Exhibit 13

<PAGE>

PRESIDENT'S MESSAGE TO OUR SHAREHOLDERS
--------------------------------------------------------------------------------

Dear Fellow Shareholders,

This past year has produced a number of changes for Northeast  Indiana  Bancorp,
Inc. and its  wholly-owned  subsidiary First Federal Savings Bank. Core earnings
for the Bank continued to increase as the year progressed but this was offset in
the fourth  quarter by  management's  decision to  recognize  through the income
statement the non-cash  impairment  of $735,500  related to our holding of FHLMC
and FNMA preferred stock. This write-down resulted in 2004 earnings of $982,000.
Prior to this  adjustment,  2004 earnings had been projected to be approximately
$1.7 million. Given the fact that mortgage originations were substantially below
2003 levels,  along with the impairment  charge,  earning the income that we did
has to be considered a positive achievement.

A number  of  changes  took  place  this past  year at your  company.  First and
foremost, effective January 1, 2005, Michael Zahn was appointed President of the
Bank by its Board of  Directors.  This will allow for the smooth  succession  of
management as I begin to near my  retirement  age and  solidifies  the Board and
management's commitment to remain an independent community bank.

First  Federal  Savings Bank also  acquired the assets of  Innovative  Financial
Services,  a full service investment  operation,  and combined this company with
First Federal's existing financial service subsidiary.  This addition solidifies
the Bank's position as the leading financial service provider in Huntington.  To
date, account growth and income from the new operation has exceeded management's
expectation  and  continues to grow  monthly.  With the  addition of  Innovative
Financial and the successful implementation of the new retail overdraft program,
these  areas  helped  offset the  decrease in  mortgage  banking  activity as it
relates  to   noninterest   income.   Also  on  a  positive   note,  the  Bank's
non-performing  assets continue to decline and our net interest margin continued
to  increase  in 2004.  This  reflects  the  emphasis  management  has placed on
addressing credit quality, improved underwriting policies and pricing structure.

Our Directors and employees  remain excited about what the future holds for your
company. We continue to increase each investor's  percentage of ownership by our
stock repurchase  program.  In 2004 the Company repurchased 107,326 shares at an
aggregate cost of $2.3 million.  With a strong capital position,  we continue to
increase and pay an above  market  dividend.  We are  dedicated to a strategy of
building a company which will benefit our  shareholders,  customers,  employees,
and our community. I thank you for your continued support.

Sincerely,


/s/ Stephen E. Zahn

Stephen E. Zahn
Chairman of the Board, President, Chief Executive Officer


/s/ Michael S. Zahn

Michael S. Zahn
Senior Vice President

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                                                                              1.
<PAGE>

                   SELECTED CONSOLIDATED FINANCIAL INFORMATION

<TABLE>
<CAPTION>
                                                                                 December 31
                                                                                 -----------
                                                           2004         2003         2002         2001         2000
                                                         --------     --------     --------     --------     --------
Selected Financial Condition Data:                         (dollars in thousands, excluding earnings per share data)
----------------------------------
<S>                                                      <C>          <C>          <C>          <C>          <C>
Total assets ........................................    $228,672     $227,395     $225,019     $238,395     $247,094
Securities ..........................................      38,964       43,837       43,063       39,671       31,609
Loans receivable, net ...............................     174,800      163,677      154,560      162,830      200,151
Deposits ............................................     123,951      122,010      122,357      137,030      146,806
Total borrowings ....................................      77,067       76,545       74,894       73,966       72,539
Shareholders' equity ................................      26,047       27,195       26,562       26,281       26,574

Selected Operations Data:
-------------------------

Total interest income ...............................    $ 12,103     $ 12,368     $ 14,297     $ 17,436     $ 19,565
Total interest expense ..............................       5,715        6,519        7,997       10,765       12,485
                                                         --------     --------     --------     --------     --------
   Net interest income ..............................       6,388        5,849        6,300        6,671        7,080
Provision for loan losses ...........................          38           --          732          575        1,591
                                                         --------     --------     --------     --------     --------
Net interest income after provision for loan
  losses ............................................       6,350        5,849        5,568        6,096        5,489
Total noninterest income ............................         720        1,739        1,464        1,348        1,010
Total noninterest expense ...........................       5,477        4,969        4,971        4,702        4,775
                                                         --------     --------     --------     --------     --------
Income before income taxes ..........................       1,593        2,619        2,061        2,742        1,724
Income tax expense ..................................         611          689          471          773          441
                                                         --------     --------     --------     --------     --------
Net income ..........................................    $    982     $  1,930     $  1,590     $  1,969     $  1,283
                                                         ========     ========     ========     ========     ========

Basic earnings per common share .....................    $   0.69     $   1.36     $   1.09     $   1.28     $   0.80
Diluted earnings per common share ...................        0.67         1.31         1.06         1.25         0.79

Selected Financial Ratios and Other Data:
-----------------------------------------

Performance Ratios:
   Return on assets (ratio of net income to
     average total assets) ..........................        0.43%        0.87%        0.69%        0.81%        0.50%
   Return on equity (ratio of net income to
     average total shareholders' equity) ............        3.70         7.22         6.01         7.35         4.88
   Interest rate spread information:
      Average during period .........................        2.67         2.41         2.44         2.39         2.39
      End of period .................................        2.82         2.75         2.57         2.53         2.34
   Net interest margin (1) ..........................        2.97         2.78         2.87         2.88         2.90
   Ratio of operating expense to average total
     assets .........................................        2.40         2.23         2.16         1.94         1.88
   Ratio of average interest-earning assets to
     average interest-bearing liabilities ...........      111.26       111.85       111.80       110.54       109.95

Quality Ratios:
   Nonperforming assets to total assets at end
     of period ......................................        0.84         1.13         3.00         3.03         1.79
   Allowance for loan losses to nonperforming
     loans ..........................................       79.30        73.44        34.35        28.26        53.99
   Allowance for loan losses to total loans .........        0.77         1.07         1.36         1.19          .99

Capital Ratios:
   Total shareholders' equity to total assets at
     end of period ..................................       11.39        11.96        11.80        11.02        10.75
  Average total shareholders' equity to average
     total assets ...................................       11.62        12.01        11.52        11.07        10.33

Other Data:
   Dividends declared per share .....................    $  0.570     $  0.530     $  0.490     $  0.450     $  0.410
   Dividend payout ratio ............................       82.61%       38.97%       44.95%       35.16%       51.25%
   Number of full-service offices ...................           3            3            3            3            3
</TABLE>

----------
(1)   Net interest income divided by average interest-earning assets.

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


                                                                              2.
<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

Northeast Indiana Bancorp,  Inc.  ("Northeast Indiana Bancorp" or "the Company")
was formed as a Delaware  corporation  in 1995 for the purpose of issuing common
stock and owning all of the common stock of First  Federal  Savings Bank ("First
Federal") as a unitary thrift holding company.  First Federal conducts  business
from its  three  offices  located  in  Huntington,  Indiana.  Northeast  Indiana
Bancorp's  primary  business  activity is its investment in First  Federal,  and
therefore, the following discussion relates primarily to its operations.

During 1998, First Federal established a trust department which began operations
in the fourth  quarter.  By the end of 2002,  trust assets under  management had
grown to $39.8 million with no significant  growth in the prior twelve months in
either number of accounts or assets under management.  With the trust department
only providing  slight positive  impacts to the Company and with the resignation
of First  Federal's  senior trust officer in the first quarter 2003,  management
and the board of directors elected to enter into a cooperative  arrangement with
another  financial  institution  for  trust  services.   The  final  cooperative
agreement was signed during the third quarter 2003. At the same time,  the trust
assets and fiduciary  responsibilities  were  transferred to the other financial
institution.  Under the  agreement,  First  Federal will continue to offer trust
services to existing  customers and solicit new business with technical  support
from the other  financial  institution.  Management  expects  minimal  impact to
Northeast Indiana Bancorp's operating performance from this transaction.

During 1999,  Northeast Indiana Bancorp announced the establishment of Northeast
Indiana Financial,  Inc. ("Northeast Indiana"), a wholly-owned subsidiary of the
Bank. In June 2004,  First Federal  announced it had acquired the brokerage firm
Innovative  Financial Services  ("Innovative")  through Northeast  Indiana.  The
staff of  Innovative,  including  one broker  and three  support  staff,  became
employees of First Federal through Northeast Indiana. Innovative offers non-FDIC
insured products such as mutual funds, annuities, stocks, bonds, life insurance,
estate planning, retirement plans to small businesses, and brokerage accounts to
its customer  base and had roughly $60 million in assets under  management as of
December 31, 2004.

The  principal  business  of  savings  banks,   including  First  Federal,   has
historically consisted of attracting deposits from the general public and making
loans secured by residential real estate. First Federal's earnings are primarily
dependent on net interest  income,  the difference  between  interest income and
interest expense.

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


                                                                              3.
<PAGE>

Interest  income  is a  function  of  the  balances  of  loans  and  investments
outstanding  during  the period and the yield  earned on such  assets.  Interest
expense is a function of the  balances of deposits  and  borrowings  outstanding
during  the same  period  and the rates paid on such  deposits  and  borrowings.
Provisions for loan losses,  service  charges and fee income,  gains on sales of
loans, other noninterest income, operating expenses and income taxes also affect
First  Federal's  earnings.  Operating  expenses  consist  primarily of employee
compensation and benefits,  occupancy and equipment  expenses,  data processing,
federal  deposit  insurance   premiums  and  other  general  and  administrative
expenses.

Prevailing  economic  conditions  as  well  as  federal  regulations  concerning
monetary policies,  fiscal policies,  and financial  institutions  significantly
affect First Federal.  After operating under historically low interest rates for
the better part of the last thirty six months,  the Federal  Reserve changed its
fiscal  policy in 2004 and began  raising  short-term  rates at a moderate  pace
which  included  five  rate  hikes  over  the  last  seven  months  of the  year
aggregating  a 125 basis point  increase in short-term  rates.  The low interest
rate  environment  of the past three years had  continued  to  pressure  the net
interest  margin of the  Company  as loan  repayments  and  amortizing  security
prepayment  speeds have run at very high levels,  but these trends also began to
improve  during 2004 as rates began to increase.  As a result,  the net interest
margin for First Federal  increased  from 2.78% as of December 31, 2003 to 2.97%
at the end of 2004.

Over the course of the past thirty six months,  management has tried to position
the Company favorably for a rising rate  environment.  There can be no assurance
that First Federal can continue to successfully market its lending products in a
rising rate  environment or that such interest rate movements will not adversely
affect net income.

Deposit balances are influenced by a number of factors including  interest rates
paid on  competing  personal  investments  and the level of personal  income and
savings within First Federal's market.  Lending activities are influenced by the
demand for  housing as well as  competition  from  other  lending  institutions.
Liquidity  levels and funds available to originate loans may also impact lending
activities.  The  primary  sources  of  funds  for  lending  activities  include
deposits,  borrowed  funds,  loan  payments,  loan sales and funds provided from
operations.

Forward-Looking Statements

When used in this document and in future  filings by Northeast  Indiana  Bancorp
with the  Securities  and Exchange  Commission,  in our press  releases or other
public  or  shareholder  communications,  or in oral  statements  made  with the
approval of an authorized  executive  officer,  the words or phrases "would be,"
"will  allow,"  "intends  to," "will likely  result,"  "are  expected to," "will
continue," "is anticipated,"  "estimate,"  "project" or similar  expressions are
intended  to  identify  "forward-looking  statements"  within the meaning of the
Private Securities Litigation Reform Act of 1995.

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


                                                                              4.
<PAGE>

Such  statements  are  subject  to risks and  uncertainties,  including  but not
limited  to,  changes in  economic  conditions  in our market  area,  changes in
policies by regulatory  agencies,  fluctuations  in interest  rates,  demand for
loans in our  market  area and  competition,  all or some of which  could  cause
actual results to differ materially from historical earnings and those presently
anticipated or projected.

Northeast  Indiana Bancorp wishes to caution readers not to place undue reliance
on any such  forward-looking  statements,  which speak only as of the date made,
and advises  readers  that  various  factors,  including  regional  and national
economic  conditions,  substantial  changes in levels of market  interest rates,
credit and other risks of lending and investment  activities and competitive and
regulatory factors,  could affect our financial  performance and could cause our
actual results for future periods to differ materially from those anticipated or
projected.

Northeast  Indiana Bancorp does not undertake,  and  specifically  disclaims any
obligation,  to update any forward-looking  statements to reflect occurrences or
unanticipated events or circumstances after the date of such statements,  or for
any other reason.

Executive Summary

While asset growth was minimal for the year ended December 31, 2004,  management
was able to accomplish  several core objectives  including further reductions in
nonperforming  assets,   increased  net  interest  margins,   significant  share
repurchases on the open market, modest loan growth, increased noninterest income
through both a retail overdraft program implemented and brokerage fees through a
brokerage  acquisition.  However,  these positive items were  overshadowed  by a
non-cash  impairment  charge of $735,500  that was  recorded on certain  Federal
National   Mortgage   Association   ("FNMA")  and  Federal  Home  Loan  Mortgage
Corporation  ("FHLMC")  preferred  stocks along with  significant  reductions in
mortgage origination volumes that sharply reduced net gains on sale of loans and
deferred  loan fees.  All of the above  translated  into net income of  $982,000
($1.7 million without the non-cash  impairment  change) and diluted earnings per
common share of $0.67 ($1.17  without the  non-cash  impairment  change) for the
year ended 2004 compared to net income of $1.9 million and diluted  earnings per
common share of $1.31 for the year ended 2003.  Detailed  discussions of each of
these areas can be found under the Financial Condition and Results of Operations
pages that follow.

Financial Condition

Northeast Indiana Bancorp's total assets increased  slightly from $227.4 million
at December 31, 2003 to $228.7 million at December 31, 2004, an increase of $1.3
million,  or 0.6%.  The increase  was due  primarily to an increase in net loans
receivable of $11.1 million, or 6.8%, and an increase in cash surrender value of
life insurance of $807,000  offset in part by a decrease of $5.9 million in cash
and cash  equivalents,  and a reduction of $4.8 million in securities  available
for sale between  periods.  The overall  increase in total  liabilities  of $2.4
million was due mainly to an increase of $1.9  million in total  deposits and an
increase of $521,000 in borrowed funds.

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


                                                                              5.
<PAGE>

Most  segments of the loan  portfolio  increased  during 2004.  The increase was
mostly  attributable to mortgage loans,  which increased $4.0 million.  Mortgage
loans secured by one-to-four  family residences  increased $6.3 million to $97.9
million at December 31, 2004 and  represent  54.6% of First  Federal's  net loan
portfolio.  Mortgage loans secured by  multi-family  and commercial  real estate
increased  $1.2 million to $26.3  million at December 31, 2004 and  construction
loans secured by  residential  and  nonresidential  real estate  decreased  $3.5
million to $5.9 million.

First  Federal  also offers a variety of consumer  loans  including  automobile,
credit  card,  home  equity  and  second  mortgage  loans as well as  commercial
business loans.  Total consumer and commercial  business loans increased $5.9 to
$49.0  million at December  31, 2004.  This  increase  was  primarily  due to an
increase  in  commercial  loans of $3.7  million  to  $25.7  million  and  small
increases in  automobile,  home equity and second  mortgage,  and other consumer
loans,  offset by a slight  decline in credit cards.  Automobile  loans comprise
$10.3  million of total  consumer  loans while home  equity and second  mortgage
loans  represent  another $8.0 million at December  31,  2004.  While  typically
producing  higher  yields,  non-mortgage  lending  exposes  the  Company to more
collateral risk in addition to credit risk.

Future  loan growth and  profitability  related  thereto,  is  dependent  on the
economy.  First Federal  currently  anticipates low growth in mortgages and will
continue to sell long term fixed rate  mortgages to the  secondary  market while
planning  to hold  more of the 10 to 15  year  term  fixed  rate  mortgages  and
continue  to hold all hybrid  ARM  mortgage  products  in our  portfolio.  First
Federal will continue to provide commercial and consumer lending and anticipates
non-residential mortgage lending to increase as a percentage of total loans.

Total  deposits  increased  $1.9 million to $123.9 million at December 31, 2004.
The 1.6%  increase in 2004 was due to  increases in time  deposits,  noninterest
bearing demand,  NOW, and savings offset by a decline in MMDA account  balances.
Under a new strategic plan finalized during late 2004,  management will continue
to seek ways to increase core deposit relationships in 2005.

