<PAGE>




                     U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington D.C. 20549

                                   FORM 10-KSB



[X]  Annual report under Section 13 or 15(d) of the Securities Exchange Act of
     1934 for the fiscal year ended December 31, 2002.

[ ]  Transition report under Section 13 or 15(d) of The Securities Exchange
     Act of 1934 for the transition period from ____________to ___________

--------------------------------------------------------------------------------
                         COMMISSION FILE NUMBER 0-24501

                           BLUE RIVER BANCSHARES, INC.
--------------------------------------------------------------------------------

                 (Name of small business issuer in its charter)


           Indiana                                             35-2016637
(State or other jurisdiction of                           (I.R.S. Employer
 incorporation or organization)                           Identification No.)



                29 E. Washington St., Shelbyville, Indiana 46176
               (Address of principal executive offices) (Zip Code)

                    Issuer's telephone number (317) 398-9721


       Securities to be registered under Section 12 (b) of the Act: None.

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

                           Common Shares, No Par Value
                                (Title of class)


Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 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
                                     ---       ---

<PAGE>


Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will 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-KSB
or any amendment to this Form 10-KSB. [ ]

State issuer's net interest income for the year ended December 31, 2002:
$2,363,000

Indicate by check mark whether the registrant is an accelerated filer (as
defined by Rule 12b-2 of the Act).

                      Yes_______       No  ____X____

State the aggregate market value of the voting and non-voting common stock held
by non-affiliates computed by reference to the price at which the stock was
sold, or the average bid and asked price of such common stock, as of a specified
date within the past 60 days (See definition of affiliate in Rule 12b-2 of the
Exchange Act): The aggregate market value of the voting common stock of the
issuer held by non-affiliates, based upon the price of a share of common stock
as quoted on the Small-Cap Market of NASDAQ on June 28, 2002 was $7,362,000.

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 2,406,150 shares of common stock as
of March 17, 2003 .

DOCUMENTS INCORPORATED BY REFERENCE. If the following documents are incorporated
by reference, briefly describe them and identify the part of the Form 10-KSB
(e.g. Part I, Part II, etc.) into which the document is incorporated: (1) any
annual report to security holders; (2) any proxy or information statement; (3)
any prospectus filed pursuant to Rule 424(b) or (c) of the Securities Act of
1933 ("Securities Act"). The listed documents should be clearly described for
identification purposes (e.g. annual report to security holders for fiscal year
ended December 31, 2002). The Registrant's Proxy Statement for the Annual
Meeting of Shareholders to be held is incorporated by reference into Part III
hereof, and the Annual Report of Shareholders for the year ended December 31,
2002 is incorporated by reference into Part II hereof.

Transitional Small Business Disclosure Format: Yes ___  No  X




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<PAGE>



FORM 10-KSB TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                             PAGE
                                                                                             ----
<S>               <C>                                                                        <C>
PART I

  Item  1 -       Description of Business.......................................................4

  Item  2 -       Description of Property......................................................17

  Item  3 -       Legal Proceedings............................................................19

  Item  4 -       Submission of Matters to a Vote of Security Holders .........................21

PART II

  Item  5 -       Market for Common Equity and Related Stockholder Matters.....................21

  Item  6 -       Management's Discussion and Analysis or Results of Operation.................21

  Item  7 -       Financial  Statements........................................................21

  Item  8 -       Changes in and Disagreements with Accountants on Accounting
                  and Financial Disclosure.....................................................22

PART III

  Item  9 -       Directors, Executive Officers, Promoters and Control Persons;
                  Compliance with Section 16(a) of the Exchange Act............................22

  Item 10 -       Executive Compensation ......................................................22

  Item 11 -       Security Ownership of Certain Beneficial Owners and Management and
                  Related Stockholder Matters..................................................22

  Item 12 -       Certain Relationships and Related Transactions...............................22

  Item 13 -       Exhibits, Financial Statement Schedules and Reports on Form 8-K..............23

  Item 14 -       Controls and Procedures......................................................24

                  Signature Page...............................................................25

                  Certifications...............................................................26

                  Exhibits.....................................................................28
</TABLE>



                                       3
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PART I.

ITEM 1.  DESCRIPTION OF BUSINESS

GENERAL

Blue River Bancshares, Inc. (the "Company") was organized on March 18, 1997 for
the purpose of acquiring or forming a bank to be headquartered in Shelbyville,
Indiana. On February 5, 1998, the Company entered into an Agreement of
Affiliation and Merger (the "Merger Agreement") with Shelby County Bancorp
("SCB" or the "Predecessor") and Shelby County Savings Bank (the "Bank")
pursuant to which the Company would acquire the Bank through the merger of SCB
into the Company (the "Merger").

On June 26, 1998, the Company completed a successful public offering of
1,500,000 new common shares at a price of $12 per share and acquired the Bank
pursuant to the Merger Agreement. At the closing of the Merger, the Bank's name
changed to "Shelby County Bank."

In December 1998, the Bank announced its intention to expand into the Fort
Wayne, Indiana market. The Bank received regulatory approval in 1999 and
commenced operations of two locations in September 1999.

On December 31, 2001, the Company's wholly owned subsidiary, Shelby County Bank
(the "Bank"), completed the sale of its two Fort Wayne branches pursuant to a
Branch Purchase and Assumption Agreement (the "Agreement") entered into with
Community First Bank and Trust, an Ohio state-chartered bank ("Community") on
October 17, 2001. The Agreement provided for Community's assumption of certain
deposit and other liabilities and purchase of certain assets of two branch
offices of the Bank. Collectively, the "Branches", operated as First Community
Bank, and were located at 7131 West Jefferson Boulevard, Fort Wayne, Indiana and
6154 Saint Joe Center Road, Fort Wayne, Indiana.

Under the terms of the Agreement, Community acquired the loans, personal
property, fixed assets, cash, records, and real property lease interests of the
Branches. Also Community assumed specific deposit and certain other liabilities
of the Branches. The Bank retained approximately $33 million of time deposits.
The transaction involved the purchase of approximately $31 million in assets and
the assumption of approximately $11 million in liabilities. The difference
between the assets and liabilities was offset by a cash payment from Community
to the Bank of approximately $20 million. Community retained all the employees
of the First Community branches.

All of the financial institutions in Shelby County, Indiana, except for the
Bank, are affiliated either with large out-of-state holding companies or with
medium-sized holding companies headquartered outside of Shelby County.
Accordingly, management of the Company believes that a locally-managed bank
located in Shelbyville can attract those customers who prefer to conduct
business with a local institution that demonstrates an active interest in their
business and personal financial affairs and can provide timely responses and
personal attention by its executive officers. The Company intends for the Bank
to maintain a strong commitment to community banking.

The Bank's offices are located in the Indiana cities of Shelbyville, Morristown
and St. Paul in Shelby County. The retail strategy of the Bank is to offer,
primarily in Shelby County and contiguous counties, a wide range of basic
banking products and services that are reasonably priced and easily understood
by the customer. The Bank's commercial strategy centers on small to medium-sized
businesses.

REGULATORY MATTERS

On July 10, 2000 the Office of Thrift Supervision (the "OTS") issued a letter
which formally designated Shelby County Bank to be in "troubled condition" based
upon the preliminary findings of the OTS' then ongoing examination of the Bank.
The OTS expressed supervisory concern relating to the Bank's management,
operating losses, interest rate risk sensitivity, internal controls and loan
documentation. Pursuant to the letter, the Bank is subject to the following
restrictions: (i) no increase in total assets during any quarter in excess of an
amount equal to interest credited on deposits during the quarter without prior
written approval of the OTS, (ii) prior OTS approval of all executive
compensation and agreements and the hiring of any executive officer, director or
consultant or changing the responsibilities of any current executive officer,
(iii) prior notice to the OTS of all transactions between the Bank and its
affiliates, (iv) prior OTS approval of all transactions between the Bank and
third parties outside the normal course of business and (v) no golden parachute
payments by the Bank, unless permissible pursuant to applicable law.



                                       4
<PAGE>


On February 7, 2001 the OTS issued a letter which formally designated Blue River
Bancshares, Inc. to be in "troubled condition" pursuant to the results of the
March 13, 2000 examination. This letter places restrictions on the Company to
notify the OTS at least 30 days prior to adding or replacing of members of the
board of directors, or employing or changing responsibilities of senior
executive officers. The letter also prohibits golden parachute payments unless
such payments are permitted by regulation.

On April 5, 2001, the OTS notified Shelby County Bank in writing that the
business plan and budget submitted by the Bank had been approved. Although the
Bank is no longer subject to the growth restrictions previously imposed by the
OTS, the Bank may not make any significant changes to its business plan and
budget without prior approval of the OTS. The Bank's business plan and budget
contemplates minimal growth in the foreseeable future. However, there can be no
assurances that the Bank will grow. In fact, depending on business conditions,
the Bank's size may decrease. The Bank has submitted a revised business plan and
budget to the OTS. This draft provides for the reasonable growth of the Bank
utilizing the additional $1,500,000 of capital which has been contributed to the
Bank during the second and third quarter 2002. On March 17, 2003 the OTS issued
a letter stating no objection to the growth reflected in the budget.

ENVIRONMENTAL MATTERS RELATING TO ST. PAUL PROPERTY

In August 1993, the Bank discovered the presence of petroleum compounds in both
the soil and groundwater underlying the property at the St. Paul branch of the
Bank. A portion of the property was the site of a former gasoline station. The
Bank engaged an environmental remediation firm to remove the "free product"
(i.e., gasoline) which was floating on top of the water table at the St. Paul
site. The cost of this clean-up work was approximately $10,000. On April 13,
1995, the Bank sold a portion of the St. Paul property to a resident of St.
Paul, Indiana for nominal consideration. The Bank apprised the buyer of the
environmental matters relating to the real estate sold, and the buyer released
and indemnified the Bank from all future liability connected with environmental
conditions on this property. There can be no assurance that a third party will
not make a claim against the Bank with respect to the contamination on or
originating from this portion of the St. Paul property or that if such a claim
were made that the indemnification of the Bank by the buyer of the property
would be sufficient to reimburse the Bank for any damages relating to such
claim.

With respect to the portion of the St. Paul property still owned by the Bank, in
early 1996, the Bank discovered the presence of diesel or fuel oil and gasoline
constituents in the groundwater. In early 1997, a heating oil storage tank was
removed from the ground and the area was remediated by excavating the soil
surrounding the location of the tank and replacing it with granular fill
material. An environmental remediation firm engaged by the Bank performed the
tank removal and remediation.

Prior to the acquisition, the Bank agreed with the Company in April 1998 to
begin the process of submitting the St. Paul branch location into Indiana's
Voluntary Remediation Program (the "VRP"). Again, the Bank engaged an
environmental consultant to assist it in this process. After performing
preliminary testing, the consultant informed the Bank that remediation would be
necessary to remove diesel or fuel oil and gasoline constituents in the
groundwater. The consultant estimated the remediation and costs associated with
the VRP to be $157,920 plus any costs incurred by the Indiana Department of
Environmental Management ("IDEM") which were believed to be immaterial. The Bank
charged to expense approximately $150,000 in its income statement for the period
ended March 31, 1998.

