UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    Form 10-Q

(Mark One)
[X]      QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934 [No Fee Required]

         For the quarterly period ended March 31, 2001 or
                                        --------------

[   ]    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934 [No Fee Required]

         For the transition period from                  to                   .
                                        ---------------     -------------------

         Commission file number    0-27590

                       INDEPENDENT FINANCIAL NETWORK, INC.
               (Exact name of issuer as specified in its charter)
                  Oregon                                 93-0800253       .
         ---------------------------        -------------------------------
         (State or other jurisdiction of   (I.R.S. Employer Identification No.)
         incorporation or organization)

         170 S. Second St., Coos Bay, Oregon                 97420   .
         ---------------------------------------          ------------
         (Address of Principal Executive Offices)          (Zip Code)

                                 (541) 267-5356
                           (Issuer's telephone number)


Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES X NO

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:

                  Class                              Outstanding at May 8, 2001
                  -----                              --------------------------
         Common Stock, $5.00 par value                        5,418,136


<PAGE>

                         Form 10-Q Table of Contents


         Part I

Item 1.  Condensed Consolidated Financial Statements

Item 2.  Management's Discussion and Analysis

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

         Part II

Item 1.  Legal Proceedings

Item 2.  Changes in Securities and Use of Proceeds

Item 3.  Defaults Upon Senior Securities

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

Item 5.  Other Information

Item 6.  Exhibits and Reports on Form 8-K

         Signatures



<PAGE>


                          PART I. FINANCIAL INFORMATION
Item 1.   Financial Statements.

                  INDEPENDENT FINANCIAL NETWORK & SUBSIDIARIES
                CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED
             (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

ASSETS                                            Mar. 31, 2001    Dec. 31, 2000
------                                            -------------    -------------

Cash and cash equivalents:
   Cash and due from banks                            $12,589           $12,459
   Federal funds sold                                  10,265             5,750
                                                       ------             -----
     Total cash and cash equivalents                   22,854            18,209

Investment securities available for sale              108,324           108,406
Loans, net                                            225,732           215,369
Mortgage loans held for sale, at cost which
  approximates market                                   2,263             2,280
Net investment in direct financing leases               3,533             3,756
Mortgage servicing rights                               3,292             3,137
Premises and equipment, net                            14,582            14,917
Federal Home Loan Bank stock, at cost                   2,412             2,374
Federal Reserve Bank stock, at cost                       759               759
Other assets                                            5,815             4,295
                                                     --------          --------
      Total assets                                   $389,566          $373,502
                                                     ========          ========

LIABILITIES, MINORITY INTEREST AND SHAREHOLDERS' EQUITY
-------------------------------------------------------
Liabilities:
  Deposits:
    Demand                                            $56,442           $57,503
    NOW accounts                                       42,487            42,360
    Money market accounts                              56,468            54,117
    Savings accounts                                   21,824            21,038
    Time deposit                                      146,066           137,255
                                                      -------           -------
      Total deposits                                  323,287           312,273

Securities sold under agreements to repurchase         12,287            10,619
Short term borrowings                                      --               139
Federal Home Loan Bank borrowings                      10,000            10,000
Other borrowings                                        4,500             2,000
Other liabilities                                       4,309             3,207
                                                        -----             -----
      Total liabilities                               354,383           338,238
                                                      -------           -------

Minority interest in subsidiaries                       1,398             2,579
Shareholders' equity:
   Nonvoting preferred stock, $5 par value.
      Authorized 5,000,000 shares; none issued             --                --
   Voting preferred stock, $5 par value.
      Authorized 5,000,000 shares; none issued             --                --
   Common stock, $5 par value.
      Authorized 10,000,000 shares - issued and
      outstanding 5,418,109 shares in 2001
      (5,418,646 shares in 2000)                       27,091            27,093
Surplus                                                 4,415             4,414
Retained earnings                                         902               493
Accumulated other comprehensive income                  1,377               685
                                                        -----               ---

         Total shareholders' equity                    33,785            32,685
                                                       ------            ------


Total liabilities, minority interest and shareholders'
   equity                                            $389,566          $373,502
                                                     ========          ========


     See accompanying notes to condensed consolidated financial statements.