Total borrowed funds increased $521,000, from $76.5 million at December 31, 2003
to $77.1 million at December 31, 2004.  Borrowed funds include advances from the
Federal Home Loan Bank of Indianapolis  (FHLB) with variable  interest rates and
stated  maturities  ranging through 2012. The balance of FHLB advances was $68.8
million, an increase from $63.0 million at December 31, 2003.

FHLB advances are subject to prepayment fees and include $16.8 million  maturing
in 2005 and 2006.  In addition,  $36.0  million of the advances  outstanding  at
December  31,  2004  contained  options  with dates  ranging  from March 1, 2005
through  December  21, 2005,  whereby the  interest  rate may be adjusted by the
FHLB,  at which time the advances  may be repaid at the option of First  Federal
without a prepayment fee. First Federal's  borrowing  capacity at the FHLB as of
December 31, 2004, was $2.3 million based on the collateral pledged.  Borrowings
at December  31, 2004 also  include  various  securities  sold under  repurchase
agreements  that were offered  starting in 1999. The balance of securities  sold
under  repurchase  agreements at December 31, 2004 was $8.3 million,  a decrease
from $13.5 million at December 31, 2003.

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


                                                                              6.
<PAGE>

Results of Operations
Comparison of Years Ended December 31, 2004 and 2003

General.  Net income for the year ended December 31, 2004 was $982,000  compared
to net income of $1.9 million for 2003,  a decrease of $948,000.  The decline in
net income was  primarily  a result of a decline in  noninterest  income of $1.0
million and an increase in noninterest expense of $508,000,  partially offset by
increased net interest  income of $539,000 and  decreased  income tax expense of
$78,000. All of these items are discussed in more detail below.

Interest Income. Interest income decreased $265,000 or 2.1% to $12.1 million for
the year ended December 31, 2004. The decrease in interest income was the result
of loan  interest  income  decreasing  $103,000  to $10.5  million  along with a
decrease of $162,000 to $1.6 million in interest  income on securities and other
interest  earning  assets.  The average yield for the year on the loan portfolio
decreased  to 6.24% in 2004  compared  to 6.91% in 2003.  The  decrease  in loan
interest  income  occurred  as a result  of lower  average  rates  during  2004,
partially  offset by increased  average  balances of loans  outstanding  in 2004
compared to 2003.

Interest  Expense.  Interest  expense for 2004 decreased  $804,000 or 12.3% over
2003  interest  expense.  The majority of the decrease was due to less  interest
expense on deposits, which decreased $495,000 in 2004. The average rate for time
deposits decreased 66 basis points from 2003 to 2004. The average rate for money
market  accounts  decreased  by 17 basis  points to 1.16% for 2004  along with a
decrease of 13 basis  points on the average  rate for  savings  accounts,  and a
decrease of 9 basis points on NOW accounts.  The average rate for other borrowed
funds declined 47 basis points to 4.57% in 2004.

Net interest income.  Net interest income  increased  $539,000 or 9.2% from $5.9
million to $6.4 million for the year ended December 31, 2004. The average spread
increased  to 2.67% from the 2.41%  reported in 2003.  Average  interest-earning
assets margin  increased to 2.97% in 2004 from 2.78% in 2003.  The net decreases
in  both   interest   income  and   interest   expense   attributable   to  both
interest-earning  assets and interest-bearing  liabilities were due primarily to
decreases in rates offset partially by increases in volume.

Provision  for Loan  Losses.  Provision  for  loan  losses  in 2004 was  $37,500
compared  to no  provision  for  loan  loss in 2003.  This  modest  increase  in
provisions  was  possible  due  to  the  Company's   continued   improvement  in
nonperforming  loans  as  evidenced  in  Note  3 to the  Consolidated  Financial
Statements. The increased provision for loan losses less net charge-offs for the
year resulted in a $415,000  decrease in the allowance for loan losses.  The net
decrease in allowance  for loan losses  during 2004 was further made possible as
the Company  recognized  lower  charge-offs  than had been allocated  towards in
prior  periods on several loans that were  transferred  to real estate owned and
subsequently  sold during 2004. The allowance for loan losses of $1.4 million at
December 31, 2004  represents  0.77% of total loans  outstanding at December 31,
2004  compared  to 1.07% at  December  31,  2003.  Management  will  continue to
maintain the allowance for loan losses at a level deemed  adequate by management
based on its quarterly  analysis and will include  additional  consideration  of
non-performing loans.

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


                                                                              7.
<PAGE>

Comparison of Years Ended December 31, 2004 and 2003 (Continued)

Non-cash Impairment Charge.  Management recorded a non-cash impairment charge on
certain FHLMC/FNMA  preferred stocks during late 2004 in the amount of $735,500.
This decision was made after these security  market values  continued to decline
further in 2004 under the  scrutiny of several  public  disclosures  about these
companies and the uncertainty  about the time frames in which recovery in market
values would take place.  These preferred stocks are investment grade securities
that have never  defaulted  on  payment to First  Federal.  No tax  benefit  was
recorded on the impairment charge as First Federal does not believe it is likely
to realize a tax benefit from this charge.  The future value of these  preferred
stocks will be impacted by their  variable  rate  features in the face of rising
interest rates and other positive income characteristics.

Noninterest  income.  Noninterest  income decreased from $1.7 million in 2003 to
$720,000  in  2004.  The  majority  of  this  change  occurred  as a  result  of
management's decision to take a non-cash impairment charge of $735,500 discussed
above.  This resulted in a net loss on  securities  of  ($716,000)  for the year
ended  December 31, 2004  compared to a net gain on securities of $18,000 in the
year ended December 31, 2003.  Service charges on deposits increased $169,000 or
47.0% to $530,000 for the year ended December 31, 2004 as management implemented
a new retail  overdraft  program during 2004. Net gain on sale of loans declined
$421,000  between 2003 to 2004 as refinancing  volumes on residential  mortgages
saw dramatic  declines.  Trust fees  declined  sharply to $29,000 for the twelve
month period ended 2004 from  $114,000 for the twelve month period ended 2003 as
2004 was the first  full year First  Federal  operated  under a revenue  sharing
agreement with another financial institution on trust assets formerly managed by
First Federal. Brokerage fees increased sharply by $65,000 or 174.8% following a
mid-year  2004  acquisition  of an  independent  brokerage  firm  as  previously
discussed.

Noninterest expense.  Noninterest expense increased to $5.5 million for the year
ended December 31, 2004 compared to $5.0 million for the year ended December 31,
2003.  This  increase  came  primarily in salaries and employee  benefits due to
increased funding on a defined benefit pension plan,  increased ESOP expense due
to the  Company's  higher  average  share price in 2004  compared to 2003,  less
deferred loan  origination fees due to lower mortgage volumes and wage increases
related to more employees from a brokerage  acquisition  that was completed late
June 2004. All other noninterest  expense areas either declined slightly or only
saw very minor increases year to year.

Income tax  expense.  Income tax  expense  decreased  from  $689,000  in 2003 to
$611,000 in the current  year.  This  decrease  was mainly due to lower  taxable
income for 2004 but was also assisted by increases in  non-taxable  income items
such as non-taxable  security  interest income and increases in earnings on cash
surrender  value  of life  insurance.  Income  taxes  were not  affected  by the
$735,500  non-cash  impairment charge discussed earlier as no deferred tax asset
was created in regard to this transaction.  Due to this fact,  Northeast Indiana
Bancorp's effective tax rate was 38.4% (26.3% without impairment charge) in 2004
as compared to 26.3% in 2003.

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


                                                                              8.
<PAGE>

Comparison of Years Ended December 31, 2003 and 2002

General.  Net income  for the year  ended  December  31,  2003 was $1.9  million
compared to net income of $1.6 million for 2002,  an increase of  $340,000.  The
increase in net income was  primarily  the result of a decrease in provision for
loan losses of $732,000  combined  with an  increase  in  noninterest  income of
$276,000. These items were partially offset by a decrease in net interest income
of $450,000 and an increase in income tax expense of $219,000.

Noninterest  expense was relatively  unchanged  between periods at $5.0 million.
Further  details  regarding the changes in the income and expenses are discussed
below.

Interest  Income.  Interest  income  decreased  $1.9  million  or 13.5% to $12.4
million for the year ended  December 31, 2003.  The decrease in interest  income
was  primarily  the result of loan interest  income  decreasing  $1.6 million to
$10.6  million  along with a decrease of $300,000 to $1.8 million in  securities
and other interest  earning  assets.  The average yield for the year on the loan
portfolio  decreased to 6.91% in 2003 compared to 7.62% in 2002. The decrease in
loan interest income occurred as a result of a reduction in average  balances of
loans outstanding in 2003 compared to 2002, and lower average rates during 2003.

Interest Expense. Interest expense for 2003 decreased $1.5 million or 18.5% over
2002  interest  expense.  The majority of the decrease was due to less  interest
expense on deposits,  which decreased $1.3 million in 2003. The average rate for
time deposits  decreased 96 basis points from 2002 to 2003. The average rate for
money market accounts  decreased by 69 basis points to 1.33% for 2003 along with
a decrease of 62 basis  points on the average rate for savings  accounts,  and a
decrease of 53 basis points on NOW accounts. The average rate for other borrowed
funds declined 4 basis points to 5.04% in 2003.

Net interest income.  Net interest income  decreased  $450,000 or 7.1% from $6.3
million to $5.8 million for the year ended December 31, 2003. The average spread
decreased  to 2.41% from the 2.44%  reported in 2002.  Average  interest-earning
assets margin  decreased to 2.78% in 2003 from 2.87% in 2002.  The net decreases
in  both   interest   income  and   interest   expense   attributable   to  both
interest-earning  assets and interest-bearing  liabilities were due primarily to
decreases in rates and secondarily to decreases in volume.

Provision  for Loan  Losses.  There  were no  provisions  for loan  loss in 2003
compared to $732,000 in 2002. This sharp decrease in provisions was possible due
to the Company's  dramatic  improvement in  nonperforming  loans as evidenced in
Note 3 to the Consolidated  Financial  Statements.  The decreased  provision for
loan losses less net charge-offs for the year resulted in a $364,000 decrease in
the allowance for loan losses.  The allowance for loan losses of $1.8 million at
December 31, 2003 was a 17.0% decrease compared to December 31, 2002. Management
will  continue  to maintain  the  allowance  for loan  losses at a level  deemed
adequate  by  management  based  on its  quarterly  analysis  and  will  include
additional consideration of nonperforming loans.

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


                                                                              9.
<PAGE>

Comparison of Years Ended December 31, 2003 and 2002 (continued)

Noninterest  income.  Noninterest  income increased from $1.5 million in 2002 to
$1.7 million in 2003.  The  majority of this change  occurred as a result of our
increases in other income to $699,000 in 2003  compared to $425,000 for 2002, an
increase of $274,000 or 64.3%. The two largest component  increases in this area
were due to net  gains  on the sale of  repossessed  assets  in 2003 of  $48,000
compared  to net  losses  on the same in 2002 of  $116,000  and an  increase  to
$169,000 on cash surrender  value of life insurance in 2003 compared to $100,000
in 2002. The former was a result of better residual values on repossessed assets
year to year and the latter  due to  additional  purchases  of  bank-owned  life
insurance ("BOLI") in 2003 of $2.1 million.

Noninterest expense. Total noninterest expense was unchanged at $5.0 million for
both 2003 and 2002.  Slight increases in data processing and  professional  fees
were more than  offset by  declines  in  correspondent  bank  charges  and other
expense between periods. All other areas were relatively unchanged year to year.

Income tax  expense.  Income tax  expense  increased  from  $471,000  in 2002 to
$689,000 in the current  year.  This  increase was mainly due to higher  taxable
income for 2003 partially  offset by increases in non-taxable  income items such
as  non-taxable  security  interest  income and  increases  in  earnings on cash
surrender value of life insurance.  Northeast  Indiana  Bancorp's  effective tax
rate was 26.3% in 2003 as compared to 22.8% in 2002.

Asset/Liability Management
--------------------------

First Federal,  like other financial  institutions,  is subject to interest rate
risk to the extent that its interest-bearing  liabilities reprice on a different
basis than its  interest-earning  assets.  Office of Thrift Supervision  ("OTS")
regulations provide a Net Portfolio Value ("NPV") approach to the quantification
of interest  rate risk.  In essence,  this approach  calculates  the  difference
between the present  value of  liabilities,  expected cash flows from assets and
cash flows from off balance sheet contracts.

Management has  established  maximum  limits for changes in net portfolio  value
resulting  from  changes  in  interest  rates  based on  consideration  of First
Federal's  portfolio  mix  of  interest-earning   assets  and   interest-bearing
liabilities along with management's  objectives for managing these portfolios in
varying interest rate  environments.  Management  monitors various indicators of
interest rate risk,  including  NPV, and  expectations  regarding  interest rate
movements along with  consideration of First Federal's overall capital levels to
determine acceptable levels of interest rate risk.

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


                                                                             10.
<PAGE>

First  Federal's  interest-earning  assets  are  composed  primarily  of  loans,
especially mortgage loans.  Management has offered adjustable rate loan products
to assist in the  management  of  interest  rate risk.  At  December  31,  2004,
adjustable rate loans comprised 40.7% of the total loan portfolio.  The interest
rate  exposure as outlined in the NPV table  reflects  our  exposure to a rising
interest rate environment due to the concentration of longer term mortgage loans
funded by relatively  shorter-term deposits and FHLB advances. In addition,  the
interest rate risk is also impacted by adjustable rate loans,  which are tied to
indices,  which lag behind market rates.  Management is aware of First Federal's
interest rate risk exposure in a rising  interest rate  environment.  To address
this  interest  rate  risk,  which we would  categorize  as  moderately  high in
comparison  to our peers,  management  will continue to market  adjustable  rate
mortgage loans when possible and review longer term funding sources.  Management
also considers the current capital position of First Federal and the composition
of the loan  portfolio  and  monitors  these  factors  in  conjunction  with its
strategic  plan of offering  various  mortgage loan products to customers in our
market area. As stated earlier,  First Federal is now using the secondary market
to assist in  managing  our  interest  rate risk  exposure.  We are also  making
adjustable rate commercial loans when possible.  Nonetheless,  our interest rate
exposure,  particularly  in a  rising  interest  rate  environment,  will  grow,
especially  to the extent that loan demand  produces  increases in balance sheet
growth.  While  management  monitors  and,  from time to time,  takes actions to
adjust our interest  rate risk, we believe a rising  interest  rate  environment
will have an adverse impact on our profitability.

Presented  below,  as of December 31, 2004 and December 31, 2003, is an analysis
of First  Federal's  estimated  interest rate risk as measured by changes in NPV
for instantaneous  and sustained  parallel shifts in interest rates, up and down
300 basis points in 100 point increments.  Due to current low interest rates the
change in rates does not include results for the minus 200 basis points or minus
300 basis points scenarios.  Assumptions used in calculating the amounts in this
table are those  assumptions  utilized by the OTS in assessing the interest rate
risk of the thrifts it regulates.  NPV is calculated by the OTS for the purposes
of interest rate risk assessment and should not be considered as an indicator of
value of First Federal.

During 2004, our rate  sensitivity  showed a slight decrease over last year from
(246) bp at December 31, 2003 to (242) bp as of December 31, 2004 based on a 200
basis point increase in rates. The rising rate scenarios  reflect the decreasing
Net Portfolio Value (NPV) of equity.

<TABLE>
<CAPTION>
                                        At December 31, 2004
     -------------------------------------------------------------------------------------
                                                               Net Portfolio Value as % of
                                  Net Portfolio Value            Present Value of Assets
                          ----------------------------------     -----------------------
     Change In Rates      $ Amount     $ Change     % Change     NPV Ratio       Change
     ---------------      --------     --------     --------     ---------       ------
                          (Dollars in Thousands)
<S>                       <C>          <C>            <C>          <C>            <C>
         +300 bp          $ 18,174     $(10,821)      (37)%         8.26%         (408) bp
         +200               22,349       (6,646)      (23)          9.92          (242)
         +100               26,200       (2,795)      (10)         11.36           (98)
            0               28,995           --        --          12.34            --
         -100               30 296        1,301         4          12.71            37
         -200                   --           --        --             --            --
         -300                   --           --        --             --            --
</TABLE>

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


                                                                             11.
<PAGE>

<TABLE>
<CAPTION>
                                        At December 31, 2003
     -------------------------------------------------------------------------------------
                                                               Net Portfolio Value as % of
                                  Net Portfolio Value            Present Value of Assets
                          ----------------------------------     -----------------------
     Change In Rates      $ Amount     $ Change     % Change     NPV Ratio       Change
     ---------------      --------     --------     --------     ---------       ------
                          (Dollars in Thousands)
<S>                       <C>          <C>            <C>          <C>            <C>
         +300 bp          $ 15,525     $(10,870)      (41)%         7.11%         (411) bp
         +200               19,634       (6,761)      (26)          8.76          (246)
         +100               23,426       (2,969)      (11)         10.19          (103)
            0               26,395           --        --          11.22            --
         -100               27,471        1,076         4          11.49            27
         -200                   --           --        --             --            --
         -300                   --           --        --             --            --
</TABLE>

Due to the current low  interest  rate  environment,  the OTS's NPV model is not
calculating  results  for the minus 200 bp or minus  300 bp  scenario.  Based on
these limitations,  in the event of a 200 basis point increase in interest rates
compared to a 100 basis point  decrease in interest rates using NPV estimates as
of December 31, 2004,  First Federal would experience a 23% decrease in NPV in a
rising rate environment,  while experiencing a 4% increase in NPV in a declining
rate environment.