In contemplation of entering the VRP, the Bank's environmental consultant,
during the summer of 1998, performed additional testing on the portion of the
St. Paul property still owned by the Bank. These tests confirmed the presence of
diesel or fuel oil and gasoline constituents in the groundwater. Assuming
successful completion of the VRP, as the program currently exists, is
interpreted and is applied, which may include further remediation of the site,
IDEM will issue a Certificate of Completion (which is recorded) and the Governor
of the State of Indiana will issue a Covenant Not to Sue.

Additionally, IDEM and the U.S. Environmental Protection Agency ("EPA") have a
Memorandum of Agreement that provides in substance that once a Certificate of
Completion has been issued by IDEM, unless the site poses an immediate and
substantial threat to human health and the environment, EPA will not plan or
anticipate any federal action under the Superfund law. Based upon the extent of
the contamination found during the summer of 1998, the Bank's environmental
consultant revised its estimate for completion of the project. On November 17,
1998 the Bank's environmental consultant estimated that the total cost for
completion of the VRP, including the remediation prior to entering the VRP, was
$238,000 plus any costs incurred by IDEM which are believed to be immaterial.
The




                                       5
<PAGE>

additional cost associated with the VRP was added to the Company's goodwill
resulting from the merger and was subsequently written off.

The Company has been actively remediating the site since April of 1999. No "free
product" has been detected for several quarters and the levels of dissolved
phase contamination in the groundwater are generally decreasing. During the
fourth quarter of 2000, the Bank's management evaluated the project status with
the environmental consultant to assess the status of the remediation process.
During this discussion, it was determined that the remediation period is
expected to last longer than the original estimate. The environmental consultant
estimated that an additional one to two years of active remediation may be
necessary; and that the total costs to completion of the remediation and VRP
process should range from $123,500 to $188,000. The Company incurred an
additional $50,000 charge against earnings for 2000 to adjust the accrual to
cover future estimated costs. In 2002, based on recent estimates of the
environmental consultant, the cost to complete the remediation is now said to be
$112,000. Therefore an additional charge of $112,000 against earnings was taken
during the third quarter of 2002.

On November 19, 2001 the Company entered into a Voluntary Remediation Agreement
with IDEM. During the third quarter 2002, additional expenses of $12,000
relating to the environmental remediation were incurred. Based on current
estimates of its environmental consultant, the cost to complete the remediation
described in the remediation work plan and complete the VRP is estimated to be
approximately $100,000 (including the fee payable to the Indiana Department of
Environmental Management). Accordingly, the Bank charged to expenses an
additional $100,000 in its income statement for the period ended September 30,
2002. There can be no assurance that the Bank will successfully complete the
Voluntary Remediation Program or that the remaining cost relating to the
Voluntary Remediation Program will not exceed $100,000. Even if the Bank does
successfully complete the VRP, there can be no assurance that a non-governmental
entity or person will not make a claim against the Bank with respect to the
environmental matters relating to the St. Paul property.

On June 26, 2002, the Bank submitted a Remediation Work Plan with respect to the
St. Paul branch of the Bank which is currently entered in Indiana's Voluntary
Remediation Program. The Work Plan addressed contaminants of concern in both the
soil and groundwater, irrespective of the source of contaminants. On September
30, 2002 the active remediation was turned off. The site was sampled for the
presence of any of the contaminates above threshold levels in December of 2002.
That sample did not indicate the presence of any contaminants above the
threshold levels. The site was sampled again in March of 2003. The results of
that sample are not yet available to the Company. Depending upon the results of
that sample, the Bank may determine to remove the active remediation system from
the site. There can be no assurance, however, that the level of the contaminants
will not rebound above the threshold levels prior to completion of the
Remediation Work Plan requiring the re-installation of the system and additional
costs. The results of the sampling process are being provided to IDEM on an
ongoing basis. Monitoring and sampling must indicate a minimum of eight
consecutive quarters in which the level of contaminants does not exceed the
threshold levels before IDEM may make a determination that the program is
completed.

MARKET AREA

The Bank's primary service area is Shelby County, which is located approximately
25 miles southeast of Indianapolis, Indiana. According to the 2001 Census,
Shelby County's population is 43,580, ranked 33rd of 92 Indiana counties. The
population has increased 7.8% compared to the 1990 census, ranking 45th in
population growth in the state over the ten-year period. According to STATS
Indiana, the population of Shelby County is projected to be 32nd among the 92
counties in population growth projected to 2020. According to STATS Indiana,
Shelby County businesses employed 23,210 full and part-time workers in 2001. Of
the total payrolls, 96.1% were from nonfarm employment, with the most prevalent
segments being manufacturing (29.3%), services (17.6%), retail trade (16.1%).
Shelby County ranks 24th in per capita income in 2000 and 22nd in the state in
median household income in 2000. The unemployment rate in Shelby County was 4.8%
in December 2002, compared to a state average of 4.7%. Total deposits held by
Shelby County financial institutions were $472 million at June 30, 2002,
according to the FDIC/OTS Summary of Deposits report.

The Company's executive offices are located at 29 East Washington Street, P.O.
Box 927, Shelbyville, Indiana 46176 and its telephone number is (317) 398-9721.

SERVICE CORPORATION SUBSIDIARY

OTS regulations permit federal savings associations to invest in the capital
stock, obligations, or other specified types of securities of subsidiaries
(referred to as "service corporations") and to make loans to such subsidiaries
and joint ventures in which such subsidiaries are participants in an aggregate
amount not exceeding 2% of an




                                       6
<PAGE>

association's assets, plus an additional 1% of assets if the amount over 2% is
used for specified community or inner-city development purposes. In addition,
federal regulations permit associations to make specified types of loans to such
subsidiaries (other than special-purpose finance subsidiaries), in which the
association owns more than 10% of the stock, in an aggregate amount not
exceeding 50% of the association's regulatory capital if the association's
regulatory capital is in compliance with applicable regulations. FIRREA requires
a savings association that acquires a non-savings association subsidiary, or
that elects to conduct a new activity within a subsidiary, to give the Federal
Deposit Insurance Corporation ("FDIC") and the OTS at least 30 days advance
written notice. The FDIC may, after consultation with the OTS, prohibit specific
activities if it determines such activities pose a serious threat to the Savings
Association Insurance Fund (the "SAIF"). Moreover, FIRREA requires savings
associations to deduct from capital, for purposes of meeting the core capital,
tangible capital, and risk-based capital requirements, their entire investment
in and loans to a subsidiary engaged in activities not permissible for a
national bank (other than exclusively agency activities for its customers or
mortgage banking subsidiaries).

The Bank wholly owns two subsidiaries. First Tier One Corporation, an Indiana
corporation, holds common stock issued by Intrieve, Inc., the Bank's previous
data processing provider. Through March 1994, it offered tax-deferred annuity
products. The Shelby Group, Inc., an Indiana Corporation ("TSGI"), offered a
full line of insurance products, including health, life, auto and medical
insurance. The Bank ceased the operations of TSGI as of November 1, 1996.

EMPLOYEES

As of December 31, 2002, the Bank employed 36 persons on a full-time basis and 7
persons on a part-time basis. Of the 36 full time employees, the Company
employed 5 of them on a part-time basis. None of the Bank's employees are
represented by a collective bargaining group. All employees of the former Fort
Wayne banking offices were retained by Community First and their employment with
the Bank was terminated effective December 31, 2001. Management of the Bank
considers its employee relations to be good.

COMPETITION

The Company and the Bank face strong competition for deposits, loans and other
financial services from numerous Indiana and out-of-state banks, thrifts, credit
unions and other financial institutions as well as other entities which provide
financial services, including consumer finance companies, securities brokerage
firms, mortgage brokers, equipment leasing companies, insurance companies,
mutual funds, and other lending sources and investment alternatives. Some of the
financial institutions and financial services providers with which the Bank
competes are not subject to the same degree of regulation as the Bank. Many of
the financial institutions aggressively compete for business in the Bank's
market areas. Many of these competitors have been in business for many years,
have established customer bases, have substantially higher lending limits than
the Bank, and are larger and will be able to offer certain services that the
Bank does not expect to provide in the foreseeable future, including home
electronic banking services and international banking services. In addition,
most of these entities have greater capital resources than the Bank, which,
among other things, may allow them to price their services at levels more
favorable to the customer and to provide larger credit facilities than could the
Bank.

TAXATION

Federal Taxation. The Company and the Bank will file a consolidated federal
income tax return on the accrual basis for each calendar year ending December
31. The consolidated federal income tax return has the effect of eliminating
intercompany distributions, including dividends, in the computation of
consolidated taxable income. Income of the Company generally would not be taken
into account in determining the bad debt deduction allowed to the Bank,
regardless of whether a consolidated tax return is filed. However, certain
"functionally related" losses of the Company would be required to be taken into
account in determining the permitted bad debt deduction which, depending upon
the particular circumstances, could reduce the bad debt deduction. The Bank's
federal income tax returns have not been audited in the last six years.

Historically, savings associations, such as the Bank, have been permitted to
compute bad debt deductions using either the bank experience method or the
percentage of taxable income method. However, for years beginning after December
31, 1995, the Bank is no longer able to use the percentage of taxable income
method of computing its allocable tax bad debt deduction. The Bank is required
to compute its allocable deduction using the experience method. As a result of
the repeal of the percentage of taxable income method, reserves taken after 1987
using the percentage of taxable income method generally must be included in
future taxable income over a six-year period, although a two-year delay may be
permitted for institutions meeting a residential mortgage loan origination test.
In


                                       7
<PAGE>

addition, the pre-1988 reserve, in which no deferred taxes have been recorded,
will not have to be recaptured into income unless (i) the Bank no longer
qualifies as a bank under the Internal Revenue Code of 1986, as amended (the
"Code"), or (ii) excess dividends are paid out by the Bank.

Depending on the composition of its items of income and expense, a savings
institution may be subject to the alternative minimum tax. A savings institution
must pay an alternative minimum tax equal to the amount (if any) by which 20% of
alternative minimum taxable income ("AMTI"), as reduced by an exemption varying
with AMTI, exceeds the regular tax due. AMTI equals regular taxable income
increased or decreased by certain tax preferences and adjustments, including
depreciation deductions in excess of that allowable for alternative minimum tax
purposes, tax-exempt interest on most private activity bonds issued after August
7, 1986 (reduced by any related interest expense disallowed for regular tax
purposes), the amount of the bad debt reserve deduction claimed in excess of the
deduction based on the experience method and 75% of the excess of adjusted
current earnings over AMTI (before this adjustment and before any alternative
tax net operating loss). AMTI may be reduced only up to 90% by net operating
loss carryovers, but alternative minimum tax paid that is attributable to most
preferences (although not to post-August 7, 1986 tax-exempt interest) can be
credited against regular tax due in later years.