<PAGE>

                  INDEPENDENT FINANCIAL NETWORK & SUBSIDIARIES
              CONDENSED CONSOLIDATED STATEMENTS OF INCOME-UNAUDITED
                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

                                                              Three months ended
                                                                  March 31,
                                                                  ---------
                                                               2001        2000
                                                               ----        ----
Interest income:
   Interest on loans                                          $5,335      $4,447
   Income on direct financing leases                              83          65
   Interest and dividends on securities:
      Taxable                                                  1,387       1,134
      Exempt from Federal income tax                             231         178
      Dividend income on Federal Home Loan Bank stock             38          35
      Dividend income on Federal Reserve Bank stock               11          11
      Interest on Federal funds sold                              80          55
                                                                  --          --
         Total interest income                                 7,165       5,925
                                                               -----       -----
Interest expense:
   Deposits
      NOW                                                        178         152
      Money market                                               544         517
      Savings                                                    131         131
      Time                                                     2,094       1,488
   Securities sold under agreements to repurchase                119         130
   Short term borrowings                                           6           6
   Federal Home Loan Bank borrowings                             143           8
   Other borrowings                                               81          21
                                                                  --          --
         Total interest expense                                3,296       2,453
                                                               -----       -----

      Net interest income                                      3,869       3,472
Provision for loan losses                                         67         146
                                                                  --         ---
      Net interest income after provision for loan losses      3,802       3,326
                                                               -----       -----

Other income:
   Service charges on deposit accounts                           414         342
   Gain on sale of investments available for sale, net           156          --
   Loan servicing fees                                           110          90
   Sold real estate loan fees                                    631         351
   Other                                                         202         241
                                                                 ---         ---
      Total other income                                       1,513       1,024
                                                               -----       -----

Other expense:
   Salaries and employee benefits                              2,754       2,277
   Occupancy of bank premises                                    293         276
   Furniture and equipment                                       509         449
   Professional fees                                             272         271
   FDIC assessment                                                15          13
   Supplies                                                      147         113
   Other                                                         735         580
                                                                 ---         ---
      Total other expense                                      4,725       3,979
                                                               -----       -----

      Income before provision for income taxes
      and minority interest                                      590         371
Provision for income taxes                                       184         116
                                                                 ---         ---
         Net income before minority interest                     406         255
Net loss attributable to minority interest                         3           5
                                                                   -           -
              Net income                                        $409        $260
                                                                ====        ====

              Net income per share - Basic                     $0.08       $0.05
                                                               =====       =====
              Net income per share - Diluted                   $0.08       $0.05
                                                               =====       =====




     See accompanying notes to condensed consolidated financial statements.



<PAGE>


                  INDEPENDENT FINANCIAL NETWORK & SUBSIDIARIES
       CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME-UNAUDITED
                             (DOLLARS IN THOUSANDS)

                                                              Three months ended
                                                                  March 31,
                                                               2001        2000
                                                               ----        ----

Net Income                                                     $409        $260

Other comprehensive income, net of income tax:

Unrealized gain (loss) on investment securities
(Net of tax of $432 and $(79) for the three months ended
March 31, 2001 and 2000, respectively)                          692        (140)
                                                                ---        -----

Comprehensive income                                         $1,101         $120
                                                             ======         ====


     See accompanying notes to condensed consolidated financial statements.