During  periods of rising rates,  the value of monetary  assets and  liabilities
decline.  Conversely,  during  periods of falling  rates,  the value of monetary
assets  and  liabilities  increase.  However,  the  amount of change in value of
specific  assets  and  liabilities  due to changes in rates is not the same in a
rising rate  environment as in a falling rate  environment  (i.e., the amount of
value  increase  under a specific rate decline may not equal the amount of value
decrease  under  an  identical  upward  rate  movement).   Based  upon  the  NPV
methodology,  the  increased  level of interest rate risk  experienced  by First
Federal in 2004 was  primarily  due to present  value  losses on assets in a 200
basis point increase environment.

Rates on average  interest  earning assets  continued to decline in 2004.  These
lower  average  rate assets  will lose more value in a 200 basis point  increase
environment than could be offset through decreases in liability values using the
model's  assumptions.  Furthermore,  to the extent that we use liabilities  with
shorter terms to maturity  than the assets in which we invest,  we will continue
to experience  increased  levels of interest rate risk in a rising interest rate
environment.

In  evaluating  First  Federal's   exposure  to  interest  rate  risk,   certain
shortcomings inherent in the method of analysis presented in the foregoing table
must be considered.  For example,  although  certain assets and  liabilities may
have similar  maturities  or periods to  repricing,  they may react in different
degrees to changes in market interest rates. Also, the interest rates on certain
types of assets and  liabilities  may  fluctuate in advance of changes in market
interest  rates,  while  interest rates on other types may lag behind changes in
market rates.  Further, in the event of a change in interest rates,  prepayments
and early withdrawal  levels could deviate  significantly  from those assumed in
calculating the table.  Finally,  the ability of many borrowers to service their
debt may decrease in the event of an interest rate  increase.  As a result,  the
actual  effect of  changing  interest  rates may differ  considerably  from that
presented in the foregoing table.

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


                                                                             12.
<PAGE>

Average Balances, Interest Rates and Yields
-------------------------------------------

The following  table presents for the periods  indicated the total dollar amount
of interest  income  from  average  interest  earning  assets and the  resultant
yields, as well as the interest expense on average interest bearing liabilities,
expressed both in dollars and rates.  No tax equivalent  adjustments  were made.
All average  balances are daily average  balances.  Nonaccruing  loans have been
included in the table as loans carrying a zero yield.

<TABLE>
<CAPTION>
                                         ___________________________Year Ended December 31,______________________
                                         --------------2 0 0 4--------------  --------------2 0 0 3--------------
                                                       -------                              -------
                                           Average     Interest                 Average     Interest
                                         Outstanding    Earned/       Yield/  Outstanding    Earned/       Yield/
                                           Balance       Paid          Rate     Balance       Paid          Rate
                                           -------       ----          ----     -------       ----          ----
                                                                    (Dollars in Thousands)
<S>                                        <C>         <C>             <C>      <C>         <C>             <C>
Interest-earning assets:
      Loans receivable(1)                  $168,042    $ 10,492        6.24%    $153,378    $ 10,595        6.91%
      Securities                             35,390       1,288        3.64       41,677       1,395        3.34
      FHLB stock                              5,391         232        4.30        5,148         259        5.02
      Other interest-earning assets           6,301          91        1.44       10,301         119        1.16
                                           --------    --------                 --------    --------
           Total interest-earning
             assets(1)                      215,124      12,103        5.63      210,504      12,368        5.87
                                           --------    --------                 --------    --------

Non-interest earning assets                  13,284                               11,972
                                           --------                             --------
           Total assets                    $228,408                             $222,476
                                           ========                             ========
Interest-bearing liabilities:
      Savings                              $ 12,259          62        0.51     $ 11,181          71        0.64
      Money market                           23,632         275        1.16       20,765         275        1.33
      NOW                                    13,352          60        0.45       12,943          70        0.54
      Time                                   74,120       2,120        2.86       73,685       2,595        3.52
      Borrowed funds                         69,993       3,198        4.57       69,630       3,508        5.04
                                           --------    --------                 --------    --------

           Total interest-bearing
             liabilities                    193,356       5,715        2.96      188,204       6,519        3.46
                                           --------    --------                 --------    --------

Non-interest bearing liabilities              8,503                                7,552
                                           --------                             --------
           Total liabilities                201,859                              195,756
           Total shareholders'
             equity                          26,549                               26,720
                                           --------                             --------
           Total liabilities and
             shareholders' equity          $228,408                             $222,476
                                           ========                             ========

Net interest income                                    $  6,388                             $  5,849
                                                       ========                             ========
Net interest rate spread                                               2.67%                                2.41%
                                                                       ====                                 ====
Net interest earning assets                $ 21,768                             $ 22,300
                                           ========                             ========
Net yield on average interest-
  earning assets                                                       2.97%                                2.78%
                                                                       ====                                 ====
Average interest-earning assets to
   average interest-bearing liabilities                                1.11x                                1.12x
                                                                       ====                                 ====

<CAPTION>
                                        ______Year Ended December 31,______
                                        --------------2 0 0 2--------------
                                                      -------
                                          Average     Interest
                                        Outstanding    Earned/       Yield/
                                          Balance       Paid          Rate
                                          -------       ----          ----
                                               (Dollars in Thousands)
<S>                                       <C>         <C>             <C>
Interest-earning assets:
      Loans receivable(1)                 $160,486    $ 12,223        7.62%
      Securities                            38,278       1,510        3.94
      FHLB stock                             4,947         298        6.02
      Other interest-earning assets         15,915         266        1.67
                                          --------    --------
           Total interest-earning
             assets(1)                     219,626      14,297        6.51
                                          --------    --------

Non-interest earning assets                  9,982
                                          --------
           Total assets                   $229,608
                                          ========
Interest-bearing liabilities:
      Savings                             $ 10,491         132        1.26
      Money market                          19,149         386        2.02
      NOW                                   12,520         134        1.07
      Time                                  81,804       3,663        4.48
      Borrowed funds                        72,488       3,682        5.08
                                          --------    --------

           Total interest-bearing
             liabilities                   196,452       7,997        4.07
                                          --------    --------

Non-interest bearing liabilities             6,715
                                          --------
           Total liabilities               203,167
           Total shareholders'
             equity                         26,441
                                          --------
           Total liabilities and
             shareholders' equity         $229,608
                                          ========

Net interest income                                   $  6,300
                                                      ========
Net interest rate spread                                              2.44%
                                                                      ====
Net interest earning assets               $ 23,174
                                          ========
Net yield on average interest-
  earning assets                                                      2.87%
                                                                      ====
Average interest-earning assets to
   average interest-bearing liabilities                               1.12x
                                                                      ====
</TABLE>

----------
--------------------------------------------------------------------------------
(1)   Calculated net of deferred loan fees, loan discounts, loans in process and
      allowance for loan losses.  Also includes Loans Held for Sale net of lower
      of cost or market.


                                                                             13.
<PAGE>

The following table presents the weighted  average yields on loans,  investments
and other interest-earning assets, and the weighted average rate on deposits and
borrowings and the resulting interest rate spreads at the dates indicated.

                                                           At December 31,
                                                      -------------------------
                                                       2004      2003      2002
                                                      -----     -----     -----
Weighted average yield on:
     Loans receivable .............................    6.20%     6.43%     7.40%
     Securities ...................................    3.89      4.09      4.08
     Other interest-earning assets ................    1.76      0.90      1.28
          Combined weighted average yield on
            interest-earning assets ...............    5.76      5.78      6.30
Weighted average rate on:
     Savings ......................................    0.50      0.50      0.97
     Money market .................................    1.19      1.09      1.63
     NOW ..........................................    0.46      0.46      0.77
     Time .........................................    2.93      3.12      3.96
     Borrowed funds ...............................    4.34      4.96      5.32
     Repurchase agreements ........................    2.24      0.88      1.18
          Combined weighted average rate on
          interest-bearing liabilities ............    2.94      3.03      3.73

Spread ............................................    2.82      2.75      2.57

The loans  receivable  yield,  which is the largest portion of interest  income,
decreased  23 basis points to 6.20%,  a 3.6%  decrease at the end of period 2004
compared to 6.43% at the end of period 2003. The overall  weighted average yield
on interest  earning assets only decreased 2 basis points to 5.76% at the end of
2004 down from 5.78% at the end of 2003. Interest-bearing liability rate changes
were also lower on most products. Time deposits decreased to 2.93% at the end of
2004  compared  to 3.12% at the end of 2003,  a 19 basis point  decrease.  Money
market  accounts  increased 10 basis points to 1.19% at the end of 2004 compared
to 1.09% at the end of 2003, a 9.2% increase. Borrowing rates decreased 62 basis
points in 2004 to 4.34%  compared  to 4.96% at the end of 2003.  The  repurchase
agreements reflect the end of period rates paid on our repurchase  accounts that
complement  our accounts  with a sweep  feature.  The combined  interest-bearing
liabilities  weighted  average  rates  decreased  to  2.94%  at the  end of 2004
compared to 3.03% at the end of 2003.  This 9 basis  point  decrease in interest
costs compared to the earning assets yield's smaller  decrease of 2 basis points
caused the spread to widen to 2.82% at the end of 2004  compared to 2.75% at the
end of 2003, a 7 basis point improvement over 2003.

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


                                                                             14.
<PAGE>

Rate/Volume Analysis
--------------------

The following  schedule presents the dollar amount of changes in interest income
and  interest  expense  for major  components  of  interest-earning  assets  and
interest-bearing  liabilities.  It distinguishes  between the changes related to
outstanding  balances  and that due to the changes in interest  rates.  For each
category   of   interest-earning   assets  and   interest-bearing   liabilities,
information is provided on changes attributable to:

o     Changes in volume (i.e., changes in volume multiplied by old rate)

o     Changes in rate (i.e., changes in rate multiplied by old volume)

For purposes of this table,  changes attributable to both rate and volume, which
cannot be segregated,  have been allocated  proportionately to the change due to
volume and the change due to rate.

<TABLE>
<CAPTION>
                               ________________________Year Ended December 31,___________________________
                                          2004 vs. 2003                          2003 vs. 2002
                               -----------------------------------    -----------------------------------
                                      Increase                               Increase
                                     (Decrease)           Total             (Decrease)           Total
                                       Due to            Increase             Due to            Increase
                                Volume        Rate      (Decrease)     Volume        Rate      (Decrease)
                                ------        ----      ----------     ------        ----      ----------
<S>                            <C>          <C>          <C>          <C>          <C>          <C>
                                                        (Dollars in Thousands)
Interest-earning assets:
      Loans receivable         $   964      $(1,067)     $  (103)     $  (525)     $(1,104)     $(1,629)
      Securities                  (222)         115         (107)         127         (242)        (115)
      FHLB stock                    12          (39)         (27)          12          (51)         (39)
      Other interest-
        earning assets             (53)          25          (28)         (78)         (68)        (146)
                               -------      -------      -------      -------      -------      -------

      Total interest-
        earning assets         $   701      $  (966)     $  (265)     $  (464)     $(1,465)     $(1,929)
                               =======      =======      =======      =======      =======      =======

Interest-bearing
  liabilities:
      Savings                  $     6      $   (15)     $    (9)     $     8      $   (69)     $   (61)
      Money market                  36          (36)          --           30         (141)        (111)
      NOW                            2          (12)         (10)           4          (68)         (64)
      Time                          15         (490)        (475)        (339)        (729)      (1,068)
      Borrowed funds               (41)        (269)        (310)         (83)         (91)        (174)
                               -------      -------      -------      -------      -------      -------

           Total interest-
             bearing
             liabilities       $    18      $  (822)     $  (804)     $  (380)     $(1,098)     $(1,478)
                               =======      =======      =======      =======      =======      =======

Net interest income                                      $   539                                $  (451)
                                                         =======                                =======
</TABLE>

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


                                                                             15.
<PAGE>

Liquidity and Capital Resources
-------------------------------

First Federal's primary sources of funds are deposits, borrowings from the FHLB,
the sale of fixed rate  mortgages  to the  secondary  market and  principal  and
interest  payments  on  loans.  While  scheduled   repayments  of  loans  are  a
predictable source of funds,  deposit flows and mortgage prepayments are greatly
influenced by general interest rates, economic conditions and competition. First
Federal has maintained its liquidity position by, among other things, monitoring
its cash and cash  equivalents  while reducing  balances in rate sensitive jumbo
deposits.

OTS regulations require First Federal to maintain sufficient liquidity to assure
its safe and sound operation.  A measure of liquidity for thrift institutions is
the  ratio of cash and  eligible  investments  to a  certain  percentage  of net
withdrawable  savings and  borrowings  due within one year.  As of December  31,
2004,  First  Federal's  average  liquidity  ratio was 9.6%,  of which 75.5% was
comprised of  short-term  investments.  Management  believes  First  Federal has
maintained adequate liquidity.

During the year ended  December 31,  2004,  there was a net decrease in cash and
cash  equivalents  of $5.9  million.  The major  source of funds during the year
included  proceeds from sale of long-term  fixed rate mortgages to the secondary
market of $2.2 million,  proceeds  from  called/sold  investments  and principal
payments of $10.9  million,  new advances  from FHLB of $33.0  million and a net
increase in deposits of $1.9 million.  These proceeds were used to purchase $6.7
million in securities,  fund new loans of $5.2 million, purchase $7.9 million in
loans from other institutions, purchase $600,000 in life insurance premiums, and
purchase  $2.3  million  of  Northeast  Indiana  Bancorp  stock,  and fund a net
decrease in other borrowed funds of $5.2 million.

During the year ended  December 31,  2003,  there was a net decrease in cash and
cash  equivalents  of $8.9  million.  The major  source of funds during the year
included  proceeds from sale of long-term  fixed rate mortgages to the secondary
market of $20.1 million,  proceeds from  called/sold  investments  and principal
payments of $25.8 million,  new advances from FHLB of $15.0 million along with a
net increase in other borrowed funds providing $5.8 million. These proceeds were
used to purchase  $27.1 million in  securities,  fund new loans of $9.3 million,
purchase $1.7 million in loans from other institutions, purchase $2.1 million in
life insurance  premiums,  and purchase  $903,000 of Northeast  Indiana  Bancorp
stock.

Under currently effective capital regulations,  savings associations must meet a
4.0% core capital  requirement and a total capital to risk weighted assets ratio
of 8.0%. At December 31, 2004,  First Federal's core capital ratio was 10.7% and
its total  capital to risk  weighted  assets  ratio was 16.7%.  First  Federal's
capital significantly  exceeds all capital requirements  currently in effect and
the institution is considered  "well-capitalized" under federal regulations. See
Note 11 of the Notes to Consolidated Financial Statements.

During 2004,  Northeast  Indiana Bancorp completed its eleventh stock repurchase
program which began in March 2004; 77,546 shares of stock were purchased in 2004
related to this program. Northeast Indiana Bancorp implemented its twelfth stock
repurchase program in September 2004.  Northeast Indiana Bancorp had repurchased
16,130 of the shares  authorized for repurchase as of December 31, 2004.  13,650
shares  were also  repurchased  upon the  exercise  of stock  options in 2004 in
accordance  with the stock option plan agreement.  As stock is  repurchased,  it
becomes  treasury  stock  and can be used for  general  corporate  purposes.

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


                                                                             16.
<PAGE>

At December  31, 2004 the Company  had  1,219,893  shares of treasury  stock and
1,420,779 of common stock outstanding.

