FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

(Mark one)

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

For the fiscal year ended September 30, 1999
                                       or
[]   Transition  Report  Pursuant  to  Section  13 or  15(d)  of the  Securities
     Exchange Act of 1934

For the transition period from __________ to__________

Commission file number: 0-23374

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

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

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

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

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

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

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

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

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

The aggregate market value of the issuer's voting stock held by  non-affiliates,
as of December 1, 1999, was $19,374,107.

The  number of shares of the  registrant's  common  stock,  without  par  value,
outstanding as of December 1, 1999, was 1,415,049 shares.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of Registrant's Annual Report to Shareholders for the fiscal year ended
September 30, 1999 are incorporated by reference into Part II.

Portions of the Proxy Statement for the 2000 Annual Meeting of the  Shareholders
are incorporated into Part I and Part III.

                            Exhibit Index on Page 50
                              Page one of 53 pages


<PAGE>



                                    MFB CORP.
                                    Form 10-K
                                      INDEX


PART I
Item 1.       Business                                                     1
Item 2.       Properties                                                  39
Item 3.       Legal Proceedings                                           40
Item 4.       Submission of Matters to a Vote of Security Holders         40

PART II

Item 5.       Market for Registrant's Common Equity and Related
                     Stockholder Matters                                  41
Item 6.       Selected Financial Data                                     42
Item 7.       Management's Discussion and Analysis of Financial
                     Condition and Results of Operations                  42
Item 7a.      Quantitative and Qualitative Disclosures
                     About Market Risk                                    42
Item 8.       Financial Statements and Supplementary Data                 44
Item 9.       Changes in and Disagreements with Accountants on
                     Accounting and Financial Disclosure                  44

PART III

Item 10.      Directors and Executive Officers of the Registrant          45
Item 11.      Executive Compensation                                      46
Item 12.      Security Ownership of Certain Beneficial Owners
                     and Management                                       46
Item 13.      Certain Relationships and Related Transactions              46

PART IV

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

Exhibit List                                                              50





<PAGE>
                                     PART 1


Item 1.           Business.

General

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

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

The Company's  principal  source of revenue is interest income from  residential
mortgage  loans,  construction  loans,  commercial  loans and consumer loans. At
September  30,  1999,  $191.5  million,  or 70.62% of the  Company's  total loan
portfolio,  consisted of mortgage loans on one-to-four  family  residential real
property which are generally secured by first mortgages on the property. A large
majority of the  residential  real estate loans  originated by MFB Financial are
secured by properties located in St. Joseph and Elkhart Counties.

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

Lending Activities

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



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<PAGE>

At  September  30,  1999,  17.48% of the  Company's  loan  portfolio  consist of
commercial loans and 6.56% of the loan portfolio consist of consumer loans.

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

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

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

MFB Financial  normally requires private mortgage  insurance on all conventional
residential  first  mortgages  with  loan-to-value  ratios in excess of 80%.  In
accordance with the Homeowners  Protection Act of 1998, MFB has adopted policies
to assure complete compliance with automatic cancellation provisions,  depending
on the date the loan was originated. On first mortgages, MFB will generally lend
up to 95% of the purchase price, or appraised property value, whichever is less.
MFB will also loan up to 97% when the applicants have  successfully  completed a
Home Buyers education  course and earn less than the area median income.  Second
mortgages and home equity loans may be originated with loan-to-values up to 100%
with higher yields to compensate for potentially higher risk.

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

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

Construction  Loans.  MFB Financial  offers  construction  loans with respect to
owner-occupied  residential real estate, to builders or developers  constructing
such properties and to owners who are to occupy the premises.

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



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<PAGE>

Commercial Loans. MFB Financial has established a commercial  lending department
focused on meeting the borrowing needs of small local  businesses.  Loans may be
secured by real estate, equipment,  inventory,  receivables or other appropriate
collateral.  Terms vary and adjustable  rate loans are generally  indexed to the
Wall Street Journal prime rate. Loans with longer amortization periods generally
contain balloon payment  provisions.  Personal guarantees by business principals
are  generally  required  in order to  manage  risk on these  loans.  Commercial
lending  activity  has allowed MFB  Financial to  diversify  its balance  sheet,
increase market penetration and improve earnings.

