ANNUAL REPORT

                                 TO SHAREHOLDERS

                                TABLE OF CONTENTS

                                                                         Page
                                                                         ----
Letter to Shareholders .................................................   1
Selected Consolidated Financial Data ...................................   2
Management's Discussion and Analysis ...................................   3
Report of Independent Auditors .........................................  18
Consolidated Balance Sheets ............................................  19
Consolidated Statements of Income ......................................  20
Consolidated Statements of Shareholders' Equity ........................  21
Consolidated Statements of Cash Flows ..................................  22
Notes to Consolidated Financial Statements .............................  24
Directors and Officers .................................................  44
Shareholder Information ................................................  45


DESCRIPTION OF BUSINESS

MFB Corp.  is an Indiana  corporation  organized in December  1993,  to become a
unitary savings and loan holding company. MFB Corp. became a unitary savings and
loan holding  company upon the  conversion of MFB  Financial,  formerly known as
Mishawaka  Federal  Savings (the "Bank") from a federal  mutual savings and loan
association to a federal stock savings bank in March 1994. MFB Corp. is the sole
shareholder of the Bank. MFB Corp. and the Bank (collectively referred to as the
"Company")  conduct business from their main office in Mishawaka,  Indiana,  and
six branch  locations in St.  Joseph and Elkhart  Counties of Indiana.  The Bank
offers a variety of lending,  deposit, trust and other financial services to its
retail and commercial customers. The Bank's wholly-owned  subsidiary,  Mishawaka
Financial  Services,  Inc. , is engaged in the sale of credit life, general fire
and accident,  car, home,  and life insurance as agent for the Bank's  customers
and the general public.

<PAGE>

                          MESSAGE TO OUR SHAREHOLDERS:

On behalf of the Board of Directors,  our management  team and all the employees
of MFB Corp. and it's subsidiary,  MFB Financial ("the Bank"), it is my pleasure
to  provide  you with our first  Annual  Report of the new  millennium.  Several
achievements  of the past year are  noteworthy in many respects and I would like
to share some thoughts about those achievements with you.

The century  date  change came and went with barely a whimper  around the world.
But behind the scenes considerable effort and resources were expended to achieve
this "non-event".  Our company worked diligently to assure uninterrupted service
for our  customers  and neither of us was  disappointed.  Although  the New Year
celebrations  were anything but routine,  it was truly business as usual when we
opened  our doors on the  morning of January  3,  2000--much  to the  delight of
customers and employees alike.

In our continuing  effort to bring our exceptional  products and services to the
broader  community,  we established two new banking facility this past year. The
first was a traditional full service location in downtown South Bend that opened
in March,  2000. We created a  state-of-the-art  facility  complete with a cyber
cafe that allows  visitors to relax with a cup of their favorite  gourmet coffee
while  they "surf the net" and learn  just how easy  banking  can be in the 21st
century.  Which brings me to the second new and exciting facility we established
last  year--a  virtual  branch.  The  Bank has  developed  a  robust  web  site,
MFBBANK.COM,  that allows people to view balances,  transfer  funds,  pay bills,
check on their  investments  and open accounts all from the  convenience  of any
internet  accessible  computer.  We invite  you to visit both our new "brick and
mortar" branch and our "virtual" branch at your earliest opportunity.

All of the  technological  advances didn't keep us from remaining focused on the
core business at hand--that  of  continuing  to grow  shareholder  value through
diversification  and  improved  profitability.  In  fact  we  made  considerable
progress  in our efforts to  diversify  the Bank this year.  Our loan  portfolio
changed  significantly  as we continued to emphasize our commitment to small and
medium size  businesses.  Our growth was funded  primarily by the acquisition of
new deposit  relationships.  Both loan and  deposit  growth are a tribute to the
focused  effort of every  employee to deliver the message to our community  that
there is still a local bank that  believes  the  customer  comes  first.  We are
dedicated to  understanding  customer  needs and providing  the right  financial
solutions.

Many people  received an unwanted  dose of reality this past  year--the  reality
that the stock  market does not always go up. Many have looked at their year end
brokerage accounts or 401-K statements and seen unimpressive results. Could they
have done better?  More than likely the answer is yes. By properly  diversifying
their holdings to include bank deposits that carried  guaranteed rates of return
the  overall  results  could  have  been far more  rewarding.  We have seen many
customers  come  to  the  realization  that  traditional  bank  products  are an
important part of a diversified investment strategy. It may not be cutting edge,
but you can't argue with the results.

And speaking of results,  the Bank's results for the past year were outstanding.
In fact this year was the most  profitable  in our history.  Net income was $2.8
million,  a  record,  and a 28%  improvement  over the  prior  year.  Even  more
remarkable is the fact that this was achieved in the same year that the Bank set
aside a substantial  addition to its loan loss reserves.  Growth  presents risks
that must be anticipated  and managed.  Even as asset quality remains well above
our peers,  substantial  loan growth demands prudent  management,  including the
establishment of appropriate reserves related to that growth.

Earnings per share  increased by $.49 per share,  a 32%  increase.  Core deposit
relationships grew $8.6 million or 14%. This growth has been planned and managed
to  translate  into  improved  long term  shareholder  value--a  goal that is as
important  to us as it is to you. We are proud of the detailed  information  you
will find on the pages that follow and reiterate  our  commitment to you to grow
the  value  of your  investment.  We  firmly  believe  your  confidence  will be
rewarded.


                                        \s\ Charles J. Viater
                                        -------------------------------------
                                        Charles J. Viater
                                        President and Chief Executive Officer

<PAGE>

                            MFB CORP. AND SUBSIDIARY
                      SELECTED CONSOLIDATED FINANCIAL DATA

The  following  selected  consolidated  financial  data  of MFB  Corp.  and  its
subsidiary  is qualified  in its entirety by, and should be read in  conjunction
with, the consolidated financial statements,  including notes thereto,  included
elsewhere in this Annual Report.

<TABLE>
<CAPTION>

                                                                                    At September 30,
                                                       -------------------------------------------------------------------------
                                                                                    (In Thousands)
                                                           2000           1999            1998           1997           1996
                                                           ----           ----            ----           ----           ----
Summary of Financial Condition:
<S>                                                    <C>             <C>            <C>            <C>            <C>
Total assets                                           $   396,003     $   346,454    $   314,961    $   255,921    $    225,809
Loans held for sale, net                                     6,495           8,062         13,517         12,671               -
Loans receivable, net                                      315,506         269,464        231,606        188,264         152,052
Cash and cash equivalents                                   14,544          12,062         17,904          9,482           1,734
Securities, including FHLB stock                            47,930          47,666         46,456         42,028          68,099
Interest-bearing time deposits in other
  financial institutions                                         -           1,000              -              -             495
Deposits                                                   239,394         201,407        180,666        171,887         158,964
Securities sold under agreements to repurchase               9,143           6,566          2,366            389               -
FHLB advances                                              112,152         104,226         92,726         47,500          24,500
Shareholders' equity                                        32,514          31,182         30,886         33,550          37,599

                                                                                Years Ended September 30,
                                                       -------------------------------------------------------------------------
                                                                                     (In Thousands)
                                                           2000           1999            1998           1997           1996
                                                           ----           ----            ----           ----           ----
Summary of Operating Results:
Interest income                                        $    28,514     $    24,254    $    20,838    $    17,685    $     14,182
Interest expense                                            16,473          14,448         12,204         10,157           8,057
                                                       -----------     -----------    -----------    -----------    ------------
     Net interest income                                    12,041           9,806          8,634          7,528           6,125
Provision for loan losses                                    1,106             230            120             30              30
     Net interest income after provision               -----------     -----------    -----------    -----------    ------------
       for loan losses                                      10,935           9,576          8,514          7,498           6,095
Noninterest income

     Service charges on deposit accounts                       541             293            192            113              86
     Trust fee income                                          146              29              -              -               -
     Insurance commissions                                     149             148            143            134             127
     Brokerage commissions                                      13              28             36             24              --
     Net gain (loss) from sales of securities                  (41)              4              8              6               3
     Net gains from sales of loans                             525             366            333              -              --
     Loan servicing fees, net                                   82              54             12              -              --
     Other                                                     430             298            240            148             146
                                                       -----------     -----------    -----------    -----------    ------------
         Total noninterest income                            1,845           1,220            964            425             362
Noninterest expense
     Salaries and employee benefits                          4,668           3,847          3,414          2,772           2,153
     Occupancy and equipment expense                         1,081             883            720            580             422
     SAIF deposit insurance premium                             62             109            108            147           1,291
     Provision to adjust loans held for sale to lower
       of cost or market                                       123             489              -              -              --
     Other expense                                           2,338           1,679          1,383          1,100             969
                                                       -----------     -----------    -----------    -----------    ------------
         Total noninterest expense                           8,272           7,007          5,625          4,599           4,835
                                                       -----------     -----------    -----------    -----------    ------------
Income before income taxes                                   4,508           3,789          3,853          3,324           1,622
Income tax expense                                           1,693           1,585          1,617          1,322             647
                                                       -----------     -----------    -----------    -----------    ------------
     Net income                                        $     2,815     $     2,204    $     2,236    $     2,002    $        975
                                                       ===========     ===========    ===========    ===========    ============
Supplemental Data:
Return on assets (1)                                          .75%           .66%            .80%           .84%           .49%
Return on equity (2)                                         8.88           6.97            6.69           5.83           2.55
Interest rate spread (3)                                     2.88           2.57            2.54           2.49           2.13
Net yield on average interest-earning assets (4)             3.33           3.01            3.17           3.24           3.11
Dividend pay-out ratio (5)                                  18.38          22.76           23.26          26.45          11.76
Net interest income to operating expenses (6)              145.56         139.96          153.48         163.70         126.67
Equity-to-assets (7)                                         8.21           9.00            9.81          13.11          16.65
Average interest-earning assets to average
  interest-bearing liabilities                             109.75         110.19          114.05         117.17         123.81
Non-performing assets to total assets                         .02            .06             .09            .10            .09
Non-performing loans to total loans                           .02            .04             .05            .14            .13
Allowance for loan losses to total loans, net                 .53            .24             .20            .20            .22
Allowance for loan losses to non-performing loans        2,533.33         665.63          366.13         141.76         171.72
Basic earnings per common share                        $     2.04      $    1.56      $     1.44     $     1.21     $      .51
Diluted earnings per common share                      $     2.00      $    1.51      $     1.37     $     1.16     $      .50
Dividends declared per share                           $     .375      $    .355      $     .335     $      .32     $      .06
Book value per share                                   $    23.93      $   21.96      $    20.95     $    20.33     $    19.05

--------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Net income divided by average total assets.
(2)  Net income divided by average total equity.
(3)  Interest  rate spread is calculated by  subtracting  average  interest rate
     cost from average interest rate earned.
(4)  Net interest income divided by average interest-earning assets.
(5)  Dividends  declared per common share  divided by basic  earnings per common
     share.
(6)  Operating expenses consist of other expenses less taxes.
(7)  Total equity divided by total assets.


<PAGE>

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

The  principal  business of the Bank has  historically  consisted of  attracting
deposits  from the general  public and the business  community  and making loans
secured  by various  types of  collateral,  including  real  estate and  general
business  assets.  The Bank is  significantly  affected by  prevailing  economic
conditions  as well as government  policies and  regulations  concerning,  among
other things,  monetary and fiscal affairs,  housing and financial institutions.
Deposit flows are  influenced by a number of factors,  including  interest rates
paid on competing investments,  account maturities, fee structures, and level of
personal income and savings. Lending activities are influenced by the demand for
funds, the number and quality of lenders, and regional economic cycles.  Sources
of funds  for  lending  activities  of the Bank  include  deposits,  borrowings,
payments on loans and income provided from  operations.  The Company's  earnings
are primarily  dependent  upon the Bank's net interest  income,  the  difference
between interest income and interest expense.

Interest  income  is a  function  of  the  balances  of  loans  and  investments
outstanding  during a given  period  and the  yield  earned  on such  loans  and
investments.  Interest  expense is a  function  of the  amount of  deposits  and
borrowings  outstanding  during the same period and interest  rates paid on such
deposits and borrowings.  The Company's earnings are also affected by the Bank's
provisions for loan and real estate losses,  service charges,  fee income, gains
from  sales of  loans,  retained  mortgage  loan  servicing  fees,  income  from
subsidiary activities, operating expenses and income taxes.

ASSET/LIABILITY MANAGEMENT

The  Company  is  subject  to  interest   rate  risk  to  the  degree  that  its
interest-bearing  liabilities,  primarily  deposits  and Federal  Home Loan Bank
advances with short and medium-term  maturities,  mature or reprice at different
rates than its interest-earning assets.

A key element of the Company's  asset/liability  plan is to protect net earnings
from changes in interest  rates by managing  the maturity or repricing  mismatch
between its interest-earning assets and rate-sensitive liabilities.  The Company
has sought to reduce exposure to its earnings through the use of adjustable rate
loans and through the sale of fixed rate loans in the secondary  market,  and by
extending funding maturities through the use of FHLB advances.

As part of its efforts to monitor  and manage  interest  rate risk,  the Company
uses the Net Portfolio Value ("NPV") methodology adopted by the Office of Thrift
Supervision  as part of its  capital  regulations.  In  essence,  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 difference is the NPV. As of
June 30, 2000, (the most recently  available data), after a 200 basis point rate
decrease,  the Company's NPV ratio was 10.95%. In the event of a 200 basis point
increase in rates,  the Company's NPV ratio was 7.62%.  Management and the Board
of  Directors  review the OTS  measurements  on a quarterly  basis to  determine
whether the Company's interest rate exposure is within the limits established by
the Board of Directors in the Company's interest rate risk policy.

The Company's asset/liability  management strategy dictates acceptable limits on
the amounts of change in NPV given certain changes in interest rates. The tables
presented  here, as of June 30, 2000 and 1999,  are an analysis of the Company's
interest rate risk as measured by changes in NPV for instantaneous and sustained
parallel shifts in the yield curve, in 100 basis point  increments,  up and down
300 basis points.

                                  June 30, 2000
                                  -------------
  Change in
Interest Rates                                            NPV as % of Portfolio
  In Basis               Net Portfolio Value                Value of Assets
   Points         -----------------------------------  -------------------------
                                                          NPV
(Rate Shock) (1)  $ Amount      $ Change     % Change    Ratio       Change (1)
----------------  --------      --------     --------    -----       ----------
                                 (Dollars in Thousands)
                  $             $                %         %              bp

   +300           $  23,139     $ (15,799)     (41)%       6.31%    (361) bp

   +200              28,608       (10,330)     (27)        7.62     (230) bp

   +100              34,016        (4,922)     (13)        8.86     (106) bp

      0              38,938                                9.92

   -100              42,796         3,858       10        10.70       78  bp

   -200              44,350         5,412       14        10.95      103  bp

   -300              45,337         6,399       16        11.06      114  bp

(1)   Expressed in basis points

As illustrated in the June 30, 2000 table,  the Company's  interest rate risk is
more  sensitive  to rising rates than  declining  rates.  This occurs  primarily
because,  as rates rise,  the market value of fixed-rate  loans  declines due to
both the rate increases and slowing prepayments. When rates decline, the Company
does not  experience a significant  rise in market value for these loans because
borrower prepayments  increase.  The value of the Bank's deposits and borrowings
change  in  approximately  the  same  proportion  in  rising  and  falling  rate
scenarios.  Specifically,  the  table  indicates  that,  at June 30,  2000,  the
Company's  NPV was  $38.9  million  or 9.92% of the  market  value of  portfolio
assets.  Based upon the  assumptions  utilized,  an  immediate  200 basis  point
increase in market interest rates would result in a $10.3 million or 27% decline
in the  Company's  NPV and would result in a 230 basis point or 23.2% decline in
the  Company's  NPV ratio to 7.62%.  Conversely,  an  immediate  200 basis point
decrease in market interest rates would result in a $5.4 million or 14% increase
in the Company's  NPV, and a 103 basis point or 10.4%  increase in the Company's
NPV ratio to 10.95%. The percentage change in the Company's NPV at June 30, 2000
was within the limit in the Company's Board-approved guidelines.