Impact of Inflation and Changing Prices
---------------------------------------

The  Financial  Statements  have been  prepared in  accordance  with  accounting
principles generally accepted in the United States of America, which require the
measurement of financial  position and operating  results in terms of historical
dollars without  consideration  for changes in the relative  purchasing power of
money over time due to  inflation.  The impact of inflation  can be found in the
increased  cost of Northeast  Indiana  Bancorp's  operations.  Nearly all of our
assets and liabilities are financial,  unlike most  industrial  companies.  As a
result,  Northeast Indiana Bancorp's performance is directly impacted by changes
in interest rates, which are indirectly influenced by inflationary expectations.
Our ability to match the financial  assets to the financial  liabilities  in its
asset/liability management will tend to minimize the change of interest rates on
our performance. Changes in investment rates do not necessarily move to the same
extent as changes in the price of goods and services.

Newly Issued But Not Yet Effective Accounting Standards
-------------------------------------------------------

Financial  Accounting  Standard  123R  requires  all public  companies to record
compensation cost for stock options provided to employees in return for employee
service. The cost is measured at the fair value of the options when granted, and
this cost is expensed over the employee  service  period,  which is normally the
vesting  period of the  options.  This will apply to awards  granted or modified
after the first quarter or year beginning after December 15, 2005.  Compensation
cost will also be recorded for prior  option  grants that vest after the date of
adoption. The effect on results of operations will depend on the level of future
option grants and the  calculation  of the fair value of the options  granted at
such  future  date,  as well as the  vesting  periods  provided,  and so  cannot
currently be predicted.

Statement  of  Position  03-3  requires  that a  valuation  allowance  for loans
acquired in a transfer, including in a business combination, reflect only losses
incurred after acquisition and should not be recorded at acquisition. It applies
to any loan  acquired  in a transfer  that  showed  evidence  of credit  quality
deterioration  since  it was  made.  The  effect  of this  new  standard  on the
Company's  financial  position and results of  operations  is not expected to be
material upon adoption.

Critical Accounting Policies
----------------------------

Management uses many assumptions in accounting for its financial  instruments in
conformity with accounting principles generally accepted in the United States of
America. These assumptions impact the presentation of the Company's consolidated
financial  statements.  Included  within the summary of  significant  accounting
policies disclosed in Note 1 of the Notes to Consolidated  Financial  Statements
are  accounting  policies  that  management  feels  are  critical  to  the  fair
presentation of the consolidated financial statements.

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


                                                                             17.
<PAGE>

Management  feels the most critical  accounting  policies involve the accounting
for loans,  securities,  and the allowance for loan losses.  The  combination of
these three items represents a significant percentage of the Company's assets as
well as accounting for a high percentage of Northeast Indiana Bancorp's interest
income. Any significant  deviation from the Company's existing accounting on any
or all of these areas could impact the future financial performance of Northeast
Indiana  Bancorp.  For more  detail on these  areas,  see Note 1 of the Notes to
Consolidated Financial Statements.

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


                                                                             18.
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors
Northeast Indiana Bancorp, Inc.
Huntington, Indiana

We have  audited  the  accompanying  consolidated  balance  sheets of  Northeast
Indiana  Bancorp,  Inc.  as of  December  31,  2004  and  2003  and the  related
consolidated  statements  of income,  changes in  shareholders'  equity and cash
flows for the years ended  December 31,  2004,  2003 and 2002.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial  position of Northeast Indiana
Bancorp, Inc. as of December 31, 2004 and 2003 and the results of its operations
and its cash  flows for the years  ended  December  31,  2004,  2003 and 2002 in
conformity with accounting principles generally accepted in the United States of
America.


                                        Crowe Chizek and Company LLC

South Bend, Indiana
February 3,  2005

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


                                                                             19.
<PAGE>

                         NORTHEAST INDIANA BANCORP, INC.
                           CONSOLIDATED BALANCE SHEETS
                           December 31, 2004 and 2003
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                   2004              2003
                                                              -------------     -------------
<S>                                                           <C>               <C>
ASSETS
Interest earning cash and cash equivalents                    $   1,142,340     $   6,849,198
Noninterest earning cash and cash equivalents                     2,242,859         2,483,881
                                                              -------------     -------------
      Total cash and cash equivalents                             3,385,199         9,333,079
Securities available for sale                                    38,903,998        43,687,318
Securities held to maturity (fair value:  2004 - $60,000;
  2003 - $150,000)                                                   60,000           150,000
Loans receivable, net of allowance for loan losses of
  $1,357,505 in 2004 and $1,772,109 in 2003                     174,800,272       163,676,825
Accrued interest receivable                                         830,837           798,722
Premises and equipment, net                                       2,175,981         2,061,781
Investments in limited liability partnerships                     1,370,919         1,602,147
Cash surrender value of life insurance                            5,159,178         4,352,129
Goodwill                                                            130,972                --
Other intangible assets                                             187,242                --
Other assets                                                      1,667,625         1,732,531
                                                              -------------     -------------
      Total assets                                            $ 228,672,223     $ 227,394,532
                                                              =============     =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Demand - noninterest bearing                                  $   7,123,510     $   5,945,039
Savings                                                          11,830,095        10,916,937
NOW                                                              13,689,018        13,005,299
MMDA                                                             15,585,845        19,335,140
Time                                                             75,722,300        72,807,321
                                                              -------------     -------------
      Total deposits                                            123,950,768       122,009,736
Borrowed funds                                                   77,066,576        76,545,485
Accrued expenses and other liabilities                            1,608,346         1,644,751
                                                              -------------     -------------
      Total liabilities                                         202,625,690       200,199,972
Shareholders' equity
      Preferred stock, no par value; 500,000 shares
        authorized; 0 shares issued                                      --                --
      Common stock, $.01 par value; 4,000,000 shares
        authorized; 2,640,672 shares issued;
        2004 - 1,420,779 shares outstanding;
        2003 - 1,487,514 shares outstanding                          26,407            26,407
      Additional paid in capital                                 29,502,677        29,143,357
      Retained earnings, substantially restricted                14,576,087        14,428,855
      Unearned employee stock ownership plan shares                (227,026)         (351,190)
      Unearned recognition and retention plan shares                (50,531)               --
      Accumulated other comprehensive loss, net of tax              (36,810)         (236,943)
      Treasury stock, at cost; 2004 - 1,219,893 shares;
        2003 - 1,153,158 shares                                 (17,744,271)      (15,815,926)
                                                              -------------     -------------
           Total shareholders' equity                            26,046,533        27,194,560
                                                              -------------     -------------
                Total liabilities and shareholders' equity    $ 228,672,223     $ 227,394,532
                                                              =============     =============
</TABLE>

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

                   The accompanying notes are an integral part
                   of these consolidated financial statements.


                                                                             20.
<PAGE>

                         NORTHEAST INDIANA BANCORP, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                  Years ended December 31, 2004, 2003 and 2002

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

<TABLE>
<CAPTION>
                                                    2004             2003            2002
                                                ------------     ------------    ------------
<S>                                             <C>              <C>             <C>
Interest income
      Loans, including fees                     $ 10,492,255     $ 10,595,572    $ 12,223,690
      Taxable securities                           1,414,523        1,564,920       1,751,720
      Non-taxable securities                         105,556           88,633          56,282
      Deposits with financial institutions            90,892          119,590         265,581
                                                ------------     ------------    ------------
           Total interest income                  12,103,226       12,368,715      14,297,273
Interest expense
      Deposits                                     2,516,768        3,011,536       4,315,055
      Borrowed funds                               3,198,473        3,507,760       3,682,428
                                                ------------     ------------    ------------
           Total interest expense                  5,715,241        6,519,296       7,997,483
                                                ------------     ------------    ------------

Net interest income                                6,387,985        5,849,419       6,299,790

      Provision for loan losses                       37,500               --         732,300
                                                ------------     ------------    ------------
Net interest income after provision for loan
  losses                                           6,350,485        5,849,419       5,567,490

Noninterest income
      Service charges on deposit accounts            529,665          360,389         354,539
      Net gain (loss) on securities                 (716,364)          18,427         (10,535)
      Net gain on sale of loans                       89,164          510,369         475,053
      Trust fees                                      29,049          113,901         153,218
      Brokerage fees                                 102,226           37,206          66,138
      Other income                                   686,630          699,085         425,378
                                                ------------     ------------    ------------
           Total noninterest income                  720,370        1,739,377       1,463,791

Noninterest expense
      Salaries and employee benefits               3,106,407        2,607,819       2,600,923
      Occupancy                                      456,225          463,926         466,357
      Data processing                                645,002          667,745         621,523
      Deposit insurance premium                       18,840           19,733          23,570
      Professional fees                              257,495          248,978         240,688
      Correspondent bank charges                     216,063          210,273         224,734
      Other expense                                  777,122          750,880         792,869
                                                ------------     ------------    ------------
           Total noninterest expense               5,477,154        4,969,354       4,970,664
                                                ------------     ------------    ------------

Income before income taxes                         1,593,701        2,619,442       2,060,617

      Income tax expense                             611,479          689,468         470,721
                                                ------------     ------------    ------------

Net income                                      $    982,222     $  1,929,974    $  1,589,896
                                                ============     ============    ============

Basic earnings per common share                 $       0.69     $       1.36    $       1.09
                                                ============     ============    ============
Diluted earnings per common share               $       0.67     $       1.31    $       1.06
                                                ============     ============    ============
</TABLE>

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

                   The accompanying notes are an integral part
                   of these consolidated financial statements.


                                                                             21.
<PAGE>

                         NORTHEAST INDIANA BANCORP, INC.
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                  Years ended December 31, 2004, 2003 and 2002

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

<TABLE>
<CAPTION>
                                                                                                                Unearned
                                                                                                                Employee
                                                                         Additional                               Stock
                                                        Common             Paid in           Retained           Ownership
                                                         Stock             Capital           Earnings          Plan Shares
                                                         -----             -------           --------          -----------
<S>                                                   <C>               <C>                <C>                <C>
Balance, January 1, 2002                              $     26,407      $ 28,874,771       $ 12,447,813       $   (620,566)

Net income                                                      --                --          1,589,896                 --
Other comprehensive income:
  Net change in unrealized gains (losses)
    on securities available for sale                            --                --                 --                 --
  Total tax effect                                              --                --                 --                 --

      Total other comprehensive income                          --                --                 --                 --


Total comprehensive income                                      --                --                 --                 --

Cash dividends ($.49 per share)                                 --                --           (752,480)                --

Purchase of 87,676 shares of treasury stock                     --                --                 --                 --
Issuance of 34,078 shares of treasury stock upon
  exercise of stock options                                     --           (16,685)                --                 --
Tax effect of stock plans                                       --            37,080                 --                 --
16,733 shares committed to be released
  under the ESOP                                                --           105,293                 --            138,215
Amortization of RRP contributions                               --                --                 --                 --
                                                      ------------      ------------       ------------       ------------

Balance, December 31, 2002                                  26,407        29,000,459         13,285,229           (482,351)

Net income                                                      --                --          1,929,974                 --
Other comprehensive income:
  Net change in unrealized gains (losses)
    on securities available for sale                            --                --                 --                 --
  Total tax effect                                              --                --                 --                 --

      Total other comprehensive income                          --                --                 --                 --


Total comprehensive income                                      --                --                 --                 --

Cash dividends ($.53 per share)                                 --                --           (786,348)                --

Purchase of 54,328 shares of treasury stock                     --                --                 --                 --
Issuance of 44,784 shares of treasury stock upon
  exercise of stock options                                     --           (52,347)                --                 --
Tax effect of stock plans                                       --            38,257                 --                 --
15,879 shares committed to be released
  under the ESOP                                                --           156,988                 --            131,161
Amortization of RRP contributions                               --                --                 --                 --
                                                      ------------      ------------       ------------       ------------

Balance, December 31, 2003                                  26,407        29,143,357         14,428,855           (351,190)

<CAPTION>
                                                                         Accumulated
                                                        Unearned            Other
                                                       Recognition      Comprehensive                             Total
                                                      and Retention     Income (Loss),        Treasury        Shareholders'
                                                       Plan Shares        Net of Tax            Stock             Equity
                                                       -----------        ----------            -----             ------
<S>                                                   <C>                <C>                <C>                <C>
Balance, January 1, 2002                              $    (12,555)      $     20,979       $(14,455,811)      $ 26,281,038

Net income                                                      --                 --                 --          1,589,896
Other comprehensive income:
  Net change in unrealized gains (losses)
    on securities available for sale                            --            302,776                 --
  Total tax effect                                              --           (184,200)                --
                                                                         ------------
      Total other comprehensive income                          --            118,576                 --            118,576
                                                                                                               ------------

Total comprehensive income                                      --                 --                 --          1,708,472

Cash dividends ($.49 per share)                                 --                 --                 --           (752,480)

Purchase of 87,676 shares of treasury stock                     --                 --         (1,320,253)        (1,320,253)
Issuance of 34,078 shares of treasury stock upon
  exercise of stock options                                     --                 --            373,168            356,483
Tax effect of stock plans                                       --                 --                 --             37,080
16,733 shares committed to be released
  under the ESOP                                                --                 --                 --            243,508
Amortization of RRP contributions                            8,637                 --                 --              8,637
                                                      ------------       ------------       ------------       ------------

Balance, December 31, 2002                                  (3,918)           139,555        (15,402,896)        26,562,485

Net income                                                      --                 --                 --          1,929,974
Other comprehensive income:
  Net change in unrealized gains (losses)
    on securities available for sale                            --           (550,803)                --
  Total tax effect                                              --            174,305                 --
                                                                         ------------
      Total other comprehensive income                          --           (376,498)                --           (376,498)
                                                                                                               ------------

Total comprehensive income                                      --                 --                 --          1,553,476

Cash dividends ($.53 per share)                                 --                 --                 --           (786,348)

Purchase of 54,328 shares of treasury stock                     --                 --           (903,433)          (903,433)
Issuance of 44,784 shares of treasury stock upon
  exercise of stock options                                     --                 --            490,403            438,056
Tax effect of stock plans                                       --                 --                 --             38,257
15,879 shares committed to be released
  under the ESOP                                                --                 --                 --            288,149
Amortization of RRP contributions                            3,918                 --                 --              3,918
                                                      ------------       ------------       ------------       ------------

Balance, December 31, 2003                                      --           (236,943)       (15,815,926)        27,194,560
</TABLE>

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

                                  (Continued)


                                                                             22.
<PAGE>

                         NORTHEAST INDIANA BANCORP, INC.
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                  Years ended December 31, 2004, 2003 and 2002

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

<TABLE>
<CAPTION>
                                                                                                                Unearned
                                                                                                                Employee
                                                                         Additional                               Stock
                                                        Common             Paid in           Retained           Ownership
                                                         Stock             Capital           Earnings          Plan Shares
                                                         -----             -------           --------          -----------
<S>                                                   <C>               <C>                <C>                <C>
Balance at January 1, 2004                            $     26,407      $ 29,143,357       $ 14,428,855       $   (351,190)
Net income                                                                                      982,222
Other comprehensive income:
  Net change in unrealized gains (losses)
    on securities available for sale
  Total tax effect

      Total other comprehensive income

Total comprehensive income

Cash dividends ($.57 per share)                                                                (834,990)

Purchase of 107,326 shares of treasury stock
Issuance of 37,591 shares of treasury stock upon
  exercise of stock options                                                      877
Tax effect of stock plans                                                    132,306
15,032 shares committed to be released
  under the ESOP                                                             195,769                               124,164
Purchase of 3,000 treasury shares for RRP                                     30,368
Amortization of RRP contributions
                                                      ------------      ------------       ------------       ------------
Balance, December 31, 2004                            $     26,407      $ 29,502,677       $ 14,576,087       $   (227,026)
                                                      ============      ============       ============       ============

<CAPTION>
                                                                         Accumulated
                                                        Unearned            Other
                                                       Recognition      Comprehensive                             Total
                                                      and Retention     Income (Loss),        Treasury        Shareholders'
                                                       Plan Shares        Net of Tax            Stock             Equity
                                                       -----------        ----------            -----             ------
<S>                                                   <C>                <C>                <C>                <C>
Balance at January 1, 2004                            $         --       $   (236,943)      $(15,815,926)      $ 27,194,560
Net income                                                                                                          982,222
Other comprehensive income:
  Net change in unrealized gains (losses)
    on securities available for sale                                          151,027
  Total tax effect                                                             49,106
                                                                         ------------
      Total other comprehensive income                                        200,133                               200,133
                                                                                                               ------------
Total comprehensive income                                                                                        1,182,355

Cash dividends ($.57 per share)                                                                                    (834,990)

Purchase of 107,326 shares of treasury stock                                                  (2,343,157)        (2,343,157)
Issuance of 37,591 shares of treasury stock upon
  exercise of stock options                                                                      383,305            384,182
Tax effect of stock plans                                                                                           132,306
15,032 shares committed to be released
  under the ESOP                                                                                                    319,933
Purchase of 3,000 treasury shares for RRP                  (61,875)                               31,507                 --
Amortization of RRP contributions                           11,344                                                   11,344
                                                      ------------       ------------       ------------       ------------
Balance, December 31, 2004                            $    (50,531)      $    (36,810)      $(17,744,271)      $ 26,046,533
                                                      ============       ============       ============       ============
</TABLE>

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

                   The accompanying notes are an integral part
                   of these consolidated financial statements.