<PAGE>


                  INDEPENDENT FINANCIAL NETWORK & SUBSIDIARIES
            CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS-UNAUDITED
                             (DOLLARS IN THOUSANDS)
                                                    Three months ended March 31,
                                                              2001         2000
                                                              ----         ----
Cash flows from operating activities:
Net income                                                    $409         $260
Adjustments to reconcile net income to net cash
 (used in) provided by operating activities:
   Depreciation and amortization                               429          261
   Deferred tax benefit                                        (1)         (13)
   Provision for loan losses                                    67          146
   Origination of mortgage loans held for sale            (32,727)     (12,666)
   Proceeds from mortgage loans sold                        32,744       13,535
   Net gain on sale of investment securities
   available for sale                                        (156)           --
   Increase in mortgage servicing rights                     (155)         (10)
   Federal Home Loan Bank stock dividend                      (38)         (35)
   Increase in other assets                                (1,520)        (548)
   Increase in other liabilities                               673          609
   Net loss attributable to minority interest                  (3)          (5)
                                                           -------    ---------
      Net cash (used in) provided by operating activities    (278)        1,534
                                                           -------    ---------

Cash flows from investing activities:
   Purchase of investment securities available for sale   (10,836)      (8,134)
   Proceeds from sale of securities available for sale       7,046           --
   Proceeds from maturities and call of investment
   securities available for sale                             5,110        5,426
   Net loan originations                                   (1,333)      (6,254)
   Purchase of participations                              (9,097)      (2,827)
   Additions to premises and equipment                        (52)        (643)
   Purchase of Federal Reserve Bank stock                       --          (3)
   Originations of direct financing leases                    (22)        (796)
   Gross payments on direct financing leases                   245          325
   Minority Interest in subsidiaries                       (1,181)        (130)
                                                           -------        -----
      Net cash used in investing activities               (10,120)     (13,036)
                                                          --------     --------

Cash flows from financing activities:
     Net increase in deposits                               11,014       18,484
     Increase (decrease) in securities sold with
     agreements to repurchase                                1,668      (4,522)
     Decrease of Federal Home Loan Bank borrowings              --      (4,000)
     Increase in other borrowings                            2,500          400
     Proceeds from issuance of common stock                     --            1
     Decrease in short term borrowings                       (139)        (317)
                                                          --------       ------
      Net cash provided by financing activities             15,043       10,046
                                                          --------       ------

      Net increase (decrease) in cash and cash equivalents   4,645      (1,456)
Cash and cash equivalents at beginning of period            18,209       16,692
                                                            ------       ------
Cash and cash equivalents at end of period                 $22,854      $15,236
                                                           =======      =======

Supplemental disclosures of cash flow information:
   Cash paid during the period for:
        Interest                                            $3,267       $1,907
        Income taxes                                           $--           $7
Supplemental disclosures of investing activities:
   Unrealized gain (loss) on investment
        securities available for sale, net of tax             $692       $(140)

     See accompanying notes to condensed consolidated financial statements.

<PAGE>


                  INDEPENDENT FINANCIAL NETWORK & SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

(1)  Basis of Financial Statement Presentation
     -----------------------------------------
The interim condensed consolidated financial statements include the accounts of
Independent Financial Network (IFN, or the Company) (formerly Security Bank
Holding Company), a bank holding company, its wholly-owned subsidiaries, IFN
Bank (which includes Security Bank, Security Mortgage and Roseburg Community
Banking Company), Pacific State Bank (Pacific State), Family Security Bank
(Family Security), Lincoln Security Bank (Lincoln Security), and Alliance
Technology Inc., and its majority-owned subsidiaries, McKenzie State Bank
(McKenzie State) and Oregon State Bank (Oregon State). All significant
intercompany accounts and transactions have been eliminated in consolidation.
The interim condensed consolidated financial statements include all adjustments,
consisting of normal recurring adjustments, that the Company considers necessary
for a fair presentation of the results of operations for such interim periods.
In preparing the condensed consolidated financial statements, management is
required to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities as of
the date of the balance sheets and income and expenses for the periods. Actual
results could differ from those estimates. The balance sheet data as of December
31, 2000 was derived from audited financial statements, but does not include all
disclosures contained in the Company's 2000 Annual Report to Shareholders. The
interim condensed consolidated financial statements should be read in
conjunction with the December 31, 2000 consolidated financial statements,
including the notes thereto, included in the Company's 2000 Annual Report to
Shareholders. Certain amounts for 2000 have been reclassified to conform with
the 2001 presentation. The results of operations for the interim periods shown
in this report are not necessarily indicative of results for any future interim
period or the entire fiscal year.