<PAGE>

                                  June 30, 1999
                                  -------------
  Change in
Interest Rates                                             NPV as % of Portfolio
  In Basis                 Net Portfolio Value                Value of Assets
   Points         -----------------------------------  -------------------------
                                                          NPV
(Rate Shock) (1)  $ Amount      $ Change     % Change    Ratio       Change (1)
----------------  --------      --------     --------    -----       ----------
                               (Dollars in Thousands)
   +300           $ 25,505      $(13,202)     (34)%        7.93%     (332) bp

   +200             30,453        (8,254)     (21)         9.24      (201) bp

   +100             35,050        (3,657)      (9)        10.39       (86) bp

      0             38,707                                11.25

   -100             40,233         1,526        4         11.53        28  bp

   -200             40,232         1,525        4         11.41        16  bp

   -300             40,517         1,810        5         11.36        11  bp

(1)  Expressed in basis points

As illustrated in the June 30, 1999 table,  the Company's  interest rate risk is
more  sensitive  to rising rates than  declining  rates.  This occurs  primarily
because,  as rates rise,  the market value of fixed-rate  loans  declines due to
both the rate increases and slowing prepayments. When rates decline, the Company
does not  experience a significant  rise in market value for these loans because
borrower prepayments  increase.  The value of the Bank's deposits and borrowings
change  in  approximately  the  same  proportion  in  rising  and  falling  rate
scenarios.  Specifically,  the  table  indicates  that,  at June 30,  1999,  the
Company's  NPV was $38.7  million  or 11.25% of the  market  value of  portfolio
assets.  Based upon the  assumptions  utilized,  an  immediate  200 basis  point
increase in market  interest rates would result in a $8.3 million or 21% decline
in the  Company's  NPV and would result in a 201 basis point or 17.9% decline in
the  Company's  NPV ratio to 9.24%.  Conversely,  an  immediate  200 basis point
decrease in market  interest rates would result in a $1.5 million or 4% increase
in the Company's NPV, and a 16 basis point or 1.4% increase in the Company's NPV
ratio to 11.41%. The percentage change in the Company's NPV at June 30, 1999 was
within the limit in the Company's Board-approved guidelines.


<PAGE>

In addition to monitoring  selected  measures of NPV,  management  also monitors
effects on net interest  income  resulting from increases or decreases in rates.
This  measure is used in  conjunction  with NPV  measures to identify  excessive
interest rate risk. In managing its asset/liability mix, the Company,  depending
on  the  relationship  between  long  and  short  term  interest  rates,  market
conditions  and consumer  preference,  may place  somewhat  greater  emphasis on
maximizing its net interest  margin than on strictly  matching the interest rate
sensitivity  of  its  assets  and  liabilities.  Management  believes  that  the
increased net income which may result from an acceptable  mismatch in the actual
maturity or repricing of its asset and liability  portfolios can, during periods
of declining or stable interest rates, provide sufficient returns to justify the
increased  exposure to sudden and  unexpected  increases in interest rates which
may result from such a mismatch. Management believes that the Company's level of
interest rate risk is acceptable under this approach as well.

In  evaluating  the  Company's  exposure to  interest  rate  movements,  certain
shortcomings inherent in the method of analysis presented in the foregoing table
must be considered.  For example,  although  certain assets and  liabilities may
have similar  maturities  or periods to  repricing,  they may react in different
degrees to changes in market interest rates. Also, the interest rates on certain
types of assets and  liabilities  may  fluctuate in advance of changes in market
interest  rates,  while  interest rates on other types may lag behind changes in
interest rates. Additionally, certain assets, such as ARM's, have features which
restrict  changes in interest  rates on a short-term  basis and over the life of
the asset.  Further,  in the event of a  significant  change in interest  rates,
prepayment and early withdrawal levels would likely deviate  significantly  from
those assumed  above.  Finally,  the ability of many  borrowers to service their
debt may  decrease  in the  event of an  interest  rate  increase.  The  Company
considers all of these factors in monitoring its exposure to interest rate risk.

The Board of  Directors  and  management  of the Company  believe  that  certain
factors  afford the  Company  the  ability to operate  successfully  despite its
exposure to interest  rate risk.  The Company  manages its interest rate risk by
originating  adjustable  rate  loans and by  selling a portion of its fixed rate
one-to-four  family real estate loans.  While the Company  generally  originates
loans for its own  portfolio,  sales of certain fixed rate first  mortgage loans
with  maturities  of 15 years or  greater  are  currently  undertaken  to manage
interest rate risk.  Loans  classified as held for sale as of September 30, 2000
totaled $6.5  million.  The Company  retains the  servicing on loans sold in the
secondary  market and, at September  30, 2000,  $56.8 million in such loans were
being serviced for others.  The Company also maintains capital well in excess of
regulatory requirements.

The Company's investment strategy is to maintain a diversified portfolio of high
quality  investments  that  balances the goals of  minimizing  interest rate and
credit risks while striving to maximize  investment return and provide liquidity
necessary to meet funding needs. Wholesale banking activities are conducted as a
means to  supplement  net income and to achieve  desired  growth  targets.  This
strategy  involves the  acquisition of assets funded through  sources other than
retail  deposits,  such as FHLB  advances.  The goal is to create  interest rate
spreads between asset yields and funding costs within acceptable risk parameters
while improving return on equity.

The  Company's  cost of funds  responds to changes in interest  rates due to the
relatively  short-term  nature of its deposit  portfolio.  The Company  offers a
range of maturities on its deposit  products at  competitive  rates and monitors
the maturities on an ongoing basis.


<PAGE>
<TABLE>
<CAPTION>

AVERAGE BALANCE SHEETS

The following are the average balance sheets for the years ended September 30:

                                                  2000               1999               1998
                                                 Average            Average            Average
                                               Outstanding        Outstanding        Outstanding
Assets:                                          Balance            Balance            Balance
                                                 -------            -------            -------
Interest earning assets:                                        (In Thousands)
<S>                                            <C>                <C>               <C>
  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 (2)                          3,837             15,571             2,401
  Loans receivable (3)                           300,717            244,132           220,244
                                               ---------          ---------         ---------
      Total interest-earning assets              359,710            324,947           272,577
Noninterest-earning assets, net
 of allowance for loan losses                     17,335             11,246             5,320
                                               ---------          ---------         ---------
      Total assets                             $ 377,045          $ 336,193         $ 277,897
                                               =========          =========         =========
Liabilities and shareholder's 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
    securities available for sale                   (921)               213                56
  Less common stock acquired by:
      Employee stock ownership plan                 (131)              (352)             (565)
      Recognition and retention plan                   -                (11)              (80)
  Treasury stock                                  (6,864)            (5,710)           (1,886)
                                               ---------          ---------         ---------
  Total shareholders' equity                      31,690             31,623            33,404
                                               ---------          ---------         ---------
  Total liabilities and
    shareholders' equity                       $ 377,045          $ 336,193         $ 277,897
                                               =========          =========         =========
</TABLE>

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



<PAGE>




INTEREST RATE SPREAD

The following table sets forth the average effective interest rate earned by the
Company  on  its  consolidated  loan  and  investment  portfolios,  the  average
effective cost of the Company's  consolidated deposits and FHLB borrowings,  the
interest   rate   spread  of  the   Company,   and  the  net  yield  on  average
interest-earning assets for the periods presented. Average balances are based on
daily average balances.

                                                    Year ended September 30,
                                           2000            1999            1998
                                           ----            ----            ----
Average interest rate earned on:

     Interest-bearing deposits             6.39%           5.12%           5.81%
     Securities (1)                        6.71            5.96            6.65
     Mortgage-backed securities (1)        6.60            5.99            5.84
     FHLB stock                            8.13            8.00            8.01
     Loans held for sale                   7.48            7.01            7.41
     Loans receivable                      8.11            7.88            7.98
         Total interest-earning assets     7.89            7.46            7.65

Average interest rate of:
     Savings accounts                      2.44            2.39            2.52
     NOW and money market accounts         2.60            2.75            2.83
     Certificates of deposit               5.48            5.29            5.57
     Repurchase agreements                 3.89            3.80            4.07
     FHLB advances                         5.65            5.45            5.67
         Total interest-bearing
           liabilities                     5.01            4.89            5.11

Interest rate spread (2)                   2.88            2.57            2.54
Net yield on interest-earning assets (3)   3.33            3.01            3.17

--------------------------------------------------------------------------------
(1)  Yield is based on amortized cost without  adjustment  for  unrealized  gain
     (loss) on securities available for sale.
(2)  Interest rate spread is calculated by subtracting the average interest rate
     cost from the average interest rate earned for the period indicated.
(3)  The net yield on average  interest-earning assets is calculated by dividing
     net interest income by the average  interest-earning  assets for the period
     indicated.

<PAGE>



The following  table describes the extent to which changes in interest rates and
changes in volume of  interest-related  assets and liabilities have affected the
Company'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.

Year ending September 30, 2000
compared to year ended             Total Net        Due to         Due to
September 30, 1999                  Change           Rate          Volume
Interest-earning assets:            ------           ----          ------

                                                  (In Thousands)
  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
                                   =======         =======       ========
Year ending September 30, 1999
compared to year ended             Total Net        Due to         Due to
September 30, 1998                  Change           Rate          Volume
Interest-earning assets:            ------           ----          ------

                                                  (In Thousands)
  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
                                   =======         =======       ========

<PAGE>



   COMPARISON OF FISCAL YEARS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999

Consolidated  net income for the Company for the year ended  September  30, 2000
was  $2,815,000  or $2.00  diluted  net  income  per common  share  compared  to
$2,204,000  or $1.51  diluted net income per common share for the same period in
1999. Net interest  income after provision for loan losses totaled $10.9 million
for the year ended  September  30, 2000  compared  to $9.6  million for the same
period one year ago.

The increase in net interest  income was due to increases in both the volume and
rates of interest-earning  assets which was offset by increases in the volume of
interest-bearing  liabilities  and  rates  paid on those  liabilities.  The Bank
continues  to place  increased  emphasis on growing the small  business  lending
portfolio  and  developing  the  consumer  lending  portfolio  within  the areas
serviced by its branches.  Commercial and consumer loan  receivables,  including
home equity and second mortgage loans, increased by $50.9 million from September
30, 1999 to September 30, 2000. At the same time,  total  deposits  increased by
$38.0 million,  securities sold under agreements to repurchase increased by $2.6
million,  and Federal Home Loan Bank borrowings  increased by $7.9 million.  The
yield on interest-earning assets increased 43 basis points from 7.46% in 1999 to
7.89% in 2000,  while  the  average  rate paid on  interest-bearing  liabilities
increased  12 basis  points  from 4.89% to 5.01%  during the same  period.  As a
result, the interest rate spread increased 31 basis points from 2.57% in 1999 to
2.88% in 2000.

Interest income  increased $4.3 million during the year ended September 30, 2000
compared to the same period in 1999. The increase was primarily due to increased
volumes  of  loans  receivable,  particularly  commercial  and  consumer  loans.
Interest  expense  increased $2.0 million  reflecting the growth in deposits and
borrowed funds.


[Graph Omitted]

                                  Diluted EPS

        1997            1998            1999            2000
        ----            ----            ----            ----

        $1.16           $1.37           $1.51           $2.00

Noninterest  income increased from $1.2 for the year ended September 30, 1999 to
$1.8 million for the twelve  months ended  September 30, 2000.  The  noninterest
income  increases are primarily due to fees generated from the growing number of
core deposit  relationships,  income generated from the Bank's trust department,
net gains from loan sales and the servicing fees retained on these sold loans.

Noninterest  expense  increased  from  $7.0  million  to  $8.3  million  for the
comparable twelve month periods ending September 30. These  noninterest  expense
increases are primarily attributable to staffing increases, renovated facilities
to support lending  operations,  expenses  associated with the opening of a full
service  office during the first quarter of 2000,  and expenses  incurred in the
offering of additional services to the Bank's customers.

The provision for loan losses 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
delinquencies,  historical  and estimated net  charge-offs  and other  pertinent
information.   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  improve  its loan  review  and risk  assessment  procedures.  Based on these
factors,  management  increased  the  provision  for loan and lease  losses from
$230,000  for the year ended  September  30,  1999 to $1.1  million for the year
ended September 30, 2000. A substantial portion of this increase was recorded in
the quarter ended  September 30, 2000 as management  expanded its  procedures to
evaluate  the  adequacy  of the  allowance  for  loan  losses,  giving  stronger
consideration  to the commercial  loan loss experience of its peer group, as the
Company does not yet have an  established  loss  history of its own.  Management
gave  particular  consideration  to the loss risks  related to the growing  loan
portfolio and the risk of loss for $1.7 million of loans  classified as impaired
during the quarter.

<PAGE>

Cash and cash  equivalents  increased  $2.4  million  from  $12.1  million as of
September 30, 1999 to $14.5 million as of September 30, 2000.  Net cash provided
by operating  activities and financing  activities  amounted to $7.6 million and
$46.8  million,  respectively,  and was  partially  offset  by net cash  used in
investing activities of $52.0 million.


[Graph Omitted]
<TABLE>
<CAPTION>

                                   Asset Mix

Home Equity and                             Cash and
Second Mortgages   Mortgage  Commercial   Investments   Construction    Consumer   Other Assets
----------------   --------  ----------   -----------   ------------    --------   ------------
<S>   <C>             <C>       <C>           <C>            <C>          <C>           <C>

      5%              49%       23%           16%            3%            1%           3%
</TABLE>


As of  September  30, 2000,  the total  securities  portfolio  amounted to $41.6
million, a decrease of $.6 million from $42.2 million at September 30, 1999. The
securities  portfolio  activity included net security purchases of $7.0 million,
security maturities totaling $1.6 million, principal payments on mortgage-backed
and related  securities  of $5.6  million and a $329,000  decrease in the market
value of securities available for sale.

As of September 30, 2000, net loans receivable were $315.5 million,  an increase
of $46.0 million from the $269.5  million as of September  30, 1999.  Commercial
loans outstanding increased by $43.7 million from $47.4 million at September 30,
1999 to $91.1 million at September 30, 2000. Residential mortgage loans and home
equity  loans  outstanding  increased  by $1.7  million  during  the year  ended
September 30, 2000 net of secondary  market sales  totaling $24.9 million during
the year.  Consumer loans  outstanding  also increased by $1.6 million from $4.5
million at September 30, 1999 to $6.1 million at September 30, 2000.  Management
believes  the  growth in all  lending  categories  is partly  attributed  to the
Company's  reputation as a quality local lender  satisfying the market's  desire
for local service and local decision making.


<PAGE>



During the year ended September 30, 2000, the Company completed secondary market
mortgage loan sales  totaling  $24.7 million and the net gains realized on these
loan sales were $525,000,  including $235,000 related to recording mortgage loan
servicing  rights.  At September 30, 2000, $6.5 million of loans were classified
as loans held for sale.


[Graph Omitted]

                         Demand, Now, Savings and MMDA
                                (Core Deposits)
                                 (in millions)

                1997            1998            1999            2000
                ----            ----            ----            ----

              $40,177         $45,134         $59,768         $68,371



The loans sold during the year ended September 30, 2000 were fixed rate mortgage
loans with  maturities of fifteen  years or longer.  Servicing of the sold loans
has been retained by the Company and the fees generated  during this period were
approximately $82,000, net of $36,000 in amortization of mortgage loan servicing
rights.  Management,  in order to meet  consumer  demand,  anticipates  that the
Company will  continue to deliver  fixed rate loans to the  secondary  market to
manage interest rate risk and to diversify the asset mix of the Company.

Total  deposits  increased  $38.0 million to $239.4  million as of September 30,
2000 from $201.4  million as of September 30, 1999,  and  securities  sold under
agreements to repurchase  increased from $6.6 million to $9.1 million during the
comparable periods. Federal Home Loan Bank ("FHLB") advances also increased from
$104.2  million as of September  30, 1999 to $112.2  million as of September 30,
2000.  These increases in deposits,  repurchase  agreements and other borrowings
primarily funded the loan growth during the year.

Total  liabilities  increased  from $315.3  million as of September  30, 1999 to
$363.5 million as of September 30, 2000.  This increase was primarily due to the
$38.0  million  increase in deposits,  a $7.9 million  increase in FHLB advances
during the year and a $2.6 million  increase in securities sold under agreements
to repurchase.