                                                                             23.
<PAGE>

                         NORTHEAST INDIANA BANCORP, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  Years ended December 31, 2004, 2003 and 2002

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

<TABLE>
<CAPTION>
                                                                          2004             2003             2002
                                                                      ------------     ------------     ------------
<S>                                                                   <C>              <C>              <C>
Cash flows from operating activities
      Net income                                                      $    982,222     $  1,929,974     $  1,589,896
      Adjustments to reconcile net income
        to net cash from operating activities:
           Depreciation and amortization                                   615,393          500,310          555,379
           Provision for loan losses                                        37,500               --          732,300
           Net (gain) loss on sale of:
                Foreclosed real estate and repossessed assets                8,180          (43,577)         115,931
                Premises and equipment                                       1,604               --               --
                Loans held for sale                                        (89,164)        (510,369)        (475,053)
           Net (gain) loss on securities available for sale                716,364          (18,427)          10,535
           Originations of loans held for sale                          (2,158,520)     (19,145,087)     (18,855,817)
           Proceeds from loans sold                                      2,247,684       20,064,831       20,464,917
           Reduction of obligation under ESOP                              319,933          288,149          243,508
           Amortization of RRP                                              11,344            3,918            8,637
           Amortization of intangible assets                                12,486               --               --
           Net change in:
                Other assets                                                84,301         (108,333)        (487,036)
                Accrued interest receivable                                (32,115)        (104,129)          58,407
                Accrued expenses and other liabilities                     (36,405)         438,895           88,787
                                                                      ------------     ------------     ------------
                     Total adjustments                                   1,738,585        1,366,181        2,460,495
                                                                      ------------     ------------     ------------
                          Net cash from operating activities             2,720,807        3,296,155        4,050,391
Cash flows from investing activities
      Investment in limited liability partnership                               --               --         (500,000)
      Purchases of securities available for sale                        (6,701,182)     (27,121,059)     (27,870,418)
      Cash paid for acquisitions                                          (437,500)              --               --
      Proceeds from maturities and principal payments of:
           Securities available for sale                                 8,050,700       21,128,468       23,191,989
           Securities held to maturity                                      90,000           75,000           81,000
      Proceeds from sale of securities available for sale                2,721,405        4,595,171        1,405,188
      Purchase of life insurance                                          (600,000)      (2,100,000)              --
      Purchases of loans                                                (7,929,680)      (1,735,793)      (3,464,773)
      Proceeds from sale of participation loans                            573,551               --               --
      Net change in loans                                               (5,215,690)      (9,261,881)       9,824,524
      Proceeds from sale of foreclosed real estate and
        repossessed assets                                               1,357,660        2,286,258          837,407
      Expenditures on premises and equipment                              (333,609)        (138,570)        (136,677)
      Proceeds from sale of premises and equipment                              --               --            8,143
                                                                      ------------     ------------     ------------
                     Net cash from investing activities                 (8,424,345)     (12,272,406)       3,376,383
Cash flows from financing activities
      Net change in deposits                                             2,028,532         (346,916)     (14,673,359)
      Advances from FHLB                                                33,000,000       15,000,000        2,000,000
      Repayment of FHLB advances                                       (27,250,000)     (19,000,000)              --
      Additional borrowings and payments of demand notes                        --         (100,000)         100,000
      Net change in other borrowed funds                                (5,228,909)       5,751,563       (1,172,489)
      Dividends paid                                                      (834,990)        (786,348)        (752,480)
      Purchase of treasury stock                                        (2,343,157)        (903,433)      (1,320,253)
      Sale of treasury stock                                               384,182          438,056          356,483
                                                                      ------------     ------------     ------------
                     Net cash from financing activities                   (244,342)          52,922      (15,462,098)
                                                                      ------------     ------------     ------------

Net change in cash and cash equivalents                                 (5,947,880)      (8,923,329)      (8,035,324)
Cash and cash equivalents at beginning of year                           9,333,079       18,256,408       26,291,732
                                                                      ------------     ------------     ------------
Cash and cash equivalents at end of year                              $  3,385,199     $  9,333,079     $ 18,256,408
                                                                      ============     ============     ============
Cash paid for:
      Interest                                                        $  5,710,711     $  6,589,699     $  7,991,828
      Income taxes                                                         327,250          510,525          628,300
Non-cash transactions:
   Transfer from loans to other real estate and repossessed assets       1,410,872        1,880,414        1,178,570
</TABLE>

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

                   The accompanying notes are an integral part
                   of these consolidated financial statements.


                                                                             24.
<PAGE>

                         NORTHEAST INDIANA BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations and Principles of Consolidation: The consolidated financial
statements include the accounts of Northeast Indiana Bancorp,  Inc.  ("Northeast
Indiana  Bancorp") and its wholly-owned  subsidiary,  First Federal Savings Bank
("First  Federal") and its wholly-owned  subsidiary  Northeast Indiana Financial
("Northeast  Indiana  Financial"),   together  referred  to  as  "the  Company".
Northeast  Indiana  Bancorp was  organized  for the purpose of owning all of the
outstanding stock of First Federal.  Intercompany transactions and balances have
been eliminated in consolidation.

The primary  source of income for the Company is the  origination  of commercial
and residential real estate loans in northeastern Indiana. Loans secured by real
estate  mortgages  comprise  approximately  77% and 79% of the loan portfolio at
December 31, 2004 and 2003, and are primarily secured by residential mortgages.

Use of Estimates: To prepare the consolidated financial statements in conformity
with accounting  principles  generally accepted in the United States of America,
management makes estimates and assumptions based on available information. These
estimates  and  assumptions   affect  the  amounts  reported  in  the  financial
statements and the disclosures  provided,  and future results could differ.  The
allowance  for  loan  losses  and  fair  values  of  financial  instruments  are
particularly subject to change.

Cash Flow Reporting:  Cash and cash equivalents are defined as cash and due from
banks and short-term  interest earning deposits in financial  institutions  with
original maturities under 90 days. Net cash flows are reported for customer loan
and  deposit  transactions  as well  as  securities  sold  under  agreements  to
repurchase with original maturities of 90 days or less.

Securities:  Securities  are  classified  as held to  maturity  and  carried  at
amortized cost when  management has the positive intent and ability to hold them
to maturity.  Securities are classified as available for sale when they might be
sold before maturity.  Securities  available for sale are carried at fair value,
with unrealized holding gains and losses reported in other comprehensive  income
or loss and shareholders'  equity,  net of tax. Other securities such as Federal
Home Loan Bank stock are carried at cost.

Interest income includes amortization of purchase premium or discount. Gains and
losses on sales are based on the amortized cost of the security sold. Securities
are  written  down to fair value when a decline in fair value is  determined  by
management  to be "other than  temporary"  as defined by FASB 115. In estimating
other-than-temporary  losses,  management considers:  (1) the length of time and
extent that fair value has been less than cost, (2) the financial  condition and
near term prospects of the issuer,  and (3) the Company's  ability and intent to
hold the security for a period sufficient to allow for any anticipated  recovery
in fair value.

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

                                   (Continued)


                                                                             25.
<PAGE>

                         NORTHEAST INDIANA BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Loans:  Loans  that  management  has the  intent  and  ability  to hold  for the
foreseeable  future or until  maturity or payoff are  reported at the  principal
balance outstanding, net of unearned interest, deferred loan fees and costs, and
an allowance  for loan losses.  Loans held for sale are reported at the lower of
cost or market, on an aggregate basis.

Interest income is reported on the interest method and includes  amortization of
net  deferred  loan fees and costs  over the loan term.  Interest  income is not
reported  when  full loan  repayment  is in  doubt,  typically  when the loan is
impaired or payments are past due over 90 days.  Past due status is based on the
contractual  terms of the loan.  Payments received on such loans are reported as
principal  reductions.   In  all  cases,  loans  are  placed  on  nonaccrual  or
charged-off  at an earlier  date if  collection  of  principal  or  interest  is
considered doubtful.

All interest accrued but not received for loans placed on nonaccrual is reversed
against interest income. Interest received on such loans is accounted for on the
cash-basis or  cost-recovery  method,  until  qualifying  for return to accrual.
Loans are returned to accrual status when all the principal and interest amounts
contractually  due are  brought  current  and  future  payments  are  reasonably
assured.

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

A loan is  impaired  when full  payment  under the loan  terms is not  expected.
Impairment  is evaluated in total for  smaller-balance  loans of similar  nature
such as  residential  mortgage,  consumer,  and  credit  card  loans,  and on an
individual loan basis for other loans.  If a loan is impaired,  a portion of the
allowance is allocated so that the loan is reported,  net, at the present  value
of  estimated  future cash flows using the loan's  existing  rate or at the fair
value of collateral if repayment is expected solely from the  collateral.  Loans
are evaluated  for  impairment  when payments are delayed,  typically 90 days or
more, or when it is probable that all principal and interest amounts will not be
collected according to the original terms of the loan.

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

                                   (Continued)


                                                                             26.
<PAGE>

                         NORTHEAST INDIANA BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Foreclosed  Assets:  Assets acquired  through or instead of loan foreclosure are
initially recorded at the lower of the loan balance or fair value when acquired,
establishing a new cost basis. If the value subsequently  declines,  a valuation
allowance is recorded  through  expense.  Costs after  acquisition are expensed.
Foreclosed assets totaled $211,000 and $165,594 at December 31, 2004 and 2003.

Investments in Limited  Liability  Partnerships:  These  represent the Company's
investments in affordable  housing projects for the primary purpose of available
tax  benefits.  They are  accounted  for  using the cost or  equity  methods  of
accounting  depending on  ownership.  The excess of the  carrying  amount of the
investment over its estimated  residual value is amortized during the periods in
which  associated  tax  credits  are  allocated  to  the  investor.  The  annual
amortization  of the  investment  is  based  on the  proportion  of tax  credits
received in the current year to total  estimated  tax credits to be allocated to
the Company.  These investments are reviewed for impairment when events indicate
their carrying  amounts may not be  recoverable  from future  undiscounted  cash
flows. If impaired, the investments are reported at discounted amounts.

Premises and  Equipment:  Land is carried at cost.  Premises and  equipment  are
stated at cost less  accumulated  depreciation.  Depreciation  is computed  over
asset useful lives on the straight  line basis.  The useful lives for  buildings
and  leasehold  improvements  range from 10 to 40 years.  The  useful  lives for
furniture, fixtures and equipment range from 3 to 10 years.

Company (or Bank) Owned Life Insurance: The Company has purchased life insurance
policies on certain key executives.  Company owned life insurance is recorded at
its cash surrender value, or the amount that can be realized.

Goodwill and Other Tangible Assets:  Goodwill results from business acquisitions
and  represents the excess of the purchase price over the fair value of acquired
tangible assets and liabilities and identifiable  intangible assets. Goodwill is
assessed  at least  annually  for  impairment  and any such  impairment  will be
recognized in the period identified.

Other  tangible  assets  consist of acquired  customer  relationship  intangible
assets arising from business  acquisitions.  They are initially measured at fair
value and then are amortized on an accelerated  method over the estimated useful
lives.

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

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

                                   (Continued)


                                                                             27.
<PAGE>

                         NORTHEAST INDIANA BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Securities Sold Under Repurchase  Agreements:  Substantially all securities sold
under repurchase  agreements  represent  amounts advanced by various  customers.
Securities  are  pledged to cover  these  liabilities,  which are not covered by
federal deposit insurance.

Stock  Compensation:  Employee  compensation  expense  under  stock  options  is
reported using the intrinsic value method.  No stock-based  compensation cost is
reflected in net income,  as all options  granted had an exercise price equal to
or  greater  than the market  price of the  underlying  common  stock at date of
grant. The following table illustrates the effect on net income and earnings per
common share if expense was measured using the fair value recognition provisions
of FASB Statement No. 123, Accounting for Stock-Based Compensation.

<TABLE>
<CAPTION>
                                                    2004           2003           2002
                                                 ----------     ----------     ----------
<S>                                              <C>            <C>            <C>
Net income as reported                           $  982,222     $1,929,974     $1,589,896
Deduct:  Stock-based compensation expense
  determined under fair value based method          (28,353)       (23,219)       (15,588)
                                                 ----------     ----------     ----------
Pro forma net income                             $  953,869     $1,906,755     $1,574,308
                                                 ==========     ==========     ==========

Basic earnings per common share as reported      $     0.69     $     1.36     $     1.09
Pro forma basic earnings per common share              0.67           1.34           1.08

Diluted earnings per common share as reported          0.67           1.31           1.06
Pro forma diluted earnings per common share            0.65           1.29           1.05
</TABLE>

The pro forma  effects are  computed  using  option  pricing  models,  using the
following  weighted-average  assumptions as of grant date. No stock options were
granted in 2004.

                                                          2003       2002
                                                         -----      -----

      Risk-free interest rate                             3.58%      4.28%
      Expected option life in years                          6          6
      Expected stock price volatility                    37.23%      24.7%
      Dividend yield                                      3.09%      3.37%

Income Taxes: Income tax expense is the total of the current year income tax due
or refundable  and the change in deferred tax assets and  liabilities.  Deferred
tax assets and liabilities are the expected future tax amounts for the temporary
differences  between  carrying  amounts and tax bases of assets and liabilities,
computed  using enacted tax rates.  A valuation  allowance,  if needed,  reduces
deferred tax assets to the amount expected to be realized.

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

                                   (Continued)


                                                                             28.
<PAGE>

                         NORTHEAST INDIANA BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Employee  Stock  Ownership  Plan: The cost of shares issued to the ESOP, but not
yet allocated to participants,  is shown as a reduction of shareholders' equity.
Compensation  expense  is  based  on the  market  price  of  shares  as they are
committed to be released to participants' accounts.  Dividends on allocated ESOP
shares reduce retained  earnings;  dividends on unearned ESOP shares reduce debt
and accrued interest.

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

Earnings Per Common Share: Basic earnings per common share is net income divided
by the weighted average number of common shares  outstanding  during the period.
ESOP and RRP shares  are  considered  outstanding  for this  calculation  unless
unearned.  Diluted  earnings  per common share  includes the dilutive  effect of
additional potential common shares issuable under stock options and RRP plans.

Stock  Dividends:   Common  share  amounts  related  to  the  ESOP  plan,  stock
compensation  plans and earnings and  dividends per share are restated for stock
dividends.

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

Industry  Segment:  Northeast  Indiana  Bancorp and its subsidiary are primarily
organized  to operate in the banking  industry.  Substantially  all revenues and
services are derived from banking products and services in northeastern Indiana.
While Northeast Indiana Bancorp's chief decision makers monitor various products
and services, operations are managed and financial performance is evaluated on a
company-wide  basis.  Accordingly,  all of Northeast  Indiana  Bancorp's banking
operations  are  considered  by  management  to be  aggregated  in one  business
segment.

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

                                   (Continued)


                                                                             29.
<PAGE>

                         NORTHEAST INDIANA BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Newly Issued But Not Yet Effective  Accounting  Standards:  Financial Accounting
Standard  123R  requires all public  companies to record  compensation  cost for
stock options provided to employees in return for employee service.  The cost is
measured  at the fair  value  of the  options  when  granted,  and this  cost is
expensed over the employee service period,  which is normally the vesting period
of the options.  This will apply to awards  granted or modified  after the first
quarter or year beginning after December 15, 2005.  Compensation  cost will also
be recorded  for prior option  grants that vest after the date of adoption.  The
effect on results of operations will depend on the level of future option grants
and the  calculation  of the fair value of the  options  granted at such  future
date,  as well as the  vesting  periods  provided,  and so cannot  currently  be
predicted.

Statement  of  Position  03-3  requires  that a  valuation  allowance  for loans
acquired in a transfer, including in a business combination, reflect only losses
incurred after acquisition and should not be recorded at acquisition. It applies
to any loan  acquired  in a transfer  that  showed  evidence  of credit  quality
deterioration  since  it was  made.  The  effect  of this  new  standard  on the
Company's  financial  position and results of  operations  is not expected to be
material upon adoption.

