof filed
as Exhibit 3.1 to Form SB-2 dated November 6, 1992, which is incorporated
herein by reference.

3.2 Bylaws of FSCM in effect on the date hereof filed as Exhibit 3.2 to Form
SB-2 dated November 6, 1992, which is incorporated herein by reference.

3.3 Amended Certificate of Designation filed with the State of Delaware on
July 21,1997 renaming the 9.25% Class A Cumulative Convertible Preferred
Stock as 9.25% Class F Cumulative Convertible Preferred Stock.
<PAGE>

3.4 Certificate of Designation filed with the State of Delaware on July 21,
1997 setting forth the terms and provisions of a newly designated class
of Preferred Stock referred to as 9.25% Class A Cumulative Convertible
Preferred Stock.

4.1 Form of Indenture for 1996 Notes filed as Exhibit 4.1 to Amendment No. 1
to Form S-2 dated November 7, 1996, which is incorporated herein by
reference.

4.2 Specimen of 8.00% Notes Due 2006 filed as Exhibit 4.2 to Amendment No. 1
to Form S-2 dated November 7, 1996, which is incorporated herein by
reference.

10.1 Services Agreement for Financial Services Corporation of the Midwest by
and between Richey Corporation and FSCM dated March 23, 1995 filed as
Exhibit 10.1 to Form 10-KSB for the fiscal year ended March 31, 1995,
which is incorporated herein by reference.

10.2 Continuity/Severance Agreement by and between TRIB and Richard J. Carlson
dated December 22, 1995 and filed as Exhibit 10.3 to Amendment No. 1 to
Form S-2 dated November 7, 1996, which is incorporated herein by
reference.

10.3 Letter from M&I Marshall & Ilsley Bank ("M&I Bank") to FSCM dated as of
December 15, 1992 setting forth the terms of loans made by M&I Bank to
FSCM filed as Exhibit 10.1 to Form 10-QSB for the quarter ended June 30,
1993 which is incorporated herein by reference.

10.4 Revolving Business Note executed by FSCM in favor of M&I Bank in the
original principal amount of $10,000,000 dated as of July 31, 1997 filed
as Exhibit 10.1 to Form 10-Q for the quarter ended September 30, 1997
which is incorporated herein by reference.

10.5 Amendment, dated August 27, 1998, to Letter Agreement dated as of
December 15, 1992 by and between FSCM and M&I Bank filed as Exhibit 10.2
to Form 10-Q for the quarter ended September 30, 1997 which is
incorporated herein by reference.

10.6 Amendment, dated as of July 27, 1996, to Letter Agreement dated as of
December 15, 1992 by and between FSCM and M&I Bank filed as Exhibit 10.4
to Amendment No. 1 to Form S-2 dated November 7, 1996 which is
incorporated herein by reference.

10.7 Collateral Pledge Agreement executed by FSCM in favor of M&I Bank and
Master Continuing Consent to Pledge dated March 29, 1991 filed as Exhibit
10.5 to Form SB-2 on November 6, 1992 which is incorporated herein by
reference.

10.8 Summary of Material Terms of Directors' and Officers' Liability Policy
covering the policy period from October 18, 1997 to October 18, 2000
filed as Exhibit 10.3 to Form 10-Q for the quarter ended September 30,
1997 which is incorporated herein by reference.

10.9 Data Processing Services Agreement by and between M&I Data Services, Inc.
and FSCM dated October 1, 1994, including all addenda thereto filed as
Exhibit 10.1 to Form 10-QSB on February 10, 1995 which is incorporated
herein by reference.

10.10 1996 Combined Incentive and Statutory Stock Option Plan and Nonstatutory
Stock Option Agreement filed as Exhibit 10.9 to Form 10-K for the fiscal
year ended March 31, 1997 which is incorporated herein by reference.

10.11 Tax Allocation Agreement dated August 19, 1993 filed as Exhibit 10.30 to
Form 10-KSB for the fiscal year ended March 31, 1995, which is
incorporated herein by reference.

10.12 THE Rock Island Bank Employee Savings Trust Plan Document for the 401(k)
plan established April 1, 1986 filed as Exhibit 10.31 to Form 10-KSB for
the fiscal year ended March 31, 1995 which is incorporated herein by
reference.

21. Subsidiary of the registrant as filed herein.

99.1 Text of Press Release dated April 13, 1998 issued by Mercantile
Bancorporation Inc. and Financial Services Corporation of the Midwest
filed as Exhibit 99.1 to Form 8-K dated April 13, 1998 which is
incorporated herein by reference.