Total shareholders' equity increased from $31.2 million as of September 30, 1999
to $32.5 million as of September 30, 2000.  The change to  shareholders'  equity
resulted  mainly  from $2.8  million of net  income  for the year  offset by the
repurchases of 61,600 shares of outstanding common stock during this period at a
cost of $1.1 million along with the payment of cash  dividends of $516,000.  The
book  value of MFB Corp.  common  stock,  based on the  actual  number of shares
outstanding,  increased from $21.96 at September 30, 1999 to $23.93 at September
30, 2000.


<PAGE>

[Graph Omitted]
<TABLE>
<CAPTION>

                            Liability and Equity Mix

Other Time    FHLB     Savings, DDA &  Stockholders'   Non-Interest     Repurchase      Other
 Deposits   Advances    MMDA Deposits     Equity      Bearing Deposits  Agreements    Liabilities
----------  --------   --------------  ------------   ----------------  ----------    -----------
<S> <C>        <C>          <C>             <C>              <C>            <C>           <C>

    44%        28%          14%             8%               3%             2%            1%

</TABLE>



COMPARISON OF FISCAL YEARS ENDED SEPTEMBER 30, 1999 AND SEPTEMBER 30,
  1998

Consolidated  net income for the Company for the year ended  September  30, 1999
was  $2,204,000  or $1.51  diluted  net  income  per common  share  compared  to
$2,236,000  or $1.37  diluted net income per common share for the same period in
1998. Net interest  income after  provision for loan losses totaled $9.6 million
for the year ended  September  30, 1999  compared  to $8.5  million for the same
period one year ago.

The  increase in net  interest  income was  primarily  due to  increases  in the
interest  income on  increases in volume of  interest-earning  assets which more
than  offset the  increase  in interest  expense on  increases  in the volume of
interest-bearing liabilities. First mortgage loan receivables increased by $14.8
million and commercial  and consumer loan  receivables  by  approximately  $23.3
million from  September 30, 1998 to September 30, 1999. At the same time,  total
deposits  increased  by $20.7  million  and  Federal  Home Loan Bank  borrowings
increased by $11.5 million.  The asset and liability growth was partially offset
by a  decrease  in the yield on  interest-earning  assets  from 7.65% in 1998 to
7.46% in 1999.  The Company  also  experienced  a decrease  in interest  paid on
interest-bearing  liabilities  from 5.11% in 1998 to 4.89% in 1999. As a result,
the  interest  rate spread  increased  three basis  points from 2.54% in 1998 to
2.57% in 1999.

Interest income  increased $3.4 million during the year ended September 30, 1999
compared to the same period in 1998. The increase was primarily due to increased
volumes  of  loans  receivable,  particularly  commercial  and  consumer  loans.
Interest  expense  increased $2.2 million  reflecting the growth in deposits and
borrowed funds.

Noninterest income increased from $964,000 for the year ended September 30, 1998
to $1.2 million for the twelve months ended  September 30, 1999. The noninterest
income  increases are primarily due to fees generated from the growing number of
core deposit relationships,  recognition of mortgage servicing rights, net gains
from loan sales and the servicing fees retained on these sold loans.

Noninterest  expense  increased  from  $5.6  million  to  $7.0  million  for the
comparable twelve month periods ending September 30. These  noninterest  expense
increases are primarily  attributable to staffing increases,  facility upgrades,
expenses incurred in the offering of additional services to the Bank's customers
and the recognition of a $489,000 provision to adjust loans held for sale to the
lower of cost or market at September 30, 1999.

The  provision for loan losses was  increased  from  $120,000  during the period
ended September 30, 1998 to $230,000 for the period ended September 30, 1999 due
to the substantial  increase in commercial and consumer loan  portfolios  during
the 1999 fiscal year.

As of September 30, 1999,  net loans were $269.5  million,  an increase of $37.9
million from the $231.6  million as of  September  30,  1998.  Commercial  loans
outstanding  increased by $16.6 million from $30.8 million at September 30, 1998
to $47.4  million at September  30, 1999.  Residential  mortgage  loans and home
equity  loans  outstanding  increased  by $18.7  million  during  the year ended
September 30, 1999 net of secondary  market sales  totaling $20.7 million during
the year.  Consumer loans  outstanding  also increased by $2.6 million from $1.9
million at September 30, 1998 to $4.5 million at September 30, 1999.  Management
believes  the  growth in all  lending  categories  is partly  attributed  to the
Company's  reputation as a quality local lender  satisfying the market's  desire
for local service and local decision making.


<PAGE>



During the year ended September 30, 1999, the Company completed secondary market
mortgage loan sales  totaling  $20.7 million and the net gains realized on these
loan sales were $366,000,  including $258,000 related to recording mortgage loan
servicing  rights.  At September 30, 1999, $8.1 million of loans were classified
as loans held for sale.

The loans sold during the year ended September 30, 1999 were fixed rate mortgage
loans with  maturities of fifteen  years or longer.  Servicing of the sold loans
has been retained by the Company and the fees generated  during this period were
approximately $54,000, net of $37,000 in amortization of mortgage loan servicing
rights.  Management,  in order to meet  consumer  demand,  anticipates  that the
Company will  continue to deliver  fixed rate loans to the  secondary  market to
manage interest rate risk and to diversify the asset mix of the Company.

Total  deposits  increased  $20.7 million to $201.4  million as of September 30,
1999 from $180.7  million as of September 30, 1998,  and  securities  sold under
agreements to repurchase  increased from $2.4 million to $6.6 million during the
comparable  periods.  Federal Home Loan Bank  ("FHLB")  advances and other short
term  borrowings  also increased from $100.0 million as of September 30, 1998 to
$106.3 million as of September 30, 1999. These increases in deposits, repurchase
agreements and other borrowings  primarily funded the loan and investment growth
during the year.

Cash and cash  equivalents  decreased  $5.8  million  from  $17.9  million as of
September 30, 1998 to $12.1  million as of September 30, 1999.  Net cash used in
investing  activities totaled $38.0 million and was partially offset by net cash
provided by operating  and  financing  activities  amounting to $2.6 million and
$29.6 million, respectively.

The  Company's  capital  leveraging  strategy  involves the purchase of mortgage
related  and  other  securities  funded  primarily  with  FHLB  advances.   This
leveraging portfolio represented $20.8 million of the total securities available
for sale at September  30, 1999 compared to $15.7 million at September 30, 1998.
As of  September  30, 1999,  the total  securities  portfolio  amounted to $42.2
million,  an increase of $400,000 from $41.8 million at September 30, 1998.  The
securities  portfolio activity included net security purchases of $65.3 million,
security   maturities   totaling   $42.4   million,    principal   payments   on
mortgage-backed  and related  securities  of $21.5  million  and a $1.1  million
decrease in the market value of securities available for sale.

Total  liabilities  increased  from $284.1  million as of September  30, 1998 to
$315.3 million as of September 30, 1999.  This increase was primarily due to the
$20.7 million increase in deposits, a $6.3 million increase in FHLB advances and
other borrowings  during the year and a $4.2 million increase in securities sold
under agreements to repurchase.

Total shareholders' equity increased from $30.9 million as of September 30, 1998
to $31.2 million as of September 30, 1999.  The change to  shareholders'  equity
resulted  mainly from the  repurchases  of 56,668 shares of  outstanding  common
stock  during  this period at a cost of $1.2  million  along with the payment of
cash dividends of $501,000 and a $672,000  adjustment to reflect the decrease in
the market value of securities  available for sale, net of tax. These  decreases
were offset by $2.2  million in net income.  The book value of MFB Corp.  common
stock, based on the actual number of shares  outstanding,  increased from $20.95
at September 30, 1998 to $21.96 at September 30, 1999.


<PAGE>



LIQUIDITY AND CAPITAL RESOURCES

Liquidity relates  primarily to the Company's ability to fund loan demand,  meet
deposit customers'  withdrawal  requirements and provide for operating expenses.
Assets  used to  satisfy  these  needs  consist  of cash,  deposits  with  other
financial institutions,  overnight  interest-bearing deposits in other financial
institutions  and  securities  available  for sale.  These  assets are  commonly
referred to as liquid assets.

A standard  measure of liquidity for savings  associations  is the ratio of cash
and eligible investments to a certain percentage of net withdrawable savings and
borrowings due within one year.  The minimum  required ratio is currently set by
OTS  regulation at 4.0%. At September 30, 2000, the Bank's  liquidity  ratio was
8.18%.  Therefore,  the Bank's  liquidity  is well above the minimum  regulatory
requirements.

Changes in the Bank's  liquidity  occur as a result of its operating,  investing
and financing  activities.  These  activities are discussed  below for the years
ended September 30, 2000, 1999 and 1998.

Liquid  assets  totaled $56.2 million as of September 30, 2000 compared to $51.2
million as of September 30, 1999 and $59.7 million as of September 30, 1998. The
$5.0 million increase in liquidity from September 30, 1999 to September 30, 2000
was primarily due to a $3.5 million  increase in cash and cash equivalents and a
$2.5 million increase in securities  available for sale offset by a $1.0 million
decrease in  interest-bearing  time  deposits in other  financial  institutions.
Management  believes the  liquidity  level of $56.2  million as of September 30,
2000 is sufficient to meet anticipated liquidity needs.

Liquidity levels decreased $8.5 million from September 30, 1998 to September 30,
1999 due primarily to a $5.8 million decrease in cash and cash equivalents and a
$2.7 million decrease in securities available for sale and interest-bearing time
deposits in other financial institutions.

As of  September  30, 2000,  total FHLB  borrowings  amounted to $112.2  million
compared to $104.2 million at September 30, 1999. The $8.0 million  increase was
used primarily to fund loan portfolio  growth.  The Bank had commitments to fund
loan originations  with borrowers  totaling $63.9 million at September 30, 2000.
In the opinion of  management,  the Company has  sufficient  cash flow and other
cash resources to meet current and anticipated loan funding commitments, deposit
customer  withdrawal  requirements and operating  expenses.  As of September 30,
1999, total FHLB borrowings  amounted to $104.2 million,  $20.8 million of which
were  used as part of the  capital  leveraging  strategy.  The  remaining  $83.4
million was used primarily to fund loan portfolio growth.

The cash flow statements provide an indication of the Company's sources and uses
of cash as well as an  indication  of the  ability of the Company to maintain an
adequate  level of  liquidity.  A  discussion  of the  changes  in the cash flow
statements for the years ended September 30, 2000, 1999 and 1998 follows.


<PAGE>



During  the year  ended  September  30,  2000,  net  cash  and cash  equivalents
increased $2.5 million from $12.0 million at September 30, 1999 to $14.5 million
at September 30, 2000.

The Company experienced a net increase in cash from operating activities of $7.6
million  during the year that was  primarily  attributable  to the net income of
$2.8 million and proceeds of $24.7  million  realized  from the sale of mortgage
loans,  offset  by the  origination  of $20.3  million  of loans  held for sale.
Beginning in the quarter ended  September 30, 1999,  the Bank adopted a strategy
of originating,  selling and delivering fixed rate,  owner-occupied  residential
mortgage loans on a "Best Efforts"  delivery program basis.  This program allows
the Bank to commit loans for delivery to investors at prices that are determined
prior to loan approval. In the event that loans are not closed and therefore not
delivered,  the Bank incurs no penalty.  The strategy reduces interest rate risk
exposure by  minimizing  the volume of loans  closed and carried in the held for
sale loan portfolio.

The $52.0 million decrease in cash from investing  activities for the year ended
September 30, 2000 was primarily  related to the $49.8 million  increase in loan
originations  exceeding  principal  payments,  investment  security purchases of
$18.2  million,  and a $1.9  million  low  income  housing  limited  partnership
investment  offset by sales and maturities of securities  totaling $12.8 million
and $5.6 million of mortgage-backed and related securities principal payments.

Financing  activities  generated  net cash of $46.9  million  for the year ended
September  30,  2000.  The net  cash was  provided  primarily  from net  deposit
increases  of  $38.0  million,  $7.9  million  in net new  borrowed  funds,  and
increases of $2.6 million in repurchase agreements,  partially offset by the use
of $1.1 million to repurchase the Company's stock and $516,000 in cash dividends
paid during the year.

During  the year  ended  September  30,  1999,  net  cash  and cash  equivalents
decreased $5.8 million from $17.9 million at September 30, 1998 to $12.1 million
at September 30, 1999.

The Company experienced a net increase in cash from operating activities of $2.6
million  during the year that was  primarily  attributable  to the net income of
$2.2 million and proceeds of $20.7  million  realized  from the sale of mortgage
loans, offset by the origination of $20.9 million of loans held for sale.

The $38.0 million decrease in cash from investing  activities for the year ended
September 30, 1999 was  primarily  related to the purchase of  securities,  FHLB
stock and interest-bearing time deposits totaling $69.1 million, a $32.8 million
increase  in net loans,  and the $2.0  million  net  increase  of  premises  and
equipment,  offset by sales and maturities of securities  totaling $44.4 million
and $21.5 million of mortgage-backed securities principal payments.

Financing  activities  generated  net cash of $29.6  million  for the year ended
September  30, 1999.  The net cash was provided  primarily  from net deposits of
$20.7  million,  $6.6 million in net new borrowed  funds,  and increases of $4.2
million in repurchase agreements, partially offset by the use of $1.2 million to
repurchase the Company's stock.

During  the year  ended  September  30,  1998,  net  cash  and cash  equivalents
increased  $8.4 million from $9.5 million at September 30, 1997 to $17.9 million
at September 30, 1998.

The Company experienced a net increase in cash from operating activities of $2.6
million during the year that was primarily  attributable  to the  origination of
$28.9 million of loans held for sale and $28.1 million of proceeds realized from
the sale of mortgage loans and net income of $2.2 million.

The $49.8 million decrease in cash from investing  activities for the year ended
September  30, 1998 was primarily  related to the $43.5 million  increase in net
loans and the $49.7  purchase of securities  and FHLB stock,  offset by sale and
maturities   of  securities   totaling   $25.7  million  and  $19.3  million  of
mortgage-backed securities principal payments.

Financing  activities  generated  net cash of $55.6  million  for the year ended
September 30, 1998.  The net cash was provided  primarily  from $45.2 million in
net new FHLB advances,  net deposits of $8.8 million,  a $4.9 million commitment
to purchase  securities and increases of $2.0 million in repurchase  agreements,
partially offset by the use of $5.9 million to repurchase the Company's stock .

As of September 30, 2000 management is not aware of any current  recommendations
by regulatory authorities which, if they were to be implemented,  would have, or
are  reasonably  likely to have,  a  material  adverse  effect on the  Company's
liquidity, capital resources or operations.

NEW ACCOUNTING PRONOUNCEMENT

SFAS No. 133 on derivatives will,  beginning with the quarter ended December 31,
2000, require all derivatives to be recorded at fair value in the balance sheet,
with changes in fair value run through income. If derivatives are documented and
effective as hedges,  the change in the derivative  fair value will be offset by
an equal change in the fair value of the hedged item.  The Company  adopted this
new  accounting  standard on October 1, 2000.  The adoption had no impact on the
consolidated  financial statements as the Company had no derivative  instruments
on October 1, 2000.

IMPACT OF INFLATION

The  audited  consolidated  financial  statements  presented  herein  have  been
prepared in accordance  with generally  accepted  accounting  principles.  These
principles  require  measurement of financial  position and operating results in
terms of historical dollars (except for securities  available for sale which are
reported at fair market  value and loans held for sale which are reported at the
lower of cost or estimated market value in the aggregate),  without  considering
changes in the relative purchasing power of money over time due to inflation.

The primary  assets and  liabilities  of the Bank are  monetary in nature.  As a
result,  interest  rates  have  a  more  significant  impact  on  the  Company's
performance  than the effects of general  levels of inflation.  Interest  rates,
however,  do not  necessarily  move  in the  same  direction  or with  the  same
magnitude as the price of goods and services,  since such prices are affected by
inflation.

In periods  of  rapidly  rising  interest  rates,  the  liquidity  and  maturity
structures  of  the  Company's  assets  and  liabilities  are  critical  to  the
maintenance of acceptable  performance levels. For a discussion of the Company's
continuing efforts to reduce its vulnerability to changes in interest rates, see
"Asset/Liability Management."

The principal effect of inflation, as distinct from levels of interest rates, on
earnings is in the area of noninterest  expense.  Such expense items as employee
compensation,  employee  benefits,  and  occupancy  and  equipment  costs may be
subject to increases as a result of inflation. An additional effect of inflation
is the possible  increase in the dollar value of the  collateral  securing loans
made by the Bank. Management is unable to determine the extent, if any, to which
properties  securing  the Bank's loans have  appreciated  in dollar value due to
inflation.