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

Dividend  Restriction:  Banking  regulations require maintaining certain capital
levels and may limit the dividends  paid by First  Federal to Northeast  Indiana
Bancorp or by Northeast Indiana Bancorp to shareholders.

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

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

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

                                   (Continued)


                                                                             30.
<PAGE>

                         NORTHEAST INDIANA BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------

NOTE 2 - SECURITIES

The fair value of available for sale securities and the related gross unrealized
gains and losses  recognized in accumulated  other  comprehensive  income (loss)
were as follows:

                                                      Gross            Gross
                                      Fair         Unrealized       Unrealized
                                      Value           Gains           Losses
                                   -----------     -----------      -----------

Available for sale - 2004
      U.S. Government agencies     $ 9,677,252     $     6,781      $   (44,527)
      Mutual funds                   4,250,538              --          (52,419)
      Mortgage-backed               12,650,575         135,066         (103,505)
      States and political
        subdivisions                 3,569,633          25,143          (30,805)
      FHLB Stock                     5,489,500              --               --
      Equity                         3,266,500           2,000               --
                                   -----------     -----------      -----------

                                   $38,903,998     $   168,990      $  (231,256)
                                   ===========     ===========      ===========

                                                      Gross            Gross
                                      Fair         Unrealized       Unrealized
                                      Value           Gains           Losses
                                   -----------     -----------      -----------

Available for sale - 2003
      U.S. Government agencies     $ 9,767,207     $    59,152      $   (26,793)
      Mutual funds                   4,180,511              --          (22,557)
      Mortgage-backed               17,627,711         161,488         (129,674)
      States and political
        subdivisions                 3,131,589          43,087          (24,996)
      FHLB Stock                     5,253,300              --               --
      Equity                         3,727,000          65,000         (338,000)
                                   -----------     -----------      -----------
                                   $43,687,318     $   328,727      $  (542,020)
                                   ===========     ===========      ===========

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

                                   (Continued)


                                                                             31.
<PAGE>

                         NORTHEAST INDIANA BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------

NOTE 2 - SECURITIES (Continued)

The carrying amount, unrecognized gains and losses, and fair value of securities
held to maturity were as follows:

<TABLE>
<CAPTION>
                                                    Gross          Gross
                                      Carrying   Unrecognized   Unrecognized     Fair
                                       Amount       Gains          Losses        Value
                                      --------   ------------   ------------   --------
<S>                                   <C>          <C>            <C>          <C>
Held to maturity - 2004
      Other debt securities           $ 60,000     $     --       $     --     $ 60,000
                                      --------     --------       --------     --------

                                      $ 60,000     $     --       $     --     $ 60,000
                                      ========     ========       ========     ========

Held to maturity - 2003
      States and political
      subdivisions                    $ 35,000     $     --       $     --     $ 35,000
      Other debt securities            115,000           --             --      115,000
                                      --------     --------       --------     --------

                                      $150,000     $     --       $     --     $150,000
                                      ========     ========       ========     ========
</TABLE>

Contractual  maturities  of debt  securities  at year end 2004 were as  follows.
Securities  not  due  at  a  single  maturity  date,  primarily  mortgage-backed
securities and mutual funds backed by debt securities, are shown separately.

                         --Available for Sale--   ------Held to Maturity------
                           ------------------           ----------------
                                  Fair              Carrying          Fair
                                  Value              Amount           Value
                               -----------         -----------     -----------

Due in one year or less        $ 5,022,700         $    60,000     $    60,000
Due from one to five years       2,359,271                  --              --
Due from five to ten years       5,739,661                  --              --
Due in over ten years              125,253                  --              --
Mutual funds                     4,250,538                  --              --
Mortgage backed securities      12,650,575                  --              --
                               -----------         -----------     -----------

                               $30,147,998         $    60,000     $    60,000
                               ===========         ===========     ===========

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

                                   (Continued)


                                                                             32.
<PAGE>

                         NORTHEAST INDIANA BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------

NOTE 2 - SECURITIES (Continued)

Sales of securities available for sale were as follows:

                                  2004               2003               2002
                              -----------        -----------        -----------

Proceeds                      $ 2,721,405        $ 4,595,171        $ 1,405,188
Gross gains                        31,824             24,701              3,663
Gross losses                      (12,688)            (6,274)           (14,198)

Securities pledged at year end 2004 and 2003 had a carrying value of $17,013,000
and  $25,431,000,  and were pledged to secure  securities sold under  repurchase
agreements and Federal Home Loan Bank advances.

Securities with unrealized  losses at year end 2004 not recognized in income are
as follows:

<TABLE>
<CAPTION>
                                     Continued Unrealized               Continued Unrealized
                                      Loss For Less than                 Loss For 12 Months
                                 ----------12 Months---------       -----------or More----------       -----------Total------------
                                           ---------                           -------                            -----
                                    Fair           Unrealized          Fair           Unrealized          Fair           Unrealized
   Description of Securities        Value             Loss             Value             Loss             Value             Loss
   -------------------------     -----------      -----------       -----------      -----------       -----------      -----------
<S>                              <C>              <C>               <C>              <C>               <C>              <C>
   U.S. Government agencies      $ 6,670,312      $   (44,527)      $        --      $        --       $ 6,670,312      $   (44,527)
   Mutual funds                           --               --         4,250,538          (52,419)        4,250,538          (52,419)
   Mortgage-backed                 2,262,862          (14,528)        3,830,404          (88,977)        6,093,266         (103,505)
   State and political
     subdivisions                  1,890,505          (25,021)          245,683           (5,784)        2,136,188          (30,805)
                                 --------------------------------------------------------------------------------------------------

Total temporarily impaired       $10,823,679      $   (84,076)      $ 8,326,625      $  (147,180)      $19,150,304      $  (231,256)
                                 ==================================================================================================
</TABLE>

Securities with unrealized losses at year end 2003 not recognized in income are
as follows:

<TABLE>
<CAPTION>
                                     Continued Unrealized               Continued Unrealized
                                           Loss For                          Loss For
                                      Less than 12 Months                 12 Months or More                       Total
                                      -------------------                 -----------------                       -----
                                    Fair           Unrealized          Fair           Unrealized          Fair           Unrealized
Description of Securities           Value             Loss             Value             Loss             Value             Loss
-------------------------        -----------      -----------       -----------      -----------       -----------      -----------
<S>                              <C>              <C>               <C>              <C>               <C>              <C>
U.S. Government agencies         $ 3,495,756      $   (26,793)      $        --      $        --       $ 3,495,756      $   (26,793)
Mutual funds                       4,180,511          (22,557)               --               --         4,180,511          (22,557)
Mortgage-backed                    8,245,451         (129,674)               --               --         8,245,451         (129,674)
State and Political
  subdivisions                     1,519,820          (24,996)               --               --         1,519,820          (24,996)
Equity                                    --               --         2,662,000         (338,000)        2,662,000         (338,000)
                                 --------------------------------------------------------------------------------------------------
Total temporarily impaired       $17,441,538      $  (204,020)      $ 2,662,000      $  (338,000)      $20,103,538      $  (542,020)
                                 ==================================================================================================
</TABLE>

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

                                   (Continued)


                                                                             33.
<PAGE>

                         NORTHEAST INDIANA BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------

NOTE 2 - SECURITIES (Continued)

At December 31, 2004,  management  recorded a non-cash impairment charge through
earnings of $735,500 for the decline in the value of $1.25 million of Fannie Mae
("FNMA") and $1.75  million of Freddie Mac  ("FHLMC")  floating  rate  preferred
stock  securities it holds.  The recent downgrade in rating on the FNMA security
due to recently  disclosed  accounting  issues,  the duration of the  suppressed
market value on both the FNMA and FHLMC securities and inability to project when
market value recovery would occur led management to record the  write-down.  The
unrealized  losses on marketable  equity  securities  decreased from $748,000 at
September  30,  2004 to $ -0- at December  31, 2004 as a result of the  non-cash
impairment  charge.  The fair value of the FNMA and FHLMC  securities  was $2.26
million at December 31, 2004.

Some of the Company's debt securities had unrealized  losses as well at year end
2004.  With the shorter  average lives on these  instruments  compared to equity
securities,  management believes its underlying  investment will be recovered at
par by existing maturity dates.

NOTE 3 - LOANS RECEIVABLE, NET

Year end loans were as follows:

<TABLE>
<CAPTION>
                                                             2004               2003
                                                         -------------      -------------
<S>                                                      <C>                <C>
      Mortgage
           Secured by one-to-four family residences      $  97,942,499      $  91,636,930
           Secured by other properties                      26,306,421         25,133,492
           Construction - residential                        2,613,400          6,795,706
           Construction - nonresidential                     3,317,912          2,673,112
      Automobile                                            10,274,648          9,591,277
      Credit card                                            1,798,417          1,985,439
      Commercial                                            25,718,871         21,955,578
      Home equity and second mortgage                        7,952,063          6,775,864
      Other consumer                                         3,252,282          2,831,756
                                                         -------------      -------------

                                                           179,176,513        169,379,154
      Net of:
           Loans in process                                    (82,821)          (134,411)
           Undisbursed portion of construction loans        (2,684,115)        (3,503,029)
           Net deferred loan origination fees                 (251,800)          (292,780)
           Allowance for loan losses                        (1,357,505)        (1,772,109)
                                                         -------------      -------------
                Loans receivable, net                    $ 174,800,272      $ 163,676,825
                                                         =============      =============
</TABLE>

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

                                   (Continued)


                                                                             34.
<PAGE>

                         NORTHEAST INDIANA BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------

NOTE 3 - LOANS RECEIVABLE, NET (Continued)

Activity in the allowance for loan losses was as follows:

                                         2004           2003            2002
                                     -----------    -----------     -----------

      Balance at beginning of year   $ 1,772,109    $ 2,135,630     $ 1,954,900
      Provision charged to income         37,500             --         732,300
      Charge-offs                       (608,515)      (647,909)       (836,914)
      Recoveries                         156,411        284,388         285,344
                                     -----------    -----------     -----------

      Balance at end of year         $ 1,357,505    $ 1,772,109     $ 2,135,630
                                     ===========    ===========     ===========

Impaired loans were as follows:

                                                       2004          2003
                                                    ----------    ----------
      Year-end loans with no allocated allowance
        for loan losses                             $       --    $       --
      Year-end loans with allocated allowance
        for loan losses                              2,224,606     2,495,469
                                                    ----------    ----------

      Total                                         $2,224,606    $2,495,469
                                                    ==========    ==========

<TABLE>
<CAPTION>
                                                         2004          2003          2002
                                                      ----------    ----------    ----------
<S>                                                   <C>           <C>           <C>
      Amount of the allowance for loan
        losses allocated                              $  311,778    $  592,517    $  959,108

      Average of impaired loans during the year        2,257,324     3,756,415     5,564,385

      Interest income recognized during impairment        82,759       156,114       366,874
      Cash-basis interest income recognized               80,968       155,781       365,208
</TABLE>

Nonperforming loans were as follows:

                                                         2004          2003
                                                      ----------    ----------

      Loans past due over 90 days still on accrual    $       --    $       --
      Nonaccrual loans                                 1,713,000     2,413,000

Nonperforming loans and impaired loans are defined  differently.  Some loans may
be included in both categories,  whereas other loans may only be included in one
category.

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

                                   (Continued)


                                                                             35.
<PAGE>

                         NORTHEAST INDIANA BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------

NOTE 4 - SECONDARY MORTGAGE MARKETING ACTIVITIES

Activity for capitalized mortgage servicing rights was as follows:

                                                 2004              2003
                                              ---------         ---------

      Servicing rights:
        Beginning of year                     $ 307,007         $ 248,681
        Additions                                21,583           195,605
        Amortized to expense                    (51,984)         (137,279)
                                              ---------         ---------

        End of year                           $ 276,606         $ 307,007
                                              =========         =========

NOTE 5 - PREMISES AND EQUIPMENT, NET

Year end premises and equipment were as follows:

                                                       2004            2003
                                                   -----------     -----------

      Land                                         $   458,331     $   458,331
      Automobiles                                       40,392          40,392
      Buildings and leasehold improvements           2,046,946       2,038,953
      Furniture, fixtures and equipment              1,807,596       1,519,049
                                                   -----------     -----------
           Total cost                                4,353,265       4,056,725
      Accumulated depreciation and amortization     (2,177,284)     (1,994,944)
                                                   -----------     -----------

                                                   $ 2,175,981     $ 2,061,781
                                                   ===========     ===========

Depreciation  expense was  $237,000,  $253,000 and  $250,000 for 2004,  2003 and
2002.

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

                                   (Continued)


                                                                             36.
<PAGE>

                         NORTHEAST INDIANA BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------

NOTE 6 - GOODWILL AND INTANGIBLE ASSETS

Goodwill

The change in balance for goodwill during the year is as follows:

                                                                    2004
                                                                  --------
      Beginning of year                                           $     --
      Acquired goodwill                                            130,972
                                                                  --------

      End of year                                                 $130,972
                                                                  ========

Acquired Intangible Assets

Acquired intangible assets were as follows as of year end:

                                                                2004
                                                     -------------------------
                                                      Gross
                                                     Carrying      Accumulated
                                                      Amount      Amortization
                                                     --------     ------------

Amortized intangible assets:
Customer relationship intangibles                    $199,728       $ 12,486
                                                     --------       --------

             Total                                   $199,728       $ 12,486
                                                     ========       ========

Aggregate amortization expense was $12,486 for 2004.

NOTE 7 - DEPOSITS

Time deposits of $100,000 or more were  $29,274,000  and $26,418,000 at year end
2004 and 2003.

Scheduled maturities of time deposits for the next five years were as follows:

            2005                                         $45,783,645
            2006                                          23,811,337
            2007                                           5,668,441
            2008                                             344,125
            2009                                              14,752
            Thereafter                                       100,000
                                                         -----------
                                                         $75,722,300
                                                         ===========

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

                                   (Continued)


                                                                             37.
<PAGE>

                         NORTHEAST INDIANA BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------

NOTE 8 - BORROWED FUNDS

Year end borrowed funds were as follows:

                                                         2004            2003
                                                     -----------     -----------

      Federal Home Loan Bank (FHLB) advances         $68,750,000     $63,000,000
      Securities sold under repurchase agreements      8,316,576      13,545,485
                                                     -----------     -----------
                                                     $77,066,576     $76,545,485
                                                     ===========     ===========

Securities Sold Under Agreements To Repurchase

Securities  sold under  agreements to repurchase are secured by  mortgage-backed
securities with a carrying amount of $9,423,000 and $13,562,000 at year-end 2004
and 2003.

Securities sold under agreements to repurchase are financing  arrangements  that
mature within one day. At maturity, the securities underlying the agreements are
returned to the Company. Information concerning securities sold under agreements
to repurchase is summarized as follows:

                                                        2004            2003
                                                    -----------     -----------

      Average daily balance during the year         $ 6,273,679     $ 4,810,814
      Average interest rate during the year                1.48%           0.99%
      Maximum month-end balance during the year     $15,715,902     $13,545,485
      Weighted average interest rate at year-end           2.24%           0.88%

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

                                   (Continued)


                                                                             38.
<PAGE>

                         NORTHEAST INDIANA BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------

NOTE 8 - BORROWED FUNDS (continued)

FHLB Advances

FHLB  advances  have fixed and  variable  interest  rates  ranging from 1.55% to
6.88%.  Scheduled maturities and the weighted average interest rates by maturity
at year end 2004 were as follows:

                                                                        Weighted
                                                                        Average
                                                                        Interest
                                                                          Rate
                                                                          ----

            2005                                   $11,750,000            1.97%
            2006                                     5,000,000            2.99
            2007                                    10,000,000            6.65
            2008                                     6,000,000            4.74
            2009                                            --              --
            Thereafter                              36,000,000            4.59
                                                   -----------
                                                   $68,750,000            4.34
                                                   ===========

FHLB  advances  are  secured  by  FHLB  stock,   eligible   mortgage  loans  and
specifically  pledged securities.  At December 31, 2004 and 2003, in addition to
FHLB stock,  collateral  of  approximately  $94.9  million and $90.0 million was
pledged to the FHLB to secure advances outstanding.

In  addition,  $36,000,000  of the  advances  outstanding  at December  31, 2004
contained  options  with dates  ranging from March 1, 2005 to December 21, 2005,
whereby  the  interest  rate may be  adjusted  by the  FHLB,  at which  time the
advances may be repaid at the option of First Federal without penalty.

