FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

(Mark one)
[X]    Annual Report Pursuant to Section 13 or 15(d) of the Securities  Exchange
       Act of 1934

For the fiscal year ended September 30, 2000
                                       or

[ ]     Transition  Report  Pursuant  to Section  13 or 15(d) of the  Securities
        Exchange Act of 1934

For the transition period from __________ to__________

Commission file number: 0-23374

                                    MFB CORP.
             (Exact name of registrant as specified in its charter)

          Indiana                                               35-1907258
State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization                            Identification Number)

121 South Church Street, P.O. Box 528 Mishawaka, Indiana               46546
           (Address of principal executive offices)                   Zip Code

Registrant's telephone number, including area code:
                                 (219) 255-3146

Securities Registered Pursuant to Section 12(b) of the  Act:
                                      None

Securities Registered Pursuant to Section 12(g) of the Act:
                        Common Stock, without par value
                         Common Share Purchase Rights

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

           (1) Yes    x                  No ___
                   -------
           (2) Yes    x                  No ___
                   -------

Indicate by check mark if disclosure of delinquent  filers pursuant to Item 405,
Regulation S-K (229.405 of this chapter) is not contained  herein,  and will not
be contained,  to the best of  Registrant's  knowledge,  in definitive  proxy or
information  statements  incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.   x
                                    -----

The aggregate market value of the issuer's voting stock held by  non-affiliates,
as of December 1, 2000, was $18,129,655.

The  number of shares of the  registrant's  common  stock,  without  par  value,
outstanding as of December 1, 2000, was 1,346,489 shares.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of Registrant's Annual Report to Shareholders for the fiscal year ended
September 30, 2000 are incorporated by reference into Part II.

Portions of the Proxy Statement for the 2001 Annual Meeting of the  Shareholders
are incorporated into Part I and Part III.

                            Exhibit Index on Page 50
                              Page one of 53 pages


<PAGE>



                                    MFB CORP.
                                    Form 10-K
                                      INDEX

PART I

Item 1.     Business                                                 1
Item 2.     Properties                                              40
Item 3.     Legal Proceedings                                       41
Item 4.     Submission of Matters to a Vote of Security Holders     41
Item 4.5    Executive Officers of Registrant                        41

PART II

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

                   Stockholder Matters                              42
Item 6.     Selected Financial Data                                 43
Item 7.     Management's Discussion and Analysis of Financial
                   Condition and Results of Operations              43
Item 7a.    Quantitative and Qualitative Disclosures

                   About Market Risk                                43
Item 8.     Financial Statements and Supplementary Data             45
Item 9.     Changes in and Disagreements with Accountants on
                   Accounting and Financial Disclosure              45

PART III

Item 10.    Directors and Executive Officers of the Registrant      46
Item 11.    Executive Compensation                                  46
Item 12.    Security Ownership of Certain Beneficial Owners
                   and Management                                   46
Item 13.    Certain Relationships and Related Transactions          46

PART IV

Item 14.    Exhibits, Financial Statement Schedules, and Reports
                   on Form 8-K                                      47
Signatures                                                          49

Exhibit List                                                        50





<PAGE>

                                     PART 1

Item 1.     Business.

General

MFB Corp.  ("MFB") is an Indiana  corporation  organized in December,  1993,  to
become a unitary savings and loan holding company.  MFB became a unitary savings
and loan holding  company upon the conversion of Mishawaka  Federal Savings (the
"Bank",  and together with MFB, the "Company") from a federal mutual savings and
loan  association to a federal stock savings bank on March 24, 1994. On November
1, 1996, Mishawaka Federal Savings officially changed its name to MFB Financial.
The principal asset of MFB consists of 100% of the issued and outstanding shares
of  common  stock,  $0.01  par value per  share,  of the  Bank.  The Bank  began
operations in Mishawaka,  Indiana in 1889 under the name Mishawaka  Building and
Loan Association.

MFB  Financial   directly,   and  indirectly  through  its  service  corporation
subsidiary, offers a number of consumer and commercial financial services. These
services include: (i) residential real estate loans; (ii) home equity and second
mortgage loans;  (iii)  construction  loans;  (iv) commercial  loans;  (v) loans
secured by deposits and other consumer loans; (vi) NOW accounts;  (vii) passbook
savings accounts;  (viii) certificates of deposit;  (ix) consumer and commercial
demand  deposit  accounts;  (x)  individual  retirement  accounts;   (xi)  trust
services;  and (xii) a variety of  insurance  products  and  brokerage  services
through Mishawaka Financial Services,  Inc., its service corporation subsidiary.
MFB  Financial  provides  these  services  through its seven  offices,  three in
Mishawaka,  two in South Bend, one in Elkhart,  and one in Goshen,  Indiana. The
Bank's market area for loans and deposits  primarily  consists of St. Joseph and
Elkhart counties.

The Company's  principal  source of revenue is interest income from  residential
mortgage  loans,  construction  loans,  commercial  loans and consumer loans. At
September  30,  2000,  $185.3  million,  or 58.23% of the  Company's  total loan
portfolio,  consisted of mortgage loans on one-to-four  family  residential real
property which are generally secured by first mortgages on the property. A large
majority of the  residential  real estate loans  originated by MFB Financial are
secured by properties located in St. Joseph and Elkhart Counties.

Consumer  loans  include  loans  secured  by  deposits,  home  equity and second
mortgage  loans,  new and used car loans and personal  loans.  Commercial  loans
include term loans and commercial lines of credit.

Lending Activities

General.  MFB Financial  historically has concentrated its lending activities on
the  origination  of loans  secured by first  mortgage  liens for the  purchase,
construction or refinancing of one-to-four family residential real property.  In
an effort to diversify  the asset mix of the Bank and enhance loan yields,  home
equity loan, commercial loan and consumer loan programs have been established.

At  September  30,  2000,  28.64% of the  Company's  loan  portfolio  consist of
commercial loans and 7.86% of the loan portfolio consist of consumer loans.

Residential  Loans.  Residential  loans  consist of  one-to-four  family  loans.
Pursuant to federal  regulations,  such loans must require at least  semi-annual
payments and be for a term of not more than 40 years,  and, if the interest rate
is adjustable, it must be correlated with changes in a readily verifiable index.

A  significant  number of the loans  made by MFB  Financial  feature  adjustable
rates.  Adjustable  rate loans  permit the Bank to better  match the interest it
earns on loans with the interest it pays on deposits.  A variety of programs are
offered to borrowers.  A majority of these loans adjust on an annual basis after
initial terms of one to five years. Initial offering rates,  adjustment caps and
margins are  adjusted  periodically  to reflect  market  conditions  and provide
diversity of the loan portfolio.

MFB Financial also offers  fixed-rate  loans with a maximum term of thirty years
for the purpose of purchasing or refinancing residential properties and building
sites.  It is the  Company's  intent to document and  underwrite  these loans to
standards  established  by  Freddie  Mac to assure  that they meet the  investor
quality required for sale in the secondary markets.

MFB Financial  normally requires private mortgage  insurance on all conventional
residential  first  mortgages  with  loan-to-value  ratios in excess of 80%.  In
accordance with the Homeowners  Protection Act of 1998, MFB has adopted policies
to assure complete compliance with automatic cancellation provisions,  depending
on the date the loan was originated. On first mortgages, MFB will generally lend
up to 103%  loan-to-value,  based  upon  the  lessor  of the  purchase  price or
appraisal.  MFB also offers programs that target first-time  homebuyers when the
applicants have successfully  completed a homebuyer's  education course and earn
less than 80%of the area median income.  Second  mortgages and home equity loans
may  be  originated  with  loan-to-values  up to  100%  with  higher  yields  to
compensate for potentially higher risk.

Substantially  all  of  the  residential   mortgage  loans  that  MFB  Financial
originates include "due-on-sale"  clauses, which give MFB Financial the right to
declare a loan  immediately  due and  payable  in the event  that,  among  other
things, the borrower sells or otherwise disposes of the real property subject to
the mortgage and the loan is not repaid.

Residential  mortgage loans in excess of $500,000 must be approved by a majority
of the members of MFB  Financial's  Board of Directors.  Loans under that amount
are approved by one or more members of MFB Financial's Loan Committee.

Construction  Loans.  MFB Financial  offers  construction  loans with respect to
owner-occupied  residential real estate, to builders or developers  constructing
such properties and to owners who are to occupy the premises.  Construction  and
development loans, residential and commercial, are underwritten in the corporate
lending department with consistent  underwriting  standards,  including adequate
collateral  and  sufficient  debt coverage  ratios.  The loan approvals are also
based on current economic conditions and personal guarantees may be required.

Generally,  construction loans are 12-month  adjustable rate mortgage loans with
interest  calculated  on the amount  disbursed  under the loan and  payable on a
monthly basis.  Interest rates for such loans are generally tied to the National
Prime  Rate.  A  construction  loan fee is also  charged  for these  loans.  MFB
Financial  normally  requires an 80%  loan-to-value  ratio for its  construction
loans.   Inspections  are  made  in  conjunction  with  disbursements   under  a
construction  loan,  and the  construction  phase is  generally  limited  to six
months.

Commercial  Loans.  MFB Financial's  commercial  lending  department  focuses on
meeting the borrowing needs of small local businesses  primarily  located in St.
Joseph and Elkhart  counties.  Loans may be secured by real  estate,  equipment,
inventory,   receivables  or  other  appropriate  collateral.   Terms  vary  and
adjustable  rate loans are  generally  indexed to the Wall Street  Journal prime
rate. Loans with longer  amortization  periods generally contain balloon payment
provisions of five years or less. Personal guarantees by business principals are
generally required in order to manage risk on these loans.

When appropriate,  MFB Financial uses guaranteed  lending programs,  such as the
small Business  Administration,  Indiana  Finance  Authority  Department and the
Business  Development Corp., to reduce risk. Lending activity is controlled with
individual  loan  officer  lending  limits and a loan  committee  consisting  of
various board members.  Commercial lending activity has allowed MFB Financial to
diversify its balance sheet, increase market penetration and improve earnings.

Consumer Loans.  Federal laws and regulations permit federally chartered savings
institutions to make secured and unsecured consumer loans in an aggregate amount
of up to 35%  of the  association's  total  assets.  In  addition,  a  federally
chartered  savings  institution  has lending  authority  above the 35% limit for
certain consumer loans,  such as property  improvement loans and deposit account
secured  loans.  However,  the Qualified  Thrift  Lender test places  additional
limitations on a savings association's ability to make consumer loans.

Consumer  loans  involve  a  higher  level  of  risk  than  one-to-four   family
residential  mortgage  loans because the  collateral,  if any,  tends to be less
stable.  However,  the relatively higher yields and shorter terms to maturity of
consumer  loans are believed to be helpful in reducing  interest-rate  risk. MFB
Financial  makes secured  consumer  loans for amounts  specifically  tied to the
value of the collateral and smaller  unsecured loans with higher interest rates.
Consumer loans would include home equity loans and lines of credit, new and used
automobile and  recreational  vehicle loans,  savings  account loans,  overdraft
lines of credit and Visa credit card loans. MFB Financial has been successful in
managing consumer loan risk.

Origination  and Sale of Loans.  Fixed-rate  mortgages  secured by single family
owner  occupied  dwellings are  documented  and  underwritten  to conform to the
standards for sale in the secondary  market.  This provides  management with the
opportunity  to  deliver  loans  with the  intent of  increasing  its  servicing
portfolio and  corresponding  fee income and creates liquidity in order in order
to fund the  acquisition  of other assets for the Bank. As loans are  originated
with the intent of sale in the secondary  market,  the Bank can choose to manage
and eliminate  interest rate risk by committing  forward sales  utilizing a Best
Efforts  program in which no penalties are incurred for  non-delivery of a loan.
Adjustable  rate  mortgages  continue  to be  originated  by the Bank  utilizing
standard  industry  notes  and  mortgages.  They  also  can be sold  to  private
institutional  investors should the Bank desire additional  liquidity or held in
portfolio  and  provide  yields  that  should  better  reflect  changing  market
conditions.

MFB Financial confines its loan origination  activities  primarily in St. Joseph
and Elkhart Counties and the surrounding  area.  Another full service  financial
center  was  opened  in  South  Bend,   Indiana  in  January  2000.  MFB's  loan
originations are generated from referrals from builders, developers, real estate
brokers,  existing customers,  and limited newspaper and periodical advertising.
All loan applications are underwritten at MFB Financial's main office.

A  savings  institution  generally  may not make any loan to a  borrower  or its
related entities if the total of all such loans exceeds 15% of its capital (plus
up to an additional 10% of capital in the case of loans fully  collateralized by
readily marketable  collateral);  provided,  however, that loans up to $500,000,
regardless  of the  percentage  limitations,  may be made  and  certain  housing
development loans of up to $30 million or 30% of capital, whichever is less, are
permitted.  MFB Financial's  portfolio of loans currently contains no loans that
exceed the 15% of capital limitation.

MFB  Financial's  loan  approval  process is intended  to assess the  borrower's
ability to repay the loan,  the  viability  of the loan and the  adequacy of the
value of the property that will secure the loan.  Fixed rate mortgage  loans are
generally  underwritten  to FHLMC and FNMA  standards.  To assess the borrower's
ability to repay,  MFB Financial  studies the  employment and credit history and
information  on  the  historical  and  projected  income  and  expenses  of  its
mortgagors.

MFB Financial  generally requires  appraisals on all property securing its loans
and requires  title  insurance  and a valid lien on its  mortgaged  real estate.
Appraisals for residential real property are generally  performed by an in-house
appraiser who is a state-certified residential appraiser. From time to time, MFB
Financial also uses the services of other certified  residential  appraisers who
are not in-house. MFB Financial requires fire and extended coverage insurance in
amounts at least equal to the  principal  amount of the loan.  It also  requires
flood insurance to protect the property securing its interest if the property is
in a flood  plain.  Tax and  insurance  payments  are  typically  required to be
escrowed by MFB Financial on new loans.

Origination  and Other Fees.  MFB Financial  realizes  income from late charges,
checking account service  charges,  safety deposit box rental fees, and fees for
other  miscellaneous  services.  MFB Financial charges application fees for most
loan applications, but such are generally credited back to the customer upon the
closing of the loan. If the loan is denied,  MFB Financial  retains a portion of
the  application  fee. Due to competitive  issues,  MFB Financial has originated
most of its mortgages without charging points.  However,  borrowers from time to
time wish to pay points and management  negotiates rates on an individual basis.
Late  charges  are  generally  assessed  if  payment  is not  received  within a
specified  number of days  after it is due.  The  grace  period  depends  on the
individual loan documents.