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

As a general rule, consumer loans made by most financial  institutions involve a
higher level of risk than one-to-four family residential  mortgage loans because
consumer loans are generally made based upon the borrower's ability to repay the
loan,  which is  subject  to  change,  rather  than the value of the  underlying
collateral,  if any. However,  the relatively higher yields and shorter terms to
maturity of consumer loans are believed to be helpful in reducing  interest-rate
risk. MFB Financial makes secured consumer loans for amounts  specifically  tied
to the value of the  collateral,  and,  smaller,  unsecured  loans  with  higher
interest  rates.  MFB  Financial has been  successful in managing  consumer loan
risk.

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

MFB Financial confines its loan origination  activities  primarily in St. Joseph
and Elkhart  Counties and the  surrounding  area. A full service branch facility
was opened in Elkhart,  Indiana in June 1999,  and another full  service  office
will be opened in South Bend,  Indiana in January 2000. MFB's loan  originations
are generated from referrals from  builders,  developers,  real estate  brokers,
existing customers,  and limited newspaper and periodical advertising.  All loan
applications are underwritten at MFB Financial's main office.



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<PAGE>

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

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

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

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

Non-Performing and Problem Assets

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



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<PAGE>

When loans are sixty days in default, personal contact is made with the borrower
to establish an  acceptable  repayment  schedule.  When loans are ninety days in
default, contact is made with the borrower by an employee of MFB Financial after
consultation  with a Senior Loan Officer who attempts to establish an acceptable
repayment schedule. Management is authorized to commence foreclosure proceedings
for any loan upon making a determination  that it is prudent to do so. All loans
on which  foreclosure  proceedings have been commenced are placed on non-accrual
status.

Non-performing  assets. At September 30, 1999, $196,000 or .06% of the Company's
total assets,  were  non-performing  assets (loans delinquent more than 90 days,
non-accrual loans, real estate owned ("REO") and troubled debt  restructurings).
At September 30, 1999, the Company had no impaired loans. At September 30, 1999,
the Bank has one real estate owned property with a value of $100,000.  Such real
estate is  classified by the Company as "real estate owned" or "REO" until it is
sold.  When  property is so acquired,  the value of the asset is recorded on the
books of the Company at fair value.  Interest accrual ceases when the collection
of interest becomes doubtful. All costs incurred from the date of acquisition in
maintaining the property are expensed.

Classified  assets.  Federal  regulations and MFB Financial's  Classification of
Assets policy provide for the  classification  of loans and other assets such as
debt and  equity  securities  considered  by the  Office of  Thrift  Supervision
("OTS") to be of lesser quality as  "substandard,"  "doubtful" or "loss" assets.
An asset is  considered  "substandard"  if it is  inadequately  protected by the
current  net worth and  paying  capacity  of the  obligor  or of the  collateral
pledged,  if  any.  "Substandard"  assets  include  those  characterized  by the
"distinct  possibility"  that the  association  will sustain  "some loss" if the
deficiencies are not corrected.  Assets classified as "doubtful" have all of the
weaknesses   inherent  in  those  classified   "substandard,"   with  the  added
characteristic  that the weaknesses  present make  "collection or liquidation in
full," on the basis of currently existing facts, conditions, and values, "highly
questionable and improbable."  Assets  classified as "loss" are those considered
"uncollectible"  and of such  little  value  that  their  continuance  as assets
without the  establishment  of a specific loss reserve is not warranted.  Assets
which do not currently  expose the insured  institution  to  sufficient  risk to
warrant  classification  in one of the  aforementioned  categories  but  possess
weaknesses are required to be designated  "special  mention" by  management.  At
September  30,  1999,  the  Bank  had  classified  $100,000  of  its  assets  as
"substandard", $0 as "doubtful", and $0 as "loss".