On August 20, 1996, the "Small Business Job Protection Act of 1996" was passed
into law. One provision of this act repeals the special bad debt reserve method
for thrift institutions currently provided for in Section 593 of the Code. The
provision requires thrifts to recapture any reserves accumulated after 1987 but
generally forgives taxes owed. Thrift institutions have been given six years to
account for the recaptured excess reserves, beginning with the first taxable
year after 1995, and are permitted to delay the timing of this recapture for one
or two years subject to whether they meet certain residential loan test
requirements.

Income of the Bank appropriated to bad debt reserves and deducted for federal
income tax purposes is not available for payment of cash dividends or other
distributions to the Company without the payment of federal income taxes by the
Bank on the amount of such income deemed removed from the reserves at the
then-current income tax rate. At December 31, 2002, approximately $1.1 million
of the Bank's retained income represented bad debt deductions for which no
federal income tax provision had been made.

State Taxation. The Bank is subject to Indiana's Financial Institutions Tax
("FIT"), that is imposed at a flat rate of 8.5% on "adjusted gross income."
"Adjusted gross income," for purposes of FIT, begins with taxable income as
defined by Section 63 of the Code, and thus, incorporates federal tax law to the
extent that it affects the computation of taxable income. Federal taxable income
is then adjusted by several Indiana modifications. Other applicable state taxes
include generally applicable sales and use taxes plus real and personal property
taxes.

The Bank's state income tax returns have not been audited in the last six years.

SUPERVISION AND REGULATION

GENERAL

Financial institutions and their holding companies are extensively regulated
under federal and state law. Consequently, the growth and earnings performance
of the Company and the Bank can be affected not only by management decisions and
general economic conditions, but also by the statutes administered by, and the
regulations and policies of, various governmental regulatory authorities. Those
authorities include, but are not limited to, Federal Board of Governors of The
Federal Reserve Bank (the "Federal Reserve"), the OTS, the Federal Deposit
Insurance Corporation (the "FDIC"), the Indiana Department of Financial
Institution (the "Department"), the Securities and Exchange Commission (the
"Commission"), the Internal Revenue Service and state taxing authorities. The
effect of such statutes, regulations and policies can be significant, and cannot
be predicted with a high degree of certainty.

Federal and state laws and regulations generally applicable to financial
institutions and their holding companies regulate, among other things, the scope
of business, investments, reserves against deposits, capital levels relative to
operations, lending activities and practices, the nature and amount of
collateral for loans, the establishment of branches, mergers, consolidations and
dividends. The system of supervision and regulation applicable to the Company
and the Bank establishes a comprehensive framework for their respective
operations and is intended primarily for the protection of the FDIC's deposit
insurance funds, the depositors of the Bank and the public, rather than
shareholders of the Bank or the Company.


                                       8
<PAGE>

Federal law and regulations establish supervisory standards applicable to the
operation, management and lending activities of the Bank, including internal
controls, loan documentation, credit underwriting, interest rate exposure, asset
growth, compensation and loan-to-value ratios for loans secured by real
property. The Bank will continue to comply with these requirements, and in some
cases may apply more restrictive standards.

The following references to statutes and regulations are intended to summarize
material effects of certain government regulation on the business of the Company
and the Bank. Any change in government regulation may have a material adverse
effect on the Company, the Bank and their operations.


REGULATION OF THE COMPANY UNDER HOLA

As the holding company for the Bank, the Company is regulated as a
"non-diversified savings and loan holding company" within the meaning of Home
Owners Loan Act (the "HOLA"), and subject to regulatory oversight of the
Director of the OTS. As such, the Company will be registered with the OTS and
thereby subject to OTS regulations, examinations, supervision and reporting
requirements. As a subsidiary of a savings and loan holding company, the Bank is
subject to certain restrictions in its dealings with the Company and with other
companies affiliated with the Company.

In general, the HOLA prohibits a savings and loan holding company, without prior
approval of the Director of the OTS, from acquiring control of another savings
association or savings and loan holding company or retaining more than 5% of the
voting shares of a savings association or of another holding company which is
not a subsidiary. The HOLA restricts the ability of a director or officer of the
Company, or any person who owns more than 25% of the Company's common stock,
from acquiring control of another savings association or savings and loan
holding company without obtaining the prior approval of the Director of the OTS.

OTS regulations generally do not restrict the permissible business activities of
a unitary savings and loan holding company.

Notwithstanding the above rules as to permissible business activities of unitary
savings and loan holding companies, if the savings association subsidiary of
such a holding company fails to meet the QTL test, then such unitary holding
company would become subject to the activities restrictions applicable to
multiple holding companies. Additional restrictions on securing advances from
the Federal Home Loan Bank (the "FHLB") also apply. At December 31, 2002, the
Bank's asset composition was in excess of that required to qualify as a
Qualified Thrift Lender ("QTL").

If the Company were to acquire control of another savings association other than
through a merger or other business combination with the Bank, the Company would
thereupon become a multiple savings and loan holding company. Except where such
acquisition is pursuant to the authority to approve emergency thrift
acquisitions and where each subsidiary savings association meets the QTL test,
the activities of the Company and any of its subsidiaries (other than the Bank
or other subsidiary savings associations) would thereafter be subject to further
restrictions. The HOLA provides that, among other things, no multiple savings
and loan holding company or subsidiary thereof which is not a savings
association shall commence or continue for a limited period of time after
becoming a multiple savings and loan holding company or subsidiary thereof, any
business activity other than (i) furnishing or performing management services
for a subsidiary savings association, (ii) conducting an insurance agency or
escrow business, (iii) holding, managing, or liquidating assets owned by or
acquired from a subsidiary savings association, (iv) holding or managing
properties used or occupied by a subsidiary savings association, (v) acting as
trustee under deeds of trust, (vi) those activities previously directly
authorized by the FSLIC by regulation as of March 5, 1987, to be engaged in by
multiple holding companies, or (vii) those activities authorized by the Federal
Reserve as permissible for bank holding companies, unless the Director of the
OTS by regulation prohibits or limits such activities for savings and loan
holding companies. Those activities described in (vii) above must also be
approved by the Director of the OTS before a multiple holding company may engage
in such activities.

The Director of the OTS may also approve acquisitions resulting in the formation
of a multiple savings and loan holding company which controls savings
associations in more than one state, if the multiple savings and loan holding
company involved controls a savings association which operated a home or branch
office in the state of the association to be acquired as of March 5, 1987, or if
the laws of the state in which the association to be acquired is located
specifically permit associations to be acquired by state-chartered associations
or savings and loan holding companies located in the state where the acquiring
entity is located (or by a holding company that controls such state-chartered
savings associations). Also, the Director of the OTS may approve an acquisition
resulting in a



                                       9
<PAGE>

multiple savings and loan holding company controlling savings associations in
more than one state in the case of certain emergency thrift acquisitions.

Indiana law permits federal and state savings association holding companies with
their home offices located outside of Indiana to acquire savings associations
whose home offices are located in Indiana and savings association holding
companies with their principal place of business in Indiana ("Indiana Savings
Association Holding Companies") upon receipt of approval by the Department.
Moreover, Indiana Savings Association Holding Companies may acquire savings
associations with their home offices located outside of Indiana and savings
association holding companies with their principal place of business located
outside of Indiana upon receipt of approval by the Department.

No subsidiary savings association of a savings and loan holding company may
declare or pay a dividend on its permanent or nonwithdrawable stock unless it
first gives the Director of the OTS 30 days advance notice of such declaration
and payment. Any dividend declared during such period or without giving notice
shall be invalid.

REGULATION OF THE BANK

As a federally chartered, Savings Association Insurance Fund ("SAIF") insured
savings association, the Bank is subject to extensive regulation by the OTS and
the FDIC. For example, the Bank must obtain OTS approval before it may engage in
certain activities and must file reports with the OTS regarding its activities
and financial condition. The OTS periodically examines the Bank's books and
records and, in conjunction with the FDIC, due to SAIF insurance, in certain
situations, has examination and enforcement powers. This supervision and
regulation are intended primarily for the protection of depositors and federal
deposit insurance funds. The Bank's semi-annual assessment owed to the OTS,
which is based upon a specified percentage of deposits, is approximately
$77,000.

The activities of the Bank are governed by the HOLA and, in certain respects,
the Federal Deposit Insurance Act, as amended (the "FDI Act"). The Director of
the OTS is authorized to promulgate regulations to ensure the safe and sound
operation of savings associations and may impose various requirements and
restrictions on the activities of savings associations.

FEDERAL HOME LOAN BANK SYSTEM. The Bank is a member of the FHLB of Indianapolis.
The FHLB System consists of 12 regional FHLBs. Each FHLB serves as a reserve or
central bank for its members within its assigned region. It is funded primarily
from funds deposited by savings associations and proceeds derived from the sale
of consolidated obligations of the FHLB System. It makes loans to members (i.e.,
advances) in accordance with policies and procedures established by the Board of
Directors of the FHLB. All FHLB advances must be fully secured by sufficient
collateral as determined by the FHLB. The Federal Housing Finance Board, an
independent agency, controls the FHLB System, including the FHLB of
Indianapolis.

As a member of the FHLB of Indianapolis, the Bank is required to purchase and
maintain stock in the FHLB of Indianapolis in an amount equal to at least 1% of
its aggregate unpaid residential mortgage loans, home purchase contracts, or
similar obligations at the beginning of each year. At December 31, 2002, the
Bank's investment in stock of the FHLB of Indianapolis was $2,153,000. The FHLB
imposes various limitations on advances such as limiting the amount of certain
types of real estate-related collateral to 30% of a member's capital and
limiting total advances to a member. Interest rates charged for advances vary
depending upon maturity, the cost of funds to the FHLB of Indianapolis and the
purpose of the borrowing.

The FHLBs are required to provide funds for the resolution of troubled savings
associations and to contribute to affordable housing programs through direct
loans or interest subsidies on advances targeted for community investment and
low- and moderate-income housing projects. These contributions have adversely
affected the level of FHLB dividends paid and could continue to do so in the
future. For the year ended December 31, 2002, dividends paid by the FHLB of
Indianapolis to the Bank totaled approximately $131,000, for an annual rate of
6.06%.