Non-Performing and Problem Assets

All loans are  reviewed  by the  Company on a regular  basis and  generally  are
placed on a  non-accrual  status when the loans  become  contractually  past due
ninety days or more. In cases where there is  sufficient  equity in the property
and/or the borrowers are willing and able to ultimately pay all accrued  amounts
in full,  the loan may be allowed to  continue to earn  interest.  At the end of
each month,  delinquency  notices are sent to all  borrowers  from whom payments
have not been received.  Contact by phone or in person is made, if feasible,  to
all such borrowers.

No later than 45 days in default,  personal contact is made with the borrower to
establish  an  acceptable  repayment  schedule.  When loans are  ninety  days in
default, contact is made with the borrower by an employee of MFB Financial after
consultation  with a Senior Loan Officer who attempts to establish an acceptable
repayment schedule. Management is authorized to commence foreclosure proceedings
for any loan upon making a determination  that it is prudent to do so. All loans
on which  foreclosure  proceedings have been commenced are placed on non-accrual
status.  Additionally,  interest  accrual ceases when the collection of interest
becomes doubtful.

Non-performing  assets. At September 30, 2000,  $66,000 or .02% of the Company's
total assets,  were  non-performing  assets (loans delinquent more than 90 days,
non-accrual loans, real estate owned ("REO") and troubled debt  restructurings).
At September 30, 2000,  the Company had  $1,651,000 of impaired loans which were
identified  during the quarter ended  September 30, 2000 as a result of work-out
discussions with a significant  commercial loan customer, and it became apparent
that the  business  would need to be sold to repay the loan.  At  September  30,
2000,  the Bank did not have real estate  owned  property.  When  property is so
acquired, the value of the asset is recorded on the books of the Company at fair
value.  All costs  incurred  from the date of  acquisition  in  maintaining  the
property are expensed.

Classified  assets.  Federal  regulations and MFB Financial's  Classification of
Assets policy provide for the  classification  of loans and other assets such as
debt and  equity  securities  considered  by the  Office of  Thrift  Supervision
("OTS") to be of lesser quality as  "substandard,"  "doubtful" or "loss" assets.
An asset is  considered  "substandard"  if it is  inadequately  protected by the
current  net worth and  paying  capacity  of the  obligor  or of the  collateral
pledged,  if  any.  "Substandard"  assets  include  those  characterized  by the
"distinct  possibility"  that the  association  will sustain  "some loss" if the
deficiencies are not corrected.  Assets classified as "doubtful" have all of the
weaknesses   inherent  in  those  classified   "substandard,"   with  the  added
characteristic  that the weaknesses  present make  "collection or liquidation in
full," on the basis of currently existing facts, conditions, and values, "highly
questionable and improbable."  Assets  classified as "loss" are those considered
"uncollectible"  and of such  little  value  that  their  continuance  as assets
without the  establishment  of a specific loss reserve is not warranted.  Assets
which do not currently  expose the insured  institution  to  sufficient  risk to
warrant  classification  in one of the  aforementioned  categories  but  possess
weaknesses are required to be designated  "special  mention" by  management.  At
September  30,  2000,  the Bank  had  classified  $1,591,000  of its  assets  as
"substandard", $0 as "doubtful", and $0 as "loss".

An insured  institution is required to establish general allowances for loan and
lease losses in an amount  deemed  prudent by  management  for loans  classified
substandard,  doubtful or impaired,  as well as for other problem loans. General
allowances  represent loss allowances  which have been  established to recognize
the inherent risk associated with lending activities, but which, unlike specific
allowances,  have not been  allocated  to  particular  problem  assets.  When an
insured  institution  classifies problem assets as "loss", it is required either
to establish a specific  allowance for losses equal to 100% of the amount of the
asset so classified or to charge off such amount. An institution's determination
as to  the  classification  of its  assets  and  the  amount  of  its  valuation
allowances is subject to review by the OTS which can order the  establishment of
additional general or specific loss allowances.

MFB Financial regularly reviews it loan portfolio to determine whether any loans
require  classification in accordance with applicable  regulations.  For reasons
such as low loan-to-value ratios, not all of the Company's non-performing assets
constitute classified assets.

Allowance for Loan Losses

The  allowance  for loan losses is  maintained  through the  provision  for loan
losses, which is charged to earnings. The provision is determined in conjunction
with management's review and evaluation of current economic conditions,  changes
in the  character  and  size of the  loan  and  lease  portfolio,  delinquencies
(current  status  as  well as past  and  anticipated  trends)  and  adequacy  of
collateral   securing   loan   delinquencies,   historical   and  estimated  net
charge-offs,  and other pertinent  information derived from a review of the loan
and lease  portfolio.  During the fiscal year ended September 30, 2000, the Bank
experienced   significant  growth  in  the  commercial  loan  portfolio.   Total
commercial  loans at  September  30, 2000 were $91.1  million  compared to $47.4
million at September 30, 1999, a 92.2% increase. In addition, the Bank continued
to  expand  its loan  review  and  risk  assessment  procedures.  Based on these
factors,  the provision for loan losses was increased  from $230,000  during the
year ended  September 30, 1999 to $1.1 million for the year ended  September 30,
2000. In  management's  opinion,  MFB  Financial's  allowance for loan losses is
adequate to absorb anticipated losses existing at September 30, 2000.

Investments

General.  Federally chartered savings  institutions have the authority to invest
in  various  types  of  liquid  assets,  including  U.S.  Treasury  obligations,
securities  of various  federal  agencies,  certain  certificates  of deposit of
insured banks and savings institutions, certain bankers' acceptances, repurchase
agreements and federal funds sold.  Subject to various  restrictions,  federally
chartered  savings  institutions  may also  invest a portion of their  assets in
commercial  paper,  corporate debt securities and asset-backed  securities.  The
investment policy of MFB Financial,  which is established and implemented by MFB
Financial's Investment Committee, is designed primarily to maximize the yield on
the  investment  portfolio  subject to minimal  liquidity  risk,  default  risk,
interest rate risk, and prudent asset/liability management.

The  Company's  investment  portfolio  consists  of U.S.  Treasury  Bonds,  U.S.
government  agency  securities,   mortgage-backed  securities,   corporate  debt
securities, equity securities and Federal Home Loan Bank ("FHLB") stock.

Liquidity.  Federal  regulations  require  FHLB-member  savings  institutions to
maintain an average daily balance of liquid assets equal to a monthly average of
not less than a specified  percentage of its net  withdrawable  savings deposits
plus  short-term   borrowings.   Liquid  assets  include  cash,  U.S.   Treasury
obligations,  certain  certificates  of  deposit of  insured  banks and  savings
institutions, certain bankers' acceptances and specified state or federal agency
obligations.  Subject to various restrictions,  FHLB-member savings institutions
may also invest in certain corporate debt securities,  commercial paper,  mutual
funds,  mortgage-related  securities, and first lien residential mortgage loans.
This liquidity  requirement  may be changed from  time-to-time by the OTS to any
amount  within the range of 4% to 10%, and is currently  4%. As of September 30,
2000,  the Bank had liquid  assets of $55.2  million and a regulatory  liquidity
ratio of 8.18%, well above the minimum regulatory requirements.

Sources of Funds

General.  Deposits have  traditionally  been MFB  Financial's  primary source of
funds for use in lending and investment activities. In addition to deposits, MFB
Financial  derives  funds from FHLB  advances,  scheduled  loan  payments,  loan
prepayments,  secondary  market loan sales, and income provided from operations.
While scheduled loan payments and income on earning assets are relatively stable
sources of funds,  deposit  inflows and outflows and secondary  market sales can
vary widely and are influenced by prevailing  interest rates,  market conditions
and levels of competition.  Borrowings from the FHLB of Indianapolis may be used
to  compensate  for  reductions  in  deposits  or  deposit  inflows at less than
projected levels.

Deposits.  Deposits are attracted principally from within St. Joseph and Elkhart
counties  through  the  offering  of a broad  selection  of deposit  instruments
including NOW,  business  checking and other  transaction  accounts,  fixed-rate
certificates of deposit,  individual retirement accounts,  and savings accounts.
MFB Financial  does not actively  solicit or advertise  for deposits  outside of
these counties. Substantially all of MFB Financial's depositors are residents of
these counties. Deposit account terms vary, with the principal differences being
the minimum balance required, the amount of time the funds remain on deposit and
the  interest  rate.  MFB  Financial  does  not pay a fee for  any  deposits  it
receives.

Interest rates paid, maturity terms,  service fees and withdrawal  penalties are
established  by MFB Financial on a periodic  basis.  Determination  of rates and
terms are predicated on funds acquisition and liquidity requirements, rates paid
by competitors,  growth goals, and federal regulations. MFB Financial relies, in
part, on customer  service and  long-standing  relationships  with  customers to
attract and retain its  deposits,  but also  prices its  deposits in relation to
rates offered by its competitors.

The flow of deposits is influenced significantly by general economic conditions,
changes in money  market and  prevailing  interest  rates and  competition.  The
variety  of  deposit  accounts  offered by MFB  Financial  has  allowed it to be
competitive  in obtaining  funds and to respond with  flexibility  to changes in
consumer  demand.  MFB  Financial  has become  more  susceptible  to  short-term
fluctuations  in deposit  flows as  customers  have  become more  interest  rate
conscious. MFB Financial manages the pricing of its deposits in keeping with its
asset/liability   management  and   profitability   objectives.   Based  on  its
experience,  the Bank believes that its passbook,  NOW and  non-interest-bearing
checking  accounts  are  relatively  stable  sources of deposits.  However,  the
ability of the Bank to attract and  maintain  certificates  of deposit,  and the
rates paid on these  deposits,  has been and will  continue to be  significantly
affected by market conditions.

Borrowings.  MFB  Financial  focuses on  generating  high quality loans and then
seeks the best  source of funding  from  deposits,  investments  or  borrowings.
Short-term  borrowings or long term debt may be used to compensate for reduction
in other  sources of funds  such as  deposits  and to assist in  asset/liability
management.  The Bank's  policy has been to utilize  borrowings  when they are a
less costly source of funds, can be invested at a positive  interest rate spread
or when the Bank desires additional capacity to fund loan demand.

MFB  Financial's  borrowings  consist  mainly  of  advances  from  the  FHLB  of
Indianapolis upon the security of a blanket collateral agreement of a percentage
of  unencumbered  loans and  investment  securities.  Such  advances can be made
pursuant  to  several  different  credit  programs,  each of  which  has its own
interest rate and range of  maturities.  There are  regulatory  restrictions  on
advances from the Federal Home Loan Banks,  See  "Regulation--Federal  Home Loan
Bank  System" and  "--Qualified  Thrift  Lender." At  September  30,  2000,  MFB
Financial had $112.2 million in Federal Home Loan Bank  borrowings  outstanding.
MFB  Financial  does  not  anticipate  any  difficulty  in  obtaining   advances
appropriate to meet its requirements in the future.

With selected  business  entities,  MFB  Financial  has entered into  repurchase
agreements.  These agreements are all one day retail repurchase agreements,  are
accounted for as borrowings by the Bank,  and are secured by certain  investment
securities  of the Bank.  At September  30,  2000,  the Bank had $9.1 million in
repurchase agreements outstanding.

Service Corporation Subsidiary

OTS  regulations  permit federal  savings  institutions to invest in the capital
stock,  obligations,  or other  specified  types of securities  of  subsidiaries
(referred to as "service  corporations")  and to make loans to such subsidiaries
and joint ventures in which such  subsidiaries  are participants in an aggregate
amount not  exceeding 2% of an  institution's  assets,  plus an additional 1% of
assets if the  amount  over 2% is used for  specified  community  or  inner-city
development  purposes.  In addition,  federal regulations permit institutions to
make specified types of loans to such subsidiaries  (other than  special-purpose
finance subsidiaries), in which the institution owns more than 10% of the stock,
in an aggregate amount not exceeding 50% of the institution's regulatory capital
if  the  association's  regulatory  capital  is in  compliance  with  applicable
regulations.  A savings  institution  that  acquires a  non-savings  institution
subsidiary,  or that elects to conduct a new activity within a subsidiary,  must
give the Federal Deposit Insurance  Corporation ("FDIC") and the OTS at least 30
days advance  written  notice.  The FDIC may, after  consultation  with the OTS,
prohibit  specific  activities if it determines  such  activities pose a serious
threat to the Savings Association Insurance Fund ("SAIF").

The Bank's only  subsidiary,  Mishawaka  Financial  Services,  Inc.  ("Mishawaka
Financial"),  was  organized  in 1975 and  currently  is  engaged in the sale of
credit life, general fire and accident,  car, home and life insurance,  as agent
to the  Bank's  customers  and the  general  public.  In  addition,  a range  of
investment  and insurance  related  products are offered to customers  through a
contractual  relationship established with Fiserv Investor Services, Inc, a full
service securities  brokerage firm. During fiscal year 2000, Mishawaka Financial
received  approximately $137,000 in commissions versus approximately $151,000 in
commissions received during fiscal year 1999. Since Mishawaka Financial conducts
all of its  activities as agent for its  customers,  the Bank is not required to
deduct  from its  capital  any  portion  of this  investment.  The  consolidated
statements  of  income  of MFB  Corp.  included  elsewhere  herein  include  the
operation of the Bank and  Mishawaka  Financial.  All  significant  intercompany
balances and transactions have been eliminated in the consolidation.

Employees

As of September  30,  2000,  MFB  Financial  employed 102 persons on a full-time
basis and 26 persons on a part-time basis. None of MFB Financial's employees are
represented by a collective bargaining group.  Management considers its employee
relations to be excellent.