FORWARD LOOKING STATEMENTS

When  used  in this  filing  and in  future  filings  by the  Company  with  the
Securities  and Exchange  Commission,  in the Company's  press releases or other
public  or  shareholder  communications,  or in oral  statements  made  with the
approval of an authorized executive officer, the words or phrases, "anticipate,"
"would be," "will allow," "intends to," "will likely result," "are expected to,"
will continue," "is anticipated," "estimated," "project," or similar expressions
are intended to identify, "forward looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements are subject to
risks and  uncertainties,  including  but not  limited to  changes  in  economic
conditions  in the  Company's  market  area,  changes in policies by  regulatory
agencies,  fluctuations  in interest  rates,  demand for loans in the  Company's
market area, and competition, all or some of which could cause actual results to
differ  materially from historical  earnings and those presently  anticipated or
projected.

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

The Company does not undertake,  and specifically  disclaims any obligation,  to
update any forward looking  statements to reflect  occurrences or  unanticipated
events or circumstances after the date of such statements.


<PAGE>

                         REPORT OF INDEPENDENT AUDITORS



Board of Directors and Shareholders
MFB Corp.
Mishawaka, Indiana

We have audited the  accompanying  consolidated  balance sheets of MFB Corp. and
Subsidiary  as of  September  30,  2000 and 1999  and the  related  consolidated
statements  of income,  shareholders'  equity and cash flows for the years ended
September 30, 2000, 1999 and 1998. These consolidated  financial  statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  financial  position of MFB Corp.  and
Subsidiary as of September 30, 2000 and 1999,  and the results of its operations
and its cash flows for the years  ended  September  30,  2000,  1999 and 1998 in
conformity with generally accepted accounting principles.

                                           /s/ Crowe, Chizek and Company LLP
                                           ---------------------------------
                                           Crowe, Chizek and Company LLP

South Bend, Indiana
November 16, 2000


<PAGE>

<TABLE>
<CAPTION>
                                      MFB CORP. AND SUBSIDIARY
                                     CONSOLIDATED BALANCE SHEETS
                                     September 30, 2000 and 1999

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

                                                                             2000              1999
                                                                             ----              ----
ASSETS
<S>                                                                    <C>              <C>
Cash and due from financial institutions                               $   9,692,995    $   6,315,747
Interest-bearing deposits in other financial
  institutions - short-term                                                4,850,957        5,746,195
                                                                       -------------    -------------
     Total cash and cash equivalents                                      14,543,952       12,061,942
Interest-bearing time deposits in other financial institutions                     -        1,000,000
Securities available for sale (amortized cost of  $42,140 in 2000
   and $39,359 in 1999                                                    41,662,790       38,170,143
Securities held to maturity (fair value of $-0- in 2000
  and $3,709,205 in 1999)                                                          -        3,984,338
Federal Home Loan Bank (FHLB) stock, at cost                               6,307,600        5,511,300
Loans held for sale, net of unrealized losses
of $131,618  in 2000 and $489,152 in 1999                                  6,494,568        8,061,951
Loans receivable, net of allowance for loan losses
  of $1,672,000 in 2000 and $638,465 in 1999                             315,505,699      269,464,085
Accrued interest receivable                                                1,894,602        1,363,318
Premises and equipment, net                                                4,687,662        4,413,409
Mortgage servicing rights, net of accumulated amortization
  of $92,954in 2000 and $56,571 in 1999                                      611,013          412,390
Investment in limited partnership                                          2,948,463        1,213,430
Other assets                                                               1,387,030          797,380
                                                                       -------------    -------------
     Total assets                                                      $ 396,003,379    $ 346,453,686
                                                                       =============    =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
     Deposits
         Noninterest-bearing demand deposits                           $  11,802,027    $   7,357,944
         Savings, NOW and MMDA deposits                                   56,568,936       52,409,560
         Other time deposits                                             171,023,260      141,639,885
                                                                       -------------    -------------
              Total deposits                                             239,394,223      201,407,389
     Securities sold under agreements to repurchase                        9,143,345        6,566,395
     Other borrowings                                                    112,151,525      104,225,750
     Advances from borrowers for taxes and insurance                       2,115,832        2,111,183
     Accrued expenses and other liabilities                                  684,027          961,339
                                                                       -------------    -------------
         Total liabilities                                               363,488,952      315,272,056
Shareholders' equity
     Common stock, no par value, 5,000,000 shares authorized;
       shares issued: 1,689,417- 2000 and 1999; shares
       outstanding:  1,358,449 - 2000, 1,420,049 - 1999                   13,136,003       13,016,302
     Retained earnings - substantially restricted                         27,711,396       25,419,722
     Accumulated other comprehensive income (loss),
       net of tax of $(601,096) in 2000 and $(470,824) in 1999              (916,439)        (717,823)
     Unearned Employee Stock Ownership Plan (ESOP) shares                          -         (222,963)
     Treasury Stock, 330,968 common shares - 2000;
       269,368 common shares - 1999, at cost                              (7,416,533)      (6,313,608)
                                                                       -------------    -------------
         Total shareholders' equity                                       32,514,427       31,181,630
                                                                       -------------    -------------
              Total liabilities and shareholders' equity               $ 396,003,379    $ 346,453,686
                                                                       =============    =============
</TABLE>

              The accompanying  notes are an integral part of these consolidated
financial statements.
<PAGE>
<TABLE>
<CAPTION>
                                      MFB CORP. AND SUBSIDIARY
                                  CONSOLIDATED STATEMENTS OF INCOME
                             Years ended September 30, 2000, 1999 and 1998

-------------------------------------------------------------------------------------------------------------------
                                                                   2000                1999                1998
                                                                   ----                ----                ----
Interest income
     Loans receivable, including fees
<S>                                                         <C>                 <C>                <C>
         Mortgage loans                                     $    14,966,575     $    14,997,969    $     15,071,514
         Consumer and other loans                                 1,948,952           1,267,455             858,670
         Financing leases and commercial loans                    7,748,432           4,060,194           1,815,178
     Securities - taxable                                         3,559,796           3,315,190           2,532,974
     Other interest-earning assets                                  290,012             612,977             559,547
                                                            ---------------     ---------------    ----------------
         Total interest income                                   28,513,767          24,253,785          20,837,883

Interest expense
     Deposits                                                    10,025,303           8,580,571           8,388,360
     Securities sold under agreements
       to repurchase                                                300,358             147,675              67,352
     FHLB advances                                                6,147,365           5,719,852           3,748,087
                                                            ---------------     ---------------    ----------------
         Total interest expense                                  16,473,026          14,448,098          12,203,799
                                                            ---------------     ---------------    ----------------
Net interest income                                              12,040,741           9,805,687           8,634,084

Provision for loan losses                                         1,106,393             230,000             120,000
                                                            ---------------     ---------------    ----------------
Net interest income after provision
  for loan losses                                                10,934,348           9,575,687           8,514,084

Noninterest income
     Service charges of deposit accounts                            540,877             293,202             191,673
     Trust fee income                                               145,594              29,398                   -
     Insurance Commissions                                          149,357             147,521             143,201
     Brokerage commissions                                           13,230              28,157              35,834
     Net realized gains (losses) from sales
        of securities available for sale                            (38,552)              3,803               7,673
     Net realized losses from sales of securities
        held to maturity                                             (2,245)                 --                  --
     Net realized gains from sales of loans                         524,969             366,320             333,171
     Loan servicing fees, net of amortization of
      $36,383 in 2000 and $37,195 in 1999 and $19,376
      in 1998                                                        81,846              54,025              12,038
     Other income                                                   429,577             297,640             240,603
                                                            ---------------     ---------------    ----------------
         Total noninterest income                                 1,844,653           1,220,066             964,193

Noninterest expense
     Salaries and employee benefits                               4,668,011           3,846,889           3,413,558
     Occupancy and equipment expense                              1,080,785             882,698             720,305
     Data processing expense                                        442,983             379,715             384,629
     SAIF deposit insurance premium                                  62,117             109,208             107,503
     Provision to adjust loans held for sale
       to lower of cost or market                                   122,896             489,152                   -
     Other expense                                                2,338,012           1,678,134           1,384,023
                                                            ---------------     ---------------    ----------------
         Total noninterest expense                                8,271,821           7,006,081           5,625,389
                                                            ---------------     ---------------    ----------------
Income before income taxes                                        4,507,180           3,789,672           3,852,888

Income tax expense                                                1,692,623           1,585,374           1,616,605
                                                            ---------------     ---------------    ----------------
     Net income                                             $     2,814,557     $     2,204,298    $      2,236,283
                                                            ===============     ===============    ================

     Basic earnings per common share                              $    2.04           $    1.56           $    1.44
     Diluted earnings per common share                                 2.00                1.51                1.37
</TABLE>
              The accompanying  notes are an integral part of these consolidated
financial statements.
<PAGE>
<TABLE>
<CAPTION>
                                      MFB CORP. AND SUBSIDIARY
                           CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                            Years ended September 30, 2000, 1999 and 1998
------------------------------------------------------------------------------------------------------------------------------------
                                                                        Accumulated
                                                                           Other
                                                                       Comprehensive
                                                                           Income                                        Total
                                                              Retained     (Loss),   Unearned    Unearned   Treasury  Shareholders'
                                               Common Stock   Earnings   Net of Tax ESOP Shares RRP Shares    Stock      Equity
                                               ------------   --------   ---------- ----------- ----------    -----      ------
<S>                                             <C>          <C>          <C>       <C>         <C>         <C>         <C>
Balance at September 30, 1997                   $13,108,171  $22,037,441  $ 73,208  $(664,610)  $(115,500)  $(888,694)  $33,550,016

Purchase of 245,200 shares of treasury stock              -            -         -          -           -  (5,931,312)   (5,931,312)
Stock option exercise-issuance of 68,850
   shares of treasury stock                        (968,611)           -         -          -           -   1,657,111       688,500
Cash dividends declared - $ .335 per share                -     (543,557)        -     20,053           -           -      (523,504)
Effect of contribution to fund ESOP                       -            -         -    200,000           -           -       200,000
Market adjustment of 20,989 ESOP shares
   committed to be released                         286,919            -         -          -           -           -       286,919
Amortization of RRP contribution                          -            -         -          -      77,000           -        77,000
Tax benefit related to employee stock plans         420,500            -         -          -           -           -       420,500
Comprehensive income:
   Net income for the year end
     September 30, 1998                                   -    2,236,283         -          -           -           -     2,236,283
   Other comprehensive income (loss)                      -            -  (118,625)         -           -           -      (118,625)
                                                                                                                        -----------
     Total comprehensive income                           -            -         -          -           -           -     2,117,658
                                                -----------  -----------  --------  ---------   ---------   ---------   -----------
Balance at September 30, 1998                    12,846,979   23,730,167   (45,417)  (444,557)    (38,500) (5,162,895)   30,885,777

Purchase of 56,668 shares of treasury stock               -            -         -          -           -  (1,209,619)   (1,209,619)
Stock option exercise-issuance of 2,500 shares
   of treasury stock                                (33,906)           -         -          -           -      58,906        25,000
Cash dividends declared - $ .355 per share                -     (514,743)        -     13,961           -           -      (500,782)
Effect of contribution to fund ESOP                       -            -         -    207,633           -           -       207,633
Market adjustment of 19,186 ESOP shares
   committed to be released                         203,229            -         -          -           -           -       203,229
Amortization of RRP contribution                          -            -         -          -      38,500           -        38,500
Comprehensive income:
   Net income for the year end
     September 30, 1999                                   -    2,204,298         -          -           -           -     2,204,298
   Other comprehensive income (loss)                      -            -  (672,406)         -           -           -      (672,406)
                                                                                                                        -----------
     Total comprehensive income                           -            -         -          -           -           -     1,531,892
                                                -----------  -----------  --------  ---------   ---------   ---------   -----------
Balance at September 30, 1999                    13,016,302   25,419,722  (717,823)  (222,963)          -  (6,313,608)   31,181,630


</TABLE>
                                  (Continued)
<PAGE>
<TABLE>
<CAPTION>

                                      MFB CORP. AND SUBSIDIARY
                           CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                            Years ended September 30, 2000, 1999 and 1998
-----------------------------------------------------------------------------------------------------------------------------------
                                                                        Accumulated
                                                                           Other
                                                                       Comprehensive
                                                                           Income                                        Total
                                                              Retained     (Loss),   Unearned    Unearned   Treasury  Shareholders'
                                               Common Stock   Earnings   Net of Tax ESOP Shares RRP Shares    Stock      Equity
                                               ------------   --------   ---------- ----------- ----------    -----      ------
<S>                                             <C>          <C>          <C>        <C>         <C>       <C>          <C>
Balance at September 30, 1999                   $13,016,302  $25,419,722  $(717,823) $(222,963)  $     -   $(6,313,608) $31,181,630

Purchase of 61,600 shares of treasury stock               -            -          -          -         -    (1,102,925)  (1,102,925)
Cash dividends declared - $ .375 per share                -     (522,883)         -      7,269         -             -     (515,614)
Effect of contribution to fund ESOP                       -            -          -    215,694         -             -      215,694
Market adjustment of 19,383 ESOP shares
   committed to be released                         119,701            -          -          -         -             -      119,701
Comprehensive income:
   Net income for the year end
     September 30, 2000                                   -    2,814,557          -          -         -             -    2,814,557
    Other comprehensive income (loss)                     -            -   (198,616)         -         -             -     (174,460)
-
     Total comprehensive income                           -            -          -          -         -             -    2,640,097
                                                -----------  -----------  ---------- ---------   -------   ------------ -----------
Balance at September 30, 2000                   $13,136,003  $27,711,396  $(892,283) $       -   $     -   $(7,416,533) $32,538,583
                                                ===========  ===========  ========== =========   =======   ============ ===========
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
                                        MFB CORP. AND SUBSIDIARY
                                CONSOLIDATED  STATEMENTS  OF CASH FLOWS
                             Years  ended September 30, 2000, 1999 and 1998
-------------------------------------------------------------------------------------------------------------
                                                                  2000              1999               1998
                                                                  ----              ----               ----
Cash flows from operating activities
<S>                                                         <C>               <C>              <C>
     Net income                                             $   2,814,557     $   2,204,298    $    2,236,283
     Adjustments to reconcile net income
       to net cash from operating activities
         Depreciation and amortization, net of
           accretion                                              493,800           298,862           314,688
         Amortization of RRP contribution                               -            38,500            77,000
         Provision for loan losses                              1,106,393           230,000           120,000
         Provision to adjust loans held for sale
           to lower of cost or market                             122,896           489,152                 -
         Net realized (gains) losses from sales of
           securities available for sale                           38,552            (3,803)           (7,673)
         Net realized losses from sales of
           securities held to maturity                              2,245                 -                 -
         Net realized gains from sales of loans                  (524,969)         (366,320)         (333,171)
         Amortization of mortgage servicing rights                 36,383            37,195            19,376
         Origination of loans held for sale                   (20,311,571)      (20,948,828)      (28,866,583)
         Proceeds from sales of loans held for sale            24,651,870        20,728,574        28,143,363
         Equity in loss of investment in limited
           partnership                                            132,578             8,084             4,236
         Market adjustment of ESOP shares
           committed to be released                               119,701           203,229           286,919
         ESOP expense                                             215,694           207,633           200,000
         Net change in:
              Accrued interest receivable                        (531,284)         (395,323)         (249,568)
              Other assets                                       (459,378)          (24,475)          (80,831)
              Accrued expenses and other liabilities             (277,312)         (138,798)          750,489
                                                            --------------    --------------   --------------
                  Net cash from operating activities            7,630,155         2,567,980         2,614,528