(2)  Stock Dividend
     --------------
On January 16, 2001, the Company declared a 5% stock dividend on the Company's
common stock which was paid on March 16, 2001 to stockholders of record on March
2, 2001. The dividend was charged to retained earnings in the amount of $1.2
million, which was based on the fair value of the Company's common stock. In
addition to the 5% stock dividend, the Company increased the number of stock
options and purchase rights under the 1995 Stock Option Plan by 5% and reduced
the exercise prices accordingly. All references to weighted average shares
outstanding, per share amounts, stock purchase rights, option shares, and
exercise prices included in the accompanying consolidated financial statements
and notes reflect the 5% stock dividend and its retroactive effect.

(3)  Earnings Per Share
     ------------------
Basic and diluted earnings per share are based on the weighted average number of
common shares outstanding during each period, with diluted including the effect
of potentially dilutive common shares. Stock options outstanding for diluted
earnings per share are calculated using the treasury stock method. The following
table presents information relating to the weighted average number of common
shares outstanding for all periods presented for both basic and diluted earnings
per share calculations:

                                                    Three months ended March 31,
                                                    ----------------------------
                                                           2001           2000
                                                           ----           ----

Weighted average shares - basic                         5,418,130      5,418,700

Potential dilution of stock options                        *2,306        **3,154
                                                            -----          -----

Weighted average shares - diluted                       5,420,436      5,421,854
                                                        =========      =========

*Options to purchase 250,276 shares of common stock at $4.56-$10.90 per share
were outstanding during the first quarter of 2001 but were not included in the
computation of diluted EPS because the options' exercise price was greater than
the average market price of the common shares.

** Options to purchase 147,683 shares of common stock at $6.68-$10.90 per share
were outstanding during the first quarter of 2000 but were not included in the
computation of diluted EPS because the options' exercise price was greater than
the average market price of the common shares.




<PAGE>

                  INDEPENDENT FINANCIAL NETWORK & SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

(4)  Other Borrowings
     ----------------
At March 31, 2001 the Company had $4,500,000 in borrowings from a third party
bank, with interest based on the prime rate (the prime rate was 8.00% at March
31, 2001). The term loan will mature in 2011.

(5)  Federal Home Loan Bank Borrowings
     ---------------------------------
At March 31, 2001 the Company had outstanding advances from the Federal Home
Loan Bank (FHLB) of $10,000,000 with a fixed rate of 5.34% and a maturity in
2002. These advances were collaterized by certain investment securities, certain
residential first mortgage loans, deposits with the FHLB, and FHLB stock
totaling approximately $10,000,000 at March 31, 2001.

(6)  Acquisition of Lincoln Security Bank
     ------------------------------------
In January of 2001 the Company completed the purchase of the minority interest
in Lincoln Security Bank (LSB), resulting in IFN having 100% ownership. IFN had
owned approximately 68% of LSB since its inception in May 1996. The purchase
price of the minority interest was $25 per share for a total of approximately
$2.6 million. The acquisition was accounted for using the purchase accounting
method, and resulted in approximately $1.4 million in goodwill, which is being
amortized over 15 years.

(7)  Segment Information
---  -------------------
The following table presents summary income and balances for reportable segments
and reconciles segments to the Company's consolidated totals for the quarter
ended March 31, 2001.
<TABLE>
<CAPTION>

                                                Information
                          Commercial  Mortgage  Technology                   Intersegment
                           Banking    Banking   Services    Administration   Eliminations   Consolidated
                           -------    -------   --------    --------------   ------------   ------------
<S>                         <C>          <C>       <C>         <C>              <C>              <C>
Interest Income             $6,920       $265        $--         $--              $(20)          $7,165
Interest Expense             3,216         19         --          81               (20)           3,296
                             -----         --         --          --               ----           -----
  Net interest income
    before provision         3,704        246         --        (81)                 --           3,869
Provision for loan loss         67         --         --          --                 --              67
                                --         --         --          --                 --              --
  Net interest income        3,637        246         --        (81)                 --           3,802