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



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<PAGE>

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

Allowance for Loan Losses

The  allowance  for loan losses is  maintained  through the  provision  for loan
losses, which is charged to earnings. The provision is determined in conjunction
with  management's   review  and  evaluation  of  current  economic   conditions
(including those of MFB Financial's lending area),  changes in the character and
size of the loan and lease portfolio,  delinquencies  (current status as well as
past  and  anticipated   trends)  and  adequacy  of  collateral   securing  loan
delinquencies,  historical and estimated net  charge-offs,  and other  pertinent
information derived from a review of the loan and lease portfolio. The provision
for loan losses was increased  from $120,000  during the period ended  September
30, 1998 to $230,000 at September  30, 1999 due to the  substantial  increase in
the volumes of commercial  and consumer  loans.  In  management's  opinion,  MFB
Financial's  allowance for loan losses is adequate to absorb  anticipated future
losses existing at September 30, 1999.

Investments

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

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

Liquidity.  Federal  regulations  require  FHLB-member  savings  institutions to
maintain an average daily balance of liquid assets equal to a monthly average of
not less than a specified  percentage of its net  withdrawable  savings deposits
plus  short-term   borrowings.   Liquid  assets  include  cash,  U.S.   Treasury
obligations,  certain  certificates  of  deposit of  insured  banks and  savings
institutions, certain bankers' acceptances and specified state or federal agency
obligations.  Subject to various restrictions,  FHLB-member savings institutions
may also invest in certain corporate debt securities,  commercial paper,  mutual
funds,  mortgage-related  securities, and first lien residential mortgage loans.
This liquidity  requirement  may be changed from  time-to-time by the OTS to any
amount  within the range of 4% to 10%, and is currently  4%. As of September 30,
1999,  the Bank had liquid  assets of $34.9  million and a regulatory  liquidity
ratio of 16.87%, well above the minimum regulatory requirements.



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<PAGE>

Sources of Funds

General.  Deposits have  traditionally  been MFB  Financial's  primary source of
funds for use in lending and investment activities. In addition to deposits, MFB
Financial derives funds from scheduled loan payments, loan prepayments, retained
earnings and income on earning assets.  While scheduled loan payments and income
on earning assets are relatively  stable sources of funds,  deposit  inflows and
outflows can vary widely and are influenced by prevailing interest rates, market
conditions and levels of  competition.  Borrowings from the FHLB of Indianapolis
may be used to compensate for reductions in deposits or deposit  inflows at less
than projected levels. In addition,  the Bank has in place a capital  leveraging
strategy that involves the purchase of earning assets funded primarily with FHLB
borrowings.  This strategy has contributed to net earnings and helps improve the
overall return on equity.

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

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

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

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



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MFB  Financial's  borrowings  consist  mainly  of  advances  from  the  FHLB  of
Indianapolis upon the security of a blanket collateral agreement of a percentage
of  unencumbered  loans and  investment  securities.  Such  advances can be made
pursuant  to  several  different  credit  programs,  each of  which  has its own
interest rate and range of  maturities.  There are  regulatory  restrictions  on
advances from the Federal Home Loan Banks,  See  "Regulation--Federal  Home Loan
Bank  System" and  "--Qualified  Thrift  Lender." At  September  30,  1999,  MFB
Financial had $104.2 million in Federal Home Loan Bank  borrowings  outstanding.
MFB  Financial  does  not  anticipate  any  difficulty  in  obtaining   advances
appropriate to meet its requirements in the future.

With selected  business  entities,  MFB  Financial  has entered into  repurchase
agreements.  These agreements are all one day retail repurchase agreements,  are
accounted for as borrowings by the Bank,  and are secured by certain  investment
securities  of the Bank.  At September  30,  1999,  the Bank had $6.6 million in
repurchase agreements outstanding.

Service Corporation Subsidiary

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

The Bank's only  subsidiary,  Mishawaka  Financial  Services,  Inc.  ("Mishawaka
Financial"),  was  organized  in 1975 and  currently  is  engaged in the sale of
credit life, general fire and accident,  car, home and life insurance,  as agent
to the  Bank's  customers  and the  general  public.  In  addition,  a range  of
investment  and insurance  related  products are offered to customers  through a
contractual   relationship   established  with  Financial   Network   Investment
Corporation (FNIC), a full service securities brokerage firm. During fiscal year
1999, Mishawaka Financial received  approximately $151,000 in commissions versus
approximately  $162,000 in commissions  received during fiscal year 1998.  Since
Mishawaka  Financial  conducts all of its activities as agent for its customers,
the  Bank is not  required  to  deduct  from its  capital  any  portion  of this
investment.  The  consolidated  statements  of  income  of  MFB  Corp.  included
elsewhere herein include the operation of the Bank and Mishawaka Financial.  All
significant  intercompany  balances and transactions have been eliminated in the
consolidation.