<PAGE>

I.   DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY;
       INTEREST RATES AND INTEREST DIFFERENTIAL

     A.   The  following  are the average  balance  sheets for the years  ending
          September 30:


                                           2000          1999          1998
                                          Average       Average       Average
                                        Outstanding   Outstanding   Outstanding
                                          Balance       Balance       Balance
                                          -------       -------       -------
Assets:                                                   (In thousands)
Interest-earning assets:
  Interest-bearing deposits              $   4,536    $   11,983    $    9,633
  Securities (1)                            25,576        17,347        13,647
  Mortgage-backed securities (1)            19,191        30,461        23,206
  FHLB stock                                 5,853         5,453         3,446
  Loans held for sale                        3,837        15,571         2,401
  Loans receivable (2)                     300,717       244,132       220,244
                                         ---------    ----------    ----------
      Total interest-earning assets        359,710       324,947       272,577
Non-interest earning assets, net
  of allowance for loan losses              17,335        11,246         5,320
                                         ---------    ----------    ----------

          Total assets                   $ 377,045    $  336,193    $  277,897
                                         =========    ==========    ==========

Liabilities and shareholders' equity:
Interest-bearing liabilities:
  Savings accounts                       $  15,218    $   12,277    $   10,737
  NOW and money market accounts             40,583        36,422        30,065
  Certificates of deposit                  156,855       137,734       130,350
  Repurchase agreements                      7,718         3,892         1,647
  FHLB advances                            108,759       104,894        66,123
                                         ---------    ----------    ----------
      Total interest-bearing liabilities   329,133       295,219       238,922
Other liabilities                           16,222         9,351         5,571
                                         ---------    ----------    ----------
  Total liabilities                        345,355       304,570       244,493

Shareholders' equity
    Common stock                            13,065        12,933        12,921
    Retained earnings                       26,541        24,550        22,958
    Net unrealized gain(loss) on securit
         available for sale                   (921)          213            56
    Less common stock acquired by:
         Employee stock ownership plan        (131)         (352)         (565)
         Recognition and retention plans         -           (11)          (80)
    Treasury stock                          (6,864)       (5,710)       (1,886)
                                         ---------    ----------    ----------
    Total shareholders' equity              31,690        31,623        33,404
                                         ---------    ----------    ----------

    Total liabilities and shareholders'  $ 377,045    $  336,193    $  277,897
                                         =========    ==========    ==========

(1)  Average  outstanding  balance reflects unrealized gain (loss) on securities
     available for sale.
(2)  Total loans less deferred net loan fees and loans in process.

<PAGE>
<TABLE>
<CAPTION>
I.   DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY;
       INTEREST RATES AND INTEREST DIFFERENTIAL (Continued)

     B.  The following tables set forth, for the years indicated,  the condensed
         average  balance  of  interest-earning   assets  and   interest-bearing
         liabilities,  the  interest  earned  or paid on such  amounts,  and the
         average interest rates earned or paid thereon.


                                                  --------Year Ended September 30, 1999-------
                                                         -----------------------------
                                                     Average                          Average
                                                     Balance         Interest       Yield/Cost
                                                     -------         --------       ----------
                                                              (Dollars in thousands)
INTEREST-EARNING ASSETS
<S>                                                <C>             <C>                  <C>
     Interest-bearing deposits                     $      4,536    $        290         6.39%
     Securities (1)                                      26,232           1,761         6.71
     Mortgage-backed securities (1)                      20,060           1,323         6.60
     FHLB stock                                           5,853             476         8.13
     Loans held for sale                                  3,837             287         7.48
     Loans receivable (2)                               300,717          24,377         8.11
                                                   ------------    ------------
         Total interest-earning assets             $    361,235          28,514         7.89
                                                   ============

INTEREST-BEARING LIABILITIES
     Savings accounts                              $     15,218             371         2.44%
     NOW and money market accounts                       40,583           1,055         2.60
     Certificates of deposit                            156,855           8,600         5.48
     Repurchase agreements                                7,718             300         3.89
     FHLB advances                                      108,759           6,147         5.65
                                                   ------------    ------------
         Total interest-bearing liabilities        $    329,133          16,473         5.01
                                                   ============    ------------

Net interest-earning assets                        $     32,102
                                                   ============

Net interest income                                                $     12,041
                                                                   ============

Interest rate spread (3)                                                                2.88%

Net yield on average interest-earning assets (4)                                        3.33%

Average interest-earning assets to
  average interest-bearing liabilities                   109.75%

</TABLE>


(1)  Average  balance  does not reflect  unrealized  gain  (loss) on  securities
     available for sale and yield is based on amortized cost.
(2)  Total loans less deferred net loan fees and loans in process.
(3)  Interest  rate spread is calculated by  subtracting  average  interest rate
     cost from average interest rate earned for the period indicated.
(4)  The net yield on average  interest-earning assets is calculated by dividing
     net  interest  income by  average  interest-earning  assets  for the period
     indicated.

<PAGE>

<TABLE>
<CAPTION>
I.   DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY;
       INTEREST RATES AND INTEREST DIFFERENTIAL (Continued)


                                                 --------Year Ended September 30, 1999-------
                                                         -----------------------------
                                                    Average                          Average
                                                    Balance         Interest       Yield/Cost
                                                    -------         --------       ----------
                                                             (Dollars in thousands)
INTEREST-EARNING ASSETS
<S>                                              <C>             <C>                  <C>
     Interest-bearing deposits                   $     11,983    $        613         5.12%
     Securities (1)                                    17,593           1,048         5.96
     Mortgage-backed securities (1)                    30,572           1,831         5.99
     FHLB stock                                         5,453             436         8.00
     Loans held for sale                               15,571           1,091         7.01
     Loans receivable (2)                             244,132          19,235         7.88
                                                 ------------    ------------
         Total interest-earning assets           $    325,304          24,254         7.46
                                                 ============

INTEREST-BEARING LIABILITIES
     Savings accounts                            $     12,277             294         2.39%
     NOW and money market accounts                     36,422           1,001         2.75
     Certificates of deposit                          137,734           7,285         5.29
     Repurchase agreements                              3,892             148         3.80
     FHLB advances                                    104,894           5,720         5.45
                                                 ------------    ------------
         Total interest-bearing liabilities      $    295,219          14,448         4.89
                                                 ============    ------------

Net interest-earning assets                      $     30,085
                                                 ============

Net interest income                                              $      9,806
                                                                 ============

Interest rate spread (3)                                                              2.57%

Net yield on average interest-earning assets (4)                                      3.01%

Average interest-earning assets to
  average interest-bearing liabilities                 110.19%

</TABLE>

(1)  Average  balance  does not reflect  unrealized  gain  (loss) on  securities
     available for sale and yield is based on amortized cost.
(2)  Total loans less deferred net loan fees and loans in process.
(3)  Interest  rate spread is calculated by  subtracting  average  interest rate
     cost from average interest rate earned for the period indicated.
(4)  The net yield on average  interest-earning assets is calculated by dividing
     net  interest  income by  average  interest-earning  assets  for the period
     indicated.

<PAGE>

I.      DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY;
          INTEREST RATES AND INTEREST DIFFERENTIAL (Continued)

<TABLE>
<CAPTION>

                                                --------Year Ended September 30, 1998-------
                                                        -----------------------------
                                                   Average                          Average
                                                   Balance         Interest       Yield/Cost
                                                   -------         --------       ----------
                                                            (Dollars in thousands)
INTEREST-EARNING ASSETS
<S>                                             <C>             <C>                  <C>
     Interest-bearing deposits                  $      9,633    $        560         5.81%
     Securities (1)                                   13,541             900         6.65
     Mortgage-backed securities (1)                   23,218           1,357         5.84
     FHLB stock                                        3,446             276         8.01
     Loans held for sale                               2,401             178         7.41
     Loans receivable (2)                            220,244          17,567         7.98
                                                ------------    ------------
         Total interest-earning assets          $    272,483          20,838         7.65
                                                ============

INTEREST-BEARING LIABILITIES
     Savings accounts                           $     10,737             271         2.52%
     NOW and money market accounts                    30,065             852         2.83
     Certificates of deposit                         130,350           7,265         5.57
     Repurchase agreements                             1,647              67         4.07
     FHLB advances                                    66,123           3,749         5.67
                                                ------------    ------------
         Total interest-bearing liabilities     $    238,922          12,204         5.11
                                                ============    ------------

Net interest earning assets                     $     33,561
                                                ============

Net interest income                                             $      8,634
                                                                ============

Interest rate spread (3)                                                             2.54%

Net yield on average interest-earning assets (4)                                     3.17%

Average interest-earning assets to
  average interest-bearing liabilities                114.05%
</TABLE>

(1)  Average  balance  does not reflect  unrealized  gain  (loss) on  securities
     available for sale and yield is based on amortized cost.
(2)  Total loans less deferred net loan fees and loans in process.
(3)  Interest  rate spread is calculated by  subtracting  average  interest rate
     cost from average interest rate earned for the period indicated.
(4)  The net yield on average  interest-earning assets is calculated by dividing
     net  interest  income by  average  interest-earning  assets  for the period
     indicated.

<PAGE>

I.   DISTRIBUTION OF ASSETS,  LIABILITIES  AND  SHAREHOLDERS'  EQUITY;  INTEREST
     RATES AND INTEREST DIFFERENTIAL (Continued)

     C.   The following tables describes the extent to which changes in interest
          rates and changes in volume of interest-related assets and liabilities
          have  affected MFB Corp.'s  consolidated  interest  income and expense
          during the periods  indicated.  For each category of  interest-earning
          asset and  interest-bearing  liability,  information  is  provided  on
          changes  attributable  to (1) changes in rate  (i.e.,  changes in rate
          multiplied by old volume) and (2) changes in volume (i.e.,  changes in
          volume multiplied by old rate).  Changes attributable to both rate and
          volume have been allocated  proportionally to the change due to volume
          and the change due to rate.

<TABLE>
<CAPTION>
                                                            Increase (Decrease) in
                                                              Net Interest Income
                                              ----------------------------------------------
                                                Total Net           Due to            Due to
                                                 Change              Rate             Volume
                                                 ------              ----             ------
                                                                (In thousands)
Year ended September 30, 2000 compared
  to year ended September 30, 1999
      Interest-earning assets
<S>                                           <C>               <C>               <C>
         Interest-bearing deposits            $      (323)      $       126       $       (449)
         Securities                                   713               146                567
         Mortgage-backed securities                  (508)              171               (679)
         FHLB stock                                    40                 8                 32
         Loans held for sale                         (804)               18               (822)
         Loans receivable                           5,142               551              4,591
                                              -----------       -----------       ------------
             Total                                  4,260             1,020              3,240

      Interest-bearing liabilities
         Savings accounts                              77                 5                 72
         NOW and money market accounts                 54               (56)               110
         Certificates of deposit                    1,315               274              1,041
         Repurchase agreements                        152                 3                149
         FHLB advances                                427               212                215
                                              -----------       -----------       ------------
             Total                                  2,025               438              1,587
                                              -----------       -----------       ------------

Change in net interest income                 $     2,235       $       582       $      1,653
                                              ===========       ===========       ============
</TABLE>



<PAGE>

I.      DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY;
          INTEREST RATES AND INTEREST DIFFERENTIAL (Continued)
<TABLE>
<CAPTION>
                                                             Increase (Decrease) in
                                                               Net Interest Income
                                              ----------------------------------------------
                                                Total Net           Due to            Due to
                                                 Change              Rate             Volume
                                                 ------              ----             ------
                                                                (In thousands)
Year ended September 30, 1999 compared
  to year ended September 30, 1998
      Interest-earning assets
<S>                                           <C>               <C>               <C>
         Interest-bearing deposits            $        53       $       (73)      $        126
         Securities                                   148              (101)               249
         Mortgage-backed securities                   474                34                440
         FHLB stock                                   160                 -                160
         Loans held for sale                          913               (10)               923
         Loans receivable                           1,668              (216)             1,884
                                              -----------       ------------      ------------
             Total                                  3,416              (366)             3,782

      Interest-bearing liabilities
         Savings accounts                              23               (14)                37
         NOW and money market accounts                149               (26)               175
         Certificates of deposit                       20              (380)               400
         Repurchase agreements                         81                (5)                86
         FHLB advances                              1,971              (148)             2,119
                                              -----------       ------------      ------------
             Total                                  2,244              (573)             2,817
                                              -----------       ------------      ------------

Change in net interest income                 $     1,172       $       207       $        965
                                              ===========       ===========       ============
</TABLE>
<PAGE>
II.  INVESTMENT PORTFOLIO

     A.   The following  table sets forth the  amortized  cost and fair value of
          securities available for sale:
<TABLE>
<CAPTION>

                                                           At September 30,
                      -------------------------------------------------------------------------------------------
                                  2000                           1999                              1998
                      --------------------------       --------------------------      --------------------------
                         Amortized        Fair          Amortized         Fair          Amortized         Fair
                           Cost           Value           Cost            Value           Cost            Value
                           ----           -----           ----            -----           ----            -----
                                                              (In thousands)

Debt securities
     U.S. Government
       and federal
<S>                   <C>            <C>               <C>             <C>             <C>            <C>
       agencies       $    17,944    $     17,738      $     7,745     $    7,563      $    4,219     $     4,254
     Mortgage-
       backed              14,834          14,212           27,112         26,450          22,259          22,267
     Other securities                                            -              -           8,929           8,929
     Corporate notes        9,924           9,355            3,959          3,728           5,945           5,863
                      -----------    ------------      -----------     ----------      ----------     -----------

                           42,702          41,305           38,816         37,741          41,352          41,313

Marketable equity

  securities                  438             318              543            429             543             506
                      -----------    ------------      -----------     ----------      ----------     -----------

                      $    43,140    $     41,623      $    39,359     $   38,170      $   41,895     $    41,819
                      ===========    ============      ===========     ==========      ==========     ===========
</TABLE>


The following  table sets forth the amortized  cost and fair value of securities
held to maturity:
<TABLE>
<CAPTION>
                                                           At September 30,
                      -------------------------------------------------------------------------------------------
                                  2000                           1999                              1998
                      --------------------------       --------------------------      --------------------------
                         Amortized        Fair          Amortized         Fair          Amortized         Fair
                           Cost           Value           Cost            Value           Cost            Value
                           ----           -----           ----            -----           ----            -----
                                                              (In thousands)
Debt securities
<S>                   <C>            <C>               <C>             <C>             <C>            <C>
Corporate notes       $         -    $          -      $     3,984     $    3,709      $        -     $         -
                      -----------    ------------      -----------     ----------      ----------     -----------

                      $         -    $          -      $     3,984     $    3,709      $        -     $         -
                      ===========    ============      ===========     ==========      ==========     ===========
</TABLE>


<PAGE>

The following table sets forth the amortized cost and estimated  market value of
Federal Home Loan Bank (FHLB) stock:

<TABLE>
<CAPTION>
                                                           At September 30,
                      -------------------------------------------------------------------------------------------
                                  2000                           1999                              1998
                      --------------------------       --------------------------      --------------------------
                                        Estimated                      Estimated                        Estimated
                         Amortized       Market         Amortized        Market         Amortized        Market
                           Cost           Value           Cost            Value           Cost            Value
                           ----           -----           ----            -----           ----            -----
                                                               (In thousands)

Other securities
FHLB stock, at
<S>                   <C>            <C>               <C>             <C>             <C>            <C>
   cost               $     6,308    $      6,308      $     5,511     $    5,511      $    4,636     $     4,636
                      ===========    ============      ===========     ==========      ==========     ===========

</TABLE>
<PAGE>



II.  INVESTMENT PORTFOLIO (Continued)

     B.   The maturity  distribution and weighted average interest rates of debt
          securities available for sale, excluding  mortgage-backed  securities,
          are as follows:
<TABLE>
<CAPTION>

                                               Amount at September 30, 2000, which matures in
                -------------------------------------------------------------------------------------------------------------
                        One               Over One to          Over Five to             Over 10
                    Year or Less           Five Years           Ten Years                Years                  Totals
                --------------------  --------------------  --------------------  --------------------  ---------------------
                Amortized    Fair     Amortized    Fair     Amortized    Fair     Amortized    Fair     Amortized    Fair
                  Cost       Value      Cost       Value      Cost       Value      Cost      Value       Cost      Value
                  ----       -----      ----       -----      ----       -----      ----      ------      ----      -----

                                                           (Dollars in thousands)
U.S. Government
  and federal
<S>             <C>       <C>         <C>       <C>        <C>        <C>         <C>       <C>        <C>        <C>
  agencies      $      -  $      -    $ 13,197  $ 13,164   $  4,000   $  3,880    $   747   $   694    $ 17,944   $ 17,738
Corporate
  notes            1,993     1,985         487       489      3,485      3,180      3,959     3,701       9,924      9,355
                --------  --------    --------  ---------  --------   --------    -------   -------    -------    --------
                $  1,993  $  1,985    $ 13,684  $  13,653  $  7,485   $  7,060    $ 4,706   $ 4,395    $ 27,868   $ 27,093
                ========  ========    ========  =========  ========   ========    =======   =======    ========   ========


Weighted
average yield       6.97%                 6.99%                7.05%                 7.26%                 7.05%
</TABLE>

     The  weighted  average  interest  rates are  based  upon  coupon  rates for
     securities   purchased  at  par  value  and  on  effective  interest  rates
     considering amortization or accretion if the securities were purchased at a
     premium or discount.