Non-interest income            908        631        380       1,023            (1,429)           1,513

Other non-interest expense   3,336        689        528         764              (592)           4,725
                             -----        ---        ---         ---              -----           -----

   Income before taxes and
    minority interest        1,209        188      (148)         178              (837)             590

Provision for income taxes     407         60       (52)       (231)                 --             184
                               ---         --       ----       -----                 --             ---

   Income before minority
    interest                   802        128       (96)         409              (837)             406

Loss attributable to
  minority interest             --         --         --          --                  3               3
                                --         --         --          --                  -               -

  Net income                  $802       $128      $(96)        $409             $(834)            $409
                              ====       ====      =====        ====             ======            ====
</TABLE>
<PAGE>

The following table presents summary income and balances for reportable segments
and reconciles segments to the Company's consolidated totals for the quarter
ended March 31, 2000.
<TABLE>
<CAPTION>
                                                Information
                          Commercial  Mortgage  Technology                   Intersegment
                           Banking    Banking   Services    Administration   Eliminations   Consolidated
                           -------    -------   --------    --------------   ------------   ------------
<S>                         <C>         <C>        <C>         <C>              <C>            <C>
Interest Income             $5,991        $--        $--         $--              $(66)          $5,925
Interest Expense             2,498         --         --          21               (66)           2,453
                             -----         --         --          --               ----           -----
  Net interest income
    before provision         3,493         --         --        (21)                 --           3,472
Provision for loan loss        146         --         --          --                 --             146
                               ---         --         --          --                 --             ---
  Net interest income        3,347         --         --        (21)                 --           3,326

Non-interest income            733        234         --       1,218            (1,161)           1,024

Other non-interest expense   3,100        256         --       1,138              (515)           3,979
                             -----        ---         --       -----              -----           -----

  Income before taxes and
   minority interest           980       (22)         --          59              (646)             371

Provision for income taxes     340        (8)         --       (216)                 --             116
                               ---        ---         --       -----                 --             ---

  Income before minority
   interest                    641       (14)         --         275              (646)             255

Loss attributable to
  minority interest             --         --         --          --                  5               5
                                --         --         --          --                  -               -

  Net income                  $641      $(14)        $--        $275             $(641)            $260
                              ====      =====        ===        ====             ======            ====
</TABLE>


Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations.


FOR THE QUARTER ENDED MARCH 31, 2001 AND 2000

GENERAL. Net income increased $149,000 or 57% for the three months ended March
31, 2001 over the same period in 2000. The increase is primarily due to growth
in loans and investments. Loan servicing fees also increased due to higher
activity with the decline in interest rates. Increases were offset by higher
expenses due to expansion in Alliance Technology Inc., increased activity in
Security Mortgage Company, and new branch offices in Winston, Lakeside and
Waldport, Oregon.

NET INTEREST INCOME. Net interest income is the difference between interest
income (principally from loans and investment securities) and interest expense
(principally on customer deposits and borrowings). Changes in net interest
income result from changes in volume, net interest spread, and net interest
margin. Volume refers to the average dollar level of interest earning assets and
interest bearing liabilities. Net interest spread refers to the differences
between the average yield on interest earning assets and the average cost of
interest bearing liabilities. Net interest margin refers to net interest income
divided by average interest earning assets. The Company's profitability, like
that of many financial institutions, is dependent to a large extent upon net
interest income. Since the Company tends to be asset sensitive, as interest
earning assets mature or reprice more quickly than interest bearing liabilities
in a given period, a significant decrease in the market rates of interest could
adversely affect net interest income. In contrast, an increasing interest rate
environment could favorably impact net interest income. Competition and the
economy also impact the Company's net interest income.

Net interest income before the provision for loan losses increased $397,000 or
11% for the three months ended March 31, 2001 over the same period in 2000. Of
the increase of $397,000, an increase in volume accounted for an increase of
$500,000, offset by a decrease in rate of $103,000. Average interest earning
assets increased $51 million, while average interest bearing liabilities
increased $53 million. The increase in average interest earning assets and
interest bearing liabilities resulted from the overall growth strategy of the
Company, primarily in loans and deposits.