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

                                   (Continued)


                                                                             39.
<PAGE>

                         NORTHEAST INDIANA BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------

NOTE 9 - EMPLOYEE BENEFITS

Employee Pension Plan: First Federal is part of a noncontributory multi-employer
defined benefit pension plan covering substantially all employees.  The trustees
of the Financial  Institutions  Retirement Fund administer the plan. There is no
separate  actuarial  valuation of plan benefits nor  segregation  of plan assets
specifically  for First Federal  because the plan is a  multi-employer  plan and
separate actuarial valuations are not made with respect to each employer nor are
the plan assets so segregated. Expense for 2004, 2003 and 2002 was approximately
$149,000, $95,000 and $50,000.

401(k) Plan:  Northeast  Indiana Bancorp has a 401(k) plan for all employees who
have  completed one year of service  (1,000 hours) and attained a minimum age of
21 years.  Participants may make deferrals up to 75% of compensation.  Northeast
Indiana  Bancorp  matches  50% of  elective  deferrals  on the  first  6% of the
participant's  compensation.  Expense for 2004, 2003 and 2002 was  approximately
$46,000, $45,000 and $40,000.

Supplemental  Retirement Plans: First Federal has a supplemental retirement plan
for the CEO and a deferred  compensation  plan for  certain  directors  of First
Federal.  First  Federal  is  recording  an  expense  equal to the change in the
present value of the payment due at retirement based on the projected  remaining
years of service  using the  projected  unit credit  method.  The balance of the
plans was approximately $652,000 and $549,000 at year-end 2004 and 2003. Expense
related to the plans was approximately $186,000, $154,000 and $130,000 for 2004,
2003 and 2002.

First Federal has purchased  insurance on the lives of the  participants  in the
supplemental  retirement  plan and the  deferred  compensation  plan with  First
Federal as beneficiary.  In addition,  life insurance was purchased on a pool of
officers both during 2003 and 2004 with First Federal as  beneficiary.  The cash
surrender  value  of  the  life  insurance  was  approximately   $5,159,000  and
$4,352,000 at year-end 2004 and 2003.  The income derived from the investment in
life insurance included in other income was approximately $207,000, $169,000 and
$100,000 for 2004, 2003 and 2002.

Employee  Stock  Ownership  Plan  (ESOP):  An ESOP  exists  for the  benefit  of
substantially  all  employees.  Contributions  to the ESOP are made by Northeast
Indiana  Bancorp  and  are  determined  by  the  Board  of  Directors  at  their
discretion.  The  contributions may be made in the form of cash or common stock.
The annual  contributions  may not be greater  than the  amount  deductible  for
federal  income tax  purposes  and cannot  cause  Northeast  Indiana  Bancorp to
violate regulatory capital requirements.

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

                                   (Continued)


                                                                             40.
<PAGE>

                         NORTHEAST INDIANA BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------

NOTE 9 - EMPLOYEE BENEFITS (Continued)

To fund the plan, the ESOP borrowed  $1,745,700  from Northeast  Indiana Bancorp
for the  purpose  of  purchasing  211,261  shares of stock at $8.26  per  share.
Principal payments on the loan are due in equal semi-annual  installments over a
twelve-year  period beginning June 30, 1995.  Interest is payable  semi-annually
during the term of the loan at 6.65%. The loan is  collateralized  by the shares
of Northeast Indiana Bancorp's common stock purchased with the proceeds and will
be repaid by the ESOP with funds from First Federal's  contributions to the ESOP
and earnings on ESOP assets.

Shares are allocated  among  participants  each December 31 on the basis of debt
service  paid  during  the year by the ESOP on the loan from  Northeast  Indiana
Bancorp  to  total  debt  service,  according  to  each  participant's  relative
compensation.

Cash   contributions,   including   dividends  on  unearned  ESOP  shares,  were
approximately  $173,000  during 2004,  $182,000  during 2003 and $192,000 during
2002.  ESOP  compensation  expense  was  approximately  $320,000,  $288,000  and
$244,000 for 2004, 2003 and 2002.

ESOP shares at year end are as follows:

                                                       2004         2003
                                                     --------     --------

      Allocated shares                                105,373      108,551
      Shares released for allocation                   15,032       15,879
      Unreleased shares                                27,485       42,517
      Shares vested and withdrawn                      63,371       44,314
                                                     --------     --------

           Total shares                               211,261      211,261
                                                     ========     ========

           Fair value of unreleased shares           $552,449     $894,558
                                                     ========     ========

Recognition  and Retention  Plan (RRP):  The RRP provides for issue of shares to
directors,  officers and employees. The maximum total shares available under the
RRP was 105,620,  and 14,126 shares are available for future grants.  There were
3,000 new RRP grants  awarded in 2004,  after no new RRP grants in 2003 or 2002.
The expense associated with the RRP was approximately $11,000, $4,000 and $9,000
in 2004, 2003 and 2002.

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

                                   (Continued)


                                                                             41.
<PAGE>

                         NORTHEAST INDIANA BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------

NOTE 10 - INCOME TAXES

Income tax expense is summarized as follows:

                                         2004         2003         2002
                                      ---------    ---------    ---------

      Current federal                 $ 360,135    $ 389,621    $ 491,123
      Deferred federal                   74,200      105,001     (159,336)
      Current state                     131,656      153,631      171,982
      Deferred state                     45,488       41,215      (33,048)
                                      ---------    ---------    ---------

           Income tax expense         $ 611,479    $ 689,468    $ 470,721
                                      =========    =========    =========

Effective  tax rates differ from federal  statutory  rates  applied to financial
statement income due to the following:

<TABLE>
<CAPTION>
                                                        2004          2003          2002
                                                     ---------     ---------     ---------
<S>                                                  <C>           <C>           <C>
Federal statutory rate of 34% times financial
  statement income before income taxes               $ 541,858     $ 890,611     $ 700,610
Tax effect of:
      State tax, net of federal income tax effect       60,229       128,598        91,696
      Low income housing credit                       (237,200)     (259,700)     (250,000)
      Tax exempt income                               (127,440)     (121,172)      (95,349)
      Impairment on available for sale securities      250,070            --            --
      ESOP market value adjustment                      66,562        53,376        35,800
      Other, net                                        57,400        (2,245)      (12,036)
                                                     ---------     ---------     ---------
           Income tax expense                        $ 611,479     $ 689,468     $ 470,721
                                                     =========     =========     =========
</TABLE>

The effective tax rate is 38.4%, 26.3% and 22.8% for 2004, 2003, and 2002.

The components of the net deferred tax asset recorded in the balance sheet at
year end are as follows:

                                                         2004          2003
                                                      ----------    ----------
      Deferred tax assets
           Deferred compensation                      $  258,639    $  217,482
           Bad debts                                     538,859       701,933
           Deferred loan fees                             99,738       115,970
           Unearned compensation                          89,391        84,898
           Interest on non-accrual loans                  35,079        79,929
           Low income housing credit carryforwards       116,422        24,767
           Other                                          32,596         4,891
                                                      ----------    ----------
                Total                                  1,170,724     1,229,870
                                                      ----------    ----------

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

                                   (Continued)


                                                                             42.
<PAGE>

                         NORTHEAST INDIANA BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------

NOTE 10 - INCOME TAXES (Continued)

<TABLE>
<CAPTION>
                                                                  2004          2003
                                                               ---------     ---------
<S>                                                            <C>           <C>
      Deferred tax liabilities
           Depreciation                                        $(145,012)    $(132,880)
           Unrealized gain on securities available for sale           --       (23,650)
           FHLB stock dividends                                 (168,897)      (75,338)
           Low income housing partnership                        (11,942)      (58,897)
                                                               ---------     ---------
                Total                                           (325,851)     (290,765)
                                                               ---------     ---------

           Net deferred tax asset                              $ 844,873     $ 915,455
                                                               =========     =========
</TABLE>

Retained  earnings at  December  31, 2004 and 2003  include  approximately  $1.3
million for which no deferred  federal income tax liability has been recognized.
This amount  represents an allocation of income to bad debt  deductions  for tax
purposes only. Reduction of amounts so allocated for purposes other than tax bad
debt losses or adjustments  arising from carryback of net operating losses would
create income for tax purposes only,  which would be subject to the then-current
corporate  income tax rate. The unrecorded  deferred income tax liability on the
above amount was approximately $442,000 at December 31, 2004 and 2003.

NOTE 11 - REGULATORY MATTERS

First  Federal is subject to regulatory  capital  requirements  administered  by
federal regulatory  agencies.  Capital adequacy guidelines and prompt corrective
action regulations involve  quantitative  measures of assets,  liabilities,  and
certain   off-balance-sheet   items  calculated   under  regulatory   accounting
practices.

Capital amounts and classifications are also subject to qualitative judgments by
regulators  about  components,  risk  weightings,  and  other  factors,  and the
regulators can lower  classifications in certain cases.  Failure to meet various
capital  requirements  can initiate  regulatory  action that could have a direct
material effect on the financial statements.

Prompt  corrective  action  regulations  provide  five   classifications:   well
capitalized,    adequately    capitalized,    undercapitalized,    significantly
undercapitalized, and critically undercapitalized,  although these terms are not
used to represent overall financial condition.  If only adequately  capitalized,
regulatory   approval   is   required   to   accept   brokered   deposits.    If
under-capitalized,  capital  distributions  are limited,  as is asset growth and
expansion, and capital restoration plans are required.

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

                                   (Continued)


                                                                             43.
<PAGE>

                         NORTHEAST INDIANA BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------

NOTE 11 - REGULATORY MATTERS (Continued)

At year end,  actual First  Federal  capital  levels (in  millions)  and minimum
required levels were:

<TABLE>
<CAPTION>
                                                                                      Minimum Required
                                                                                         To Be Well
                                                             Minimum Required            Capitalized
                                                                For Capital        Under Prompt Corrective
                                         Actual              Adequacy Purposes        Action Regulations
                                         ------              -----------------        ------------------
                                   Amount        Ratio      Amount        Ratio      Amount        Ratio
                                   ------        -----      ------        -----      ------        -----
2004
----
<S>                                 <C>          <C>         <C>           <C>        <C>          <C>
Total capital
  (to risk weighted assets)         $25.5        16.7%       $12.2         8.0%       $15.3        10.0%
Tier 1 (core) capital
  (to risk weighted  assets)         24.4        16.0          6.1         4.0          9.2         6.0
Tier 1 (core) capital
  (to adjusted total  assets)        24.4        10.7          9.1         4.0         11.4         5.0
Tier 1 (core) capital
  (to average assets)                24.4        10.7          9.1         4.0         11.4         5.0

<CAPTION>
                                                                                      Minimum Required
                                                                                         To Be Well
                                                             Minimum Required            Capitalized
                                                                For Capital        Under Prompt Corrective
                                         Actual              Adequacy Purposes        Action Regulations
                                         ------              -----------------        ------------------
                                   Amount        Ratio      Amount        Ratio      Amount        Ratio
                                   ------        -----      ------        -----      ------        -----
2003
----
<S>                                 <C>          <C>         <C>           <C>        <C>          <C>
Total capital
  (to risk weighted assets)         $26.4        17.8%       $11.9         8.0%       $14.8        10.0%
Tier 1 (core) capital
  (to risk weighted  assets)         25.2        17.0          5.9         4.0          8.9         6.0
Tier 1 (core) capital
  (to adjusted total  assets)        25.2        11.1          9.1         4.0         11.4         5.0
Tier 1 (core) capital
  (to average assets)                25.2        11.3          8.9         4.0         11.1         5.0
</TABLE>

First Federal was categorized as well capitalized at year end 2004 and 2003.

Regulations  of the Office of Thrift  Supervision  limit the amount of dividends
and other capital distributions that may be paid by savings institutions without
prior approval of the Office of Thrift Supervision.  The regulatory  restriction
is based on a three-tiered  system with the greatest  flexibility being afforded
to well-capitalized  (Tier 1) institutions.  First Federal is currently a Tier 1
institution.  Accordingly,  First  Federal can make,  without  prior  regulatory
approval,  distributions  during a calendar  year up to 100% of its retained net
income for the calendar  year-to-date  plus retained net income for the previous
two calendar  years as long as First Federal would remain  well-capitalized,  as
defined  by  the  Office  of  Thrift   Supervision   prompt   corrective  action
regulations, following the proposed distribution. At year end 2004, the Bank had
no retained earnings available for distribution without regulatory approval.

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

                                   (Continued)


                                                                             44.
<PAGE>

                         NORTHEAST INDIANA BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------

NOTE  12  -  COMMITMENTS  AND  CONTINGENCIES  AND  FINANCIAL   INSTRUMENTS  WITH
  OFF-BALANCE-SHEET RISK

Some financial instruments,  such as loan commitments,  credit lines, letters of
credit, and overdraft  protection,  are issued to meet customer financing needs.
These  agreements to provide credit or to support the credit of others,  as long
as  conditions  established  in the  contract are met,  usually have  expiration
dates.  Commitments  may expire  without being used.  Off-balance-sheet  risk to
credit loss exists up to the face amount of these instruments, although material
losses  are not  anticipated.  The same  credit  policies  are used to make such
commitments as are used for loans, including obtaining collateral at exercise of
the commitment.

Financial instruments with off-balance-sheet risk were as follows at year end.

                                                  2004             2003
                                              -----------      -----------

      Fixed rate commitments                  $ 6,218,431      $ 6,956,076
      Variable rate commitments                10,358,931       12,438,597
      Credit card arrangements                  4,051,233        3,841,561
      Letters of credit                         2,117,497        1,949,647

Most  loan  commitments  have  terms up to 60  days.  At year  end  2004,  fixed
commitments have contractual  interest rates ranging from 4.75% to 7.75%. Credit
card interest rates are fixed at 14.9% or 9.8%. Most variable rate  arrangements
are tied either to the national monthly median cost of funds,  prime rate or the
U.S. Treasury bill rate and have spreads between 0% and 5%.

Certain executives of the Bank have employment  contracts,  which are based upon
changes of control.  The employment  contracts provide for the payment of one to
three years worth of the officers' salaries upon a change of control.

NOTE 13 - STOCK OPTIONS

Options to buy stock have been  granted to  directors,  officers  and  employees
under two different  stock option and  incentive  plans.  Exercise  price is the
market price at date of grant.  The maximum option term is ten years and options
vest over five years under both plans.  The Company had almost awarded all stock
options  under the original  stock option plan by the year ended 2001.  As such,
the 2002 Omnibus  Incentive Plan was added to the Company's  proxy statement and
approved by the shareholders at the May 1, 2002 Northeast Indiana Bancorp,  Inc.
Annual  Meeting.  There were 158,753 new stock  options  approved  under the new
plan. At year end 2004, 141,474 shares were authorized for future grants.

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

                                   (Continued)


                                                                             45.
<PAGE>

                         NORTHEAST INDIANA BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------

NOTE 13 - STOCK OPTIONS (Continued)

Information about option grants follows:

                                       Number           Exercise      Fair Value
                                     of Options           Price       of Grants
                                     ----------           -----       ---------

Outstanding, end of 2001               196,007
        Granted                          5,000          $  14.45       $   3.16
        Granted                          2,500             14.63           2.89
        Exercised                      (25,763)             9.71
        Exercised                       (3,300)            14.66
        Exercised                       (2,200)            11.31
        Exercised                       (1,815)            12.60
        Exercised                       (1,000)            10.19
                                       -------
Outstanding, end of 2002               169,429
                                       -------
        Granted                          5,000             15.27           2.96
        Granted                         10,000             20.64           7.24
        Exercised                      (43,934)             9.71
        Exercised                         (550)            14.66
        Exercised                         (300)            11.31
        Forfeited                       (1,150)            12.91
                                       -------
Outstanding, end of 2003               138,495
                                       -------
        Exercised                       33,391              9.71
        Exercised                          500             10.19
        Exercised                        1,600             11.31
        Exercised                        1,100             14.66
        Exercised                        1,000             20.64
        Forfeited                         (300)            11.31
                                       -------
Outstanding, end of 2004               100,604
                                       =======

Options outstanding at year end were as follows:

<TABLE>
<CAPTION>
                                                     2004             2003             2002
                                                  -----------      -----------      -----------
<S>                                               <C>              <C>              <C>
      Number of options                               100,604          138,495          169,429
      Minimum exercise price                      $      9.71      $      9.71      $      9.71
      Maximum exercise price                            20.64            20.64            18.49
      Weighted-average exercise price                   11.92            11.46            10.37
      Weighted-average remaining option life       3.07 years       3.67 years       3.76 years
</TABLE>

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

                                   (Continued)


                                                                             46.
<PAGE>

                         NORTHEAST INDIANA BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------

NOTE 13 - STOCK OPTIONS (Continued)

Exercisable options outstanding at year-end 2004 were as follows:

               Range of                     Number of           Weighted Average
           Exercise Prices             Options Exercisable       Exercise Price
           ---------------             -------------------       --------------

            $9.00-$11.99                     66,724                  $ 9.71
            $12.00-$14.99                     8,750                   13.95
            $15.00-$17.99                     2,815                   16.79
            $18.00-$20.99                     2,815                   19.25
                                             ------                  ------

                                             81,104                  $10.75
                                             ======                  ======

There were 81,104,  110,795 and 149,103  options  exercisable  at year end 2004,
2003 and 2002. The  weighted-average  exercise  price of options  exercisable at
year end 2004, 2003 and 2002 was $10.75, $10.24 and $9.95.