     C.   Excluding those holdings of the investment  portfolio in U.S. Treasury
          securities  and other agencies of the U.S.  Government,  there were no
          investments  in securities of any one issuer which exceeded 10% of the
          shareholders' equity of the Company at September 30, 2000.


<PAGE>


III. LOAN PORTFOLIO

     A.   The  following   table  sets  for  the   composition  of  MFB  Corp.'s
          consolidated  loan  portfolio and  mortgage-backed  securities by loan
          type as of the dates indicated,  including a  reconciliation  of gross
          loans receivable to net loans  receivable  after  consideration of the
          allowance  for  loan  losses,  deferred  net loan  fees  and  loans in
          process:

<TABLE>
<CAPTION>
                              -------------------------------------------September 30,----------------------------------------
                                      2000               1999               1998                1997                1996
                              --------------------  ------------------  ----------------  -------------------  ---------------
                                          Percent            Percent            Percent               Percent              Percent
                                            of                 of                 of                    of                   of
                                Amount     Total     Amount   Total     Amount   Total       Amount    Total     Amount     Total
                                ------     -----     ------   -----     ------   -----       ------    -----     ------     -----
                                                                         (Dollars in thousands)
Mortgage loans
<S>                           <C>         <C>     <C>         <C>     <C>        <C>        <C>        <C>      <C>         <C>
  Residential                 $ 185,267   58.23%  $ 191,480   70.62%  $ 183,151  78.49%     $ 164,598  86.91%   $ 143,751   92.87%
  Residential construction       13,146    4.13      11,158    4.12       8,233   3.53          8,245   4.35        5,005    3.23
  Multi-family                    3,631    1.14       3,299    1.22         120    .05            130    .07          163     .10

Commercial and other loans
  Commercial loans               91,105   28.64      47,399   17.48      30,775  13.19          8,833   4.66          876     .57
  Home equity and second
    mortgage loans               18,917    5.95      13,308    4.91       9,067   3.89          7,177   3.79        3,790    2.45
  Financing leases                    -     -            17     .01          83    .03            325    .17        1,125     .73
  Other                           6,089    1.91       4,461    1.64       1,914    .82             96    .05           83     .05
                              ---------  ------   ---------  ------   --------- ------      --------- ------    ---------  ------
    Gross loans receivable      318,155  100.00%    271,122  100.00%    233,343 100.00%       189,404 100.00%     154,793  100.00%
                                         ======              ======             ======                ======               ======

Less
     Allowance for loan losses   (1,672)               (638)               (454)                 (370)               (340)
     Deferred net loan fees        (923)               (933)               (798)                 (653)               (440)
     Loans in process               (54)                (87)               (485)                 (117)             (1,961)
                              ---------           ---------           ---------             ---------           ---------
         Net loans
          receivable          $ 315,506           $ 269,464           $ 231,606             $ 188,264           $ 152,052
                              =========           =========           =========             =========

Mortgage-backed securities
     FHLMC certificates       $     610           $     868           $   2,316             $   3,508           $   5,013
     CMO - REMIC                 13,602              25,582              19,951                12,071              19,061
                              ---------           ---------           ---------             ---------           ---------
         Net mortgage-backed
           securities         $  14,212           $  26,450           $  22,267             $  15,579           $  24,074
                              =========           =========           =========             =========
Mortgage loans
     Adjustable rate          $ 157,144   77.78%  $ 142,756   69.32%  $ 153,897      80.36% $ 139,665  80.74%   $ 130,336   87.01%
     Fixed rate                  44,900   22.22      63,181   30.68      37,607      19.64     33,308  19.26       19,459   12.99
                              ---------  ------   ---------  ------   ---------     ------  --------- ------    ---------  ------

         Total                $ 202,044  100.00%  $ 205,937  100.00%  $ 191,504     100.00% $ 172,973 100.00%   $ 149,795  100.00%
                              =========  ======   =========  ======  ==========     ======  ========= ======    =========  ======
</TABLE>
<PAGE>



III. LOAN PORTFOLIO (Continued)

     B.   Loan Maturity.  The following table sets forth certain  information at
          September 30, 2000,  regarding the dollar amount of loans  maturing in
          MFB Corp.'s  consolidated  loan portfolio based on the date that final
          payment  is due under the terms of the loan.  Demand  loans  having no
          stated  schedule of repayments  and no stated  maturity and overdrafts
          are  reported  as due in one  year or  less.  This  schedule  does not
          reflect  the  effects  of  possible   prepayments  or  enforcement  of
          due-on-sale clauses.  Management expects prepayments will cause actual
          maturities to be shorter.
<TABLE>
<CAPTION>

                                                                       Due during years ended September 30,
                                  Balance      ----------------------------------------------------------------------------------
                                Outstanding
                              at September 30,                                     2004         2006       2011           2016
                                                                                   and           to         to            and
                                  2000          2001        2002        2003       2005         2010       2015         Following
                                  ----          ----        ----        ----       ----         ----       ----         ---------
                                                                                   (In thousands)
Mortgage Loans
<S>                             <C>           <C>          <C>        <C>        <C>          <C>        <C>           <C>
      Residential               $  185,267    $  19,208    $   113    $   283    $   1,276    $ 9,601    $   34,828    $  119,958
      Residential construction      13,146       13,146          -          -            -          -             -             -
      Multi-family                   3,631           36        664        109        2,756         66             -             -

Commercial and other Loans
      Commercial loans              91,105       35,435      2,368     12,089       37,042      3,129         1,042             -
      Home equity and second
        mortgage                    18,917          796        903      1,813        9,332      5,676           263           134
      Other                          6,089          356        643      1,547        3,342        201             -             -
                                ----------    ---------    -------    -------    ---------    -------    ----------    ----------

      Total                     $  318,155       68,977    $ 4,691    $15,841    $  53,748    $18,673    $   36,133    $  120,092
                                ==========    =========    =======    =======    =========    =======    ==========    ==========
</TABLE>

The following  table sets forth, as September 30, 2000, the dollar amount of all
loans due  after one year  which  have  fixed  interest  rates and  floating  or
adjustable interest rates.

                                            Due After September 30, 2001
                                            ----------------------------
                                                     Variable
                                       Fixed Rates    Rates        Total
                                       -----------    -----        -----
                                                  (In thousands)
Mortgage loans
      Residential                      $   37,768  $  128,291    $ 166,059
      Multi-family                          3,510          85        3,595

Commercial and other loans
      Commercial loans                     55,600          70       55,670
      Home equity and second mortgage       3,073      15,048       18,121
      Other                                 5,733           -        5,733
                                       ----------  ----------    ---------

      Total                            $  105,684  $  143,494    $ 249,178
                                       ==========  ==========    =========



<PAGE>

III. LOAN PORTFOLIO (Continued)

     C.   Risk Elements

          1.   Nonaccrual, Past Due and Restructured Loans

               The table  below sets forth the  amounts  and  categories  of MFB
               Corp.'s  consolidated   non-performing   assets  (accruing  loans
               delinquent more than 90 days,  non-accrual  loans,  troubled debt
               restructurings  and real estate  owned).  It is the policy of MFB
               Corp.  that all earned but  uncollected  interest on all loans be
               reviewed  quarterly to determine if any portion thereof should be
               classified as uncollectible for any loan past due in excess of 90
               days.

                                                   At September 30,
                                  ----------------------------------------------
                                   2000      1999      1998      1997      1996
                                   ----      ----      ----      ----      ----
                                                 (Dollars in thousands)

Accruing loans delinquent
  more than 90 days               $   60    $   96    $  124    $  261    $  198
Non-accruing loans (1)                 6         -         -         -         -
Troubled debt restructurings           -         -         -         -         -
                                  ------    ------    ------    ------    ------
      Total non-performing
        loans                         66        96       124       261       198
Real estate owned, net                 -       100       145         -         -
                                  ------    ------    ------    ------    ------

      Total non-performing
        assets                    $   66    $  196    $  269    $  261    $  198
                                  ======    ======    ======    ======    ======

Non-performing loans to
  total loans, net (2)              .02%      .03%      .05%      .14%      .13%
Non-performing assets to
  total assets                      .02%      .06%      .09%      .10%      .09%

Management  believes that the allowance for loan losses balance at September 30,
2000 is adequate to absorb any losses on  nonperforming  loans, as the allowance
balance is  maintained by  management  at a level  considered  adequate to cover
losses that are currently  anticipated  based on past loss  experience,  general
economic  conditions,  information about specific borrower situations  including
their financial  position and collateral values, and other factors and estimates
which are subject to change over time.

The gross interest  income that would have been recorded and the actual interest
income recorded on non-accruing  loans outstanding at September 30, 2000 was not
material.

(1)  MFB Corp.  generally  places  mortgage  loans on a  nonaccrual  status when
     serious doubt exists as to their collectibility.
(2)  Total loans less deferred net loan fees and loans in process.

<PAGE>

III. LOAN PORTFOLIO (Continued)

     C.   Risk Elements (Continued)

          2.   Potential Problem Loans

               As of  September  30,  2000,  there are no loans,  other than the
               $1,591,000 of impaired  loans,  where there are serious doubts as
               to the  ability  of the  borrower  to comply  with  present  loan
               repayment  terms,  which may result in  disclosure  of such loans
               pursuant  to Item  III.C.1.  Consideration  was  given  to  loans
               classified   for   regulatory   purposes   as   loss,   doubtful,
               substandard,  or special  mention that have not been disclosed in
               Section 1 above.  Management  believes  that  these  loans do not
               represent or result from trends or uncertainties which management
               reasonably   expects  will  materially  impact  future  operating
               results,  liquidity, or capital resources, or management believes
               that these loans do not  represent  material  credits about which
               management is aware of any information which causes management to
               have serious doubts as to the ability of such borrowers to comply
               with the loan repayment terms.

          3.   Foreign Outstandings

               None

          4.   Loan Concentrations

               MFB Corp. historically has concentrated its lending activities on
               the  origination of loans secured by first mortgage liens for the
               purchase,  construction  or  refinancing  of  one-to-four  family
               residential  real  property.  These loans  continue to be a major
               focus of MFB Corp.'s loan  origination  activities,  representing
               62.36% of MFB Corp.'s total loan portfolio at September 30, 2000.
               However,  MFB Corp.  continues  to place  increased  emphasis  on
               diversifying  its  balance  sheet  and  improving  earnings  with
               significant  growth in small business  lending,  which  represent
               28.64% of the total loan portfolio at September 30, 2000.

     D.   Other Interest-Earning Assets

          There are no other  interest-earning  assets as of September  30, 2000
          which would be required to be  disclosed  under Item III.  C.1 or 2 if
          such assets were loans.


<PAGE>

IV.  SUMMARY OF LOAN LOSS EXPERIENCE

     A.   The allowance for loan losses is maintained  through the provision for
          loan losses,  which is charged to  earnings.  The  provision  for loan
          losses is  determined  in  conjunction  with  management's  review and
          evaluation  of current  economic  conditions  (including  those of MFB
          Corp.'s lending area),  changes in the  characteristic and size of the
          loan portfolio, loan delinquencies (current status as well as past and
          anticipated   trends)  and  adequacy  of   collateral   securing  loan
          delinquencies,  historical  and estimated net  charge-offs,  and other
          pertinent information derived from a review of the loan portfolio.  In
          management's  opinion,  MFB  Corp.'s  allowance  for  loan  losses  is
          adequate  to absorb  anticipated  losses from loans at  September  30,
          2000.

          The following table analyzes changes in the consolidated allowance for
          loan losses during the past five years ended September 30, 2000.