<PAGE>

The average net interest spread decreased from 4.72% to 4.55%, mainly due to the
higher cost of deposits and the increase in other borrowings. Average rates paid
increased 49 basis points to 3.95% in the first quarter of 2001 from 3.46% in
the first quarter of 2000, primarily from an increase in time certificates of
deposit, which carry a higher interest cost than other deposits and the increase
in other borrowings at prime rate. In addition, average earning asset yields
increased 32 basis points from 8.18% to 8.50%, resulting from an increase in
market interest rates for loans and investment securities. The Company's net
interest margin for the first quarter of 2001 was 4.59%, a decrease of 20 basis
points from 4.79% for the first quarter of 2000.

PROVISION FOR LOAN LOSSES. The loan loss provision during the three-month period
ended March 31, 2001, was $67,000 and $146,000 for the same period in 2000. The
decrease is primarily due to low net charge offs. At March 31, 2001 the
consolidated loan loss ratio was 1.19% of gross loans, compared to 1.22% at
December 31, 2000.

Net charge-offs during the three month periods were $16,000 and $12,000 for 2001
and 2000, respectively. Management believes the loan loss provision maintains
the allowance for loan losses at an appropriate level. The allowance for loan
losses was $2,795,000 at March 31, 2001, as compared to $2,742,000 at December
31, 2000.

Non-performing assets (defined as loans on non-accrual status, 90 days or more
past due, and other real estate owned) were $789,000 and $650,000 at March 31,
2001 and December 31, 2000, respectively. Management believes the loans are
adequately secured and that no significant losses will be incurred.

OTHER INCOME. Other income increased $489,000 to $1,513,000 for the three months
ended March 31, 2001 as compared to $1,024,000 for the same period in 2000. The
increase in other income is due primarily to an increase in sold real estate
loan fees, resulting from a decrease in overall mortgage interest rates over the
same period a year ago. In addition, the Company recognized $156,000 in
securities gains in the first quarter of 2001. Other increases were also
experienced in service charges on deposits and loan servicing fees, based on
increased levels of deposits and serviced loans.

OTHER EXPENSE. Other expense increased 19% to $4,725,000 for the three months
ended March 31, 2001 compared to $3,979,000 for the same period in 2000.
Salaries and employee benefits, the largest non-interest expense, increased
$477,000 or 21%. The increase in salaries is primarily due to the additions of
Alliance Technology Inc, the new branches in Winston, Lakeside and Waldport and
annual increases in personnel costs. Other expense increased $155,000 or 27%
primarily due to early pay-offs on mortgage servicing rights. Additional
increases were experienced in all remaining categories resulting from the
Company's overall growth strategy.
--------------------------------------------------------------------------------
FINANCIAL CONDITION
Total assets have increased 4% to $389.6 million at March 31, 2001 compared to
$373.5 million at December 31, 2000.

Net loans, leases, mortgage servicing rights and mortgage loans held for sale
increased in the period from $225 million at December 31, 2000 to $235 million
at March 31, 2001. The increase is due to the growth strategy of the Company and
the addition of the new branches.

The decrease in premises and equipment at March 31, 2001 results from fewer
additions in the current year. Increases were experienced in the prior year due
to expansion activities underway by the Company at Oregon State Bank and the
Winston/Green branch of Security Bank in Winston, Oregon.

Other assets increased at March 31, 2001 due primarily to a $1 million increase
in goodwill as a result of the purchase of the minority interest in Lincoln
Security Bank. Prepaid assets and other suspense items, which include inventory
and projects in progress at Alliance Technology Inc. also increased. Increases
were offset by a decrease in deferred tax assets.

