The community bank marketplace continues to change to meet the needs of customers and the demands of its competition. These circumstances reinforce confidence in CSI's business strategy to offer technology solutions that satisfy banks' diverse needs and promise an even greater demand for our products and services.

To meet these demands, CSI is increasing its staff of over 400 professionals. This staff of highly skilled and dedicated professionals is led by a visionary Management Team that is committed to our ongoing mission to be "the nation's premier community bank processor."

New ideas are welcomed from a variety of sources. We receive valuable input from our Product Advisory Council, a select group of bankers who not only serve as a sounding board for new ideas, but also submit new ones from a banker's perspective. Interaction with vendors allows us to target products that can be interfaced with our own to expand our broad range of banking solutions. Participation in the Association for Financial Technology (AFT), Bank Administration Institute (BAI) and other regional and national conferences provides insight into industry trends and reinforces our sensitivity to what's happening in the market. CSI Account Managers visit regularly with hundreds of partner banks in ten states to learn what they need and how we can help.

Major investments are necessary to continue our success strategy and build for tomorrow:

The World Wide Web-CSI believes in the power of the Internet. Our web site, www.csiweb.com, features a Bankers Desktop Library with links to financial, economic, government, bank and stock market information, plus CSI's corporate history, profile, vision, and news. CSI WebSecure, a secure Internet site available only to CSI customer banks, provides the ultimate in communication efficiency and convenience for customer banks that partner with CSI.

Open Architecture Systems-We are developing our own PC products to Microsoft standards, both Windows® and NT. The result is "open architecture systems" that integrate seamlessly with other third party software developers and position CSI to partner with vendors industry wide.

The Year 2000-During the past year we continued the proactive efforts begun in 1995 to ensure that CSI systems will perform without interruption when the critical hour of midnight 1999 arrives. Our first step was to assemble a Year 2000 project team made up of managers from every department company-wide. We have now expanded our Year 2000 plan to include the five-step approach suggested by the FFIEC to inventory all critical hardware and software, certify system compliance with internal testing or vendor contact, and modify or replace non-compliant systems. The few products that were determined to be non-compliant have been identified to customers, and alternative solutions have been offered. Wording that demonstrates our commitment to providing Year 2000 compliant systems has been added to all new contracts. This same commitment has been contractually made with existing customers through the issuance of a supplemental agreement.

In a recent FDIC examination, CSI was complimented for our plan and efforts in assisting our customer banks to become compliant. The bottom line is CSI has a well-orchestrated plan that ensures quality products and services now ... and into the next millennium.

Corporate Headquarters-Our most visible accomplishment last year was the completion of CSI Corporate Headquarters. The move to the 75,000 square-foot glass and mortar icon overlooking Interstate 24 in Paducah, Kentucky, was completed in October 1997. Sophisticated technology and a fiber optics communications network are only two of the many advantages the new facility brings to CSI. Training and conference rooms are equipped with video telecommunication capabilities and the walls of windows that wrap two of the building's three floors provide an open environment that encourages synergy among CSI employees.

The building is a visual reflection of CSI's commitment to the bank processing industry. It is a visible reminder to shareholders that you are aligned with a company that sets goals and meets them; targets markets and moves on them; aims for increased revenues and puts the money to work for you.

Fiscal 1998 was a year of performance, of building value, market share and revenues. The results:

CSI: performing today, building for tomorrow.