                                                Years Ended September 30,
                                  ---------------------------------------------
                                   2000      1999      1998      1997      1996
                                   ----      ----      ----      ----      ----
                                                (Dollars in thousands)
Balance of allowance at
  beginning of period             $  638    $  454    $  370    $  340    $  310
Add
      Recoveries of loans
        previously charged-
        off--residential real
        estate loans                             -         -         -         -
Less charge offs
      Residential real estate

        loans                                    -         -         -         -
      Commercial real estate
        loans                         51        45        36         -         -
      Consumer loans                  21         1         -         -         -
                                  ------    ------    ------    ------    ------
Net charge-offs                       72        46        36         -         -
Provisions for loan losses         1,106       230       120        30        30
                                  ------    ------    ------    ------    ------

Balance of allowance at
  end of period                   $1,672    $  638    $  454    $  370    $  340
                                  ======    ======    ======    ======    ======

Net charge-offs to total
  average loans out-
  standing for period              *.02%     *.02%     *.02%        -%        -%
Allowance at end of
  period to total loans, net
  at end of period (1)             *.53%     *.24%     *.20%      .20%      .22%
Allowance to total non-
  performing loans at
  end of period                2,533.33%   664.58%   366.13%   141.76%   171.72%


(1)    Total loans less deferred net loan fees and loans in process.
*      Not including loans held for sale

<PAGE>


IV.  SUMMARY OF LOAN LOSS EXPERIENCE (Continued)


     Allocation of Allowance for Loan Losses.  The following  table  presents an
     analysis of the allocation of MFB Corp.'s  allowance for loan losses at the
     dates indicated.
<TABLE>
<CAPTION>

                                                                  September 30,
                                 --------------------------------------------------------------------------------------------

                                    2000                1999               1998               1999               1996
                                 ----------------  -----------------  -----------------  -----------------  -----------------
                                         Percent            Percent            Percent            Percent            Percent
                                         of loans           of loans           of loans           of loans           of loans
                                         in each            in each            in each            in each            in each
                                         category           category           category           category           category
                                         to total           to total           to total           to total           to total
                                 Amount   Loans    Amount    Loans    Amount    Loans    Amount    Loans    Amount    Loans
                                 ------   -----    ------    -----    ------    -----    ------    -----    ------    -----
                                                                       (Dollars in thousands)
Balance at end of period
  applicable to
<S>                              <C>      <C>      <C>       <C>      <C>       <C>      <C>       <C>      <C>       <C>
      Residential                $   99   58.23%   $   110   70.62%   $   181   78.49%   $   323   86.91%   $   311   92.87%

      Commercial                  1,379   28.64        387   17.48        213   13.19         19    4.66          1     .57

      Multi-family                    4    1.14          3    1.22          1     .05          1     .07          1     .10

      Residential construction       13    4.13         11    4.12          8    3.53          1    4.35          1    3.23

      Consumer loans (1)             65    7.86         45    6.56         26    4.74          1    4.01          1    3.23

      Unallocated                   112       -         82       -         25       -         25       -         25       -
                                 ------  ------    -------  ------    -------  ------    -------  ------    -------  ------

          Total                  $1,672  100.00%   $   638  100.00%   $   454  100.00%   $   370  100.00%   $   340  100.00%
                                 ======  ======    =======  ======    =======  ======    =======  ======    =======  ======
</TABLE>

(1)  Includes home equity and second mortgage loans, financing leases, and other
     loans including, education loans and loans secured by deposits.
<PAGE>


V.   DEPOSITS

     The average  amount of deposits and average  rates paid are  summarized  as
     follows for the years ended September 30:
<TABLE>
<CAPTION>

                                                      2000                   1999                    1998
                                                      ----                   ----                    ----
                                             Average      Average    Average     Average   Average      Average
                                              Amount       Rate       Amount      Rate      Amount       Rate
                                              ------       ----       ------      ----      ------       ----
                                                                    (Dollars in thousands)
<S>                                          <C>            <C>     <C>           <C>     <C>            <C>
      Savings accounts                       $   15,218     2.44%   $   12,277    2.39%   $   10,737     2.52%
      Now and money market accounts              40,583     2.60        36,422    2.75        30,065     2.83
      Certificates of deposit                   156,855     5.48       137,734    5.29       130,350     5.57
      Demand deposits (noninterest-bearing)      10,738                  6,763                 3,554
                                             ----------             ----------            ----------

                                             $  223,394             $  193,196            $  174,706
                                             ==========             ==========            ==========
</TABLE>


     Maturities  of time  certificates  of deposit  and other time  deposits  of
     $100,000  or more  outstanding  at  September  30,  2000 is  summarized  as
     follows:

                                                       Amount
                                                       ------
                                                  (In thousands)

      Three months or less                         $    12,747
      Over three months and through six months           6,338
      Over six months and through twelve months         13,591
      Over twelve months                                 6,933
                                                   -----------

                                                   $    39,609
                                                   ===========


<PAGE>

VI.  RETURN ON EQUITY AND ASSETS

     The ratio of net income to average  total assets and average  shareholders'
     equity and certain other ratios are as follows:

                                                   September 30,
                                  ---------------------------------------------
                                      2000              1999             1998
                                      ----              ----             ----
                                               (Dollars in thousands)

   Average total assets           $  377,045        $  336,193       $  277,897
                                  ==========        ==========       ==========

   Average shareholders' equity   $   31,690        $   31,623       $   33,404
                                  ==========        ==========       ==========

   Net income                     $    2,815        $    2,204       $    2,236
                                  ==========        ==========       ==========

   Return on average total assets        .75%              .66%             .80%
                                  ==========        ==========       ==========

   Return on average shareholders'
      equity                            8.88%             6.97%            6.69%
                                  ==========        ==========       ==========

   Dividend payout ratio
    (dividends declared per
    common share divided by
    basic net income per
    common share)                      18.38%            22.76%           23.26%
                                  ==========        ==========       ==========

   Average shareholders' equity
     to average total assets            8.40%             9.41%           12.02%
                                  ==========        ==========       ==========


VII. SHORT-TERM BORROWINGS

     The following  table sets forth the maximum  month-end  balance and average
     balance of FHLB advances and securities sold under agreements to repurchase
     at the dates indicated.

                                                   September 30,
                                  ---------------------------------------------
                                     2000              1999             1998
                                     ----              ----             ----
                                               (Dollars in thousands)
Maximum Balance:
FHLB advances.....................$  118,152        $  110,226       $   92,726
Securities sold under agreements
  to repurchase...................    10,201             7,079            3,882

Average Balance:
FHLB advances:....................   108,759           104,894           66,123
Securities sold under agreements
  to repurchase...................     7,718             3,892            1,647

Average Rate Paid On:
FHLB advances.....................      5.65%             5.45%            5.67
Securities sold under agreements
  to repurchase...................      3.89              3.80             4.07
<PAGE>

The following table sets forth the Bank's borrowings at the dates indicated:

                                                   September 30,
                                  ---------------------------------------------
                                     2000              1999             1998
                                     ----              ----             ----
                                               (Dollars in thousands)
Amounts Outstanding:
FHLB advances.....................$  112,152        $  104,226       $   92,726
Securities sold under agreements
  to repurchase...................     9,143             6,566            2,366

Weighted Average Interest Rate:
FHLB Advances.....................      5.70%             5.37%            5.42
Securities sold under agreements
  to repurchase...................      4.08              3.52             4.02



<PAGE>

                                   COMPETITION

MFB Financial  originates  most of its loans to and accepts most of its deposits
from residents of St. Joseph and Elkhart counties in Indiana.

MFB Financial is subject to  competition  from various  financial  institutions,
including  state and national  banks,  state and federal  savings  associations,
credit unions,  certain  non-banking  consumer  lenders,  and other companies or
firms,  including  brokerage houses and mortgage  brokers,  that provide similar
services in St. Joseph and Elkhart Counties with significantly  larger resources
than MFB Financial.  In total,  there are 16 financial  institutions  located in
Mishawaka,  Indiana,  including  MFB  Financial.  These  financial  institutions
consist of six  commercial  banks,  three savings banks and seven credit unions.
MFB Financial must also compete with banks and savings  institutions  in Elkhart
and South Bend since media  advertising  from these cities reaches the Mishawaka
community.  MFB Financial  also competes with money market and mutual funds with
respect  to  deposit  accounts  and with  insurance  companies  with  respect to
individual retirement accounts.

Under  current   federal  law,  bank  holding   companies  may  acquire  savings
institutions  and  savings  institutions  may  also  acquire  banks.  Commercial
companies may not, however,  acquire unitary savings and loan holding companies,
such as MFB Corp.  Affiliations  between banks and savings associations based in
Indiana may also increase the competition faced by the Company.

In addition,  The Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994 (the "Riegle-Neal  Act") permits bank holding companies to acquire banks in
other states and, with state consent and subject to certain limitations,  allows
banks  to  acquire  out-of-state  branches  either  through  merger  or de  novo
expansion.  The State of Indiana passed a law establishing  interstate branching
provisions for Indiana  state-chartered  banks consistent with those established
by the Riegle-Neal Act (the "Indiana  Branching Law"). The Indiana Branching Law
authorizes Indiana banks to branch interstate by merger or de novo expansion and
authorizes  out-of-state  banks  meeting  certain  requirements  to branch  into
Indiana by merger or de novo expansion. This legislation has already resulted in
increased competition for the Holding Company and the Bank.

The primary  factors  influencing  competition  for deposits are interest rates,
service and  convenience of office  locations.  MFB Financial  competes for loan
originations  primarily  through  the  efficiency  and  quality of  services  it
provides borrowers,  builders, Realtors and the small business community through
interest rates and loan fees it charges. Competition is affected by, among other
things, the general  availability of lendable funds,  general and local economic
conditions, current interest rate levels, and other factors that are not readily
predictable.


<PAGE>

                                   REGULATION

General

The Bank is a  federally  chartered  savings  bank,  the  deposits  of which are
federally  insured and backed by the full faith and credit of the United  States
Government.  Accordingly,  the Bank is subject to broad federal  regulation  and
oversight  extending to all its operations.  The Bank is a member of the FHLB of
Indianapolis  and is  subject  to  certain  limited  regulation  by the Board of
Governors  of the Federal  Reserve  System  ("Federal  Reserve  Board").  As the
savings and loan  holding  company of the Bank,  the Company  also is subject to
federal  regulation and oversight.  The purpose of the regulation of the Company
and other holding companies is to protect subsidiary savings  associations.  The
Bank is a member  of the  Savings  Association  Insurance  Fund  ("SAIF")  which
together with the Bank Insurance Fund (the "BIF") are the two deposit  insurance
funds  administered by the FDIC, and the deposits of the Bank are insured by the
FDIC. As a result,  the FDIC has certain  regulatory and  examination  authority
over the Bank.  Certain of these  regulatory  requirements  and restrictions are
discussed below or elsewhere in this document.

The OTS has extensive authority over the operations of savings institutions.  As
part of this authority,  the Bank is required to file periodic  reports with the
OTS and is subject to periodic  examinations  by the OTS and the FDIC.  The last
regular  OTS  examination  of the Bank  was as of March  13,  2000.  When  these
examinations  are conducted by the OTS, the examiners may require the Company to
provide  for  higher  general  or  specific  loan  loss  reserves.  To fund  the
operations  of the OTS, all savings  institutions  are subject to a  semi-annual
assessment,  based on the total assets, condition, and complexity of operations.
The Bank's OTS  assessment  for the fiscal year ended  September  30, 2000,  was
approximately $78,000.

The OTS also has extensive  enforcement  authority over all savings institutions
and  their  holding  companies,   including  the  Bank  and  the  Company.  This
enforcement authority includes,  among other things, the ability to assess civil
money  penalties,  to issue  cease-and-desist  or removal orders and to initiate
injunctive actions.  In general,  these enforcement actions may be initiated for
violations  of laws and  regulations  and  unsafe or  unsound  practices.  Other
actions or inactions  may provide the basis for  enforcement  action,  including
misleading  or  untimely  reports  filed  with the  OTS.  Except  under  certain
circumstances,  public  disclosure  of final  enforcement  actions by the OTS is
required.

In addition,  the  investment,  lending and  branching  authority of the Bank is
prescribed by federal laws and it is prohibited  from engaging in any activities
not permitted by such laws. For instance,  no savings  institution may invest in
non-investment  grade corporate debt  securities.  In addition,  the permissible
level of investment by federal  associations in loans secured by  nonresidential
real property may not exceed 400% of total capital,  except with approval of the
OTS. The Bank is in compliance with the noted restrictions.


<PAGE>



The Bank is also subject to federal and state  regulation  as to such matters as
loans to officers,  directors,  or principal  shareholders,  required  reserves,
limitations as to the nature and amount of its loans and investments, regulatory
approval  of any merger or  consolidation,  issuance or  retirements  of its own
securities,  and  limitations  upon  other  aspects of  banking  operations.  In
addition,  the  activities and operations of the Bank are subject to a number of
additional  detailed,  complex and sometimes  overlapping federal and state laws
and regulations,  These include state usury and consumer credit laws, state laws
relating to fiduciaries, The Federal Truth-In-Lending; Act and Regulation Z, the
Federal Equal Credit Opportunity Act and Regulation B, the Fair Credit Reporting
Act, the Community Reinvestment Act,  anti-redlining  legislation and anti-trust
laws.

On November 12, 1999,  President Clinton signed into law the  Gramm-Leach-Bliley
Financial  Services   Modernization  Act  of  1999,  federal  legislation  which
modernizes  the laws  governing the  financial  services  industry.  The new law
establishes a comprehensive  framework to permit  affiliations  among commercial
banks,  insurance  companies,  securities  firms  and  other  financial  service
providers.  As a result of this  legislation,  bank  holding  companies  will be
permitted to engage in a wider variety of financial  activities  than  permitted
under  prior  law,   particularly  with  respect  to  insurance  and  securities
activities.  To the extent the law permits banks, securities firms and insurance
companies to affiliate,  the financial  services industry may experience further
consolidation.  This  could  result  in a growing  number  of  larger  financial
institutions that offer wider varieties of financial services than are currently
offered by MFB and that could  aggressively  compete  in the  markets  currently
served by MFB. The statute  grandfathered  MFB's status as a unitary savings and
loan holding company and its authority to engage in commercial  activities.  The
legislation  also  provides,  however,  that a company  that  acquires a unitary
savings and loan holding company through a merger or other business  combination
may engage only in those  activities that are permissible for a multiple savings
and loan holding  company or for a financial  holding  company.  This  provision
likely  could  reduce the number of  potential  acquirors  of MFB.  The law also
increases commercial banks' access to loan funding by the Federal Home Loan Bank
System, and includes new provisions in the privacy area, restricting the ability
of financial  institutions to share nonpublic personal customer information with
third parties.

Safety and Soundness Standards

The OTS, as well as the other federal banking agencies,  has adopted  guidelines
establishing safety and soundness standards on such matters as loan underwriting
and  documentation,  asset quality,  earnings  standards,  internal controls and
audit systems,  interest rate risk exposure and  compensation and other employee
benefits.  In general the standards  are designed to assist the federal  banking
agencies in identifying and addressing  problems at insured  institutions before
capital  becomes  impaired.  Any  institution  which  fails to comply with these
standards must submit a compliance  plan.  Failure to submit a plan or to comply
with an  approved  plan will  subject  the  institution  to further  enforcement
action.

Federal Home Loan Bank System

The Bank is a member of the FHLB system,  which  consists of 12 regional  banks.
The Federal Housing Finance Board ("FHFB"), an independent agency,  controls the
FHLB System  including  the FHLB of  Indianapolis.  The FHLB  System  provides a
central  credit  facility  primarily  for  member  financial  institutions.   At
September 30, 2000, the Bank's  investment in stock of the FHLB of  Indianapolis
was $6.3 million.