SAVINGS ASSOCIATION REGULATORY CAPITAL. Currently, savings associations are
subject to three separate minimum capital-to-assets requirements: (i) a leverage
limit, (ii) a tangible capital requirement, and (iii) a risk-based capital
requirement. The leverage limit requires that savings associations maintain
"core capital" of at least 4% of total assets, 3% for savings associations with
a composite rating of 1. Core capital is generally defined as common
shareholders' equity (including retained income), noncumulative perpetual
preferred stock and related surplus, certain minority equity interests in
subsidiaries, certain non-withdrawable accounts, qualifying supervisory
goodwill, purchased mortgage servicing rights and purchased credit card
relationships (subject to certain limits) less nonqualifying intangibles. Under
the tangible capital requirement, a savings association must maintain tangible




                                       10
<PAGE>

capital (core capital less all intangible assets except purchased mortgage
servicing rights which may be included after making the above-noted adjustment
in an amount up to 100% of tangible capital) of at least 1.5% of total assets.
Under the risk-based capital requirements, a minimum amount of capital must be
maintained by a savings association to account for the relative risks inherent
in the type and amount of assets held by the savings association. The risk-based
capital requirement requires a savings association to maintain capital (defined
generally for these purposes as core capital plus general valuation allowances
and permanent or maturing capital instruments such as preferred stock and
subordinated debt less assets required to be deducted) equal to 8.0% of
risk-weighted assets. Assets are ranked as to risk in one of four categories
(0-100%). A credit risk-free asset, such as cash, requires no risk-based
capital, while an asset with a significant credit risk, such as a non-accrual
loan, requires a risk factor of 100%. Moreover, a savings association must
deduct from capital, for purposes of meeting the core capital, tangible capital
and risk-based capital requirements, its entire investment in and loans to a
subsidiary engaged in activities not permissible for a national bank (other than
exclusively agency activities for its customers or mortgage banking
subsidiaries). At December 31, 2002, the Bank was in compliance with all capital
requirements imposed by law.

In 1994 and 1997 the OTS proposed new regulations affecting risk based capital
standards and regulatory treatment of recourse obligations. However, final rules
were never issued. On March 8, 2000, the OTS again proposed new regulations in
this area. Until a final rule is issued, the impact on the savings association
can not be determined.

The following is a summary of the Bank's regulatory capital and capital
requirements at December 31, 2002:


<TABLE>
<CAPTION>
                                 TANGIBLE       CORE      RISK-BASED
FOR CAPITAL ADEQUACY PURPOSES    CAPITAL      CAPITAL      CAPITAL
-----------------------------    --------     -------     ----------
<S>                              <C>          <C>         <C>
Bank amount                      $ 6,670      $ 6,670      $ 7,410
Required amount                    1,378        2,755        4,658
                                 -------      -------      -------
Excess                           $ 5,292      $ 3,915      $ 2,752
                                 =======      =======      =======
Bank ratio                          7.26%        7.26%       12.73%
Required ratio                      1.50%        3.00%        8.00%
                                 -------      -------      -------
Ratio excess                        5.76%        4.26%        4.73%
                                 =======      =======      =======
</TABLE>


If an association is not in compliance with the capital requirements, the OTS is
required to prohibit asset growth and to impose a capital directive that may
restrict, among other things, the payment of dividends and officers'
compensation. In addition, the OTS and the FDIC generally are authorized to take
enforcement actions against a savings association that fails to meet its capital
requirements. These actions may include restricting the operations activities of
the association, imposing a capital directive, cease and desist order, or civil
money penalties, or imposing harsher measures such as appointing a receiver or
conservator or forcing the association to merge into another institution.

DIVIDEND LIMITATIONS. An OTS regulation imposes limitations upon all "capital
distributions" by savings associations, including cash dividends, payments by an
association to repurchase or otherwise acquire its shares, payments to
shareholders of another institution in a cash-out merger and other distributions
charged against capital. Under the regulation a savings association may be
required to file an application, a notice or northing at all prior to making a
capital distribution. A savings association will be required to file an
application prior to making a capital distribution if (i) the association is not
eligible for expedited treatment under the applicable OTS regulations, (ii) the
total amount of all of the associations capital distributions (including the
proposed capital distribution) for the applicable calendar year exceeds the
association's net income for that year to date plus the association's retained
net income for the preceding two years, (iii) the distribution, or (iv) the
proposed capital distribution would violate a prohibition contained in any
applicable statute, regulation, or agreement between the association and the OTS
(or the FDIC), or violate a condition imposed on the association in an
OTS-approved application or notice. A savings association will be required to
file a notice prior to making a capital distribution if : (i) the association
would not be well capitalized following the distribution, (ii) the proposed
capital distribution would reduce the amount of or retire any part of the
associations common or preferred stock or retire any part of debt instruments
such as notes or debentures included in capita under the OTS regulations, or
(iii) the association is a subsidiary of a savings and loan holding company.
Neither an application nor a notice will be required to be filed by the savings
association prior to making a capital distribution if none of the above criteria
are met.



                                       11
<PAGE>

REAL ESTATE LENDING STANDARDS. OTS regulations require savings associations to
establish and maintain written internal real estate lending policies. Each
association's lending policies must be consistent with safe and sound banking
practices and appropriate to the size of the association and the nature and
scope of its operations. The policies must establish loan portfolio
diversification standards; establish prudent underwriting standards, including
loan-to-value limits, that are clear and measurable; establish loan
administration procedures for the association's real estate portfolio; and
establish documentation, approval, and reporting requirements to monitor
compliance with the association's real estate lending policies. The
association's written real estate lending policies must be reviewed and approved
by the association's Board of Directors at least annually. Further, each
association is expected to monitor conditions in its real estate market to
ensure that its lending policies continue to be appropriate for current market
conditions.

LOANS TO ONE BORROWER. The Bank may not make a loan or extend credit to a single
or related group of borrowers in excess of 15% of its unimpaired capital and
surplus. Additional amounts may be lent, not in excess of 10% of unimpaired
capital and surplus, if such loans or extensions of credit are fully secured by
readily marketable collateral, including certain debt and equity securities but
not including real estate. In some cases, a savings association may lend up to
30 percent of unimpaired capital and surplus to one borrower for purposes of
developing domestic residential housing, provided that the association meets its
regulatory capital requirements and the OTS authorizes the association to use
this expanded lending authority. At December 31, 2002, the Bank did not have any
loans or extensions of credit to a single or related group of borrowers in
excess of its lending limits.

QUALIFIED THRIFT LENDER. Savings associations must meet a QTL test. If the Bank
maintains an appropriate level of qualified thrift investments ("QTIs")
(primarily residential mortgages and related investments, including certain
mortgage-related securities) and otherwise qualifies as a QTL, the Bank will
continue to enjoy full borrowing privileges from the FHLB of Indianapolis. The
required percentage of QTIs is 65% of portfolio assets (defined as all assets
minus intangible assets, property used by the association in conducting its
business and liquid assets in an amount not exceeding 20% of total assets). In
addition, savings associations may include shares of stock of the FHLBs, FNMA,
and FHLMC as QTIs. Compliance with the QTL test is determined on a monthly basis
in nine out of every twelve months. As of December 31, 2002, the Bank was in
compliance with its QTL requirement, with approximately 85% of its assets
invested in QTIs.

A savings association which fails to meet the QTL test must either convert to a
bank (but its deposit insurance assessments and payments will be those of and
paid to the SAIF) or be subject to the following penalties: (i) it may not enter
into any new activity except for those permissible for a national bank and for a
savings association; (ii) its branching activities shall be limited to those of
a national bank; (iii) it shall not be eligible for any new FHLB advances; and
(iv) it shall be bound by regulations applicable to national banks respecting
payment of dividends. Three years after failing the QTL test the association
must (i) dispose of any investment or activity not permissible for a national
bank and a savings association and (ii) repay all outstanding FHLB advances. If
such a savings association is controlled by a savings and loan holding company,
then such holding company must, within a prescribed time period, become
registered as a bank holding company and become subject to all rules and
regulations applicable to bank holding companies (including restrictions as to
the scope of permissible business activities).

BRANCHING. The rules of the OTS on branching by federally-chartered savings
associations permit nationwide branching to the extent allowed by federal
statute. This permits federal savings associations with interstate networks to
diversify their loan portfolio and lines of business. The OTS authority
pre-empts any state law purporting to regulate branching by federal savings
associations.

INSURANCE OF DEPOSITS. The FDIC is an independent federal agency that insures
the deposits, up to prescribed statutory limits, of banks and thrifts and
safeguards the safety and soundness of the banking and thrift industries. The
FDIC administers two separate insurance funds, the Bank Insurance Fund (the
"BIF") for commercial banks and state savings banks and the SAIF for savings
associations such as the Bank and banks that have acquired deposits from savings
associations. The FDIC is required to maintain designated levels of reserves in
each fund. As of September 30, 1996, the reserves of the SAIF were below the
level required by law, primarily because a significant portion of the
assessments paid into the SAIF have been used to pay the cost of prior thrift
failures, while the reserves of the BIF met the level required by law in May,
1995. However, on September 30, 1996, provisions designed to recapitalize the
SAIF and eliminate the premium disparity between the BIF and SAIF were signed
into law.



                                       12
<PAGE>

The FDIC is authorized to establish separate annual assessment rates for deposit
insurance for members of the BIF and members of the SAIF. The FDIC may increase
assessment rates for either fund if necessary to restore the fund's ratio of
reserves to insured deposits to the target level within a reasonable time and
may decrease these rates if the target level has been met. The FDIC has
established a risk-based assessment system for both SAIF and BIF members. Under
this system, assessments vary depending on the risk the institution poses to its
deposit insurance fund. An institution's risk level is determined based on its
capital level and the FDIC's level of supervisory concern about the institution.

On September 30, 1996, President Clinton signed into law legislation which
included provisions designed to recapitalize the SAIF and eliminate the
significant premium disparity between the BIF and the SAIF. BIF institutions pay
lower assessments than comparable SAIF institutions because BIF institutions pay
only 20% of the rate being paid by SAIF institutions on their deposits with
respect to obligations issued by the federally-chartered corporation which
provided some of the financing to resolve the thrift crisis in the 1980's
("FICO"). The 1996 law also provides for the merger of the SAIF and the BIF, but
not until such time as bank and thrift charters are combined. Until the charters
are combined, savings associations with SAIF deposits may not transfer deposits
into the BIF system without paying various exit and entrance fees, and SAIF
institutions will continue to pay higher FICO assessments. Such exit and
entrance fees need not be paid if a SAIF institution converts to a bank charter
or merges with a bank, as long as the resulting bank continues to pay applicable
insurance assessments to the SAIF, and as long as certain other conditions are
met.

In 2001, the Bank's annual deposit insurance assessment was $149,000, an
increase of 153% over the 2000 premium. This increase was due to the fact that
the Bank's risk classification during the second assessment period of 2000
changed from risk category 1B to risk category 1C as the composite CAMEL rating
of the Bank changed from a 3 to a 4. The change in the CAMEL rating increased
the assessment from $.03 per $100 in assessable deposits to $.17 per $100 in
assessable deposits. In 2002, the Bank's annual deposit insurance was $206,000,
an increase of 39% over the 2001 premium as the Bank was assessed in Risk
Category 1C for the entire assessment period.

PROMPT CORRECTIVE ACTION. The Federal Deposit Insurance Corporation Act of 1991
("FDICIA") established a system of prompt corrective action to resolve the
problems of undercapitalized institutions. Under this system, federal depository
institution regulators are required to take certain mandatory supervisory
actions, and may take certain discretionary supervisory actions against
undercapitalized institutions, the severity of which depends upon the
institution's degree of capitalization. In addition, subject to a narrow
exception, FDICIA generally requires the federal depository institution
regulators to appoint a receiver or conservator for an institution that is
critically undercapitalized.