Cash flows from investing activities
     Net change in interest-bearing time
       deposits in other financial institutions                 1,000,000        (1,000,000)                -
     Net change in loans receivable                           (49,753,856)      (32,793,948)      (43,461,852)
     Proceeds from:
         Sales of securities available for sale                 9,632,387         1,989,992         2,926,206
         Sales of securities held to maturity                   1,602,755                 -                 -
         Principal payments of mortgage-backed
           and related securities                               5,550,697        21,505,020        19,343,270
         Maturities of securities available for sale            1,104,095        42,410,326        22,738,565
         Maturities of securities held to maturity                500,000                 -                 -
     Purchase of:
         Securities available for sale                         (3,000,000)      (63,280,952)      (47,461,878)
         Securities held to maturity                          (15,243,229)       (3,984,360)                -
         FHLB stock                                              (796,300)         (875,000)       (2,236,300)
         Premises and equipment, net                             (752,752)       (2,001,153)         (423,665)
         Investment in limited partnership                     (1,867,611)                -        (1,225,750)
                                                            --------------    --------------   --------------
              Net cash from investing activities              (52,023,814)      (38,030,075)      (49,801,404)

                                  (Continued)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                        MFB CORP. AND SUBSIDIARY
                                CONSOLIDATED  STATEMENTS  OF CASH FLOWS
                             Years  ended September 30, 2000, 1999 and 1998
-------------------------------------------------------------------------------------------------------------
                                                                  2000              1999               1998
                                                                  ----              ----               ----
Cash flows from financing activities
<S>                                                         <C>               <C>              <C>
     Purchase of MFB Corp. common stock                     $  (1,102,925)    $  (1,209,619)   $   (5,931,312)
     Net change in deposits                                    37,986,834        20,741,414         8,778,708
     Net change in securities sold under
       agreements to repurchase                                 2,576,950         4,200,679         1,976,796
     Proceeds from other borrowings                            91,000,000        23,000,000        72,156,964
     Repayment of other borrowings                            (83,074,225)      (16,431,214)      (22,000,000)
     Proceeds from exercise of stock options                            -            25,000           688,500
     Net change in advances from
       borrowers for taxes and insurance                            4,649          (205,134)          462,069
     Cash dividends paid                                         (515,614)         (500,782)         (523,504)
                                                            --------------    --------------   ---------------
         Net cash from financing activities                    46,875,669        29,620,344        55,608,221
                                                            --------------    --------------   ---------------
Net change in cash and cash equivalents                         2,482,010        (5,841,751)        8,421,345

Cash and cash equivalents at beginning of year                 12,061,942        17,903,693         9,482,348
                                                            --------------    --------------   ---------------
Cash and cash equivalents at end of year                    $  14,543,952     $  12,061,942    $   17,903,693
                                                            ==============    ==============   ===============

Supplemental disclosures of cash flow
  information

Cash paid during the year for:

         Interest                                           $  16,422,424     $  14,403,181    $   12,305,287
         Income taxes                                           2,192,981         1,627,895         1,182,448

Supplemental schedule of noncash investing activities:

     Transfer from:
         Loans receivable to loans held for sale            $   6,626,186     $           -    $            -
         Loans held for sale to loans receivable                4,020,337         5,294,087                 -
         Securities held to maturity to securities
          available for sale                                   17,163,545                 -                 -

</TABLE>

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

<PAGE>
                            MFB CORP. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        September 30, 2000, 1999 and 1998

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation:  The accompanying consolidated financial statements
include the accounts of MFB Corp.,  and its  wholly-owned  subsidiary  (together
referred to as "the  Company"),  MFB  Financial  (the  "Bank"),  a federal stock
savings bank, and Mishawaka Financial Services,  Inc., a wholly-owned subsidiary
of the Bank. Mishawaka Financial Services, Inc. is engaged in the sale of credit
life,  general fire and accident,  car, home and life insurance as agent for the
Bank's   customers  and  the  general  public.   All  significant   intercompany
transactions and balances are eliminated in consolidation.

Nature of Business  and  Concentrations  of Credit Risk:  The primary  source of
income  for  the  Company  results  from  granting   commercial,   consumer  and
residential  real  estate  loans in St.  Joseph  and  Elkhart  Counties  and the
surrounding area. Loans secured by real estate mortgages comprise  approximately
70% of the loan  portfolio at September  30, 2000 and are  primarily  secured by
residential  mortgages.  The Company operates  primarily in the banking industry
which accounts for more than 90% of its revenues, operating income and assets.

Use  of  Estimates  In  Preparing  Financial  Statements:   The  preparation  of
consolidated   financial   statements  in  conformity  with  generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets,  liabilities and disclosure of contingent
assets and liabilities at the date of the financial  statements and the reported
amounts of revenue and  expenses  during the  reporting  period,  as well as the
disclosures  provided.  Areas  involving the use of estimates and assumptions in
the  accompanying  financial  statements  include the allowance for loan losses,
fair values of securities and other  financial  instruments,  determination  and
carrying  value of loans  held for sale,  determination  and  carrying  value of
impaired loans, the value of mortgage servicing rights, the value of investments
in limited partnerships, the value of stock options, the realization of deferred
tax assets,  and the  determination  of  depreciation  of premises and equipment
recognized in the Company's  financial  statements.  Actual results could differ
from those  estimates.  Estimates  associated with the allowance for loan losses
and  the  fair  values  of  securities  and  other  financial   instruments  are
particularly susceptible to material change in the near term.

Cash and Cash  Equivalents:  For purposes of reporting cash flows, cash and cash
equivalents is defined to include the Company's cash on hand, due from financial
institutions  and  short-term   interest-bearing  deposits  in  other  financial
institutions. The Company reports net cash flows for customer loan transactions,
deposit  transactions,  short term borrowings  having an original maturity of 90
days  or  less,   advances  from   borrowers  for  taxes  and   insurance,   and
interest-bearing time deposits in other financial institutions.


<PAGE>

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Securities:  Securities  are  classified  as held to  maturity  and  carried  at
amortized cost when  management has the positive intent and ability to hold them
to maturity.  Securities are classified as available for sale when they might be
sold before maturity.  Securities  available for sale are carried at fair value,
with  unrealized   holding  gains  and  losses  reported   separately  as  other
comprehensive income or loss and in shareholders' equity, net of tax. Securities
are  classified as trading when held for short term periods in  anticipation  of
market gains, and are carried at fair value. Securities are written down to fair
value when a decline in fair value is not temporary.

Gains and losses on the sale of  securities  are  determined  using the specific
identification  method based on amortized  cost and are  reflected in results of
operations  at the time of sale.  Interest  and  dividend  income,  adjusted  by
amortization  of purchase  premium or discount  over the  estimated  life of the
security using the level yield method, is included in earnings.

Mortgage Banking Activities:  Mortgage loans originated and intended for sale in
the secondary  market are reported on the  statements of financial  condition as
loans held for sale and are carried at the lower cost or estimated  market value
in the aggregate.  Net unrealized losses are recognized in a valuation allowance
by charges to income.

Loan  servicing  fees are  recognized  when  received and the related  costs are
recognized when incurred.  The Bank sells mortgages into the secondary market at
market prices, which includes consideration for normal servicing fees.

Effective October 1, 1996, the Company adopted Statement of Financial Accounting
Standards  ("SFAS") No. 122,  Accounting  for Mortgage  Servicing  Rights.  This
Statement  changed the accounting for mortgage  servicing  rights  retained by a
loan  originator.  Under this standard,  if the originator  sells or securitizes
mortgage loans and retains the related servicing  rights,  the total cost of the
mortgage loan is allocated  between the loan (without the servicing  rights) and
the servicing  rights,  based on their  relative fair values.  Prior to adopting
SFAS No. 122 on October 1, 1996,  servicing  right assets were recorded only for
purchased  rights to service  mortgage  loans.  The costs  allocated to mortgage
servicing  rights are now  recorded  as a separate  asset and are  amortized  in
proportion  to, and over the life of, the net  servicing  income.  The  carrying
value  of  the  mortgage   servicing  rights  are  periodically   evaluated  for
impairment.

Loans Receivable: Loans receivable that management has the intent and ability to
hold for the  foreseeable  future or until  maturity or pay-off are  reported at
their outstanding principal balances adjusted for any charge-offs, the allowance
for  loan  losses,  and any  deferred  fees or costs on  originated  loans,  and
unamortized premiums or discounts on purchased loans.

Premiums or discounts on mortgage  loans are amortized to income using the level
yield method over the remaining  period to  contractual  maturity,  adjusted for
anticipated prepayments. Loan fees and certain direct loan origination costs are
deferred,  and the net fee or cost is  recognized  as an  adjustment to interest
income using the interest method.


<PAGE>



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Because some loans may not be repaid in full,  an  allowance  for loan losses is
recorded.  The  allowance  for loan losses is increased by a provision  for loan
losses  charged to expense and  decreased by  charge-offs  (net of  recoveries).
Estimating  the risk of loss and the  amount of loss on any loan is  necessarily
subjective.  Accordingly,  the  allowance is maintained by management at a level
considered adequate to cover losses that are currently anticipated. Management's
periodic  evaluation  of the adequacy of the allowance is based on the Company's
past loan loss experience, known and inherent risks in the portfolio,  periodic,
adverse  situations  that may  affect  the  borrower's  ability  to  repay,  the
estimated value of any underlying  collateral,  and current economic conditions.
While  management  may  periodically  allocate  portions  of the  allowance  for
specific problem loan situations,  the whole allowance is available for any loan
charge-offs that occur.

Loans are  considered  impaired if full  principal or interest  payments are not
anticipated in accordance  with the contractual  loan terms.  Impaired loans are
carried at the present  value of expected  future cash flows  discounted  at the
loan's  effective  interest  rate or at the fair value of the  collateral if the
loan is  collateral  dependent.  A portion of the  allowance  for loan losses is
allocated to impaired loans if the value of such loans is deemed to be less than
the unpaid balance.  If these allocations cause the allowance for loan losses to
require increase,  such increase is reported as a component of the provision for
loan losses.

Smaller-balance  homogeneous  loans are evaluated for impairment in total.  Such
loans include  residential  first mortgage  loans secured by one-to-four  family
residences, residential construction loans, automobile, manufactured homes, home
equity and second mortgage loans. Commercial loans and mortgage loans secured by
other  properties are evaluated  individually  for impairment.  When analysis of
borrower  operating  results and financial  condition  indicates that underlying
cash flows of the borrower's  business are not adequate to meet its debt service
requirements,  the loan is evaluated  for  impairment.  Often this is associated
with a delay or shortfall in payments of 30 days or more.  Nonaccrual  loans are
often also considered impaired. Impaired loans, or portions thereof, are charged
off when deemed  uncollectible.  The nature of disclosures for impaired loans is
considered  generally  comparable to prior nonaccrual and renegotiated loans and
non-performing and past due asset disclosures.

Interest  income on loans is accrued  over the term of the loans  based upon the
principal outstanding. The accrual of interest on impaired loans in discontinued
when, in  management's  opinion,  the borrower may be unable to meet payments as
they become due.  When  interest  accrual is  discontinued,  all unpaid  accrued
interest is reversed.  Interest  income is  subsequently  recognized only to the
extent that cash payments are received  until,  in  management's  judgment,  the
borrower has the ability to make contractual interest and principal payments, in
which case the loan is returned to accrual status.


<PAGE>



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Foreclosed Real Estate:  Real estate properties acquired through, or in lieu of,
loan  foreclosure  are  initially   recorded  at  fair  value  at  the  date  of
acquisition, establishing a new cost basis. Any reduction to fair value from the
carrying  value of the related loan at the time of  acquisition is accounted for
as a loan loss and charged against the allowance for loan losses. Valuations are
periodically  performed by  management  and  valuation  allowances  are adjusted
through a charge to income for changes in fair value or estimated selling costs.
Foreclosed  real  estate at  September  30,  2000 and 1999  amounted to $-0- and
$100,000.

Income  Taxes:  Deferred tax assets and  liabilities  are reflected at currently
enacted  income tax rates  applicable  to the period in which the  deferred  tax
assets or liabilities are expected to be realized or settled.  As changes in tax
laws or rates are  enacted,  deferred  tax assets and  liabilities  are adjusted
through income tax expense. A valuation allowance,  if needed,  reduces deferred
tax assets to the amount expected to be realized.

Premises and Equipment:  Land is carried at cost. Buildings and improvements and
furniture and equipment are carried at cost, less  accumulated  depreciation and
amortization  computed  principally by using the  straight-line  method over the
estimated  useful lives of the assets.  These assets are reviewed for impairment
when events indicate the carrying amount may not be recoverable.

Employee Stock  Ownership Plan (ESOP):  The Company  accounts for its ESOP under
AICPA  Statement of Position  (SOP) 93-6. The cost of shares issued to the ESOP,
but  not  yet  allocated  to  participants,  are  presented  as a  reduction  of
shareholders'  equity.  Compensation  expense is  recorded  based on the average
market  price  of  the  shares  committed  to  be  released  for  allocation  to
participant  accounts.  The difference  between the market price and the cost of
shares  committed to be released is recorded as an  adjustment  to common stock.
Dividends  on  allocated  ESOP shares are  recorded  as a reduction  of retained
earnings; dividends on unearned ESOP shares are reflected as a reduction of debt
and accrued interest.

Financial  Instruments with  Off-Balance-Sheet  Risk: The Company, in the normal
course of business,  makes  commitments to make loans which are not reflected in
the  consolidated  financial  statements.  A  summary  of these  commitments  is
disclosed in Note 13.


<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Earnings Per Common Share:  Basic  earnings per common share is based on the net
income  divided by the  weighted  average  number of common  shares  outstanding
during the period.  ESOP shares are  considered  outstanding  for  earnings  per
common share calculations as they are committed to be released;  unearned shares
are not considered  outstanding.  Recognition  and retention plan ("RRP") shares
are considered  outstanding  for earnings per common share  calculations as they
become vested. Diluted earnings per common share shows the dilutive effective of
additional  potential  common shares  issuable under stock options and nonvested
shares issued under the RRP.

Stock Compensation:  Expense for employee  compensation under stock option plans
is based on Accounting  Principles Board (APB) Opinion 25, with expense reported
only if options are granted below market price at grant date. Disclosures of net
income and earnings per common share are provided as if the fair value method of
SFAS No. 123 were used for stock-based compensation.

Comprehensive Income (Loss):  Comprehensive income (loss) consists of net income
and  other  comprehensive  income  (loss).  Other  comprehensive  income  (loss)
includes  the net  change  in net  unrealized  gains and  losses  on  securities
available for sale, net of reclassification  adjustments and tax effects, and is
also recognized as a separate component of shareholders' equity.

Segments:  MFB  Corp.  and its  subsidiary,  MFB  Financial  and its  subsidiary
Mishawaka Financial  Services,  Inc. provide a broad range of financial services
to  individuals  and  companies in Mishawaka  and the  surrounding  area.  These
services include demand, time and savings deposits;  lending;  insurance;  trust
and other financial services.  While the Company's chief decision makers monitor
the revenue streams of the various Company products and services, operations are
managed  and  financial  performance  is  evaluated  on  a  Company-wide  basis.
Accordingly,   all  of  the  Company's  banking  operations  are  considered  by
management to be aggregated in one reportable operating segment.

New Accounting  Pronouncement:  SFAS No. 133 on derivatives will, beginning with
the quarter ended December 31, 2000,  require all  derivatives to be recorded at
fair value in the balance sheet.  Unless designated as hedges,  changes in these
fair  values  will be  recorded  in the income  statement.  If  derivatives  are
documented and effective as hedges, the change in the derivative fair value will
generally be offset by an equal change in the fair value of the hedged item.

Reclassifications:  Some items in the prior  consolidated  financial  statements
have been reclassified to conform with the current presentation.

<PAGE>
NOTE 2 - EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE

A reconciliation  of the numerators and denominators  used in the computation of
the basic  earnings  per common  share and diluted  earnings per common share is
presented below:
<TABLE>
<CAPTION>
                                                         Year ended September 30,
                                                     2000              1999            1998
                                                     ----              ----            ----
Basic Earnings Per Common Share
     Numerator
<S>                                               <C>             <C>             <C>
         Net income                               $ 2,814,557     $  2,204,298    $   2,236,283
                                                  ============    =============   ==============
     Denominator
         Weighted average common shares
           outstanding                              1,389,274        1,448,790        1,611,492
         Less:  Average unallocated ESOP shares       (10,428)         (30,450)         (50,538)
         Less:  Average nonvested RRP shares                -           (1,925)          (7,700)
                                                  ------------    -------------   --------------
         Weighted average common shares
           outstanding for basic earnings per
           common share                             1,378,846        1,416,415        1,553,254
                                                  ============    =============   ==============
     Basic earnings per common share              $      2.04     $       1.56    $       1.44
                                                  ============    =============   ==============
Diluted Earnings Per Common Share
     Numerator
         Net income                               $ 2,814,557     $  2,204,298    $   2,236,283
                                                  ============    =============   ==============
     Denominator

         Weighted average common shares
           outstanding for basic earnings per
           common share                             1,378,846        1,416,415        1,553,254
         Add:  Dilutive effects of average

           nonvested RRP shares                             -              448            3,166
         Add:  Dilutive effects of assumed

           exercises of stock options                  31,715           44,793           75,417
                                                  ------------    -------------   --------------
         Weighted average common shares
           and dilutive potential common
           shares outstanding                       1,410,561        1,461,656        1,631,837
                                                  ============    =============   ==============
     Diluted earnings per common share            $      2.00     $       1.51    $       1.37
                                                  ============    =============   ==============
</TABLE>

Stock  options for 80,750 and 78,250 and 45,000  shares of common stock were not
considered  in computing  diluted  earnings per common share for the years ended
September 30, 2000 and 1999 and 1998 because they were antidilutive.