All 12 FHLB's are  required to provide  funds to  establish  affordable  housing
programs through direct loans or interest subsidies on advances to members to be
used for  lending at  subsidized  interest  rates for  low-and  moderate-income,
owner-occupied  housing projects,  affordable rental housing,  and certain other
community  projects.  These contributions and obligations could adversely affect
the value of FHLB stock in the future.  A  reduction  in value of such stock may
result in a corresponding reduction in the Bank's capital.

The FHLB of  Indianapolis  serves  as a  reserve  or  central  bank  for  member
institutions  within its assigned  region.  It is funded primarily from proceeds
derived from the sale of consolidated  obligations of the FHLB System.  It makes
advances to members in accordance  with policies and  procedures  established by
the FHLB and the Board of Directors of the FHLB of Indianapolis.

All FHLB advances  must be fully secured by sufficient  collateral as determined
by the FHLB. Eligible collateral includes first mortgage loans less than 60 days
delinquent or securities  evidencing  interests therein,  securities  (including
mortgage-backed  securities)  issued,  insured  or  guaranteed  by  the  federal
government or any agency  thereof,  FHLB  deposits,  certain small  business and
agricultural  loans  of  smaller  institutions  and  real  estate  with  readily
ascertainable  value in which a perfected  security  interest  may be  obtained.
Other forms of collateral  may be accepted as over  collateralization  or, under
certain circumstances, to renew outstanding advances. All long-term advances are
required  to  provide  funds for  residential  home  financing  and the FHLB has
established  standards of  community  service that members must meet to maintain
access to long-term advances.

Interest rates charged for advances vary  depending  upon maturity,  the cost of
funds to the FHLB of Indianapolis and the purpose of the borrowing.

Insurance of Deposits

The FDIC administers two separate insurance funds, which are not commingled: one
primarily  for  federally  insured banks ("BIF") and one primarily for federally
insured  savings  associations  ("SAIF").  As the federal insurer of deposits of
savings  institutions,  the  FDIC  determines  whether  to  grant  insurance  to
newly-chartered  savings  institutions,  has  authority  to  prohibit  unsafe or
unsound activities and has enforcement powers over savings institutions (usually
in  conjunction  with  the  OTS or on its  own if the  OTS  does  not  undertake
enforcement action).

Deposit accounts in the Bank are insured by the SAIF within prescribed statutory
limits which generally  provide a maximum of $100,000  coverage for each insured
account.  As a condition  to such  insurance,  the FDIC is  authorized  to issue
regulations and, in conjunction with the OTS, conduct examinations and generally
supervises the operations of its insured members.  This supervision extends to a
comprehensive  regulatory  scheme  governing,  among other  things,  the form of
deposit instruments issued by savings institutions, and certain aspects of their
lending activities, including appraisal requirements, private mortgage insurance
coverage and lending authority.

The FDIC's deposit  insurance  premiums are assessed through a risk-based system
under  which all  insured  depository  institutions  are placed into one of nine
categories and assessed insurance premiums based upon their level of capital and
supervisory   evaluation.   Under  the  system,   institutions   classified   as
well-capitalized (i.e. a core capital ratio of at least 5%, a ratio of Tier 1 or
core capital to risk-weighted  assets ("Tier 1 risk-based  capital") of at least
6% and a total risk-based  capital ratio of at least 10%) pay the lowest premium
while institutions that are less than adequately  capitalized (i.e. core or Tier
1 risk-based  capital ratio of less than 4% or a total risk-based  capital ratio
of less than 8%) and  considered  of  substantial  supervisory  concern  pay the
highest premium.  Risk classification of all insured institutions is made by the
FDIC semi-annually.

In addition to the assessment for deposit  insurance,  savings  institutions are
required to pay on bonds issued in the late 1980s by the  Financing  Corporation
to recapitalize the predecessor to the SAIF. During 1998, Financial  Corporation
payments for SAIF members approximated 6.10 basis points, while BIF members paid
1.22 basis points.  By law, payments on Financing  Corporation  obligations have
been shared equally between the members of both insurance funds since January 1,
2000. The Bank's annual deposit  insurance  premium for the year ended September
30, 2000,  including  the  Financial  Corporation  payments,  was  approximately
$62,000  based  upon its  current  risk  classification  and the new  assessment
schedule for SAIF insured institutions.  These premiums are subject to change in
future periods.

The FDIC is authorized to increase  assessment  rates, on a semiannual basis, if
it  determines  that  the  reserve  ratio  of the  SAIF  will be less  than  the
designated  reserve  ratio of 1.25% of SAIF insured  deposits.  In setting these
increased  assessments,  the FDIC must seek to restore the reserve ratio to that
designated  reserve  level,  or such higher  reserve ratio as established by the
FDIC.  The FDIC may also impose  special  assessments  on SAIF  members to repay
amounts  borrowed from the United States Treasury or for any other reason deemed
necessary by the FDIC.

Regulatory Capital

Currently,   savings   institutions   are  subject  to  three  separate  minimum
capital-to-assets  requirements:  (i) a leverage limit,  (ii) a tangible capital
requirement,  and (iii) a risk-based  capital  requirement.  The leverage  limit
requires  that  savings  associations  with the  highest  rating  for safety and
soundness  maintain  "core  capital" of at least 3% of total assets,  with other
savings  associations  maintaining  core  capital  of 4% to 5% of total  assets,
depending  on their  condition.  Core  capital  is  generally  defined as common
shareholders'  equity  (including  retained  income),   noncumulative  perpetual
preferred  stock and related  surplus,  certain  minority  equity  interests  in
subsidiaries,  purchased  mortgage  servicing  rights and purchased  credit card
relationships (subject to certain limits), less nonqualifying intangibles. Under
the tangible capital requirement,  a savings bank must maintain tangible capital
(core capital less all intangible  assets except  purchased  mortgage  servicing
rights and purchased credit card relationships  which may be included subject to
certain limits) of at least 1.5% of total assets.  Under the risk-based  capital
requirements,  a minimum  amount of capital must be maintained by a savings bank
to account for the relative risks inherent in the type and amount of assets held
by the savings bank. The total risk-based capital requirement requires a savings
bank to maintain capital  (defined  generally for these purposes as core capital
plus general valuation  allowances and permanent or maturing capital instruments
such as  preferred  stock and  subordinated  debt  less  assets  required  to be
deducted) equal to 8.0% of risk-weighted assets. Assets are ranked as to risk in
one of four  categories  (0-100%)  with a credit  risk-free  asset  such as cash
requiring no risk-based capital and an asset with a significant credit risk such
as a  non-accrual  loan being  assigned a factor of 100%. At September 30, 2000,
based on the capital  standards then in effect,  the Bank was in compliance with
all capital requirements imposed by law.

The OTS has delayed indefinitely implementation of a final rule which sets forth
the   methodology  for  calculating  an  interest  rate  risk  component  to  be
incorporated  into the OTS  regulatory  capital rule.  Under the new rule,  only
savings  institutions with "above normal" interest rate risk (institutions whose
portfolio  equity would  decline in value by more than 2% of assets in the event
of a hypothetical  200-basis-point  move in interest  rates) will be required to
maintain  additional capital for interest rate risk under the risk-based capital
framework. Although the OTS has decided to delay implementation of this rule, it
will  continue  to  monitor  the  level  of  interest  rate  risk at  individual
institutions  and it retains the authority,  on a case-by-case  basis, to impose
additional  capital  requirements for individual  institutions  with significant
interest  rate risk.  The OTS  recently  updated  its  standards  regarding  the
management of interest rate risk to include summary guidelines to assist savings
institutions in determining their exposure to interest rate risk.

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

Prompt Corrective Action

Applicable  Federal law requires that federal bank regulatory  authorities  take
"prompt corrective action" with respect to institutions that do not meet minimum
capital  requirements.   For  these  purposes,  five  capital  tiers  have  been
established:   well  capitalized,   adequately  capitalized,   undercapitalized,
significantly   undercapitalized  and  critically   undercapitalized.   At  each
successively  lower  capital  category,   an  institution  is  subject  to  more
restrictive  and  numerous  mandatory  or  discretionary  regulatory  actions or
limits,  and the OTS has less  flexibility  in  determining  how to resolve  the
problems of the  institution.  OTS  regulations  define these capital  levels as
follows: (1) well-capitalized institutions must have total risk-based capital of
at least 10%, core risk-based capital (consisting only of items that qualify for
inclusion  in core  capital) of at least 6% and a leverage  ratio of at least 5%
and are not subject to any order or written  directive  of the OTS to maintain a
specific  capital  level for any capital  measure;  (2)  adequately  capitalized
associations  are those that meet the  regulatory  minimum  of total  risk-based
capital of 8%,  core  risk-based  capital of 4% and a leverage  ratio of 4%, but
which are not well capitalized; (3) undercapitalized institutions are those that
do not meet the requirements for adequately capitalized  institutions,  but that
are  not  significantly  undercapitalized;  (4)  significantly  undercapitalized
institutions  have total  risk-based  capital of less than 6%,  core  risk-based
capital of less than 3% and a leverage ratio of less than 3%; and (5) critically
undercapitalized institutions are those with tangible capital of less than 2% of
total assets.  In addition,  the OTS can downgrade an institution's  designation
notwithstanding  its capital level, based on less than satisfactory  examination
ratings in areas other than capital or if the  institution is deemed to be in an
unsafe or unsound  condition.  Each  undercapitalized  institution must submit a
capital   restoration   plan  to  the  OTS  within  45  days  after  it  becomes
undercapitalized.  Such institution will be subject to increased  monitoring and
asset  growth  restrictions  and will be required to obtain  prior  approval for
acquisitions,  branching  and engaging in new lines of  business.  Significantly
undercapitalized institutions must restrict the payment of bonuses and raises to
their senior  executive  officers.  Furthermore,  a critically  undercapitalized
institution  must be placed in  conservatorship  or receivership  within 90 days
after reaching such capitalization level, except under limited circumstances. It
will also be prohibited from making payments on any subordinate  debt securities
without  the  prior  approval  of the FDIC and will be  subject  to  significant
additional  operating  restrictions.  The Bank's  capital at September 30, 2000,
meets the standards for a well-capitalized institution.

Capital Distributions Regulation

An OTS  regulation  imposes  limitations  upon all  "capital  distributions"  by
savings  institutions,  including cash dividends,  payments by an institution to
repurchase or otherwise acquire its shares,  payments to shareholders of another
institution  in a  cash-out  merger  and  other  distributions  charged  against
capital.  The OTS  regulations  permit a savings  institution  to make a capital
distribution  to its  shareholders  in a maximum amount that does not exceed the
institution's  undistributed  net income for the prior two years plus the amount
of its  undistributed  income from the current year. The rule requires a savings
institution  , such as the Bank,  that is a  subsidiary  of a  savings  and loan
holding  company  to file a notice  with the OTS  thirty  days  before  making a
capital distribution up to the maximum amount described above. The proposed rule
would also require all savings  institutions,  whether a holding company or not,
to file an  application  with the OTS prior to making any  capital  distribution
where the association is not eligible for "expedited  processing"  under the OTS
"Expedited  Processing  Regulation," where the proposed  distribution,  together
with any other  distributions  made in the same year,  would exceed the "maximum
amount"  described  above,  where  the  institution  would be under  capitalized
following the distribution or where the distribution would otherwise be contrary
to a statute, regulation or agreement with the OTS.

Real Estate Lending Standards

OTS regulations  require savings  institutions to establish and maintain written
internal real estate lending policies.  Each institution's lending policies must
be consistent with safe and sound banking  practices and appropriate to the size
of the institution and the nature and scope of its operations. The policies must
establish   loan  portfolio   diversification   standards;   establish   prudent
underwriting  standards,  including  loan-to-value  limits,  that are  clear and
measurable;  establish loan administration procedures for the institution's real
estate   portfolio;   and   establish   documentation   approval  and  reporting
requirements to monitor  compliance with the  institution's  real estate lending
policies.

The  institution's  written real estate  lending  policies  must be reviewed and
approved by the  institution's  board of directors at least  annually.  Further,
each institution is expected to monitor  conditions in its real estate market to
ensure that its lending  policies  continue to be appropriate for current market
conditions.

Federal Reserve System

Under FRB  regulations,  the Bank is required to maintain  reserves  against its
transaction  accounts  (primarily  checking and NOW accounts)  and  non-personal
money market deposit  accounts.  The effect of these reserve  requirements is to
increase the Bank's cost of funds.  The Bank is in  compliance  with its reserve
requirements.

A  federal  savings  bank,  like  other  depository   institutions   maintaining
reservable accounts, may borrow from the Federal Reserve Bank "discount window,"
but the FRB's  regulations  require the savings bank to exhaust other reasonable
alternative  sources,   including  borrowing  from  its  regional  FHLB,  before
borrowing from the Federal Reserve Bank. Certain  limitations are imposed on the
ability of  undercapitalized  depository  institutions  to borrow  from  Federal
Reserve Banks.

Transactions with Affiliates

Transactions  between  savings  associations  and any  affiliate are governed by
Sections 23A and 23B of the Federal  Reserve Act. An affiliate of a savings bank
is any company or entity which  controls the savings  bank,  any company that is
under common  control with the savings  bank,  or a bank or savings  association
subsidiary of the savings bank. In a holding  company context the parent holding
company of a savings  bank (such as MFB) and any  companies  controlled  by such
parent holding company are affiliates of the savings bank.

Generally,  Sections  23A and 23B (i) limit the extent to which the savings bank
or its subsidiaries may engage in "covered  transactions" with any one affiliate
to an amount equal to 10% of such institution's  capital stock and surplus,  and
contain an aggregate  limit on all such  transactions  with all affiliates to an
amount equal to 20% of such capital  stock and surplus and (ii) require that all
such transactions be on terms  substantially the same, or at least as favorable,
to the institution or subsidiary as those provided to a non-affiliate.  The term
"covered  transaction"  with respect to an affiliate of a financial  institution
includes a loan to the affiliate,  a purchase of assets from the affiliate,  the
issuance  of a  guarantee  on  behalf of the  affiliate,  and  similar  types of
transactions.

In addition to the restrictions imposed by Sections 23A and 23B, no savings bank
may (i)  loan  or  otherwise  extend  credit  to an  affiliate,  except  for any
affiliate  which  engages  only in  activities  which are  permissible  for bank
holding companies, or (ii) purchase or invest in any stocks, bonds,  debentures,
notes,  or similar  obligations of any affiliate  other than shares of a bank or
savings association subsidiary of the savings bank.