As mandated by FDICIA, the federal banking regulators have specified by
regulation the relevant capital measures at which an insured depository
institution is deemed well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized. Pursuant to the FDIC's regulations implementing the prompt
corrective action provisions of FDICIA, a bank will be deemed to be: (i) well
capitalized if the bank has a total risk-based capital ratio of 10% or greater,
Tier 1 risk-based capital ratio of 6% or greater and leverage ratio of 5% or
greater; (ii) adequately capitalized if the bank has a total risk-based capital
ratio of 8% or greater, Tier 1 risk-based capital ratio of 4% or greater and
leverage ratio of 4% or greater (3% for the most highly rated banks); (iii)
undercapitalized if the bank has a total risk-based capital ratio of less than
8%, or Tier 1 risk-based capital ratio of 4% or greater and leverage ratio of
less than 4% (less than 3% for the most highly rated banks); (iv) significantly
undercapitalized if the bank has a total risk-based capital ratio of less than
6%, Tier 1 risk-based capital ratio of less than 3% or leverage ratio of less
than 3%; and (v) critically undercapitalized if the bank has a ratio of tangible
equity to total assets of 2% or less. At December 31, 2002, the Bank was
categorized as "well capitalized," and it was not subject to regulatory order,
agreement or directive to meet and maintain a specific level for any capital
measure. However, there are no assurances that the Bank will maintain its "well
capitalized" status.

Subject to certain exceptions, these capital ratios are generally determined on
the basis of Call Reports submitted by each depository institution and the
reports of examination by each institution's appropriate federal depository
institution regulatory agency. Depending upon the capital category to which an
institution is assigned, the regulators' corrective powers include: requiring
the submission of a capital restoration plan (which must include a holding
company guarantee of performance); placing limits on asset growth and
restrictions on activities; requiring the institution to issue additional
capital stock (including additional voting stock) or to be acquired; restricting
transactions with affiliates; restricting the interest rate the institution may
pay on deposits; ordering a new election of directors of the institution;
requiring that senior executive officers or directors be dismissed; prohibiting
the institution from accepting deposits from correspondent banks; requiring the
holding company to divest certain



                                       13
<PAGE>


subsidiaries including the institution; requiring the institution to divest
certain subsidiaries; prohibiting the payment of principal or interest on
subordinated debt; and ultimately, appointing a receiver or conservator for the
institution.

In general, a depository institution may be reclassified to a lower category
than is indicated by its capital position if the appropriate federal depository
institution regulatory agency determines the institution to be otherwise in an
unsafe or unsound condition or to be engaged in an unsafe or unsound practice.
This could include a failure by the institution, following receipt of a
less-than-satisfactory rating on its most recent examination report, to correct
the deficiency.

TRANSACTIONS WITH AFFILIATES. The Bank is subject to certain restrictions
imposed by the Federal Reserve Act ("FRA") on any extensions of credit to the
Company or its subsidiaries, on investments in the stock or other securities of
the Company or its subsidiaries, and the acceptance of the stock or other
securities of the Company or its subsidiaries as collateral for loans. These
restrictions limit the aggregate amount of transactions with any individual
affiliate to 10% of the Bank's capital and surplus, limit the aggregate amount
of transactions with all affiliates to 20% of the Bank's capital and surplus,
require that loans and certain other extensions of credit be secured by
collateral in certain specified amounts and types, generally prohibit the
purchase of low quality assets from affiliates and generally require that
certain transactions with affiliates, including loans and asset purchases, be on
terms and under circumstances, including credit standards, that are
substantially the same or at least as favorable to the Bank as those prevailing
at the time for comparable transactions with nonaffiliated individuals or
entities.

Also, the FRA prescribes certain limitations and reporting requirements on
extensions of credit by the Bank to its directors and executive officers, to
directors and executive officers of the Company and its subsidiaries, to
principal shareholders of the Company and its subsidiaries, to principal
shareholders of the Company and to "related interests" of such directors,
officers and principal shareholders. Among other things, the FRA, and the
regulations thereunder, require such loans to be made on substantially the same
terms as those offered to unaffiliated individuals, place limits on the amount
of loans the Bank may extend to such individuals and require certain approval
procedures to be followed. In addition, such legislation and regulations may
affect the terms upon which any person becoming a director or officer of the
Company or one of its subsidiaries or a principal shareholder of the Company may
obtain credit from banks with which the Bank maintains a correspondent
relationship.

LIMITATIONS ON RATES PAID FOR DEPOSITS. Regulations promulgated by the FDIC
pursuant to FDICIA limit the ability of insured depository institutions to
accept, renew or roll over deposits by offering rates of interest which are
significantly higher than the prevailing rates of interest on deposits offered
by other insured depository institutions having the same type of charter in the
institution's normal market area. Under these regulations, "well-capitalized"
depository institutions may accept, renew or roll such deposits over without
restriction, "adequately capitalized" depository institutions may accept, renew
or roll such deposits over with a waiver from the FDIC (subject to certain
restrictions on payments of rates) and "undercapitalized" depository
institutions may not accept, renew or roll such deposits over. The regulations
contemplate that the definitions of "well capitalized," "adequately capitalized"
and "undercapitalized" will be the same as the definition adopted by the
agencies to implement the corrective action provisions of FDICIA. The Bank does
not believe that these regulations will have a materially adverse effect on its
current operations.

COMMUNITY REINVESTMENT ACT MATTERS. Federal law requires that ratings of
depository institutions under the Community Reinvestment Act of 1977 ("CRA") be
disclosed. The disclosure includes both a four-unit descriptive rating
(outstanding, satisfactory, needs to improve, and substantial noncompliance) and
a written evaluation of an institution's performance. Each FHLB is required to
establish standards of community investment or service that its members must
maintain for continued access to long-term advances from the FHLBs. The
standards take into account a member's performance under the CRA and its record
of lending to first-time homebuyers. The OTS has designated the Bank's record of
meeting community credit needs as satisfactory.

SAFETY AND SOUNDNESS STANDARDS. On July 10, 1995, the FDIC, the OTS, the Federal
Reserve and the Office of the Comptroller of the Currency published final
guidelines implementing the FDICIA requirement that the federal banking agencies
establish operational and managerial standards to promote the safety and
soundness of federally insured depository institutions. The guidelines, which
took effect on August 9, 1995, establish standards for internal controls,
information systems, internal audit systems, loan documentation, credit
underwriting, interest rate exposure, asset growth and compensation, fees and
benefits, and specifically prohibit, as an unsafe and unsound practice,
excessive compensation that could lead to a material loss to an institution. The
federal banking agencies also adopted asset quality and earnings standards that
were added to the safety and soundness guidelines effective October 1, 1996. If
an institution fails to comply with any of the standards set forth in the
guidelines, the institution's primary federal regulator may require the
institution to submit a plan for achieving and maintaining compliance.




                                       14
<PAGE>

Failure to submit an acceptable compliance plan, or failure to adhere to a
compliance plan that has been accepted by the appropriate regulator, would
constitute grounds for further enforcement action.

CONSUMER BANKING. The Bank's business will include making a variety of types of
loans to individuals. In making these loans, the Bank will be subject to state
usury and regulatory laws and to various federal statutes, such as the Equal
Credit Opportunity Act, Fair Credit Reporting Act, Truth in Lending Act, Real
Estate Settlement Procedures Act and Home Mortgage Disclosure Act, and the
regulations promulgated thereunder, which prohibit discrimination, specify
disclosures to be made to borrowers regarding credit and settlement costs and
regulate the mortgage loan servicing activities of the Bank, including the
maintenance and operation of escrow accounts and the transfer of mortgage loan
servicing. The Riegle Act imposed new escrow requirements on depository and
non-depository mortgage lenders and services under the National Flood Insurance
Program. See "Supervision and Regulation -- Regulatory Developments." In
receiving deposits, the Bank will be subject to extensive regulation under state
and federal law and regulations, including the Truth in Savings Act, the
Expedited Funds Availability Act, the Bank Secrecy Act, the Electronic Funds
Transfer Act and the FDI Act. Violation of these laws could result in the
imposition of significant damages and fines upon the Bank, its directors and
officers.

REGULATORY DEVELOPMENTS

In 1994, the Congress enacted two major pieces of banking legislation, the
Riegle Community Direction Act (the "Riegle Act") and the Riegle-Neal Interstate
Banking and Branching Efficiency Act (the "Riegle-Neal Act"). The Riegle Act
addressed such varied issues as the promotion of economic revitalization of
defined urban and rural "qualified distressed communities" through special
purpose "Community Development Financial Institutions," the expansion of
consumer protection with respect to certain loans secured by a consumer's home
and reverse mortgages and reductions in compliance burdens regarding Currency
Transaction Reports, in addition to reform of the National Flood Insurance
Program, the promotion of a secondary market for small business loans and leases
and mandating specific changes to reduce regulatory impositions on depository
institutions and holding companies.

The Riegle-Neal Act substantially changed the geographic constraints applicable
to the banking industry. Effective September 29, 1995, the Riegle-Neal Act
allows bank holding companies to acquire banks located in any state in the
United States without regard to geographic restrictions or reciprocity
requirements imposed by state law, but subject to certain conditions, including
limitations on the aggregate amount of deposits that may be held by the
acquiring holding company and all of its insured depository institution
affiliates. Effective June 1, 1997 (or earlier if expressly authorized by
applicable state law), the Riegle-Neal Act allows banks to establish interstate
branch networks through acquisitions of other banks, subject to certain
conditions, including certain limitations on the aggregate amount of deposits
that may be held by the surviving bank and all of its insured depository
institution affiliates. The establishment of de novo interstate branches or the
acquisition of individual branches of a bank in another state (rather than the
acquisition of an out-of-state bank in its entirety) is allowed by the
Riegle-Neal Act only if specifically authorized by state law. The legislation
allowed individual states to "opt-out" of certain provisions of the Riegle-Neal
Act by enacting appropriate legislation prior to June 1, 1997.

Effective March 14, 1996, Indiana "opted in" to the interstate branching
provisions of the Riegle-Neal Act. The Indiana legislation authorizes, subject
to certain approval and other requirements, Indiana-chartered banks to establish
branches in states other than Indiana and out-of-state banks to establish
branches in Indiana. Indiana and out-of-state banks are authorized to establish
branches either by acquisition or de novo.

FDIC regulations, which became effective April 1, 1996, impose certain
limitations (and in certain cases, prohibitions) on (i) "golden parachute"
severance payments by troubled depository institutions, their subsidiaries and
affiliated holding companies to institution-affiliated parties (primarily
directors, officers, employees or principal shareholders of the institution),
and (ii) indemnification payments by a depository institution, their
subsidiaries and affiliated holding companies, regardless of financial
condition, to institution-affiliated parties. The FDIC regulations impose
limitations on indemnification payments which could restrict, in certain
circumstances, payments by the Company or the Bank to their respective directors
or officers otherwise permitted under Indiana state law.