<PAGE>
NOTE 3 - SECURITIES

The amortized  cost and fair value of securities  available for sale and held to
maturity are as follows:
<TABLE>
<CAPTION>
                                                                    Available for Sale
                                        -------------------------September 30, 2000--------------------------
                                                                 ------------------
                                                                 Gross            Gross
                                            Amortized         Unrealized       Unrealized            Fair
                                              Cost               Gains           Losses              Value
                                              ----               -----           ------              -----
Debt securities
     U.S. Government
<S>                                     <C>                 <C>              <C>              <C>
       and federal agencies             $     17,944,537    $      5,868     $    (212,198)   $    17,738,207
     Mortgage-backed                          14,833,896               -          (621,714)        14,212,182
     Corporate notes                           9,924,042           2,493          (571,820)         9,354,715
                                        ----------------    ------------     --------------   ---------------
                                              42,702,475           8,361        (1,405,732)        41,305,104
Marketable equity securities                     437,850               -           120,164            317,686
                                        ----------------    ------------     --------------   ---------------
                                        $     43,140,325    $      8,361     $   1,525,896    $    41,662,790
                                        ================    ============     ==============   ===============

                                                                 Available for Sale
                                        -------------------------September 30, 1999--------------------------
                                                                 ------------------
                                                                 Gross            Gross
                                            Amortized         Unrealized       Unrealized            Fair
                                              Cost               Gains           Losses              Value
                                              ----               -----           ------              -----
Debt securities
     U.S. Government
       and federal agencies             $      7,745,193    $          -     $    (182,510)   $     7,562,683
     Mortgage-backed                          27,112,085          56,085          (718,350)        26,449,820
     Corporate notes                           3,958,662               -          (230,232)         3,728,430
                                        ----------------    ------------     --------------   ---------------
                                              38,815,940          56,085        (1,131,092)        37,740,933
Marketable equity securities                     542,850               -          (113,640)           429,210
                                        ----------------    ------------     --------------   ---------------
                                        $     39,358,790    $     56,085     $  (1,244,732)   $    38,170,143
                                        ================    ============     ==============   ===============

NOTE 3 - SECURITIES (continued)
                                                                  Held to Maturity
                                        -------------------------September 30, 1999--------------------------
                                                                 ------------------
                                                                Gross            Gross
                                            Amortized         Unrealized       Unrealized            Fair
                                              Cost               Gains           Losses              Value
                                              ----               -----           ------              -----
Corporate notes                         $      3,984,338    $          -     $    (275,133)   $     3,709,205
                                        ================    ============     ==============   ===============
</TABLE>
<PAGE>

The amortized cost and fair value of debt securities by contractual maturity are
shown below. Expected maturities may differ from contractual  maturities because
borrowers may have the right to call or prepay  obligations with or without call
or prepayment penalties.

                                                September 30, 2000
                                                ------------------
                                        --------Available for Sale-------
                                             Amortized           Fair
                                               Cost              Value
                                               ----              -----
     Due in one year or less            $    1,993,045    $     1,984,700
     Due after one year through
       five years                           13,683,939         13,652,997
     Due after five years through
       ten years                             7,485,499          7,059,690
     Due after ten years                     4,706,096          4,395,535
                                        --------------    ---------------
                                            27,868,579         27,092,922
     Mortgage-backed securities             14,833,896         14,212,182
                                        --------------    ---------------
                                        $   42,702,475    $    41,305,104
                                        ==============    ===============

Proceeds from sales of securities  available for sale were $9,677,559 during the
year ended  September  30,  2000.  Gross  gains of $11,602  and gross  losses of
$63,794  were  realized  on these  sales.  Proceeds  from  sales  of  securities
available  for sale were  $2,008,177  during the year ended  September 30, 1999.
Gross gains of $5,026 and gross  losses of $1,223 were  realized on these sales.
During the year ended September 30, 1998,  proceeds from the sales of securities
available for sale were  $2,926,206 with gross gains of $10,534 and gross losses
of $2,861 realized on these sales.

In September, 2000, a held to maturity security was sold. Proceeds from the sale
of the security were  $1,602,755  and a gross loss of $2,245 was realized on the
sale. As a result of this sale, all remaining held-to-maturity securities with a
carrying value of $17,163,545 and a market value of $16,843,467 were transferred
to available-for-sale.


<PAGE>

NOTE 4 - LOANS RECEIVABLE, NET

Loans receivable, net at September 30 are summarized as follows:
<TABLE>
<CAPTION>
                                                                     2000                 1999
                                                                     ----                 ----
First mortgage loans (principally conventional)
  Principal balances
<S>                                                           <C>                  <C>
      Secured by one-to-four family residences                $     185,266,466    $     191,479,582
      Construction loans                                             13,146,237           11,157,731
      Other                                                           3,630,897            3,298,833
                                                              ------------------   ------------------
                                                                    202,043,600          205,936,146
      Less undisbursed portion of construction and
        other mortgage loans                                            (54,156)             (87,153)
                                                              ------------------   ------------------
           Total first mortgage loans                               201,989,444          205,848,993


                                                                     2000                 1999
                                                                     ----                 ----
Commercial and consumer loans:
  Principal balances
      Home equity and second mortgage                         $      18,916,792    $      13,308,441
      Commercial                                                     91,105,033           47,399,290
      Financing leases                                                        -               16,969
      Other                                                           6,089,133            4,461,096
                                                              ------------------   ------------------
           Total commercial and consumer loans                      116,110,958           65,185,796
Allowance for loan losses                                            (1,672,000)            (638,465)
Net deferred loan origination fees                                     (922,703)            (932,239)
                                                              ------------------   ------------------
                                                              $     315,505,699    $     269,464,085
                                                              ==================   =================
</TABLE>

Activity in the allowance for loan losses is summarized as follows for the years
ended September 30:
                                          2000           1999          1998
                                          ----           ----          ----
      Balance at beginning of year    $   638,465    $  453,567    $  370,000
      Provision for loan losses         1,106,393       230,000       120,000
      Charge-offs                         (72,858)      (45,102)      (36,433)
      Recoveries                                              -             -
                                      -----------    ----------    ----------
      Balance at end of year          $ 1,672,000    $  638,465    $  453,567
                                      ===========    ==========    ==========

<PAGE>

NOTE 4 - LOANS RECEIVABLE, NET (continued)

Impaired loans were as follows:
                                                   2000        1999        1998
                                                   ----        ----        ----
Year-end balances with no allocated allowance
   for loan losses                              $   60,000    $   -       $   -
Year-end loans with allocated allowance
   for loan losses                               1,591,000        -           -
                                                ----------    -----       -----
                           Total                $1,651,000    $   -       $   -
                                                ==========    =====       =====
Amount of the allowance for loan losses
   allocated                                    $  150,000    $   -       $   -

Average of impaired loans during the year       $   12,000    $   -       $   -

Interest income recognized during  impairment   $    1,000    $   -       $   -

Cash-basis interest income recognized during
 impairment                                     $        -    $   -       $   -


Nonperforming loans were as follows at year end:
                                                    2000              1999
                                                    ----              ----
  Loans past due over 90 days still on
    accrual status                              $   60,000         $ 96,000
  Nonaccrual loans                                   6,000                -

Mortgage  loans  serviced  for  others  are  not  included  in the  accompanying
consolidated  balance  sheets.  The  Company  is  subject  to  certain  recourse
obligations on the loans serviced by Telebank.  The unpaid principal balances of
these loans at September 30, are summarized as follows:

                                                    2000              1999
                                                    ----              ----
   Mortgage loan portfolios serviced for:
     Telebank                                   $   6,699,963   $    7,597,059
     Hanover Capital Mortgage Holdings, Inc.        6,376,675        6,785,972
     LaSalle Bank, FSB                              6,740,764        7,222,714
     Citizens Bank                                  5,698,176        6,250,822
     Federal Home Loan Mortgage Corporation        31,292,424       13,709,321
                                                -------------   --------------
                                                $  56,808,002   $   41,565,888
                                                =============   ==============

Custodial escrow balances  maintained in connection with the foregoing  serviced
loans were $345,000 and $209,000 at September 30, 2000 and 1999.


<PAGE>

Certain  directors  and  executive  officers of the Company and its  subsidiary,
including  associates  of such  persons,  are loan  customers.  A summary of the
related party loan activity,  for loans  aggregating  $60,000 or more to any one
related party, is as follows:

                                                    2000               1999
                                                    ----               ----
    Balance - beginning of year              $    1,582,502    $    1,513,829
    New loans                                        40,496           443,980
    Repayments                                      (47,918)         (375,307)
    Effect of changes in related parties            108,434                 -
                                             --------------    --------------
    Balance - end of year                    $    1,683,514    $    1,582,502
                                             ==============    ==============


NOTE 5 - PREMISES AND EQUIPMENT, NET

Premises and equipment at September 30 are summarized as follows:
                                                    2000               1999

  Land                                       $      834,895    $      834,895
  Buildings and improvements                      3,810,621         3,571,734
  Furniture and equipment                         2,507,489         2,052,425
                                             --------------    --------------
      Total cost                                  7,153,005         6,459,054
  Accumulated depreciation and amortization      (2,465,343)       (2,045,645)
                                             --------------    --------------
                                             $    4,687,662    $    4,413,409
                                             ==============    ==============

Depreciation and  amortization of premises and equipment,  included in occupancy
and equipment expense was approximately $478,000,  $383,000 and $241,000 for the
years ended September 30, 2000, 1999 and 1998, respectively.

NOTE 6 - DEPOSITS

The aggregate amount of short-term jumbo certificates of deposit in denomination
of $100,000 or more was  approximately  $39,609,000 and $30,252,000 at September
30, 2000 and 1999.

At September 30, 2000, the scheduled  maturities of  certificates of deposit are
as follows for the years ended September 30:

         2001                         $132,462,809
         2002                           33,531,570
         2003                            3,017,406
         2004                            1,533,503
         2005                              343,087
         Thereafter                        134,885
                                      ------------

                                      $171,023,260
                                      ============

NOTE 7 - SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

Securities  sold under  agreements to repurchase  consist of  obligations of the
Company to other parties.  These  arrangements are all one-day retail repurchase
agreements and are secured by investment securities.  Such collateral is held by
safekeeping agents of the Company.

NOTE 7 - SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
(continued)

Information  concerning  securities  sold under  agreements  to repurchase as of
September 30 is summarized as follows:
<TABLE>
<CAPTION>

                                               2000           1999             1998
                                               ----           ----             ----
<S>                                        <C>             <C>             <C>
  Average daily balance during the year    $  7,718,000    $  3,892,000    $ 1,647,000
  Average interest rate during the year            3.89%           3.80%          4.07%
  Maximum month end balance
    during the year                        $ 10,201,000    $  7,079,000    $ 3,882,000
  Balance at end of year                   $  9,143,345    $  6,566,395    $ 2,365,716

Securities underlying these agreements at year end were as follows:

  Carrying value of securities             $ 12,000,000    $  9,892,000    $ 8,385,000
  Fair value                               $ 11,921,000    $  9,310,000    $ 8,387,000
</TABLE>
<PAGE>

NOTE 8 - FEDERAL HOME LOAN BANK ADVANCES

At September 30, 2000,  advances from the Federal Home Loan Bank of Indianapolis
with fixed and  variable  rates  ranging  from 4.79% to 6.82% are required to be
repaid in the year ending September 30 as follows:

         2001                               $  2,350,000
         2002                                    350,000
         2003                                 20,300,000
         2004                                    800,000
         2005                                 15,200,000
         Thereafter                           73,151,525
                                            ------------
                                            $112,151,525
                                            ============

FHLB advances are secured by all FHLB stock,  qualifying  first mortgage  loans,
government  agency and mortgage  backed  securities.  At September  30, 2000 and
1999, in addition to  $6,307,600  and  $5,511,000  in FHLB stock,  collateral of
approximately  $207,941,000  and  $225,715,000  is pledged to the FHLB to secure
advances outstanding.

At  September  30,  1998,  the Bank had a due to broker for $4.9  million  for a
security purchase which settled October 5, 1998.

NOTE 9 - EMPLOYEE BENEFITS

Employee  Pension  Plan:  The  Bank  is  part  of  a  qualified  noncontributory
multiple-employer defined benefit pension plan covering substantially all of its
employees.   The  plan  is   administered  by  the  trustees  of  the  Financial
Institutions  Retirement Fund.  There is no separate  valuation of plan benefits
nor segregation of plan assets  specifically  for the Bank because the plan is a
multiple-employer  plan and  separate  actuarial  valuations  are not made  with
respect to each  employer nor are the plan assets so  segregated.  As of July 1,
2000,  the latest  actuarial  valuation  date,  total plan assets  exceeded  the
actuarially  determined value of total vested benefits.  The cost of the plan is
set annually as an established percentage of wages. Pension plan expense for the
years ended September 30, 2000, 1999 and 1998 was approximately  $4,400,  $6,900
and $1,500, respectively.

401(k) Plan: On July 1, 1996,  the Company  adopted a retirement  savings 401(k)
plan which covers all full time employees who are 21 or older and have completed
one year of service.  Beginning August 1, 1996, participants may defer up to 15%
of  compensation.  The Company  matches 50% of elective  deferrals  on 6% of the
participants'  compensation.  Expense  for the 401(k)  plan for the years  ended
September  30,  2000,  1999 and  1998 was  approximately  $69,000,  $60,000  and
$52,000.

Employee Stock Ownership Plan (ESOP):  In conjunction with its stock conversion,
the Company established an ESOP for eligible employees.  Employees with at least
one year of  employment  and who have  attained age  twenty-one  are eligible to
participate.  The ESOP borrowed  $1,400,000 from the Company to purchase 140,000
shares of common stock issued in the conversion at $10 per share. Collateral for
the loan is the unearned  shares of common stock  purchased by the ESOP with the
loan  proceeds.   The  loan  will  be  repaid  principally  from  the  Company's
discretionary  contributions  to the ESOP  over a period  of  seven  years.  The
interest rate for the loan is 6.25%.  Shares  purchased by the ESOP will be held
in suspense until allocated among ESOP participants as the loan is repaid.

ESOP  expense was  approximately  $335,000,  $411,000 and $487,000 for the years
ended September 30, 2000, 1999 and 1998.  Contributions  to the ESOP,  including
dividends on unearned  ESOP shares,  was  approximately  $223,000,  $222,000 and
$220,000 during the years ended September 30, 2000, 1999 and 1998.

Company contributions to the ESOP and shares released from suspense proportional
to the repayment of the ESOP loan are allocated  among ESOP  participants on the
basis of compensation in the year of allocation.  Benefits generally become 100%
vested  after five years of  credited  service.  A  participant  who  terminates
employment   for  reasons  other  than  death,   normal   retirement  (or  early
retirement),  or  disability  prior to the  completion of five years of credited
service  does  not  receive  any  benefits  under  the  ESOP.   Forfeitures  are
reallocated among the remaining participating  employees, in the same proportion
as contributions.

Benefits are payable in the form of stock except for fractional shares which are
paid in cash upon termination of employment.  The Company's contributions to the
ESOP are not fixed, so benefits payable under the ESOP cannot be estimated.

ESOP  participants  receive  distributions  from their ESOP  accounts  only upon
termination of service.

For the years ended September 30, 2000, 1999 and 1998, 20,857, 19,186 and 20,989
shares with an average fair value of $16.08,  $21.41 and $23.20 per share,  were
committed to be released.