The restrictions  contained in Section 22(h) of the Federal Reserve Act on loans
to  executive  officers,  directors  and  principal  shareholders  also apply to
savings associations.  Under Section 22(h), loans to an executive officer and to
a  greater  than  10%  shareholder  of a  savings  bank  (18%  in  the  case  of
institutions  located  in an area  with less then  30,000  in  population),  and
certain  affiliated  entities of either,  may not exceed together with all other
outstanding  loans to such  person and  affiliated  entities  the  association's
loan-to-one-borrower   limit  (generally  equal  to  15%  of  the  institution's
unimpaired capital and surplus and an additional 10% of such capital and surplus
for loans fully secured by certain readily marketable collateral). Section 22(h)
also  prohibits  certain  loans,  above amounts  prescribed  by the  appropriate
federal banking agency,  to directors,  executive  officers and greater than 10%
shareholders  of a savings bank, and their  respective  affiliates,  unless such
loan is  approved  in  advance by a majority  of the board of  directors  of the
institution  with any  "interested"  director not  participating  in the voting.
Currently,  the FRB requires  board of director  approval  for certain  loans to
directors, officers, and 10% shareholders (including all other outstanding loans
to such  persons)  above the greater of $25,000 or 5% of capital and surplus (up
to  $500,000).  Further,  the FRB requires  that loans to  directors,  executive
officers and principal  shareholders be made on terms  substantially the same as
offered in comparable transactions to other unaffiliated parties.  Section 22(g)
of the Federal Reserve Act, which imposes limitations on loans made to executive
officers, also applies to savings institutions.

Holding Company Regulation

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

HOLA  generally  prohibits a savings and loan  holding  company,  without  prior
approval of the  Director of the OTS,  from (i)  acquiring  control of any other
savings  bank or savings  and loan  holding  company or  controlling  the assets
thereof or (ii)  acquiring or retaining more than 5 percent of the voting shares
of a  savings  bank  or  holding  company  thereof  which  is not a  subsidiary.
Additionally,  under certain circumstances a savings and loan holding company is
permitted  to acquire,  with the  approval of the  Director of the OTS, up to 15
percent of previously  unissued  voting shares of an  under-capitalized  savings
bank for cash without that savings bank being deemed  controlled  by the holding
company.  Except with the prior approval of the Director of the OTS, no director
or officer of a savings and loan holding company or person owning or controlling
by proxy or otherwise  more than 25% of such company's  stock,  may also acquire
control of any savings institution,  other than a subsidiary institution, or any
other savings and loan holding company.

The Company's Board of Directors  presently  intends to operate MFB as a unitary
savings and loan holding  company.  Under  current law,  there are  generally no
restrictions  on the  permissible  business  activities of a unitary savings and
loan holding company.  However,  if the Director of OTS determines that there is
reasonable  cause to believe that the continuation by a savings and loan holding
company of an  activity  constitutes  a serious  risk to the  financial  safety,
soundness,  or stability of its subsidiary savings bank, the Director of the OTS
may impose  such  restrictions  as deemed  necessary  to  address  such risk and
limiting (i) payment of dividends by the savings bank, (ii) transactions between
the savings bank and its  affiliates,  and (iii) any  activities  of the savings
bank that  might  create a  serious  risk that the  liabilities  of the  holding
company and its  affiliates  may be imposed on the savings  bank.  Further,  the
recently  enacted  Gramm-Leach-Bliley  Act  prohibits a company  that engages in
activities  in which a multiple  thrift  holding  company or  financial  holding
company may not engage from acquiring a savings and loan holding  company,  such
as MFB.

Notwithstanding the above rules as to permissible business activities of unitary
savings and loan holding  companies,  if the savings bank  subsidiary  of such a
holding  company fails to meet the Qualified  Thrift Lender  ("QTL") test,  then
such unitary holding company must, within one year of the savings  association's
failure to meet the QTL test,  register  as a bank  holding  company  and become
subject  to all of the  provisions  of the  Bank  Holding  Company  Act of 1956.
See-"Qualified   Thrift  Lender."  At  September  30,  2000,  the  Bank's  asset
composition  was in excess of that  required  to qualify the Bank as a Qualified
Thrift Lender.

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

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

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


<PAGE>



Branching

The OTS has adopted regulations which permit nationwide  branching to the extent
permitted  by  federal   statute.   Federal   statutes  permit  federal  savings
institutions to branch outside of their home state if the institution  meets the
domestic  building and loan test in Section  7701(a)(l9) of the Internal Revenue
Code of 1986, as amended (the "Code") or the asset  composition  test of Section
7701(c) of the Code.  Branching that would result in the formation of a multiple
savings and loan holding company controlling  savings  institutions in more than
one state is  permitted  if the law of the state in which the savings bank to be
acquired is located specifically  authorizes  acquisition of its state-chartered
institutions by  state-chartered  institutions or their holding companies in the
state where the acquiring institution or holding company is located.

Federal Securities Law

The  shares of Common  Stock of MFB are  registered  with the SEC under the 1934
Act. MFB is subject to the  information,  proxy  solicitation,  insider  trading
restrictions  and  other  requirements  of the 1934 Act and the rules of the SEC
thereunder.

If MFB has fewer than 300  shareholders,  it may deregister its shares under the
1934 Act and cease to be subject to the foregoing requirements.

Shares of Common  Stock held by  persons  who are  affiliates  of MFB may not be
resold  without  registration  or  unless  sold in  accordance  with the  resale
restrictions  of Rule 144 under the 1933 Act.  If MFB meets the  current  public
information requirements under Rule 144, each affiliate of MFB who complies with
the other  conditions  of Rule 144 would be able to sell in the  public  market,
without  registration,  a number of shares  not to  exceed,  in any  three-month
period,  the  greater  of (i) 1% of the  outstanding  shares  of MFB or (ii) the
average  weekly  volume of trading in such  shares  during  the  preceding  four
calendar weeks.

Loans to One Borrower

Under OTS regulations, the Bank may not make a loan or extend credit to a single
or related  group of  borrowers in excess of 15% of its  unimpaired  capital and
surplus.  Additional  amounts  may be lent,  not in excess of 10% of  unimpaired
capital and surplus,  if such loans or extensions of credit are fully secured by
readily marketable collateral,  including certain debt and equity securities but
not including  real estate.  In some cases, a savings bank may lend up to 30% of
unimpaired  capital  and surplus to one  borrower  for  purposes  of  developing
domestic  residential  housing,   provided  that  the  savings  bank  meets  its
regulatory  capital  requirements and the OTS authorizes the savings bank to use
this expanded authority.  At September 30, 2000, the bank did not have any loans
or  extensions  of credit to a single or related group of borrowers in excess of
its regulatory limits. Management does not believe that the loan-to-one-borrower
limits  will have a  significant  impact on the Bank's  business  operations  or
earnings.

Qualified Thrift Lender

Under current OTS regulations, the QTL test requires that a savings bank have at
least 65% of its portfolio assets invested in "qualified thrift  investments" on
a  monthly  average  basis  in 9  out  of  every  12  months.  Qualified  thrift
investments  under the QTL test consist  primarily of housing  related loans and
investments. Portfolio assets under the QTL test include all of an association's
assets less (i) goodwill and other intangibles,  (ii) the value of property used
by the  association  to conduct  its  business,  and (iii) its liquid  assets as
required to be maintained under law up to 20% of total assets.

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

 A  savings  bank  failing  to meet the QTL test may  re-qualify  as a QTL if it
thereafter  meets the QTL test. In the event of such  re-qualification  it shall
not  be  subject  to  the  penalties  described  above.  A  savings  bank  which
subsequently  again fails to qualify under the QTL test shall become  subject to
all of the described penalties without application of any waiting period.

At September 30, 2000, 75.65% of the Bank's portfolio assets (as defined on that
date) were invested in qualified  thrift  investment  (as defined on that date),
and  therefore  the Bank's asset  composition  was in excess of that required to
qualify  the Bank as a QTL.  Also,  the Bank does not  expect  to  significantly
change its lending or investment  activities  in the near future,  and therefore
expects  to  continue  to  qualify  as a QTL,  although  there  can  be no  such
assurance.

Community Reinvestment Act Matters

Under  current  law,  ratings of  depository  institutions  under the  Community
Reinvestment Act of 1977 ("CRA") must be disclosed. The disclosure includes both
a  four-unit   descriptive   rating  using  terms  such  as   satisfactory   and
unsatisfactory and a written evaluation of each institution's performance.  Each
FHLB is required to establish standards of community  investment or service that
its members must  maintain for continued  access to long-term  advances from the
FHLBs.  The  standards  take  into  account  a  member's  performance  under the
Community  Reinvestment Act and its record of lending to first-time home buyers.
The FHLBs have  established  an  "Affordable  Housing  Program" to subsidize the
interest  rate of  advances  to  member  associations  engaged  in  lending  for
long-term, low-and moderate-income, owner-occupied and affordable rental housing
at subsidized  rates.  The Bank is  participating  in this program.  The OTS has
determined that the Bank has a satisfactory  record of meeting  community credit
needs.

                                    TAXATION

Federal Taxation

Historically,  savings  institutions,  such as the Bank,  had been  permitted to
compute  bad debt  deductions  using  either the bank  experience  method or the
percentage of taxable income method.  However, in August, 1996,  legislation was
enacted that repealed the reserve  method of accounting  for federal  income tax
purposes.  As a result, the Bank must recapture that portion of the reserve that
exceeds the amount that could have been taken  under the  experience  method for
post-1987 tax years.  The  recapture is occurring  over a six-year  period,  the
commencement  of which began with the Bank's  taxable year ending  September 30,
1999, since the Bank met certain residential lending requirements.  In addition,
the pre-1988 reserve,  for which no deferred taxes have been recorded,  will not
have to be recaptured  into income unless (i) the Bank no longer  qualifies as a
bank under the Code, or (ii) excess dividends or  distributions  are paid out by
the Bank.  The remaining  amount of bad debt to be  recaptured is  approximately
$870,000.

Depending on the composition of its items of income and expense,  a savings bank
may be  subject  to the  alternative  minimum  tax.  A savings  bank must pay an
alternative minimum tax equal to the amount (if any) by which 20% of alternative
minimum taxable income ("AMTI"),  as reduced by an exemption  varying with AMTI,
exceeds the regular tax due. AMTI equals  regular  taxable  income  increased or
decreased by certain tax preferences  and  adjustments,  including  depreciation
deductions  in excess of that  allowable for  alternative  minimum tax purposes,
tax-exempt  interest on most private  activity bonds issued after August 7, 1986
(reduced by any related interest  expense  disallowed for regular tax purposes),
the amount of the bad debt reserve  deduction claimed in excess of the deduction
based  on the  experience  method  and 75% of the  excess  of  adjusted  current
earnings over AMTI (before this  adjustment and before any  alternative  tax net
operating  loss).  AMTI  may be  reduced  only up to 90% by net  operating  loss
carryovers, but alternative minimum tax paid can be credited against regular tax
due in later years.

For federal  income tax  purposes,  MFB  reports its income and  expenses on the
accrual  method of  accounting.  MFB, the Bank and  Mishawaka  Financial  file a
consolidated federal income tax return for each fiscal year ending September 30.
The federal  income tax returns  filed by MFB have not been  audited in the last
five years.

State Taxation

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

MFB's state income tax returns have not been audited in the last five years.


<PAGE>

Item 2.  Properties.

At September 30, 2000, MFB Financial conducted its business from its main office
at 121 South  Church  Street,  Mishawaka,  Indiana  46544,  and six full service
financial  centers.  The main  office and four  branch  offices are owned by MFB
Financial, while the Goshen office and the new South Bend office are leased.

The following table provides certain information with respect to MFB Financial's
offices as of September 30, 2000:

                                       Year                     Approximate
Description and Address               Opened                   Square Footage
-----------------------               ------                   --------------
Main Office
121 S. Church Street
Mishawaka, IN 46544                    1961                        13,738

Branch Office
411 W. McKinley Ave.
Mishawaka, IN 46545                    1975                         4,800

Branch Office
402 W. Cleveland Rd.
Mishawaka, IN 46545                    1977                         2,540

Branch Office
2427 Mishawaka Ave.
South Bend, IN 46615                   1978                         2,600

Branch Office (Wal*Mart)
2304 Lincolnway East
Goshen, IN. 46526                      1997                           500

Branch Office
25990 County Road 6
Elkhart, IN. 46514                     1999                         3,250

Branch Office
100 E. Wayne St., Suite 150
South Bend, IN. 46601                  2000                         3,222

MFB Financial  operates seven  automatic  teller  machines  (ATMs),  one at each
office listed above. MFB Financial's  ATMs participate in the nationwide  CIRRUS
ATM network.

MFB Financial  owns  computer and data  processing  equipment  which is used for
transaction processing and accounting. MFB Financial also has contracted for the
date processing and reporting  services of BISYS,  Inc. in Houston,  Texas.  The
cost of these data processing services is approximately $37,000 per month.


<PAGE>


Item 3.   Legal Proceedings.

The Bank is involved in various  legal  actions  arising in the normal course of
its  business.  In the opinion of  management,  the  resolutions  of these legal
actions are in the aggregate not expected to have a material  adverse  effect on
the Company's results of operations.

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

No matter was submitted to a vote of MFB's shareholders during the quarter ended
September 30, 2000.

Item 4.5. Executive Officers of Registrant

Presented below is certain  information  regarding the executive officers of MFB
and MFB Financial:

     Name                                 Position
     ----                                 --------
Charles J. Viater         President and Chief Executive Officer of MFB,
                            MFB Financial and Mishawaka Financial Services, Inc.
Donald R. Kyle            Executive Vice President and Chief Operating Officer
                            of MFB Financial
M. Gilbert Eberhart       Secretary of MFB and MFB Financial
Timothy C. Boenne         Vice President and Controller of MFB Financial

Charles J. Viater (age 46) has served as President and Chief  Executive  Officer
of MFB and MFB Financial since September 1, 1995. Previously, he served as Chief
Financial  Officer of Amity  Bancshares,  Inc. and Executive  Vice  President of
Amity Federal Savings Bank in Tinley Park, Illinois.

Donald  R.  Kyle  (age 53) has  served as  Executive  Vice  President  and Chief
Operating  Officer of MFB Financial since July, 1999.  Previously,  he served as
Regional President of a midwest money center bank.

M. Gilbert Eberhart (age 66) has served as Secretary of MFB Financial since 1987
and of MFB since its organization. He is also a dentist based in Mishawaka.

Timothy C. Boenne (age 54) has served as Vice  President  and  Controller of MFB
Financial since 1992.