The FDIC includes, in its evaluations of a bank's capital adequacy, an
assessment of the bank's exposure to declines in the economic value of the
bank's capital due to changes in interest rates. On June 26, 1996, the FDIC,
along with the Office of the Comptroller of the Currency (the "OCC") and the
Federal Reserve, issued a joint policy statement to provide guidance on sound
practices for managing interest rate risk. The statement sets forth the factors
the federal regulatory examiners will use to determine the adequacy of a bank's
capital for interest rate risk. These qualitative factors include the adequacy
and effectiveness of the bank's internal interest rate risk management process
and the level of interest rate exposure. Other qualitative factors that will be
considered include the size of



                                       15
<PAGE>

the bank, the nature and complexity of its activities, the adequacy of its
capital and earnings in relation to the bank's overall risk profile, and its
earning exposure to interest rate movements. The interagency supervisory policy
statement describes the responsibilities of a bank's board of directors in
implementing a risk management process and the requirements of the bank's senior
management in ensuring the effective management of interest rate risk. Further,
the statement specifies the elements that a risk management process must
contain.

In August 1996, the Federal Reserve and the FDIC issued final regulations
further revising their risk-based capital standards to include a supervisory
framework for measuring market risk. The effect of the new regulations is that
any bank holding company or bank which has significant exposure to market risk
must measure such risk using its own internal model, subject to the requirements
contained in the regulations, and must maintain adequate capital to support that
exposure.

The new regulations apply to any bank holding company or bank whose trading
activity equals 10% or more of its total assets, or whose trading activity
equals $1 billion or more. Examiners may require a bank holding company or bank
that does not meet the applicability criteria to comply with the capital
requirements if necessary for safety and soundness purposes.

The new regulations contain supplemental rules to determine qualifying and
excess capital, calculate risk-weighted assets, calculate market risk equivalent
assets and calculate risk-based capital ratios adjusted for market risk.

On November 12, 1999, President Clinton signed the Gramm-Leach-Bliley Act into
law. Effective as of March 11, 2000, the Gramm-Leach-Bliley Act:

         |_|   allows bank holding companies meeting management, capital and CRA
               standards to engage in a substantially broader range of
               nonbanking activities then was previously permissible, including
               insurance underwriting and agency, and underwriting and making
               merchant banking investments in commercial and financial
               companies;

         |_|   allows insurers and other financial service companies to acquire
               banks;

         |_|   removes various restrictions that previously applied to bank
               holding company ownership of securities firms and mutual fund
               advisory companies and;

         |_|   establishes the overall regulatory structure applicable to bank
               holding companies that also engage in insurance and securities
               operations.

In order for a bank holding company to engage in the broader range of activities
that are permitted by the Gramm-Leach-Bliley Act, (1) all of its depository
institutions must be well capitalized and well managed and (2) it must file a
declaration with the Federal Reserve Board that it elects to be a "financial
holding company". In addition, to commence any new activity permitted by the
Gramm-Leach-Bliley Act, each insured depository institution of the financial
holding company must have received at least a "satisfactory" rating in its most
recent examination under the Community Reinvestment Act.

The Gramm-Leach-Bliley Act also allows a national bank to own a financial
subsidiary engaged in certain of the nonbanking activities authorized for
financial holding companies. The national bank must meet certain requirements,
including that it and all of its depository institution affiliates be well
capitalized and well managed. Also, to commence any activity or acquire any
company engaged in any new activity, the national bank must have at least a
"satisfactory" Community Reinvestment Act examination rating. In addition, it
must obtain approval of the OCC.

The Gramm-Leach-Bliley Act also modified laws related to financial privacy and
community reinvestment. The new financial privacy provisions generally prohibit
financial institutions, including the Company, from disclosing nonpublic
personal financial information to third parties unless customers have the
opportunity to "opt out" of the disclosure. The Gramm-Leach-Bliley Act also
requires an annual disclosure of an institutions privacy policy in addition to a
disclosure at the time that a customer relationship is established. Regulations
governing the privacy requirements of the Act have been proposed. Until the
final rules have been issued, it is difficult to determine the impact of the
regulations on the activities of the Company.


                                       16
<PAGE>
Only July 30, 2002, President George W. Bush signed into law the Sarbanes-Oxley
Act of 2002 (the "Sarbanes-Oxley Act"). The Sarbanes-Oxley Act implements a
broad range of corporate governance and accounting measures for public
companies designed to promote honesty and transparency in corporate America and
better protect investors from the type of corporate and accounting scandals
that have occurred during the past year. The Sarbanes-Oxley Act's principal
legislation includes:

     o    the creation of an independent accounting oversight board;

     o    auditor independence provisions which restrict non-audit services
          that accountants may provide to their audit clients;

     o    additional corporate governance and responsibility measures,
          including the requirement that the chief executive officer and chief
          financial officer certify financial statements;

     o    the forfeiture of bonuses or other incentive-based compensation and
          profits from the sale of an issuer's securities by directors and
          senior officers in the twelve month period following initial
          publication of any financial statements that later require
          restatement;

     o    an increase the oversight of, and enhancement of certain requirements
          relating to audit committees of public companies and how they interact
          with the company's independent auditors;

     o    requirement that audit committee members must be independent and are
          absolutely barred from accepting consulting, advisory or other
          compensatory fees from the issuer;

     o    requirement that companies disclose whether at least one member of
          the committee is a "financial expert" (as such term will be defined by
          the Securities and Exchange Commission) and if not, why not;

     o    expanded disclosure requirements for corporate insiders, including
          accelerated reporting of stock transactions by insiders and a
          prohibition on insider trading during pension blackout periods;

     o    a prohibition on personal loans to directors and officers, except
          certain loans made by insured financial institutions;

     o    disclosure of a code of ethics and filing a Form 8-K for a change or
          waiver of such code;

     o    mandatory disclosure by analysts of potential conflicts of interest;
          and

     o    a range of enhanced penalties for fraud and other violations.

Although we anticipate that we will incur additional expense in complying with
the provisions of the Sarbanes-Oxley Act and the resulting regulations,
management does not expect that such compliance will have a material impact on
our results of operations or financial condition.

On October 26, 2001, President Bush signed the USA Patriot Act of 2001 (the
"Patriot Act"). The Patriot Act is intended to strengthen the ability of U. S.
Law Enforcement to combat terrorism on a variety of fronts. The potential impact
of the Patriot Act on financial institutions is significant and wide-ranging.
The Patriot Act contains sweeping anti-money laundering and financial
transparency laws and requires financial institutions to implement additional
policies and procedures with respect to, or additional measures designed to
address, any or all of the following matters, among others: money laundering,
suspicious activities and currency transaction reporting; and currency crimes.

Additional legislation and administrative actions affecting the banking industry
are being considered and in the future may be considered by the United States
Congress, state legislatures and various regulatory agencies, including those
referred to above. It cannot be predicted with certainty whether such
legislation or administrative action will be enacted or the extent to which the
banking industry in general or the Company and the Bank in particular would be
affected thereby.

FORWARD-LOOKING STATEMENTS

A cautionary note about forward-looking statements. In its oral and written
communication, the Company from time to time includes forward-looking
statements, within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements can include statements about estimated
cost savings, plans and objectives for future operations, and expectations about
performance as well as economic and market conditions and trends. They often can
be identified by the use of words like "expect", "may", "could", "intend",
"project", "estimate", "believe" or "anticipate." The Company may include
forward-looking statements in filings with the Securities and Exchange
Commission, such as this Form 10-KSB, in other written materials, and in oral
statements made by senior management to analysts, investors, representatives of
the media, and others. It is intended that these forward-looking statements
speak only as of the date they are made, and the Company undertakes no
obligation to update any forward-looking statement to reflect events or
circumstances after the date on which the forward-looking statement is made or
to reflect the occurrence of unanticipated events. By their nature,
forward-looking statements are based on assumptions and are subject to risks,
uncertainties, and other factors. Actual results may differ materially from
those contained in the forward-looking statement. The discussion in the 2002
Annual Report to Shareholders under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations," incorporated in Item
6 of this Form 10-KSB, lists some of the factors which could cause the Company's
actual results to vary materially from those in any forward-looking statements.
Your attention is directed to this discussion which can be found in Exhibit 13
to this Form 10-KSB. Other uncertainties which could affect the Company's future
performance include changes in interest rates, the effects of competition,
technological changes and regulatory developments; changes in fiscal, monetary
and tax policies; market, economic conditions, either nationally or regionally,
resulting in, among other things, credit quality deterioration; and changes in
the securities markets. Investors should consider these risks, uncertainties,
and other factors in addition to those mentioned by the Company in its other
filings from time to time when considering any forward-looking statement.

ITEM 2.  DESCRIPTION OF PROPERTY

<TABLE>
<CAPTION>
                                                                    NET BOOK VALUE
                                                                     OF PROPERTY,         APPROXIMATE
                                                    YEAR OPENED     FURNITURE AND           SQUARE
DESCRIPTION AND ADDRESS                             OR ACQUIRED        FIXTURES             FOOTAGE
-----------------------                             -----------     --------------        -----------
<S>                                                 <C>              <C>                   <C>
Shelbyville Main Office
29 East Washington St                                  1975          $1,026,312              15,000

Shelbyville Rampart Office
34 Rampart Street                                      1995          $  659,419               3,000

Morristown Office (only property under lease,
all others owned)
127 East Main Street                                   1995          $   43,254               1,800

St. Paul Office
105 County Line Road                                   1989          $   52,790               1,476
</TABLE>



                                       17
<PAGE>

                  In the opinion of management, the Bank's properties are
                  adequately covered by insurance.

                  The Bank has three ATMs, one at each of the following offices:
                  Shelbyville Main Office, the Rampart Office, and the
                  Morristown office. The Bank's ATMs are on the JACK HENRY &
                  ASSOC./PASSPORT interchange system and participate in the
                  nationwide CIRRUS ATM network.

                  The Bank owns computer and data processing equipment, which is
                  used for transaction processing, accounting, financial
                  forecasting, and loan document preparation. The net book value
                  of electronic data processing equipment owned by the Bank was
                  $201,000 at December 31, 2002.

                  The Bank also has contracted for the data processing and
                  reporting services of Jack Henry & Associates. The Bank's
                  service corporation subsidiary owns common stock of Intrieve,
                  the prior data processor, having a book value of $15,000. The
                  Bank intends to redeem this stock for cash during the first
                  quarter of 2003. The cost of these data processing services is
                  approximately $36,000 per month.




                                       18
<PAGE>


ITEM 3.  LEGAL PROCEEDINGS

In August 1993, the Bank discovered the presence of petroleum compounds in both
the soil and groundwater underlying the property at the St. Paul branch of the
Bank. A portion of the property was the site of a former gasoline station. The
Bank engaged an environmental remediation firm to remove the "free product"
(i.e., gasoline) which was floating on top of the water table at the St. Paul
site. The cost of this clean-up work was approximately $10,000. On April 13,
1995, the Bank sold a portion of the St. Paul property to a resident of St.
Paul, Indiana for nominal consideration. The Bank apprised the buyer of the
environmental matters relating to the real estate sold, and the buyer released
and indemnified the Bank from all future liability connected with environmental
conditions on this property. There can be no assurance that a third party will
not make a claim against the Bank with respect to the contamination on or
originating from this portion of the St. Paul property or that if such a claim
were made that the indemnification of the Bank by the buyer of the property
would be sufficient to reimburse the Bank for any damages relating to such
claim.