The ESOP shares as of September 30 were as follows:

                                             2000          1999          1998
                                             ----          ----          ----
   Allocated shares                         140,000       120,617       100,674
   Unearned shares                                -        19,383        39,326
   Shares withdrawn from the plan by
       participants                         (14,571)      (14,571)       (5,601)
                                            --------      --------      --------
       Total ESOP shares held in the plan   125,429       125,429       134,399
                                            ========      ========      ========
   Fair value of unearned shares            $     -      $383,000    $1,003,000

<PAGE>



NOTE 9 - EMPLOYEE BENEFITS (Continued)

Recognition  and  Retention  Plans  (RRPs):   In  conjunction   with  its  stock
conversion,  the Company  established  RRPs as a method of providing  directors,
officers and other key employees of the Company with a  proprietary  interest in
the Company in a manner  designed to  encourage  such persons to remain with the
Company.  Eligible  directors,  officers and other key  employees of the Company
become  vested  in  awarded  shares  of  common  stock at a rate of 20% per year
commencing March 24, 1994. The RRPs acquired, in the aggregate, 70,000 shares of
common stock issued in the  conversion  at $10 per share and 70,000  shares were
awarded to RRP  participants at no cost to them. RRP expense for the years ended
September 30, 2000, 1999 and 1998 was approximately  $-0-,  $38,500 and $77,000,
respectively.

Stock Option Plan:  The Board of Directors of the Company  adopted the MFB Corp.
Stock Option Plans (the "Option Plans").  The number of options authorized under
the Plans totals 350,000 shares of common stock. Officers, employees and outside
directors of the Company and its  subsidiary  are eligible to participate in the
Option  Plans.  The option  exercise  price must be no less than 85% of the fair
market  value of common  stock on the date of the  grant,  and the  option  term
cannot exceed ten years and one day from the date of the grant.  As of September
30, 2000,  all options  granted  have an exercise  price of at least 100% of the
market  value of the  common  stock on the  date of  grant  and no  compensation
expense was recognized for stock options for the years ended September 30, 2000,
1999 and 1998. As of September 30, 2000,  63,750  options  remain  available for
future grants.

SFAS No. 123,  which became  effective  for the year ended  September  30, 1997,
requires pro forma  disclosures  for companies  that do not adopt its fair value
accounting  method  for  stock-based  employee  compensation.  Accordingly,  the
following proforma information presents net income and earnings per common share
had the fair  value  method  been used to  measure  compensation  cost for stock
option plans.  The exercise price of options granted is equivalent to the market
value of underlying stock at the grant date.

The fair  value  for the  options  was  estimated  at the date of grant  using a
Black-Scholes   option   pricing  model  with  the  following   weighted-average
assumptions:

                                2000              1999
                                ----              ----
   Risk-free interest rate      6.62%             4.74%
   Expected dividend rate       2.17%             1.71%
   Stock price volatility      16.25%            12.20%

There were no options granted for the year ended September 30, 1997.


<PAGE>



NOTE 9 - EMPLOYEE BENEFITS (Continued)
<TABLE>
<CAPTION>
                                                  2000            1999             1998
                                                  ----            ----             ----
<S>                                          <C>            <C>              <C>
Net income as reported                       $  2,814,557   $    2,204,298   $   2,236,283
Proforma net income                          $  2,687,837        2,054,921       2,069,443

Reported earnings per common and common
  equivalent share
     Basic                                   $       2.04            $1.56           $1.44
     Diluted                                 $       2.00            $1.51           $1.37

Proforma earnings per common and common
  equivalent share
     Basic                                   $       1.95            $1.45           $1.33
     Diluted                                 $       1.91            $1.41           $1.27
</TABLE>

Activity in the Option Plan for the years ended is summarized as follows:
<TABLE>
<CAPTION>
                                                                             Weighted       Weighted
                                              Number of                       Average        Average
                                             Outstanding    Exercise         Exercise      Fair Value
                                               Options        Price            Price        of Grants
                                               -------        -----            -----        ---------
<S>                                            <C>        <C>                  <C>            <C>
     Balance at September 30, 1997             190,350    $ 10.00-$15.25       $ 10.80
     Granted                                    45,000    $ 26.75              $ 26.75        $9.76
     Exercised                                 (68,850)   $ 10.00              $ 10.00
                                               --------
     Balance at September 30, 1998             166,500    $ 10.00-$26.75       $ 15.45
     Granted                                    35,750    $ 18.25-$21.875      $ 21.37        $5.30
     Exercised                                  (2,500)   $ 10.00              $ 10.00
                                               --------
     Balance at September 30, 1999             199,750    $ 10.00-$26.75       $ 16.58
     Granted                                     5,500    $ 16.3125-$17.25     $ 17.05        $5.52
     Exercised                                       -
     Balance at September 30, 2000             205,250    $ 10.00-26.75        $ 16.59

</TABLE>

<PAGE>



NOTE 9 - EMPLOYEE BENEFITS (Continued)

Options exercisable at September 30 are as follows:

                                                              Weighted
                                     Number                    Average
                                   of Options              Exercise Price
                                   ----------              --------------
      1998                           122,500                 $ 12.14
      1999                           142,150                 $ 13.69
      2000                           161,400                 $ 14.80

At September 30, 2000, options outstanding had a weighted-average remaining life
of 4.98 years.

NOTE 10 - INCOME TAXES

The Company  files  consolidated  income tax returns.  Prior to fiscal 1997,  if
certain  conditions  were met in  determining  taxable income as reported on the
consolidated  federal income tax return, the Bank was allowed a special bad debt
deduction  based on a  percentage  of taxable  income (8% for fiscal 1996) or on
specified  experience formulas.  The Bank used the  percentage-of-taxable-income
method for the tax year ended  September  30, 1996.  Tax  legislation  passed in
August 1996 now  requires  the Bank to deduct a provision  for bad debts for tax
purposes  based on actual  loss  experience  and  recapture  the excess bad debt
reserve accumulated in tax years after September 30, 1987. The related amount of
deferred tax liability which must be recaptured is approximately $446,000 and is
payable over a six year period  beginning with the tax year ending September 30,
1999.

Income tax expense for the years ended September 30 are summarized as follows:

                                      2000             1999             1998
                                      ----             ----             ----
   Federal

     Current                      $  1,530,984       1,535,497     $  1,301,834
     Deferred                         (239,781)       (284,395)          (2,359)
                                  -------------   -------------    -------------
                                     1,291,203       1,251,102        1,299,475
   State

     Current                           439,792         397,363          317,774
     Deferred                          (38,372)        (63,091)            (644)
                                  -------------   -------------    -------------
                                       401,420         334,272          317,130
                                  -------------   -------------    -------------
        Total income tax expense  $  1,692,623    $  1,585,374     $  1,616,605
                                  =============   =============    =============


<PAGE>



NOTE 10 - INCOME TAXES (Continued)

Total  income tax expense  differed  from the amounts  computed by applying  the
federal income tax rate of 34% in all periods  presented to income before income
taxes as a result of the following for the years ended September 30:
<TABLE>
<CAPTION>

                                                                2000                1999                1998

<S>                                                       <C>                 <C>                  <C>
Income taxes at statutory rate                            $     1,532,441     $     1,288,488      $   1,309,982
Tax effect of:
         State tax, net of federal income
           tax effect                                             264,937             220,620            209,306
         Excess of fair value of ESOP
           shares released over cost                               40,698              69,098             97,552
         Low income housing credits                              (155,000)                  -                  -
         Other items, net                                           9,547               7,168               (235)
                                                          ----------------    ---------------      --------------
              Total income tax expense                    $     1,692,623     $     1,585,374      $   1,616,605
                                                          ================    ===============      ==============
</TABLE>

The  components  of the net  deferred  tax  asset  (liability)  recorded  in the
consolidated balance sheets as of September 30 are as follows:

                                                       2000             1999
                                                       ----             ----
   Deferred tax assets

     Bad debt deduction                            $   413,217      $         -
     Net deferred loan fees                            392,148          396,202
     Valuation adjustment on loans held for sale        55,938          207,890
     Net unrealized depreciation
       on securities available for sale                601,096          470,824
     Other                                              41,843           14,764
                                                   -----------      ------------
                                                     1,504,242        1,089,680
   Deferred tax liabilities

     Accretion                                         (31,852)         (20,445)
     Depreciation                                      (48,351)         (52,057)
     Bad debt deduction                                      -         (100,382)
     Mortgage servicing rights                        (259,681)        (175,266)
     Other                                             (58,524)         (44,121)
                                                   ------------     ------------
                                                      (398,408)        (392,271)
   Valuation allowance                                       -                -

     Net deferred tax asset (liability)            $ 1,105,834      $   697,409
                                                   ===========      ============

Federal  income  tax  laws  provided  savings  banks  with  additional  bad debt
deductions  through the tax year ended September 30, 1987,  totaling  $4,596,000
for the Bank. Accounting standards do not require a deferred tax liability to be
recorded on this amount,  which liability  would  otherwise total  $1,563,000 at
September 30, 2000 and 1999. If the Bank were liquidated or otherwise  ceases to
be a bank or if tax laws change, the $1,563,000 would be recorded as expense.


<PAGE>



NOTE 11 - REGULATORY MATTERS

The Bank is subject to regulatory capital  requirements  administered by federal
banking  agencies.  Capital  adequacy  guidelines and prompt  corrective  action
regulations involve quantitative  measures of assets,  liabilities,  and certain
off-balance-sheet   items  calculated  under  regulatory  accounting  practices.
Capital amounts and classifications are also subject to qualitative judgments by
regulators  about  components,  risk  weightings,  and  other  factors,  and the
regulators can lower  classifications in certain cases.  Failure to meet various
capital  requirements  can initiate  regulatory  action that could have a direct
material effect on the financial statements.

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

The Bank's actual capital and required  capital amounts and ratios are presented
below:
<TABLE>
<CAPTION>
                                                                                                  Minimum
                                                                                                 Requirement
                                                                      Minimum                    To Be Well
                                                                    Requirement              Capitalized Under
                                                                    For Capital              Prompt Corrective
                                         Actual                  Adequacy Purposes           Action Provisions
                                         ------                  -----------------           -----------------
                                   Amount        Ratio          Amount        Ratio          Amount       Ratio
                                   ------        -----          ------        -----          ------       -----
                                                               (Dollars in Thousands)
As of September 30, 2000
    Total capital (to risk
<S>                            <C>               <C>        <C>                <C>      <C>               <C>
      weighted assets)         $    33,810       13.25%     $    20,416        8.00%    $    25,520       10.00%
    Tier 1 (core) capital

      (to risk weighted assets)     32,288       12.65           10,208        4.00          15,312        6.00
    Tier 1 (core) capital (to
      adjusted total assets)        32,288        8.14           15,869        4.00          19,836        5.00

As of September 30, 1999
    Total capital (to risk
      weighted assets)         $    31,268       15.23%     $    16,428        8.00%    $    20,536       10.00%
    Tier 1 (core) capital

      (to risk weighted assets)     30,630       14.92            8,214        4.00          12,321        6.00
    Tier 1 (core) capital (to
      adjusted total assets)        30,630        8.83           13,868        4.00          17,335        5.00


</TABLE>

<PAGE>



NOTE 11 - REGULATORY MATTERS (Continued)

Regulations of the Office of Thrift  Supervision limit the dividends that may be
paid without  prior  approval of the Office of Thrift  Supervision.  The Bank is
currently a  "well-capitalized"  Tier 1 institution  and can make  distributions
during a year of 100% of its retained  net income for the calendar  year-to-date
plus retained net income for the previous two calendar years (less any dividends
previously paid) as long as the Bank would remain "well-capitalized",  following
the proposed distribution. Accordingly, at September 30, 2000 none of the Bank's
retained  earnings was  potentially  available for  distribution to the Company,
without obtaining prior regulatory approval.

NOTE 12 - OTHER NONINTEREST  INCOME AND EXPENSE

Other  noninterest  income and expense amounts are summarized as follows for the
years ended September 30:
<TABLE>
<CAPTION>

                                                 2000              1999           1998
Other noninterest income                         ----              ----           ----
<S>                                           <C>             <C>            <C>
     Other service charges and fees           $   360,698     $   510,980    $   318,636
     Other                                         68,879         109,260        113,640
                                              -----------     -----------    -----------
                                              $   429,577     $   620,240    $   432,276
                                              ===========     ===========    ===========
Other noninterest expense

     Advertising and promotion                $   208,274     $   206,254    $   186,257
     Professional fees                            197,819         170,429        166,652
     Printing, postage, stationery,
       and supplies                               278,928         219,267        162,794
     Direct loan origination costs deferred      (135,694)       (202,349)      (262,686)
     Other                                      1,345,702         904,818        746,377
                                              -----------     -----------    -----------
                                              $ 1,895,029     $ 1,298,419    $   999,394
                                              ===========     ===========    ===========
</TABLE>

<PAGE>

NOTE 13 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK AND   CONTINGENCIES

Various outstanding  commitments and contingent liabilities are not reflected in
the  financial  statements.  Commitments  to make loans at  September  30 are as
follows:
<TABLE>
<CAPTION>

                            -------------------2 0 0 0---------------- -------------------1 9 9 9----------------
                                  Fixed       Variable                       Fixed       Variable
                               Rate Loans    Rate Loans       Total       Rate Loans    Rate Loans       Total

<S>                         <C>              <C>           <C>           <C>           <C>            <C>
First mortgage loans        $   3,023,124    $ 1,454,250   $ 4,477,374   $ 1,534,750   $ 1,100,350    $ 2,635,100
Commercial loans                  677,750      5,880,332     6,558,082     9,984,354     8,866,800     18,851,154
Unused lines of credit          8,656,675      8,204,191    16,860,866     7,953,681     7,812,361     15,766,042
Unused commercial loan
  lines and credit                      -     29,085,625    29,085,625             -    22,206,913     22,206,913
Unused construction loan
  lines of credit               1,691,061      5,207,279     6,898,340             -     5,574,641      5,574,641
                            -------------    -----------   -----------   -----------   -----------    -----------
                            $  14,048,610    $49,831,677   $63,880,287   $19,472,785   $45,561,065    $65,033,850
                            =============    ===========   ===========   ===========   ===========    ===========
</TABLE>

Fixed  rate  mortgage  loan  commitments  at  September  30,  2000  are at rates
primarily  ranging from 7.375% to 10.00%.  Mortgage loan fixed rate  commitments
are primarily for terms ranging from 15 to 30 years, while commercial loan fixed
rate  commitments  are  primarily  for five year terms.  Rates on variable  rate
mortgage loans range from 7.625% to 10.00% and are tied to the one year treasury
bill  rate.  Rates  on  variable  commercial  loan  commitments  are tied to the
national prime rate.

Since  commitments to make loans and to fund unused lines of credit and loans in
process may expire without being used, the amounts do not necessarily  represent
future cash  commitments.  In addition,  commitments are agreements to lend to a
customer as long as there is no violation of any  condition  established  in the
contract.  The maximum exposure to credit loss in the event of nonperformance by
the other party is the contractual amount of these instruments.  The same credit
policy is used to make such commitments as is used for loans receivable.

Under employment  agreements with certain executives,  officers,  certain events
leading to separation  from the Company  could result in cash payments  totaling
$1,480,000 as of September 30, 2000.

The Company and the Bank are subject to certain claims and legal actions arising
in the  ordinary  course  of  business.  In the  opinion  of  management,  after
consultation  with legal counsel,  the ultimate  disposition of these matters is
not expected to have a material  adverse  effect on the  consolidated  financial
position or results of operation of the Company.


<PAGE>



NOTE 14 - PARENT COMPANY FINANCIAL STATEMENTS

Presented below are the condensed  financial  statements for the parent company,
MFB Corp.