<PAGE>

                                     PART II

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

The  Bank  converted  from  a   federally-chartered   mutual  savings  and  loan
association to a federally-chartered stock savings bank effective March 24, 1994
(the "Conversion") and simultaneously formed a savings and loan holding company,
MFB. MFB's common stock,  without par value ("Common  Stock"),  is quoted on the
National  Association of Security Dealers Automated Quotation System ("NASDAQ"),
National Market System,  under the symbol "MFBC." The following table sets forth
the high and low closing  prices as reported by NASDAQ,  and dividends  declared
per share for Common Stock for the quarters indicated.

     Quarter                                                      Dividends
     Ended              High Trade            Low Trade           Declared
     -----              ----------            ---------           --------
December 31, 1998          23.00               18.00             .085/share
March 31, 1999             23.00               21.50             .09/share
June 30, 1999              22.25               21.25             .09/share
September 30, 1999         22.00               19.75             .09/share
December 31, 1999          20.00               15.50             .09/share
March 31, 2000             17.625              15.25             .095/share
June 30, 2000              17.00               16.00             .095/share
September 30, 2000         19.75               15.75             .095/share

As of September 30, 2000, there were approximately 560 shareholders of record of
MFB's Common Stock.

Since  MFB has no  independent  operations  or other  subsidiaries  to  generate
income, its ability to accumulate  earnings for the payment of cash dividends to
its  shareholders  is directly  dependent  upon the  earnings on its  investment
securities and ability of the Bank to pay dividends to MFB.

Under OTS  regulations,  a converted  savings bank may not declare or pay a cash
dividend if the effect  would be to reduce net worth  below the amount  required
for the liquidation account created at the time it converted. In addition, under
OTS  regulations,  the  extent  to  which  a  savings  bank  may  make  "capital
distributions" is limited (See "Regulation - Capital Distributions Regulation.")
Prior notice of any dividend to be paid by the Bank will have to be given to the
OTS.

Under current federal income tax law, dividend distributions with respect to the
Common  Stock,  to the extent that such  dividends  paid are from the current or
accumulated  earnings and profits of the Bank (as  calculated for federal income
tax purposes),  will be taxable as ordinary income to the recipient and will not
be deductible by the Bank.  Any dividend  distributions  in excess of current or
accumulated earnings and profits will be treated for federal income tax purposes
as a distribution  from the Bank's  accumulated  bad debt reserves,  which could
result in increased federal income tax liability for the Bank.

Unlike the Bank,  generally  there is no restriction on the payment of dividends
by MFB,  subject to the  determination  of the director of the OTS that there is
reasonable cause to believe that the payment of dividends  constitutes a serious
risk to the financial safety,  soundness or stability of the Bank.  Indiana law,
however,  would  prohibit MFB from paying a dividend if, after giving  effect to
the  payment  of that  dividend,  MFB would not be able to pay its debts as they
become due in the ordinary course of business, or if MFB's total assets would be
less than the sum of its total liabilities plus  preferential  rights of holders
of preferred stock, if any.

Item 6.  Selected Financial Data.

The  information  required  by this item is  incorporated  by  reference  to the
material under the heading "Selected  Consolidated  Financial Data" on page 2 of
MFB's Annual Report to Shareholders for its fiscal year ended September 30, 2000
(the "Annual Report").

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

The  information  required by this item is  incorporated by reference to pages 3
through 17 of the Annual Report.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The Office of Thrift Supervision  ("OTS") provides a Net Portfolio Value ("NPV")
approach to the  quantification  of interest  rate risk for thrift  institutions
such as MFB  Financial,  (the "Bank").  This approach  calculates the difference
between  the present  value of  expected  cash flows from assets and the present
value of  expected  cash  flows  from  liabilities,  as well as cash  flows from
off-balance-sheet contracts.

The OTS issued a regulation which uses a net market value methodology to measure
the interest rate risk exposure of thrift  institutions.  Under OTS regulations,
an institution's "normal" level of interest rate risk in the event of an assumed
200 basis point change in interest rates is a decrease in the  institution's NPV
in an amount  not to exceed  two  percent of the  present  value of its  assets.
Thrift  institutions with greater than "normal" interest rate risk exposure must
take a deduction  from their total  capital  available to meet their  risk-based
capital requirement.  The amount of that deduction is one half of the difference
between (a) the institution's  actual  calculated  exposure to a 200 basis point
interest rate increase or decrease  (whichever  results in the greater pro forma
decrease in NPV) and (b) its  "normal"  level of exposure  which is 2.00% of the
present value of its assets. The regulation,  however, will not become effective
until the OTS evaluates the process by which thrift  institutions  may appeal an
interest  rate risk  deduction  determination.  It is  uncertain as to when this
evaluation may be completed.

Presented below, as of June 30, 2000, is an analysis of the Bank's interest rate
risk as measured by changes in NPV for an instantaneous  and sustained  parallel
shift in the yield curve, in 100 basis point  increments,  up and down 300 basis
points, in accordance with OTS regulations.

As  illustrated  in both  the June 30,  2000 and 1999  tables,  the Bank is more
sensitive to rising rate changes than  declining  rates.  This occurs  primarily
because,  as rates rise,  the market value of fixed-rate  loans  declines due to
both the rate increase and slowing  prepayments.  When rates  decline,  the Bank
does not  experience a significant  rise in market value for these loans because
borrowers  prepay at relatively  higher rates.  The value of the Bank's deposits
and borrowings change in approximately the same proportion in rising and falling
rate scenarios.

Management  reviews the OTS measurements and related peer reports on a quarterly
basis.  In addition to  monitoring  selected  measures of NPV,  management  also
monitors effects on net interest income resulting from increases or decreases in
interest  rates.  This  measure  is used in  conjunction  with NPV  measures  to
identify excessive interest rate risk.

                                At June 30, 2000
                             (Dollars in thousands)

                     Change in
                  Interest Rates
                  (Basis Points)        $ Change          % Change
                  --------------        --------          --------
                      +300bp           $  (15,799)          (41)%
                      +200bp              (10,330)          (27)%
                      +100bp               (4,922)          (13)%
                         0bp

                      -100bp                3,858            10%
                      -200bp                5,412            14%
                      -300bp                6,399            16%



                                At June 30, 1999
                             (Dollars in thousands)

                     Change in
                  Interest Rates
                  (Basis Points)        $ Change          % Change

                      +300bp           $  (13,202)          (34%)
                      +200bp               (8,254)          (21%)
                      +100bp               (3,657)           (9%)
                         0bp

                      -100bp                1,526             4%
                      -200bp                1,525             4%
                      -300bp                1,810             5%




Item 8.  Financial Statements and Supplementary Data.

MFB's Consolidated  Financial Statements and Notes thereto contained on pages 19
through 43 of the Annual Report are incorporated herein by reference.

Item 9.  Changes  in  and  Disagreements  with  Accountants  on  Accounting  and
         Financial Disclosure.

None.

<PAGE>

                                    PART III

Item 10. Directors and Executive Officers of the Registrant.

The information  required by this item with respect to directors is incorporated
by reference to pages 2 through 4 of MFB's Proxy  Statement  for its 2000 Annual
Shareholder  Meeting  (the  "Proxy  Statement").  Information  concerning  MFB's
executive officers is included in Item 4.5 in Part I of this report. Information
concerning  compliance  by such persons  with  Section  16(a) of the 1934 Act is
incorporated by reference to page 11 of the Proxy Statement.

Item 11. Executive Compensation

The information required by this item with respect to executive  compensation is
incorporated by reference to pages 6 through 11 of the Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

The  information  required by this item is  incorporated by reference to pages 1
through 3 of the Proxy Statement.

Item  13.  Certain  Relationships  and  Related  Transactions.  The  information
required by this item is  incorporated by reference to pages 8 through 12 of the
Proxy Statement.

<PAGE>

                                     PART IV

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

(a)  The following financial statements are incorporated by reference as part of
     this report:
<TABLE>
<CAPTION>

                                                                                    Pages in the
                                                                                  Annual Report to
                                                                                    Shareholders
                                                                                    ------------

Financial Statements
--------------------
<S>                                                                                      <C>
Report of Independent Auditors                                                           18
Consolidated Balance Sheets at September 30, 2000 and 1999                               19
Consolidated Statements of Income for the Years Ended September 30, 2000, 1999           20
     and 1998
Consolidated Statements of Shareholders' Equity for the Years Ended                      21
     September 30, 2000, 1999 and 1998
Consolidated Statements of Cash Flows for the Years Ended September 30, 2000,           22-23
     1999 and 1998
Notes to Consolidated Financial Statements                                              24-43

</TABLE>

(b) MFB filed three Form 8-K reports during the year ended September 30, 2000.


Date of report: February 2, 2000
Item reported: News  releases  dated  January  14,  2000 and  January  19,  2000
               regarding  the  announcement  of first  quarter  earnings and the
               declaration  of a  $.095  per  share  cash  dividend  payable  on
               February  15, 2000 to holders of record on  February 1, 2000.  In
               addition,  a  stock  repurchase  program  of  up  to  5%  of  the
               Corporation's outstanding shares of common stock was announced.

Date of report: April 20, 2000
Item reported: News release dated April 20, 2000,  regarding the announcement of
               second quarter earnings and declaration of a $.095 per share cash
               dividend  payable on May 16,  2000 to holders of record on May 2,
               2000.


<PAGE>



Date of report: July 26, 2000
Item reported: News release dated July 19, 2000  regarding the  announcement  of
               third quarter  earnings and declaration of a $.095 per share cash
               dividend  payable  on August  15,  2000 to  holders  of record on
               August 1, 2000.

(c)  The exhibits filed  herewith or  incorporated  by reference  herein are set
     forth on the Exhibit Index on page 50

(d)  All  schedules  are  omitted  as the  required  information  either  is not
     applicable  or is  included in the  consolidated  financial  statements  or
     related notes.


<PAGE>
                                   SIGNATURES

Pursuant to the  requirement of Section 13 or 15(d) of the  Securities  Exchange
Act of 1934, as amended, the Registrant had duly caused this report to be signed
on behalf of the undersigned, thereto duly authorized.

                                    MFB CORP

Date: December 21, 2000                         By:   /s/ Charles J. Viater
                                                   -----------------------------
                                                Charles J. Viater, President and
                                                Chief Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the  report  has been  signed  below by the  following  persons on behalf of the
Registrant and in the capacities indicated on this 21st day of December, 2000.

   /s/ Charles J. Viater                     /s/ M. Gilbert Eberhart
-----------------------------------        -------------------------------------
Charles J. Viater                          M. Gilbert Eberhart, Director
President, Chief Executive Officer
and Director
(Principal Executive Officer)                /s/ Thomas F. Hums
                                           -------------------------------------
                                           Thomas F. Hums,
                                           Chairman of the Board

   /s/ Timothy C. Boenne                     /s/ Jonathan E. Kintner
-----------------------------------        -------------------------------------
Timothy C. Boenne                          Jonathan E. Kintner, Director
Vice President and Controller
(Principal Financial and Accounting
Officer)                                     /s/ Christine A. Lauber
                                           -------------------------------------
                                           Christine A. Lauber, Director


                                             /s/ Michael J. Marien
                                           -------------------------------------
                                           Michael J. Marien, Director


                                             /s/ Marian K. Torian
                                           -------------------------------------
                                           Marian K. Torian, Director


                                             /s/ Reginald H. Wagle
                                           -------------------------------------
                                           Reginald H. Wagle, Director




<PAGE>



                                  EXHIBIT LIST

Exhibit Index                                                               Page
-------------

3(l)   The  Articles of  Incorporation  of the  Registrant  is  incorporated  by
       Reference  to Exhibit  3(l) to the  Registration  Statement  on Form S- 1
       (Registration No. 33-73098).

3(2)   The Code of By-Laws of  Registration is incorporated by reference to Item
       7-Exhibit 3 of the October 15, 1995  Securities  and Exchange  Commission
       Form 8K Report.

10(l)  MFB Corp.  Stock Option Plan is incorporated by reference to Exhibit A to
       the Registrant's definitive Proxy Statement in respect of its 1996 Annual
       Shareholder Meeting.*

10(2)  MFB Financial Recognition and Retention Plans and Trusts are incorporated
       by reference to Exhibit B to the Registrants  definitive  Proxy Statement
       in respect of its 1996 Annual Shareholder Meeting.*

10(3)  Employment  Agreement  between  MFB  Financial  and  Charles J. Viater is
       incorporated by reference to Exhibit 10(3) to the Registrant's  Form 10-K
       filed for its fiscal year ended September 30, 1997. *

10(4)  Employment  Agreement  between  MFB  Financial  and  Timothy C. Boenne is
       incorporated  by reference to Exhibit 10(8) to the  Registration  on Form
       S-1 (Registration No. 33-73098).  First Amendment thereto dated March 31,
       1997 is  incorporated  by reference to Exhibit 10(4) to the  Registrant's
       Form 10-K filed for its fiscal year ended September 30, 1998. *

10(5)  Employment Agreement between MFB Financial and Michael J. Portolese dated
       December 1, 1998,  is  incorporated  by reference to Exhibit 10(5) to the
       Registrant's  Form 10-K filed for its fiscal  year  ended  September  30,
       1999.*

10(6)  Employment  Agreement between MFB Financial and William L. Stockton,  Jr.
       is  incorporated  by  reference  to  Exhibit  10(11) to the  Registration
       Statement  on Form  S-1  (Registration  No.  33-73098).  First  Amendment
       thereto  dated March 31, 1997 is  incorporated  by  reference  to Exhibit
       10(6) to the  Registrant's  Form 10-K  filed for its  fiscal  year  ended
       September 30, 1998.*

10(7)  The MFB Corp.  1997 Stock  Option Plan is  incorporated  by  reference to
       Exhibit A to the  Registrant's  definitive  Proxy Statement in respect of
       its 1997 Annual Shareholder Meeting. *

10(8)  Employment  Agreement between MFB Financial and Donald R. Kyle dated July
       1,  1999,  is   incorporated   by  reference  to  Exhibit  10(8)  to  the
       Registrant's  Form 10-K filed for its fiscal  year  ended  September  30,
       1999. *

11     Statement regarding computation of earnings per share (**)

13     Shareholder Annual Report, incorporated by reference.

21     Subsidiaries of the Registrant is incorporated by reference to Exhibit 22
       to the Registration Statement on Form S-1 (Registration No. 33-73098).

23     Consent of Crowe, Chizek and Company LLP.

27     Financial Data Schedule

*      Management  contracts  and plans  required  to be filed as  exhibits  are
       included as Exhibits 10(1) - 10(8).

**     See Notes 1 and 2 of Notes to Consolidated Financial Statements, included
       in the 2000  Shareholder  Annual  Report  incorporated  by  reference  as
       Exhibit 13.