Deposit growth has continued for the first quarter of 2001, increasing $11
million, or 4% to $323 million at March 31, 2001, compared to $312 million at
December 31, 2000. The growth in 2001 has been predominantly spread between
money market accounts, savings accounts, and time certificates of deposit.
<PAGE>

Securities sold under agreements to repurchase increased $1.7 million to $12.3
million at March 31, 2001, compared to $10.6 million at December 31, 2000,
resulting mainly due to timing differences with the commercial repurchase
agreements and customer deposit levels.

Other borrowings increased to $4.5 million at March 31, 2001. The increase is
due to borrowings from a third party bank to purchase the minority interest in
Lincoln Security Bank.

Other liabilities increased to $4.3 million at March 31, 2001, compared to $3.2
million at December 31, 2000 due primarily to increases in temporary suspense
items and accrued expenses.

LIQUIDITY
Liquidity enables the Company to meet the withdrawals of its depositors and the
borrowing needs of its loan customers. The Company maintains its liquidity
position through maintenance of cash resources and a stable core deposit base. A
further source of liquidity is the Company's ability to borrow funds. The
Company maintains four unsecured lines of credit totaling $33 million for the
purchase of funds on an overnight basis. The Company is also a member of the
Federal Home loan Bank, which provides a secured line of credit in the amount of
$54 million, and other funding opportunities for liquidity and asset/liability
matching. As of March 31, 2001 no funds were borrowed under the Company's
unsecured lines of credit and $10 million in borrowings from the Federal Home
Loan Bank were outstanding. Interest rates charged on the lines are determined
by market factors. The Company's liquidity has been stable and adequate over the
past several years. Short-term deposits have continued to grow and excess
investable cash is invested on a short-term basis into Federal funds sold. The
Company's primary source of funds is consumer deposits and commercial accounts.
These funds are not subject to significant movements as a result of changing
interest rates and other economic factors, and therefore enhance the Company's
long-term liquidity.

CAPITAL RESOURCES
Beginning in 1990, federal regulators required the calculation of Risk-based
Capital. This is an analysis that weights balance sheet and off-balance sheet
items for their inherent risk. It requires minimum standards for Risk-based
Capital by Capital Tier. Full implementation of this analysis was required in
1992, requiring a minimum total Risk-based Capital ratio of 8.00%, a minimum
Tier 1 Capital Ratio of 4.00% and a minimum Leverage Capital Ratio of 4.00%.

At March 31, 2001, the Company's estimated regulatory capital ratios were as
follows: Total Risk-based Capital Ratio of 12.42%, Tier 1 Capital Ratio of
11.43% and Leverage Capital Ratio of 8.52%. This was compared to 13.32%, 12.27%
and 9.14% for total Risk-based Capital Ratio, Tier 1 Capital Ratio and Leverage
Capital Ratio, respectively, at December 31, 2000. If the Company were fully
leveraged, further growth would be restricted to the level attainable through
generation and retention of net income unless the Company were to seek
additional capital from outside sources.


Item 3.  Quantitative and Qualitative Disclosures about Market Risk.

OVERVIEW. Interest rate, credit, and operations risks are the most significant
risks impacting the Company's performance. Other types of market risk, such as
foreign currency exchange rate risk and commodity price risk do not arise in the
normal course of the Company's business activities. The Company relies on loan
reviews, prudent loan underwriting standards and an adequate reserve for loan
loss to mitigate credit risk.

The Company defines interest sensitivity (or interest rate risk) as the risk
that the Company's earnings or capital will change when interest rates change.
Market, or economic risk, by comparison, is the risk that the value of the
Company's assets will change when interest rates change. To ensure consistent
measurement, the Company has developed comprehensive Asset and Liability
Management policies that are followed by all affiliate banks.

"Exposure" is the change in pre-tax earnings, over a 12-month period, when the
Fed Funds rate changes. "Leverage" is the Company's exposure calculated as a
percent of capital and therefore is expressed in terms of a pre-tax Return on
Equity.


<PAGE>

If the Company's earnings move in the same direction as interest rates, then the
Company is "asset sensitive" (i.e. interest income changes more than interest
expense). If the earnings move in the opposite direction from the change in
rates, then the Company is "liability sensitive" (i.e. interest expense changes
more than interest income).