NOTE 14 - RELATED PARTY TRANSACTIONS

Certain directors and officers of First Federal are loan customers. A summary of
related  party loan  activity for loans  aggregating  $60,000 or more to any one
related party is as follows:

      Balance - January 1, 2004                               $ 3,402,556
           New loans                                              923,193
           Repayments                                          (1,011,199)
           Changes in related parties during the year                  --
                                                              -----------
      Balance - December 31, 2004                             $ 3,314,550
                                                              ===========

Related party deposits were approximately $619,000 and $621,000 at year end 2004
and 2003.

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

                                   (Continued)


                                                                             47.
<PAGE>

                         NORTHEAST INDIANA BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------

NOTE 15 - FAIR VALUES OF FINANCIAL INSTRUMENTS

Following  are  carrying  amounts  and  estimated  fair  values  at year end (in
thousands):

<TABLE>
<CAPTION>
                                                  2 0 0 4                         2 0 0 3
                                                  -------                         -------
                                         Carrying        Estimated       Carrying        Estimated
                                          Amount         Fair Value       Amount         Fair Value
                                         ---------       ----------      ---------       ----------
<S>                                      <C>             <C>             <C>             <C>
Financial assets:
-----------------
      Cash and cash equivalents          $   3,385       $   3,385       $   9,333       $   9,333
      Securities available for sale         38,904          38,904          43,687          43,687
      Securities held to maturity               60              60             150             150
      Loans receivable, net                174,800         177,687         163,677         167,023
      Accrued interest receivable              831             831             799             799
      Investments in limited
        liability partnerships               1,371           1,371           1,602           1,602
      Cash surrender value of life
        insurance                            5,159           5,159           4,352           4,352

Financial liabilities:
----------------------
      Deposits                            (123,951)       (123,944)       (122,010)       (123,491)
      Borrowed funds                       (77,067)        (79,416)        (76,545)        (82,133)
      Accrued interest payable                (175)           (175)           (170)           (170)
</TABLE>

For purposes of the above  disclosures  of estimated  fair value,  the following
assumptions  were used. The estimated fair value for cash and cash  equivalents,
accrued  interest,  investments  in  limited  liability  partnerships  and  cash
surrender  value of life  insurance  is  considered  to  approximate  cost.  The
estimated  fair value for  securities  is based on quoted  market values for the
individual securities or equivalent securities.

The estimated fair value for loans held for sale is based on market quotes.  The
estimated  fair value for loans is based on  estimates of the rate that would be
charged for similar  such loans at December  31, 2004 and 2003,  applied for the
time period  until  estimated  repayment  and the  allowance  for loan losses is
considered to be a reasonable  estimate of discount for credit quality concerns.
The  estimated  fair  value for demand and  savings  deposits  is based on their
carrying value. The estimated fair value for time deposits and borrowed funds is
based on estimates  of the rate that would be paid on such  deposits or for such
borrowings  at  December  31, 2004 and 2003,  applied for the time period  until
maturity.   The  estimated  fair  value  of  other  financial   instruments  and
off-balance-sheet  loan  commitments  approximates  cost  and is not  considered
significant for this presentation.

While these  estimates of fair value are based on  management's  judgment of the
most  appropriate  factors,  there is no assurance that were  Northeast  Indiana
Bancorp  to have  disposed  of such  items at  December  31,  2004 or 2003,  the
estimated fair values would  necessarily  have been achieved at that date, since
market values may differ depending on various circumstances.  The estimated fair
values at December 31, 2004 and 2003 should not  necessarily  be  considered  to
apply at subsequent dates.

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

                                   (Continued)


                                                                             48.
<PAGE>

                         NORTHEAST INDIANA BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------

NOTE 16 - BUSINESS COMBINATION

On June 30, 2004,  First  Federal  acquired  100% of the  personal  property and
customer list of Innovative Financial Services, a locally-owned  brokerage firm,
through First Federal's brokerage subsidiary  Northeast Indiana Financial,  Inc.
Operating  results  of  Innovative   Financial  Services  are  included  in  the
consolidated financial statements since the date of acquisition.  As a result of
this  acquisition,  the Company expects to further  solidify its market share in
the financial  services  market,  expand its customer base to enhance fee income
and provide an  opportunity  to market  additional  products and services to new
customers.

The  aggregate  purchase  price was  $350,000.  The purchase  price  resulted in
approximately  $131,000  in  goodwill  and  $200,000  in  customer  relationship
intangible. The customer relationship intangible will be amortized over 8 years,
using  an  accelerated  method.  Goodwill  will  not be  amortized  but  instead
evaluated periodically for impairment.

The following  table  summarizes the estimated fair value of assets acquired and
liabilities assumed at the date of acquisition.

Premises and equipment                                                  $ 19,300
Goodwill                                                                 130,972
Customer list intangible                                                 199,728
                                                                        --------
   Total assets acquired                                                 350,000

   Total liabilites assumed                                                   --
              Net assets acquired                                       $350,000
                                                                        ========

Information relating to proforma income and expense had the acquisition occurred
at January 1, 2004 and 2003 is not considered material to this presentation.

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

                                   (Continued)


                                                                             49.
<PAGE>

                         NORTHEAST INDIANA BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------

NOTE 17 - PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION

Condensed  financial  information  of  Northeast  Indiana  Bancorp,  Inc.  is as
follows:

                            CONDENSED BALANCE SHEETS
                           December 31, 2004 and 2003

                                                           2004          2003
                                                       -----------   -----------
ASSETS
Cash and cash equivalents                              $   582,710   $ 1,487,833
Securities available for sale                              281,116       287,677
Loan receivable from Employee Stock Ownership Plan         290,950       436,425
Investment in subsidiary bank                           24,905,980    24,993,175
Other assets                                                 7,998         4,307
                                                       -----------   -----------

      Total assets                                     $26,068,754   $27,209,417
                                                       ===========   ===========

LIABILITIES
Accrued expenses                                       $    22,221   $    14,857

SHAREHOLDERS' EQUITY                                    26,046,533    27,194,560
                                                       -----------   -----------

      Total liabilities and shareholders' equity       $26,068,754   $27,209,417
                                                       ===========   ===========

                         CONDENSED STATEMENTS OF INCOME
                  Years ended December 31, 2004, 2003 and 2002

<TABLE>
<CAPTION>
                                                  2004           2003           2002
                                              -----------    -----------    -----------
<S>                                           <C>            <C>            <C>
Interest income                               $    38,497    $    48,458    $    58,017
Dividends from subsidiary bank                  1,725,000      1,775,000      1,600,000
                                              -----------    -----------    -----------

      Total income                              1,763,497      1,823,458      1,658,017

Operating expenses                                241,793        229,497        233,454
                                              -----------    -----------    -----------
Income before income taxes and equity in
  undistributed earnings of subsidiary bank     1,521,704      1,593,961      1,424,563

Income tax benefit                                (83,179)       (70,808)       (92,073)
                                              -----------    -----------    -----------
Income before equity in undistributed
  earnings of subsidiary bank                   1,604,883      1,664,769      1,516,636
Equity in undistributed
  earnings of subsidiary bank                    (622,661)       265,205         73,260
                                              -----------    -----------    -----------

Net income                                    $   982,222    $ 1,929,974    $ 1,589,896
                                              ===========    ===========    ===========
</TABLE>

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

                                   (Continued)


                                                                             50.
<PAGE>

                         NORTHEAST INDIANA BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------

NOTE 17 - PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION (Continued)

                       CONDENSED STATEMENTS OF CASH FLOWS
                  Years ended December 31, 2004, 2003 and 2002

<TABLE>
<CAPTION>
                                                              2004           2003           2002
                                                          -----------    -----------    -----------
<S>                                                       <C>            <C>            <C>
Cash flows from operating activities
      Net income                                          $   982,222    $ 1,929,974    $ 1,589,896
      Adjustments to reconcile net income to cash
        from operating activities:
           Amortization                                          (154)          (145)          (137)
           Equity in undistributed
             earnings of subsidiary bank                      622,661       (265,205)       (73,260)
           Change in:
                Other assets                                  131,274         71,441         15,210
                Accrued expenses                                7,364          4,803          1,143
                                                          -----------    -----------    -----------
                     Net cash from operating activities     1,743,367      1,740,868      1,532,852

Cash flows from investing activities
      Repayments on loan receivable from ESOP                 145,475        145,475        145,475
                                                          -----------    -----------    -----------
                Net cash from investing activities            145,475        145,475        145,475

Cash flows from financing activities
      Dividends paid                                         (834,990)      (786,348)      (752,480)
      Purchase of treasury stock                           (2,343,157)      (903,433)    (1,320,253)
      Sale of treasury stock                                  384,182        438,056        356,483
                                                          -----------    -----------    -----------
           Net cash from financing activities              (2,793,965)    (1,251,725)    (1,716,250)
                                                          -----------    -----------    -----------
Net change in cash and cash equivalents                      (905,123)       634,618        (37,923)

Cash and cash equivalents at beginning of year              1,487,833        853,215        891,138
                                                          -----------    -----------    -----------

Cash and cash equivalents at end of year                  $   582,710    $ 1,487,833    $   853,215
                                                          ===========    ===========    ===========
</TABLE>

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

                                   (Continued)


                                                                             51.
<PAGE>

                         NORTHEAST INDIANA BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2004, 2003 and 2002
--------------------------------------------------------------------------------

NOTE 18 - EARNINGS PER COMMON SHARE

A  reconciliation  of the numerators and  denominators of the basic earnings per
common share and diluted  earnings per common share  computations  for the years
ended December 31, is presented below.

<TABLE>
<CAPTION>
                                                           2004           2003           2002
                                                       -----------    -----------    -----------
<S>                                                    <C>            <C>            <C>
Basic Earnings Per Common Share

      Net income available to common shareholders      $   982,222    $ 1,929,974    $ 1,589,896
                                                       ===========    ===========    ===========

      Weighted average common shares
        outstanding before adjustment                    1,461,346      1,478,123      1,531,361

      Less: unallocated ESOP shares                        (42,517)       (58,396)       (75,129)

      Less: non-vested RRP shares                           (3,100)          (310)          (762)
                                                       -----------    -----------    -----------

      Weighted average common shares outstanding
         for basic earnings per  common share            1,415,729      1,419,417      1,455,470
                                                       ===========    ===========    ===========

           Basic Earnings Per Common Share             $      0.69    $      1.36    $      1.09
                                                       ===========    ===========    ===========

Diluted Earnings Per Common Share

      Net income available to common
        shareholders, per above                        $   982,222    $ 1,929,974    $ 1,589,896
                                                       ===========    ===========    ===========

      Weighted average common shares outstanding         1,415,729      1,419,417      1,455,470

      Add: dilutive effects of assumed conversions
        and exercises of stock options                      48,179         58,038         49,532
                                                       -----------    -----------    -----------

      Weighted average common and dilutive
        shares outstanding for dilutive earnings per
        common share                                     1,463,908      1,477,455      1,505,002
                                                       ===========    ===========    ===========

           Diluted Earnings Per Common Share           $      0.67    $      1.31    $      1.06
                                                       ===========    ===========    ===========
</TABLE>

Stock  options  for 0,  10,000  and  14,380  shares  of  common  stock  were not
considered in computing  diluted  earnings per common shares for the years ended
December 31, 2004, 2003 and 2002 because they were not dilutive.

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


                                                                             52.
<PAGE>

                         NORTHEAST INDIANA BANCORP, INC.

                                TABLE OF CONTENTS
--------------------------------------------------------------------------------

PRESIDENT'S MESSAGE TO OUR SHAREHOLDERS ...................................    1

SELECTED CONSOLIDATED FINANCIAL INFORMATION ...............................    2

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
  CONDITION AND RESULTS OF OPERATIONS .....................................    3

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM ......................................................................   19

CONSOLIDATED FINANCIAL STATEMENTS .........................................   20

STOCKHOLDER INFORMATION ...................................................   54

DIRECTORS AND EXECUTIVE OFFICERS ...........................   Inside Back Cover
--------------------------------------------------------------------------------

<PAGE>

                             STOCKHOLDER INFORMATION

Stock Listing Information

The  Company's  common stock is traded on The NASDAQ  National  Market under the
symbol "NEIB".

Stock Price Information

The  following  table  sets  forth  the high and low bid  prices  and  dividends
declared per share of common stock for the periods indicated. The source of such
price  information was NASDAQ's monthly trade history report.  The prices do not
represent actual  transactions  and do not include retail markups,  markdowns or
commissions.

                                                               Dividends
              Quarter Ended                High        Low     Declared
              -------------                ----        ---     --------

            March 31, 2003                $16.20     $15.05     $  .13
            June 30, 2003                  20.02      15.50        .13
            September 30, 2003             21.25      18.18        .13
            December 31, 2003              22.00      18.15        .14

            March 31, 2004                $21.49     $19.95     $  .14
            June 30, 2004                  22.35      21.00        .14
            September 30, 2004             22.00      20.07        .14
            December 31, 2004              22.72      20.10        .15

Dividend payment  decisions are made with  consideration of a variety of factors
including earnings,  financial condition,  market  considerations and regulatory
restrictions. Restrictions on dividend payments are described in Note 1 and Note
11 of Notes to Consolidated Financial Statements included in this Annual Report.

As of February 08, 2005,  there were  approximately  403 shareholders of record,
not  including  those  shares  held in nominee or street  name  through  various
brokerage firms or banks.

Annual Report on Form 10-KSB

A copy of the Company's annual report on Form 10-KSB,  filed with the Securities
and  Exchange  Commission,   is  available  without  charge  in  PDF  format  at
www.firstfedhuntington.com or by writing:

       Randy J. Sizemore
       Senior Vice President/Chief Financial Officer
       Northeast Indiana Bancorp, Inc.
       100 Frontage Road
       Huntington, Indiana 46750

Stock Transfer Agent

Inquiries regarding stock transfer,  registration,  lost certificates or changes
in name and address should be directed to the stock transfer agent and registrar
by writing:

       Registrar and Transfer Company
       10 Commerce Drive
       Cranford, New Jersey 07016

Investor Information

Stockholders,  investors,  and analysts interested in additional information may
contact Stephen E. Zahn, Chairman, President and CEO, Northeast Indiana Bancorp,
Inc.

<TABLE>
<CAPTION>
               Corporate Office                   Special Counsel                 Independent Auditor
<S>                                          <C>                             <C>
       Northeast Indiana Bancorp, Inc.         Barnes & Thornburg LLP        Crowe Chizek and Company LLC
            648 North Jefferson Street       11 South Meridian Street              330 E. Jefferson Blvd.
             Huntington, Indiana 46750         Indianapolis, IN 46204           South Bend, Indiana 46624
                        (260) 356-3311
</TABLE>


                                                                             54.
<PAGE>

                         NORTHEAST INDIANA BANCORP, INC.
                        DIRECTORS AND EXECUTIVE OFFICERS
--------------------------------------------------------------------------------

BOARD OF DIRECTORS                         EXECUTIVE OFFICERS

Stephen E. Zahn                            Stephen E. Zahn
Chairman of the Board                      President and Chief Executive Officer
President and Chief Executive Officer
                                           Dee Ann Hammel
Dan L. Stephan                             Senior Vice President, Secretary
Past State Representative                    and Chief Operations Officer
  Indiana Legislature
Agent                                      Randy J. Sizemore
  Variable Annuity Life Insurance Company  Senior Vice President, Treasurer
                                             and Chief Financial Officer
J. David Carnes
Medical Doctor and Associate               Michael S. Zahn
  Family Practice Associates               Senior Vice President

Michael S. Zahn
Senior Vice President

Randall C. Rider
President
  Lime City Manufacturing Company, Inc.

William A Zimmer
President
  W.A. Zimmer Company


                                                                             55.