With respect to the portion of the St. Paul property still owned by the Bank, in
early 1996, the Bank discovered the presence of diesel or fuel oil and gasoline
constituents in the groundwater. In early 1997, a heating oil storage tank was
removed from the ground and the area was remediated by excavating the soil
surrounding the location of the tank and replacing it with granular fill
material. An environmental remediation firm engaged by the Bank performed the
tank removal and remediation.

Prior to the acquisition, the Bank agreed with the Company in April 1998 to
begin the process of submitting the St. Paul branch location into Indiana's
Voluntary Remediation Program (the "VRP"). Again, the Bank engaged an
environmental consultant to assist it in this process. After performing
preliminary testing, the consultant informed the Bank that remediation would be
necessary to remove diesel or fuel oil and gasoline constituents in the
groundwater. The consultant estimated the remediation and costs associated with
the VRP to be $157,920 plus any costs incurred by the Indiana Department of
Environmental Management ("IDEM") which were believed to be immaterial. The Bank
charged to expense approximately $150,000 in its income statement for the period
ended March 31, 1998.

In contemplation of entering the VRP, the Bank's environmental consultant,
during the summer of 1998, performed additional testing on the portion of the
St. Paul property still owned by the Bank. These tests confirmed the presence of
diesel or fuel oil and gasoline constituents in the groundwater. Assuming
successful completion of the VRP, as the program currently exists, is
interpreted and is applied, which may include further remediation of the site,
IDEM will issue a Certificate of Completion (which is recorded) and the Governor
of the State of Indiana will issue a Covenant Not to Sue.

Additionally, IDEM and the U.S. Environmental Protection Agency ("EPA") have a
Memorandum of Agreement that provides in substance that once a Certificate of
Completion has been issued by IDEM, unless the site poses an immediate and
substantial threat to human health and the environment, EPA will not plan or
anticipate any federal action under the Superfund law. Based upon the extent of
the contamination found during the summer of 1998, the Bank's environmental
consultant revised its estimate for completion of the project. On November 17,
1998 the Bank's environmental consultant estimated that the total cost for
completion of the VRP, including the remediation prior to entering the VRP, is
$238,000 plus any costs incurred by IDEM which are believed to be immaterial.
The additional cost associated with the VRP was added to the Company's goodwill
resulting from the merger.

The Company has been actively remediating the site since April of 1999. No "free
product" has been detected for several quarters and the levels of dissolved
phase contamination in the groundwater are generally decreasing. During the
fourth quarter of 2000, the Bank's management evaluated the project status with
the environmental consultant to assess the status of the remediation process.
During this discussion, it was determined that the remediation period is
expected to last longer than the original estimate. The environmental consultant
estimated that an additional one to two years of active remediation may be
necessary; and that the total costs to completion of the remediation and VRP
process should range from $123,500 to $188,000. The Company incurred an
additional $50,000 charge against earnings for 2000 to adjust the accrual to
cover future estimated costs. In 2002, based on recent estimates of the
environmental consultant, the cost to complete the remediation is now said to be
$ 112,000 therefore an additional charge of $112,000 against earnings was taken
during the third quarter. There can be no assurance that the Bank will
successfully complete the VRP or that the cost relating to the VRP will not
exceed $400,000 plus any costs incurred by IDEM which are believed to be
immaterial.



                                       19
<PAGE>
On June 26, 2001, the Bank filed a complaint against Bruce H. Young in the
Hamilton Superior Court for collection of a promissory note and against
International Marine Drive, LLC on its guaranty of that note to foreclose its
security interest in collateral of International Marine Drive. On August 24,
2001, the defendant filed a counterclaim against the Bank seeking compensatory
damages and other punitive damages for breach of contract, fraud, constructive
fraud, promissory estoppel and violations of the Corrupt Business Influence Act.
These claims are for an undisclosed amount. The counterclaim arises out of
certain alleged actions taken by the Bank and Robert Reed in his capacity as
former President and C.E.O. of the Bank. The counterclaim alleges, in part, that
the Bank committed to make certain loans to International Marine Drive, LLC,
which were never made. The Bank moved for summary judgment against Mr. Young on
the note. Young was granted five months in which to conduct discovery and to
prepare a response. Mr. Young subsequently made an application to extend that
period until May 12, 2002. In January 2002 the Court denied the Bank's Motion to
Strike Mr. Young's request for a jury trial. The case was on the Court's jury
calendar for January 2003. In December, 2002, the Bank entered into a mediation
agreement to receive $375,000 from Mr. Young. A settlement agreement was signed
on December 31, 2002 and the matter was dismissed by the Court on both the
complaint and also the counter-claim in January, 2003.

On or about November 14, 2002, the Bank filed a complaint with the Shelby County
Circuit Court against Custom Care Lawn Service, LLC and the guarantors of a
certain promissory note which was in default and unpaid. Pursuant to this
filing, the Bank requested a judgment for the amount due and foreclosure of its
lien upon the collateral securing the note. On February 21, 2003, Custom Care
Lawn Service, LLC and the guarantors answered defendant's claim and filed a
counter-claim for damages. The counter claims, include: 1) breach of service
contract; 2) failure to release a lien; 3) constructive fraud; 4) equitable
estoppel; 5) mismanagement by the Bank; 6) frivolous claim; 7) Fair Debt
Collection Practices Act violations. Management of the Bank believes that there
is no merit to the claims.

On November 19, 2001 the Company entered into a Voluntary Remediation Agreement
with IDEM. During the third quarter 2002, additional expenses of $12,000
relating to the environmental remediation were incurred. Based on current
estimates of its environmental consultant, the cost to complete the remediation
described in the remediation work plan and complete the VRP is estimated to be
approximately $100,000 (including the fee payable to the Indiana Department of
Environmental Management). Accordingly, the Bank charged to expenses an
additional $100,000 in its income statement for the period ended September 30,
2002. There can be no assurance that the Bank will successfully complete the
Voluntary Remediation Program or that the remaining cost relating to the
Voluntary Remediation Program will not exceed $100,000. Even if the Bank does
successfully complete the VRP, there can be no assurance that a non-governmental
entity or person will not make a claim against the Bank with respect to the
environmental matters relating to the St. Paul property.

On June 26, 2002, the Bank submitted a Remediation Work Plan with respect to the
St. Paul branch of the Bank which is currently entered in Indiana's Voluntary
Remediation Program. The Work Plan addressed contaminants of concern in both the
soil and groundwater, irrespective of the source of contaminants. On September
30, 2002 the active remediation was turned off. The site was sampled for the
presence of any of the contaminates above threshold levels in December of 2002.
That sample did not indicate the presence of any contaminants above the
threshold levels. The site was sampled again in March of 2003. The results of
that sample are not yet available to the Company. Depending upon the results of
that sample, the Bank may determine to remove the active remediation system from
the site. There can be no assurance, however, that the level of the contaminants
will not rebound above the threshold levels prior to completion of the
Remediation Work Plan requiring the re-installation of the system and additional
costs. The results of the sampling process are being provided to IDEM on an
ongoing basis. Monitoring and sampling must indicate a minimum of eight
consecutive quarters in which the level of contaminants does not exceed the
threshold levels before IDEM may make a determination that the program is
completed.

                                       20
<PAGE>



ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

                  Not applicable.

PART II.

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS

                  In conjunction with a public offering of common stock
                  completed in the second quarter of 1998, the Company obtained
                  approval for quotation on the National Association of
                  Securities Dealers Automated Quotation System Small-Cap Market
                  ("NASDAQ") under the symbol "BRBI". During 2003, the Company
                  satisfied all requirements for continued inclusion on, and was
                  traded on, NASDAQ.

                  As of March 25, 2003, there were 196 shareholders of record of
                  Blue River common stock.

                  The following table sets forth the high and low sale prices
                  for Blue River common stock for the quarters during the years
                  indicated, as reported by NASDAQ. Such over-the-counter
                  quotations reflect inter-dealer prices, without retail
                  mark-up, markdown or commission, and may not necessarily
                  represent actual transactions.

<TABLE>
<CAPTION>
                                        2002                 2001
                               -------------------   -------------------
                                 HIGH       LOW       HIGH       LOW
                   <S>                 <C>        <C>        <C>        <C>
                    First Quarter       $   5.50   $   4.15   $   4.25   $   3.06
                    Second Quarter          5.23       4.40       4.85       3.43
                    Third Quarter           4.88       4.26       4.70       3.31
                    Fourth Quarter          4.90       4.25       4.65       3.45
</TABLE>

                  The Company did not declare any dividend on its shares of
                  common stock during 2002 or 2001. Future dividend payments by
                  the Company are subject to regulatory and legal limitations
                  and may be dependent upon dividends paid by the Bank. See
                  "Business-Supervision and Regulation". The Company does not
                  intend to pay dividends in the foreseeable future.

                  On September 17, 2002, the Company sold 309,889 shares of
                  common stock at a price of $4.73 per share, or approximately
                  $1,466,000 in aggregate, to Russell Breeden III, Wayne C.
                  Ramsey and L. Gene Tanner. On February 2, 2003, the Company
                  sold 546,348 shares of common stock at a price of $4.73 per
                  share or approximately $2,584,000 in aggregate, to Russell
                  Breeden III, Wayne C. Ramsey and L. Gene Tanner and other
                  accredited investors. The Company had reasonable grounds to
                  believe the investors were accredited investors, capable of
                  evaluating merits and risks of this investment, and who
                  acquired the shares for investment purposes. The transactions
                  were private in nature, and the shares were issued in reliance
                  upon Section 4(2) and/or Rule 506 promulgated under the
                  Securities Act of 1933, as amended. Messrs, Breeden and Ramsey
                  are directors of the Company.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
     OF OPERATION

                  Pages 30 through 59 inclusive, of the Company's Annual Report
                  to Shareholders for the year ended December 31, 2002 is
                  incorporated herein by reference in regard to this item.

ITEM 7.  FINANCIAL STATEMENTS

                  Pages 60 through 84, inclusive, of the Company's Annual Report
                  to Shareholders for the year ended December 31, 2002 is
                  incorporated herein by reference in regard to this item.



                                       21
<PAGE>



ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
     FINANCIAL DISCLOSURE


         None.

PART III.

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
     WITH SECTION 16(A) OF THE EXCHANGE ACT

                  This information is omitted from this report pursuant to
                  General Instruction E. (3) of Form 10-KSB as the Company
                  intends to file with the Commission its definitive Proxy
                  Statement for the Annual Meeting of Shareholders pursuant to
                  Regulation 14A of the Securities Exchange Act of 1934, as
                  amended, not later than 120 days after December 31, 2002.