CALCULATION OF INTEREST RATE RISK. A change in earnings as a result of changes
in interest rates is caused by two factors. First, the rate on each asset and
liability changes by a different amount and at a different time. Second, there
are different volumes of assets and liabilities maturing and repricing (the
traditional gap). The combination causes a change in the Company's net interest
margin.

EXPOSURE CALCULATION OF INTEREST RATE RISK: The Company will use change in
earnings exposure as its primary measure of interest rate risk. It is the policy
of the Company to control the exposure of the Company's earnings to changing
interest rates by generally maintaining a position within a reasonable range
around an "earnings neutral" or "balanced" position. This is defined as the mix
of assets and liabilities that generate a net interest margin that is not
affected by interest rate changes.

There are three reasons for establishing a target range rather than an exact
earnings neutral position. Measuring interest rate risk is not an exact science.
We can only estimate the earnings impact of a change in rates, and this estimate
may change as the rate environment changes (this is often called "basis risk").
Also, the mix of assets and liabilities available in the Company's market may
not produce an exact earnings neutral position, thus forcing the Company to
forego good business opportunities if it must keep a totally balanced position.
Lastly, a neutral position does not allow the Company to modestly position
itself to take advantage of a rising or falling rate trend (i.e. keeping
investments shorter when rates are rising).

There can be exceptions to this general rule. If, for example, the Company has a
liquidity or capital problem then this takes priority and the Company would
employ a strategy that protects liquidity by maintaining an asset sensitive
position (i.e. having assets that will reprice quickly to reflect a change in
interest rates). This would keep assets at current rates to allow their sale, if
needed, without recognizing a significant loss.

Interest Rate Risk Exposure/Leverage Limits:
--------------------------------------------
The Company shall normally maintain a mix of assets and liabilities that
produces interest rate risk that will change the Company's net interest income
over the next 12 months less than the following limits, if the Fed Funds rate
changes 2%:

                                       Change in ROE
                                         Leverage
                                         --------

         Asset sensitive...............   4.0%

         Liability sensitive...........   2.0%

There is a lower risk limit for liability sensitivity because, in a liability
sensitive Company, interest rate risk and market risk move in the same
direction, thereby exaggerating the impact of changing rates. If the Company
were asset sensitive, these two risks would tend to offset each other.

Interest rate risk is calculated quarterly and reported to the Asset/Liability
Management Committee and then to the respective Boards of Directors. Significant
changes in the structure of the Company's finances can be modeled during the
quarters to ensure continued compliance with these policy limits. At no time
during 2000 and for the quarter ended March 31, 2001 were these limitations
exceeded. Management has assessed these limits and believes that there has been
no material change since December 31, 2000.

INFLATION
The primary impact of inflation on the Company's operations is increased asset
yields, deposit costs and operating overhead. Unlike most industrial companies,
virtually all of the assets and liabilities of a financial institution are
monetary in nature. As a result, interest rates generally have a more
significant impact on a financial institution's performance than the effects of
general levels of inflation. Although interest rates do not necessarily move in
the same direction or to the same extent as the prices of goods and services,
increases in inflation generally have resulted in increased interest rates. The
effects of inflation can magnify the growth of assets, and if significant, would
require that equity capital increase at a faster rate than would otherwise be
necessary.



<PAGE>


                           PART II. OTHER INFORMATION

Item 1.   Legal Proceedings.

          None.


Item 2.   Changes in Securities.

          Not applicable.


Item 3.   Defaults Upon Senior Securities.

          Not applicable.


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

          None.


Item 5.   Other Information.

          Not applicable.


Item 6.   Exhibits and Reports on Form 8-K.

          (a)     Exhibits.
                  None.

          (b)     Reports on Form 8-K.
                  None.


<PAGE>


                                   SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


DATED:    May 8, 2001.

                                     INDEPENDENT FINANCIAL NETWORK, INC.


                                     By:  /s/ Charles D. Brummel
                                        ---------------------------------
                                        Charles D. Brummel
                                        Chairman and Chief Executive Officer