<PAGE>

(b) Reports on Form 8-K:

There were no exhibits or reports filed on Form 8-K filed during the quarter
ended March 31, 1998.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

FINANCIAL SERVICES CORPORATION
OF THE MIDWEST

Date June 5, 1998 By /s/ Douglas M. Kratz,
------------------ --------------------------------------
Douglas M. Kratz, Chairman, Chief
Executive Officer, Chief Financial
Officer and Director

Date June 5, 1998 By /s/ Jean M. Hanson
------------------ --------------------------------------
Jean M. Hanson, Vice President,
Controller and Chief Accounting
Officer

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

Date June 5, 1998 By /s/ Perry B. Hansen
------------------ --------------------------------------
Perry B. Hansen, President and
Director

Date June 5, 1998 By /s/ John T. Kustes
------------------- ---------------------------------------
John T. Kustes, Treasurer and Director

EXHIBIT 3.3

AMENDED CERTIFICATE OF DESIGNATION FOR
FINANCIAL SERVICES CORPORATION
OF THE MIDWEST

At a meeting of the Board of Directors of Financial Services Corporation of the
Midwest, a Delaware corporation ("FSCM"), held at 7:30 a.m. on the 26th day of
June, 1997, after notice duly given of the time, place and purpose of said
meeting or appropriate waiver of such notice, the following resolutions were
unanimously adopted by the affirmative vote of the directors of FSCM:

RESOLVED, that FSCM's 9.25% Class A Cumulative Convertible Preferred Stock as
designated in that certain Certificate of Designation filed by FSCM with the
Delaware Secretary of State on December 30, 1992 is hereby renamed as FSCM's
9.25% Class F Cumulative Convertible Preferred Stock.

The undersigned hereby certify that:

1. The foregoing resolution was unanimously adopted by the Board of Directors
of FSCM at a meeting duly called and held at the time and on the date
indicated above.

2. The foregoing resolution is required to be approved by no class of stock of
FSCM.

/s/ Douglas M. Kratz
--------------------------------------------------
Douglas M. Kratz, President

ATTEST: /s/ Patricia A. Zimmer
--------------------------------------------------
Patricia A. Zimmer, Secretary

STATE OF ILLINOIS )
COUNTY OF ROCK ISLAND )

The foregoing instrument was acknowledged before me this 2nd day of June, 1997
by Douglas M. Kratz, the President, and Patricia A. Zimmer, the Secretary, of
Financial Services Corporation of the Midwest, a Delaware corporation, each of
whom acknowledged that he or she executed the foregoing as the act and deed of
the Corporation and further acknowledged that the facts state therein are true.

/s/ De Anna Smith
-------------------------------
Notary Public

EXHIBIT 3.4

CERTIFICATE OF DESIGNATION FOR
FINANCIAL SERVICES CORPORATION OF THE MIDWEST

At a meeting of the Board of Directors of Financial Services Corporation of the
Midwest, a Delaware corporation (the "Corporation"), held at 7:30 a.m. on the
5th day of May, 1997, after notice duly given of time, place and purpose of said
meeting or appropriate waiver of such notice, the following resolutions were
unanimously adopted by the affirmative vote of the directors of the Corporation:

RESOLVED, that the Chairman and Chief Executive Officer, the President, the
Controller and Chief Accounting Officer, and the Secretary of FSCM hereby are,
and each of them with the full authority to act without the others hereby is,
authorized, in the name and on behalf of FSCM, to take all actions necessary or
desirable to issue up to 5,000 shares of 9.25% Class A Cumulative Convertible
Preferred Stock ("New Class A Preferred") with a stated value of $1,000.00 per
share, with the rights and preferences set forth in the resolutions attached as
Exhibit A hereto, including, without limitation, preparing and filing with the
Delaware Secretary of State a Certificate of Designation setting forth the terms
and provisions of the New Class A Preferred; and

RESOLVED FURTHER, that the resolutions attached as Exhibit A hereto are hereby
adopted as though fully set forth herein.

The undersigned hereby certify that:

1. The foregoing resolutions, including, without limitation, the resolutions
set forth on Exhibit A hereto, were unanimously adopted by the Board of
Directors of the Corporation at a meeting duly called and held at the time
and on the date indicated above.

2. The foregoing resolutions are not required to be approved by any holders of
ANY class of capital stock of the Corporation.

/s/ Douglas M. Kratz
---------------------------------------
Douglas M. Kratz, President

ATTEST: /s/ Patricia A. Zimmer
----------------------------------------
Patricia A. Zimmer, Secretary
STATE OF ILLINOIS )
) ss
COUNTY OF ROCK ISLAND)

The foregoing instrument was acknowledged before me this 2nd day of June, 1997,
by Douglas M. Kratz, the President, and Patricia A. Zimmer, the Secretary, of
Financial Services Corporation of the Midwest, a Delaware corporation, each of
whom acknowledged that he or she executed the foregoing as the act and deed of
the Corporation and further acknowledged that the facts stated therein are true.