                            CONDENSED BALANCE SHEETS
                           September 30, 2000 and 1999

                                                      2000              1999
                                                      ----              ----
ASSETS

Cash and cash equivalents                         $    552.249     $    384,044
Securities available for sale                        1,277,686          429,210
Securities held to maturity                                  -        1,000,000
Investment in Bank subsidiary                       31,468,005       29,980,712
Loan receivable from ESOP                                    -          222,963
Other assets                                            21,960           20,138
                                                  ------------     ------------
     Total assets                                 $ 33,319,900     $ 32,037,067
                                                  ============     ============
LIABILITIES

Loan payable to Bank subsidiary                   $    750,000     $    750,000
Accrued expenses and other liabilities                  55,473          105,437
                                                  ------------     ------------
     Total liabilities                                 805,473          855,437

SHAREHOLDERS' EQUITY                                32,514,427       31,181,630
                                                  ------------     ------------
     Total liabilities and shareholders' equity   $ 33,319,900     $ 32,037,067
                                                  ============     ============

<PAGE>



NOTE 14 - PARENT COMPANY FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>

                         CONDENSED STATEMENTS OF INCOME
                  Years ended September 30, 2000, 1999 and 1998

                                                      2000             1999            1998
                                                      ----             ----            ----
<S>                                               <C>              <C>             <C>
Dividends from Bank subsidiary - cash             $  1,544,000     $  1,125,000    $  5,650,000
Interest income                                        109,608           57,205          48,748
Other income                                                 -                -             919
Interest expense                                        66,187           17,062           1,346
Other expenses                                         120,362          110,790         107,359
                                                  ------------     ------------    ------------
Income  before income taxes and
  equity in undistributed net income
  of Bank subsidiary                                 1,467,059        1,054,353       5,590,962

Income tax benefit                                      32,350           29,857          25,014
                                                  ------------     ------------    ------------
Income before equity in undistributed
  net income of Bank subsidiary                      1,499,409        1,084,210       5,615,976

(Distributions in excess of) equity in
  undistributed net income of Bank subsidiary        1,315,148        1,120,088      (3,379,693)
                                                  ------------     ------------    ------------
Net income                                        $  2,814,557     $  2,204,298    $  2,236,283
                                                  ============     ============    ============
</TABLE>


<PAGE>

<TABLE>
<CAPTION>
NOTE 14 - PARENT COMPANY FINANCIAL STATEMENTS (Continued)

                    CONDENSED STATEMENTS OF CASH FLOWS Years
                     ended September 30, 2000, 1999 and 1998

                                                       1999             1998            1997
Cash flows from operating activities
<S>                                               <C>              <C>             <C>
  Net income                                      $  2,814,557     $  2,204,298    $  2,236,283
  Adjustments to reconcile net income to
    net cash  from operating activities
      Distributions in excess of (equity in
        undistributed) net income of
        Bank subsidiary                             (1,315,148)      (1,120,088)      3,379,693
      Net realized losses from sales
          of securities available for sale               5,110                -               -
      Net change in other assets                        16,605          353,863        (361,526)
      Net change in accrued expenses and
        other liabilities                              (49,964)         121,285         310,634
                                                  ------------     ------------    ------------
           Net cash from operating activities        1,471,160        1,559,358       5,565,084

Cash flows from investing activities
     Principal repayments on loan receivable
       from ESOP                                       222,963          221,594         220,053
     Purchase of securities available for sale               -                -        (242,500)
     Purchase of securities held to maturity                 -       (1,000,000)              -
     Proceeds from sales of securities
          available for sale                            99,890                -               -
                                                  ------------     ------------    ------------
     Net cash from investing activities                322,853         (778,406)        (22,447)

Cash flows from financing activities
     Proceeds from loan payable to Bank
       subsidiary                                            -          750,000               -
     Purchase of MFB Corp. common stock             (1,102,925)      (1,209,619)     (5,931,312)
     Proceeds from exercise of stock options                 -           25,000         688,500
     Cash dividends paid                              (522,883)        (514,743)       (543,557)
                                                  ------------     ------------    ------------
         Net cash from financing activities         (1,625,808)        (949,362)     (5,786,369)
                                                  ------------     ------------    ------------
Net change in cash and cash equivalents                168,205         (168,410)       (243,732)

Cash and cash equivalents at beginning
  of year                                              384,044          552,454         796,186
                                                  ------------     ------------    ------------
Cash and cash equivalents at end of year          $    552,249     $    384,044    $    552,454
                                                  ============     ============    ============
</TABLE>


<PAGE>

NOTE 15 - FAIR VALUES OF FINANCIAL INSTRUMENTS

The  following  table shows the estimated  fair values and the related  carrying
amounts of the Company's  financial  instruments at September 30, 2000 and 1999.
Items which are not financial instruments are not included.

<TABLE>
<CAPTION>
                                                   2000                                   1999
                                                   ----                                   ----
                                       Carrying            Estimated          Carrying          Estimated
                                        Amount             Fair Value          Amount           Fair Value
                                       --------            ----------         --------          ----------
<S>                                 <C>               <C>                <C>                <C>
Cash and cash equivalents           $   14,543,952    $    14,544,000    $    12,062,942    $    12,061,000
Interest-bearing time
  deposits in other financial
  institutions                                   -                  -          1,000,000          1,000,000
Securities available for sale           41,662,790         41,623,000         38,170,143         38,170,000
Securities held to maturity                      -                  -          3,984,338          3,709,000
FHLB stock                               6,307,600          6,308,000          5,511,300          5,511,000
Loans held for sale, net                 6,494,568          6,495,000          8,061,951          8,062,000
Loans receivable, net of
  allowance for loan losses            315,505,699        309,494,000        269,464,085        269,707,000
Accrued interest receivable              1,894,602          1,895,000          1,363,318          1,363,000
Mortgage servicing rights, net             611,013            611,000            412,000            412,000
Investment in limited

  partnership                            2,948,463          2,948,000          1,213,000          1,213,000
Noninterest bearing demand
  deposits                             (11,802,027)       (11,802,000)        (7,357,944)        (7,358,000)
Savings, NOW and MMDA
  deposits                             (56,568,936)       (56,569,000)       (52,409,560)       (52,410,000)
Other time deposits                   (171,023,260)      (171,023,000)      (141,639,885)      (141,314,000)
Securities sold under
  agreements to repurchase              (9,143,345)        (9,143,000)        (6,566,395)        (6,566,000)
FHLB advances                         (112,151,525)      (108,300,000)      (104,225,750)      (101,370,000)
Advances from borrowers
  for taxes and insurance               (2,115,832)        (2,116,000)        (2,111,183)        (2,111,000)

</TABLE>


<PAGE>



NOTE 15 - FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued)

For purposes of the above  disclosures  of estimated  fair value,  the following
assumptions  were used as of September  30, 2000 and 1999.  The  estimated  fair
value for cash and cash equivalents and interest-bearing  time deposits in other
financial  institutions  are considered to approximate  cost. The estimated fair
value for  securities  available for sale and  securities  held to maturity,  is
based upon quoted market values for the individual  securities or for equivalent
securities.  The estimated fair value for loans held for sale,  net, is based on
the price  offered in the  secondary  market on September  30, 2000 and 1999 for
loans having similar interest rates and maturities. The estimated fair value for
loans receivable is based upon estimates of the difference in interest rates the
Company  would  charge  the  borrowers  for  similar  such  loans  with  similar
maturities  made at September 30, 2000 and 1999,  applied for an estimated  time
period  until the loan is  assumed  to reprice  or be paid.  In  addition,  when
computing the estimated fair value for loans receivable,  the allowance for loan
losses was subtracted from the calculated fair value for consideration of credit
issues.  The estimated fair value for FHLB stock,  accrued interest  receivable,
mortgage  servicing  rights,  investment  in  limited  partnership,  noninterest
bearing  demand  deposits,  savings,  NOW and MMDA  deposits and  advances  from
borrowers  for taxes and  insurance  is based upon  their  carrying  value.  The
estimated  fair value for other time deposits as well as  securities  sold under
agreements to repurchase  and FHLB advances is based upon  estimates of the rate
the Company  would pay on such  deposits or borrowings at September 30, 2000 and
1999,  applied for the time period until  maturity.  The estimated fair value of
other financial instruments and off-balance-sheet  loan commitments  approximate
cost and are not considered significant to this presentation.

While these  estimates of fair value are based on  management's  judgment of the
most  appropriate  factors,  there is no assurance that were the Company to have
disposed of such items at September 30, 2000 and 1999, the estimated fair values
would  necessarily  have been  achieved at that date,  since  market  values may
differ  depending  on  various  circumstances.  The  estimated  fair  values  at
September  30, 2000 and 1999 should not  necessarily  be  considered to apply at
subsequent dates.

In addition, other assets and liabilities of the Company that are not defined as
financial  instruments  are  not  included  in the  above  disclosures,  such as
property and equipment.  Also, nonfinancial instruments typically not recognized
in financial statements  nevertheless may have value but are not included in the
above disclosures.  Excluded, among other items, are the estimated earning power
of core deposit accounts,  the trained work force, customer goodwill and similar
items.


<PAGE>

NOTE 16 - OTHER COMPREHENSIVE INCOME (LOSS)

Other comprehensive income (loss) components and related taxes were as follows:

<TABLE>
<CAPTION>

                                                         2000              1999             1998
                                                         ----              ----             ----
Net change in net unrealized gains and losses
 on securities available for sale
   Unrealized gains (losses) arising during
<S>                                               <C>                <C>             <C>
     the year                                     $      (47,362)    $  (1,109,639)  $    (188,757)
   Reclassification adjustment for transfer
     of securities from held-to-maturity to
      available-for-sale                                (320,078)                -               -
   Reclassification adjustment for gains
     included in net income                               38,552            (3,803)         (7,673)
       Net change in net unrealized gains
         and losses on securities available
         for sale                                       (328,888)       (1,113,442)       (196,430)

Tax benefit                                             (130,272)         (441,036)        (77,805)

     Total other comprehensive income (loss)      $     (198,616)    $    (672,406)   $   (118,625)



</TABLE>

<TABLE>
<CAPTION>
NOTE 17 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

                                              --------------Year Ended September 30, 2000--------------
                                                            -----------------------------
                                                  1st            2nd             3rd            4th
(In thousands, except per share data)           Quarter        Quarter         Quarter        Quarter
                                                -------        -------         -------        -------
<S>                                           <C>            <C>            <C>             <C>
Interest income                               $     6,520    $     6,894    $     7,405     $     7,695

Interest expense                                    3,685          3,972          4,279           4,537
                                              -----------    -----------    -----------     -----------
Net interest income                                 2,835          2,922          3,126           3,158

Provision for loan losses                              75             80            190             761
                                              -----------    -----------    -----------     -----------
Net interest income after provision for loan
  losses                                            2,760          2,842          2,936           2,397

Noninterest income                                    358            295            569             623

Noninterest expense                                 2,010          1,978          2,160           2,124
                                              -----------    -----------    -----------     -----------
Income before income taxes                          1,108          1,159          1,345             896

Income tax expense                                    419            435            501             338
                                              -----------    -----------    -----------     -----------
Net income                                    $       689    $       724    $       844     $       558
                                              ===========    ===========    ===========     ===========
Basic earnings per common share               $       .49    $       .52    $       .62     $       .41
                                              ===========    ===========    ===========     ===========
Diluted earnings per common share             $       .48    $       .51    $       .61     $       .40
                                              ===========    ===========    ===========     ===========

</TABLE>

<PAGE>

NOTE 17 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) (Continued)
<TABLE>
<CAPTION>

                                              --------------Year Ended September 30, 1999--------------
                                                            -----------------------------
                                                  1st            2nd             3rd            4th
(In thousands, except per share data)           Quarter        Quarter         Quarter        Quarter
                                                -------        -------         -------        -------
<S>                                           <C>            <C>            <C>             <C>
Interest income                               $     5,960    $     5,957    $     6,075     $     6,262

Interest expense                                    3,626          3,589          3,608           3,625
                                              -----------    -----------    -----------     -----------
Net interest income                                 2,334          2,368          2,467           2,637

Provision for loan losses                              45             45             65              75
                                              -----------    -----------    -----------     -----------
Net interest income after provision for loan
  losses                                            2,289          2,323          2,402           2,562

Noninterest income                                    304            286            258             372

Noninterest expense                                 1,467          1,594          2,023           1,923
                                              -----------    -----------    -----------     -----------
Income before income taxes                          1,126          1,015            637           1,011

Income tax expense                                    463            421            272             429
                                              -----------    -----------    -----------     -----------
Net income                                    $       663    $       594    $       365     $       582
                                              ===========    ===========    ===========     ===========
Basic earnings per common share               $       .46    $       .42    $       .26     $       .42
                                              ===========    ===========    ===========     ===========
Diluted earnings per common share             $       .45    $       .40    $       .25     $       .41
                                              ===========    ===========    ===========     ===========


</TABLE>

<PAGE>




                            MFB CORP. AND SUBSIDIARY
                             DIRECTORS AND OFFICERS
                               September 30, 2000

--------------------------------------------------------------------------------
                      MFB CORP. AND MFB FINANCIAL DIRECTORS


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

Thomas F. Hums (age 67) served as President and Chief  Executive  Officer of MFB
Financial from 1972 until  September 1995. He also served as President and Chief
Executive  Officer  of  Mishawaka  Financial  Services,  Inc.  from  1975  until
September 1995. He also served as President and Chief  Executive  Officer of MFB
Corp. from inception  until  September  1995. He is the current  Chairman of MFB
Corp. and MFB Financial.

Jonathan E. Kintner (age 57) is an optometrist based in Mishawaka.

Michael J. Marien (age 53) is a Sales Representative with Signode Corporation, a
division of ITW.

Marian K. Torian (age 79) is a past Chairman of MFB Corp.  and of MFB Financial.
She is a retired teacher from the School City of Mishawaka.

Charles J. Viater (age 46) has served as President and Chief  Executive  Officer
of MFB Corp.,  MFB  Financial  and  Mishawaka  Financial  Services,  Inc.  since
September  1995.  He  previously  served as Executive  Vice  President for Amity
Federal  Savings  Bank and Chief  Financial  Officer of Amity  Bancshares,  Inc.
beginning in December 1990.

Reginald  H. Wagle  (age 58) has served as Vice  President  of  Memorial  Health
Foundation since 1992. Until 1992, he was a free-lance  political consultant and
until 1991, he also served as District  Director for the Office of United States
Representative John P. Hiler, Third Congressional District of Indiana.

Christine  A.  Lauber  (age 55) is a  Certified  Public  Accountant  in  private
practice in South Bend, Indiana.


                        MFB FINANCIAL EXECUTIVE OFFICERS

Charles J. Viater                                  Timothy C. Boenne
President and Chief Executive Officer*             Vice President and Controller

Donald R. Kyle                                     M. Gilbert Eberhart
Executive Vice President and                       Secretary*
Chief Operating Officer


* Holds same position with MFB Corp.


<PAGE>



                            MFB CORP. AND SUBSIDIARY
                             SHAREHOLDER INFORMATION
                               September 30, 2000
--------------------------------------------------------------------------------
Market Information

The  common  stock  of MFB  Corp.  is  traded  on the  National  Association  of
Securities Dealers Automated Quotation System, National Market System, under the
symbol  "MFBC."  As  of  September  30,  2000,  there  were   approximately  560
shareholders  of record.  The following  table sets forth market price (based on
daily closing prices) and dividend  information  for the Company's  common stock
for the periods indicated.

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



Transfer Agent and Registrar
            Registrar and Transfer Co.
            10 Commerce Drive
            Cranford, NJ 07016


Special Counsel
            Barnes & Thornburg
            1313 Merchants Company Building
            11 South Meridian Street
            Indianapolis, IN. 46204

Independent Auditors
            Crowe, Chizek and Company LLP
            330 East Jefferson Blvd.
            South Bend, IN 46601




Shareholder and General Inquiries

The  Company is  required  to file an Annual  Report on Form 10-K for its fiscal
year ended  September  30, 2000 with the  Securities  and  Exchange  Commission.
Copies of this annual report may be obtained without charge upon written request
to:

                  Charles J. Viater
                  President and Chief Executive Officer
                  MFB Corp.
                  121 South Church Street
                  PO Box 528
                  Mishawaka, IN 46546

Office Locations

  Main Office                Branch Office               Branch Office
  121 S. Church St.          411 W. McKinley Ave.        25990 County Road 6
  Mishawaka, IN 46544        Mishawaka, IN 46545         Elkhart, IN 46514

  Branch Office              Branch Office               Branch Office
  402 W. Cleveland Rd.       2427 Mishawaka Ave.         2304 Lincolnway East
  Mishawaka, IN 46545        South Bend, IN 46615        Goshen, IN 46526

  Branch Office
  100 E. Wayne Street
  Suite 150
  South Bend, IN. 46601