ITEM 10. EXECUTIVE COMPENSATION

                  This information is omitted from this report pursuant to
                  General Instruction E. (3) of Form 10-KSB as the Company
                  intends to file with the Commission its definitive Proxy
                  Statement for the Annual Meeting of Shareholders pursuant to
                  Regulation 14A of the Securities Exchange Act of 1934, as
                  amended, not later than 120 days after December 31, 2002.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
     RELATED STOCKHOLDER MATTERS

                  This information is omitted from this report pursuant to
                  General Instruction E. (3) of Form 10-KSB as the Company
                  intends to file with the Commission its definitive Proxy
                  Statement for the Annual Meeting of Shareholders pursuant to
                  Regulation 14A of the Securities Exchange Act of 1934, as
                  amended, not later than 120 days after December 31, 2002.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

                  This information is omitted from this report pursuant to
                  General Instruction E. (3) of Form 10-KSB as the Company
                  intends to file with the Commission its definitive Proxy
                  Statement for the Annual Meeting of Shareholders pursuant to
                  Regulation 14A of the Securities Exchange Act of 1934, as
                  amended, not later than 120 days after December 31, 2002.



                                       22
<PAGE>



ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following Exhibits are being filed as part of this 10-KSB:

<TABLE>
<S>                         <C>
        2*                  Branch Purchase and Assumption Agreement
        3(i)****            Articles of Incorporation
        3(ii)*******        Amended and Restated By-Laws
        10.01*****          Registrant's 1997 Directors' Stock Option Plan (1)
        10.02*****          Registrant's 1997 Key Employees' Stock Option Plan (1)
        10.03**             Registrant's 2000 Directors' Stock Option Plan (1)
        10.04**             Registrant's 2000 Key Employees' Stock Option Plan (1)
        10.05**             Registrant's 2000 Employee Stock Purchase Plan (1)
        10.06**             Registrant's First Amendment of 2000 Key Employees' Stock Option Plan (1)
        10.07               Registrant's 2002 Employee Stock Option Plan (1)
        10.08               Registrant's Change in Control Agreement with Randy J. Collier (2)
        10.09               Registrant's Employment Agreement with Lawrence T. Toombs (2)
        10.10******         Stock Purchase Agreement
        13                  The Annual Report to Shareholders of the Company for the year ended December 31, 2002
                            (Except for the pages and information thereof
                            expressly incorporated by reference in this Form
                            10-KSB, the Annual Report to Shareholders is
                            provided solely for the information of the
                            Securities and Exchange Commission and is not deemed
                            "filed" as part of this Form 10-KSB).
        21***               Subsidiaries of the Registrant
        *                   Incorporated by reference to Registrant's Form 8-K, filed January 15, 2002.
        **                  Incorporated by reference to Registrant's Form 10-KSB, filed March 31, 2001.
        ***                 Incorporated by reference to Registrant's Form 10-KSB, filed March 31, 1999.
        ****                Incorporated by reference to Registrant's Amendment No. 4 to the Registration Statement
                            on Form SB-2, File No. 333-48269 filed on June 22, 1998.
        *****               Incorporated by reference to Registrant's Amendment No. 2 to the Registration Statement
                            on Form SB-2, File No. 333-48269 filed on June 8, 1998.
        ******              Incorporated by reference to Registrant's Form 8-K, filed June 7, 2002.
        *******             Incorporated by reference to Registrant's Form 10-QSB, filed November 2002.
</TABLE>

        (1)      Compensatory Plan
        (2)      Management Employment Contract

(b) The Company filed the following reports on Form 8-K during the three months
ended December 31, 2002:

Report filed on October 18, 2002 containing a press release, dated October 18,
2002, announcing that the Company would hold a special meeting of shareholders
for the purpose of obtaining shareholder approval of a private placement of the
Company's common stock, and announcing the hiring of Randy Collier as Executive
Vice President of the Company and as Executive Vice President and Chief Credit
Officer of the Company.

Report filed on November 14, 2002 containing a press release, dated November 14,
2002, announcing earnings for the quarter ended September 30, 2002.



                                       23
<PAGE>



ITEM 14.  CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

         Within 90 days prior to the date of this report, we carried out an
evaluation (the "Evaluation"), under the supervision and with the participation
of our Chief Executive Officer ("CEO") and Controller, of the effectiveness of
the design and operation of our disclosure controls and procedures ("Disclosure
Controls"). Based on the Evaluation, our CEO and Controller concluded that,
subject to the limitations noted below, our Disclosure Controls are effective in
timely alerting them to material information required to be included in our
periodic SEC reports.

CHANGES IN INTERNAL CONTROLS

         We have also evaluated our internal controls for financial reporting,
and there have been no significant changes in our internal controls subsequent
to the date of their last evaluation.

LIMITATIONS ON THE EFFECTIVENESS OF CONTROLS

         Our management, including our CEO and Controller, does not expect that
our Disclosure Controls and internal controls will prevent all error and all
fraud. A control system, no matter how well conceived and operated, can provide
only reasonable, not absolute, assurance that the objectives of the control
system are met. Further, the design of a control system must reflect the fact
that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any within the company have been
detected. These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur because of simple
error or mistake. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people, or by management
override of the control.

         The design of any system of controls also is based in part upon certain
assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential
future conditions; over time, control may become inadequate because of changes
in conditions, or the degree of compliance with the policies or procedures may
deteriorate. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and not be detected.

CEO AND CONTROLLER CERTIFICATIONS

         Appearing immediately following the Signatures section of this report
there are Certifications of the CEO and Controller. The Certifications are
required in accord with Section 302 of the Sarbanes-Oxley Act of 2002 (the
Section 302 Certifications). This Item of this report, which you are currently
reading is the information concerning the Evaluation referred to in the Section
302 Certifications and this information should be read in conjunction with the
Section 302 Certifications for a more complete understanding of the topics
presented.



                                       24
<PAGE>



SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf of the undersigned, thereunto duly
authorized.

                                              Blue River Bancshares, Inc.
                                              (Registrant)

Date:   March 31, 2003                          /s/ Lawrence T. Toombs
                                              --------------------------------
                                              Lawrence T. Toombs,
                                              President

In accordance with the Exchange Act, 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:   March 31, 2003                          /s/ Patrice M. Lima
                                              --------------------------------
                                              Patrice M. Lima,
                                              Vice President & Controller
                                              (Principal Financial Officer)
                                              (Principal Accounting Officer)

Date:   March 31, 2003                          /s/ Steven R. Abel
                                              --------------------------------
                                              Steven R. Abel,
                                              Chairman of the Board & CEO
                                              (Principal Executive Officer)

Date:   March 31, 2003                          /s/ D. Warren Robison
                                              --------------------------------
                                              D. Warren Robison,
                                              Senior Vice President &
                                              Secretary, Director

Date:   March 31, 2003                          /s/ Russell Breeden, III
                                              --------------------------------
                                              Russell Breeden, III, Director

Date:   March 31, 2003                          /s/ Wayne C. Ramsey
                                              --------------------------------
                                              Wayne C. Ramsey, Director

Date:   March 31, 2003                          /s/ Wendell L. Bernard
                                              --------------------------------
                                              Wendell L. Bernard, Director

Date:   March 31, 2003                          /s/ Ralph W. Van Natta
                                              --------------------------------
                                              Ralph W. Van Natta, Director

Date:   March 31, 2003                          /s/ Peter G. DePrez
                                              --------------------------------
                                              Peter G. DePrez, Director

Date:   March 31, 2003                          /s/ Michael J. Vaught
                                              --------------------------------
                                              Michael J. Vaught, Director


                                       25
<PAGE>
                                 CERTIFICATIONS

I, Patrice M. Lima, certify that:

1. I have reviewed this annual report on Form 10-KSB of Blue River Bancshares,
Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date:  March 31, 2003

                                                /s/ Patrice M. Lima
                                    -------------------------------------------
                                                  Patrice M. Lima
                                           Vice President and Controller


                                       26
<PAGE>

I, Steven R. Abel, certify that:

1. I have reviewed this annual report on Form 10-KSB of Blue River Bancshares,
Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date:  March 31, 2003

                                               /s/ Steven R. Abel
                                  --------------------------------------------
                                                 Steven R. Abel
                                          Chairman of the Board and CEO


                                       27
<PAGE>




EXHIBIT INDEX

(a)  The following Exhibits are being filed as part of this 10-KSB:

<TABLE>
<S>                         <C>
        2*                  Branch Purchase and Assumption Agreement
        3(i)****            Articles of Incorporation
        3(ii)*******        Amended and Restated By-Laws
        10.01*****          Registrant's 1997 Directors' Stock Option Plan (1)
        10.02*****          Registrant's 1997 Key Employees' Stock Option Plan (1)
        10.03**             Registrant's 2000 Directors' Stock Option Plan (1)
        10.04**             Registrant's 2000 Key Employees' Stock Option Plan (1)
        10.05**             Registrant's 2000 Employee Stock Purchase Plan (1)
        10.06**             Registrant's First Amendment of 2000 Key Employees' Stock Option Plan (1)
        10.07               Registrant's 2002 Employee Stock Option Plan (1)
        10.08               Registrant's Change in Control Agreement with Randy J. Collier (2)
        10.09               Registrant's Employment Agreement with Lawrence T. Toombs (2)
        10.10******         Stock Purchase Agreement
        13                  The Annual Report to Shareholders of the Company for the year ended December 31, 2002
                            (Except for the pages and information thereof
                            expressly incorporated by reference in this Form
                            10-KSB, the Annual Report to Shareholders is
                            provided solely for the information of the
                            Securities and Exchange Commission and is not deemed
                            "filed" as part of this Form 10-KSB).
        21***               Subsidiaries of the Registrant
        *                   Incorporated by reference to Registrant's Form 8-K, filed January 15, 2002.
        **                  Incorporated by reference to Registrant's Form 10-KSB, filed March 31, 2001.
        ***                 Incorporated by reference to Registrant's Form 10-KSB, filed March 31, 1999.
        ****                Incorporated by reference to Registrant's Amendment No. 4 to the Registration Statement
                            on Form SB-2, File No. 333-48269 filed on June 22, 1998.
        *****               Incorporated by reference to Registrant's Amendment No. 2 to the Registration Statement
                            on Form SB-2, File No. 333-48269 filed on June 8, 1998.
        ******              Incorporated by reference to Registrant's Form 8-K, filed June 7, 2002.
        *******             Incorporated by reference to Registrant's Form 10-QSB, filed November 2002.
</TABLE>

        (1)  Compensatory Plan
        (2)  Management Employment Contract

     (b) The Company filed the following reports on Form 8-K during the three
     months ended December 31, 2002:

Report filed on October 18, 2002 containing a press release, dated October 18,
2002, announcing that the Company would hold a special meeting of shareholders
for the purpose of obtaining shareholder approval of a private placement of the
Company's common stock, and announcing the hiring of Randy Collier as Executive
Vice President of the Company and as Executive Vice President and Chief Credit
Officer of the Company.

Report filed on November 14, 2002 containing a press release, dated November 14,
2002, announcing earnings for the quarter ended September 30, 2002.



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