/s/ De Anna Smith
------------------------------------
Notary Public

<PAGE>

Exhibit A

RESOLVED, that the proper officers of FSCM be, and hereby are, authorized and
directed to take all steps necessary or desirable to issue up to 5,000 shares of
new 9.25% Class A Cumulative Convertible Preferred Stock, with a stated value of
One Thousand and 00/100 Dollars ($1,000.00) per share (the "Class A Preferred
Stock"). The rights and preferences of the Class A Preferred Stock shall be as
follows:

1. Dividend Payments. The shares of Class A Preferred Stock shall be entitled
to receive, when and as declared by the board of directors of FSCM out of
assets of FSCM legally available for payment thereof, cumulative cash
dividends on the stated value of the Class A Preferred Stock at the per
annum rate, computed on the basis of actual days over a 360-day year, equal
to nine and one-quarter percent (9.25%). Such dividends shall be payable
quarterly on March 31, June 30, September 30 and December 31 of each year,
commencing September 30, 1997. Such dividends on the Class A Preferred
Stock shall accrue cumulatively on a daily basis from and as of the date of
original issuance of the Class A Preferred Stock until such time as the
Class A Preferred Stock is redeemed or converted, whether or not declared
and whether or not any funds of FSCM are legally available for the payment
of dividends. Dividends shall be payable to holders of record of the Class
A Preferred Stock as they appear on the books of FSCM on the record date
determined by the Board of Directors. Dividends payable for the initial
dividend period shall be based on the amount of dividends accrued since the
date of issuance of the Class A Preferred Stock.

2. Dividend Priorities. No dividend payments shall be paid or declared and set
apart for payment on any other shares of stock of FSCM, whether common or
preferred, for any period, and no shares of common stock shall be redeemed
or purchased by FSCM, unless all cumulative dividends have been paid or
contemporaneously are declared and paid or set apart for payment on the
Class A Preferred Stock for such period. Holders of the Class A Preferred
Stock shall not be entitled to any dividends, whether payable in cash,
property or stock, in excess of full dividends for any period. No interest
or sum of money in lieu of interest shall be payable in respect of any
dividend payments or payment which may be in arrears. If at any time FSCM
pays less than the total amount of dividends then accrued with respect to
the Class A Preferred Stock, such payment shall be distributed ratably
among the holders of Class A Preferred Stock based upon the aggregate
accrued but unpaid dividends on the shares of Class A Preferred Stock held
by each such holder on the record date fixed by the Board of Directors for
the payment of such dividend.

3. Voting Rights. The Class A Preferred Stock shall be non-voting, except as
may otherwise be required by applicable law and except for the special
voting rights contained in Section 5 hereof.

4. Redemption. The shares of Class A Preferred Stock are not redeemable by
FSCM upon demand or notice but only if the holder(s) of such shares agree
to any such redemption and the terms and conditions thereof. No shares of
any other class of preferred stock of FSCM may be redeemed or purchased by
FSCM until all shares of the Class A Preferred Stock have been redeemed.
Any redemption of the Class A Preferred Stock shall be subject to receipt
of all required regulatory approvals, including all required approvals from
the Board of Governors of the Federal Reserve System ("Federal Reserve
Board"), and the receipt of any consents or waivers from any third parties.

5. Appointment of Directors. If at any time FSCM falls in arrears in the
payment of dividends on the Class A Preferred Stock in an aggregate amount
at least equal to full accrued dividends for four (4) quarterly dividend
periods, holders of the Class A Preferred Stock shall be entitled, as a
class and by majority vote, to appoint two (2) members to the board of
directors of FSCM. In such event, FSCM, at its expense, will cause to be
held a special meeting of the holders of the Class A Preferred Stock as
promptly as possible for purposes of selecting the two individuals to be
appointed as members of the Board of Directors of FSCM. Such special voting
rights shall continue until all accrued and unpaid dividends on the Class A
Preferred Stock have been paid in full, at which time such special voting
rights and the appointment of the two additional board members shall
terminate until such time as dividends are again in arrears for four (4)
quarters or more. Any appointment of two (2) members to the board of
directors hereunder shall be subject to receipt of all required regulatory
approvals, including all required approvals from the Federal Reserve Board.
<PAGE>

6. Conversion Feature.

a. Timing. At the option of the holder, each share of the Class A
Preferred Stock may be converted into shares of the common stock of
FSCM, at any time and from time to time. A holder may convert part or
all of the holder's shares of preferred stock, in a single transaction
or multiple transactions.

b. Conversion Ratio. Each share of Class A Preferred Stock shall be
initially convertible into eight and one-third (8-1/3) shares of
common stock at a price of $120.00 of the stated value of the Class A
Preferred Stock per share of common stock; provided, that a holder of
Class A Preferred Stock converting such shares into shares of common
stock shall receive cash in lieu of any fractional share of common
stock, the amount of which shall be based on the greater of $120.00
per share of common stock or the per share "Book Value" of the common
stock at the "Determination Date" (as the terms "Book Value" and
"Determination Date" are defined below). For example, if a holder of
Class A Preferred Stock owned ten (10) of such shares with a total
stated value of $10,000.00, and the Book Value of the common stock was
$150.00, the holder could convert the ten (10) shares of Class A
Preferred Stock into eighty-three (83) shares of Common Stock and
would receive $50.00 of cash for the one-third fractional share of
common stock. The conversion ratio shall be adjusted as appropriate to
account for any change in the capitalization of FSCM occurring after
the date of issuance of the Class A Preferred Stock prior to actual
conversion, whether resulting from a recapitalization, stock dividend,
stock split, reverse stock split, redemption or otherwise.

c. Book Value. The per share "Book Value" of FSCM's common stock shall be
determined by FSCM on a consolidated, fully diluted basis pursuant to
the application of generally accepted accounting principles,
consistently applied. Consistent with generally accepted accounting
principles, Book Value shall not include loan or lease loss reserves.
A determination of the Book Value shall be final and binding on all
parties.

d. Determination Date. The Determination Date shall be the last day of
the calendar month immediately preceding the "Conversion Date" (as
such term is defined below).

e. Exercise of Conversion Rights. To exercise conversion rights, a holder
of Class A Preferred Stock must provide FSCM with written notice
specifying (i) the intent by the holder to exercise its conversion
rights, (ii) the number of shares of Class A Preferred Stock to be
converted and (iii) the effective date of such conversion, to be not
less than fifteen (15) days nor greater than sixty (60) days from the
date of such notice or such longer period as shall be necessary to
obtain all required regulatory approvals, including all required
approvals from the Federal Reserve Board (the "Conversion Date").

f. Payment of Dividends. Cumulative dividends accrued but unpaid on Class
A Preferred Stock at the Conversion Date shall be paid by FSCM to the
holder of such Class A Preferred Stock so converted at the Conversion
Date, pro rated through the Conversion Date.

7. Dissolution Payment and Priority. In the event of any voluntary or
involuntary dissolution, liquidation or winding up of FSCM, shares of
Class A Preferred Stock are entitled to receive, out of assets of FSCM
legally available for distribution to shareholders, before any
distribution is made to holders of any other stock of FSCM, whether
common or preferred, liquidation distributions in the amount of
$1,000.00 per share, plus accrued and unpaid dividends, if any. If the
amounts payable with respect to the Class A Preferred Stock are not
paid in full, the holders of Class A Preferred Stock shall share
ratably on a per share basis on the amount available for distribution.
Upon payment of the full amount of the stated value plus accrued and
unpaid dividends, the holders of Class A Preferred Stock will not be
entitled to any further participation in any distribution or payments
by FSCM.

8. Preemptive Rights. The holders of Class A Preferred Stock will not
have preemptive rights. The Class A Preferred Stock will be fully paid
and non-assessable.
<PAGE>

9. Amendment. The affirmative vote of the holders of at least sixty-six
and two-thirds percent (66-2/3%) of the outstanding shares of the
Class A Preferred Stock is required to amend the Certificate of
Incorporation of FSCM to (i) create or authorize any class of stock
ranking prior to the Class A Preferred Stock in respect of dividends
or distribution of assets on liquidation or otherwise alter or abolish
the liquidation preferences or any other preferential rights of the
Class A Preferred Stock, (ii) reduce the redemption price or otherwise
alter any redemption rights of the Class A Preferred Stock, (iii)
alter or abolish any rights of the Class A Preferred Stock to receive
dividends, (iv) alter or abolish the conversion rights of the Class A
Preferred Stock, or (v) exclude, or limit the voting rights of the
Class A Preferred Stock as to these matters.

EXHIBIT 21

Subsidiary of

Financial Services Corporation of the Midwest

Name of Subsidiary State of Incorporation Business Name
- -------------------------- ---------------------- --------------------------

THE Rock Island Bank, N.A. United States THE Rock Island Bank, N.A.

<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FORM THE MARCH
31, 1998 FORM 10-K OF FINANCIAL SERVICES CORPORATION OF THE MIDWEST AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 24,786
<INT-BEARING-DEPOSITS> 11,759
<FED-FUNDS-SOLD> 9,900
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 102,026
<INVESTMENTS-CARRYING> 33,646
<INVESTMENTS-MARKET> 33,928
<LOANS> 326,490
<ALLOWANCE> 6,958
<TOTAL-ASSETS> 518,046
<DEPOSITS> 408,995
<SHORT-TERM> 43,708
<LIABILITIES-OTHER> 5,962
<LONG-TERM> 25,000
0
5,000
<COMMON> 170
<OTHER-SE> 29,211
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</TABLE>