                                     - 8 -
<PAGE>

Employees

As of September 30, 1999, MFB Financial employed 93 persons on a full-time basis
and 27 persons on a  part-time  basis.  None of MFB  Financial's  employees  are
represented by a collective bargaining group.  Management considers its employee
relations to be excellent.



                                     - 9 -
<PAGE>

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

     A.   The  following  are the average  balance  sheets for the years  ending
          September 30:
<TABLE>
<CAPTION>



                                                                        1999            1998             1997
                                                                       Average         Average          Average
                                                                     Outstanding     Outstanding      Outstanding
                                                                       Balance         Balance          Balance
                                                                   -------------    ------------    ------------
Assets:                                                                            (In thousands)
Interest-earning assets:
<S>                                                                <C>              <C>             <C>
     Interest-bearing deposits                                     $      11,983    $      9,633    $      1,856
     Securities (1)                                                       17,347          13,647          30,765
     Mortgage-backed securities (1)                                       30,461          23,206          22,222
     FHLB stock                                                            5,453           3,446           1,783
     Loans held for sale                                                  15,571           2,401              35
     Loans receivable (2)                                                244,132         220,244         175,726
                                                                   -------------    ------------    ------------
         Total interest-earning assets                                   324,947         272,577         232,387
Non-interest earning assets, net
  of allowance for loan losses                                            11,246           5,320           4,663
                                                                   -------------    ------------    ------------

              Total assets                                         $     336,193    $    277,897    $    237,050
                                                                   =============    ============    ============

Liabilities and shareholders' equity:
Interest-bearing liabilities:
     Savings accounts                                              $      12,277    $     10,737    $     10,359
     NOW and money market accounts                                        36,422          30,065          26,770
     Certificates of deposit                                             137,734         130,350         126,202
     Repurchase agreements                                                 3,892           1,647              97
     FHLB advances                                                       104,894          66,123          34,960
                                                                   -------------    ------------    ------------
         Total interest-bearing liabilities                              295,219         238,922         198,388
Other liabilities                                                          9,351           5,571           4,316
                                                                   -------------    ------------    ------------
     Total liabilities                                                   304,570         244,493         202,704

Shareholders' equity
         Common stock                                                     12,933          12,921          14,015
         Retained earnings                                                24,550          22,958          21,381
         Net unrealized gain(loss) on securities
              available for sale                                             213              56            (100)
         Less common stock acquired by:
              Employee stock ownership plan                                 (352)           (565)           (790)
              Recognition and retention plans                                (11)            (80)           (157)
         Treasury stock                                                   (5,710)         (1,886)             (3)
                                                                   --------------   ------------    ------------
         Total shareholders' equity                                       31,623          33,404          34,346
                                                                   -------------    ------------    ------------

         Total liabilities and shareholders' equity                $     336,193    $    277,897    $    237,050
                                                                   =============    ============    ============
</TABLE>


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


                                     - 10 -
<PAGE>

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

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

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

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

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

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

Interest rate spread (3)                                                                                   2.57%

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

Average interest-earning assets to
  average interest-bearing liabilities                                      110.19%
</TABLE>
--------------------------------------------------------------------------------
(1)     Average  balance does not reflect  unrealized  gain (loss) on securities
        available for sale and yield is based on amortized cost.
(2)     Total loans less deferred net loan fees and loans in process.
(3)     Interest rate spread is calculated by subtracting  average interest rate
        cost from average interest rate earned for the period indicated.
(4)     The net  yield on  average  interest-earning  assets  is  calculated  by
        dividing net interest income by average  interest-earning assets for the
        period indicated.

                                     - 11 -
<PAGE>


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

<TABLE>
<CAPTION>


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

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

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

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

Interest rate spread (3)                                                                                   2.54%

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

Average interest-earning assets to
  average interest-bearing liabilities                                      114.05%
</TABLE>
--------------------------------------------------------------------------------
(1)     Average  balance does not reflect  unrealized  gain (loss) on securities
        available for sale and yield is based on amortized cost.
(2)     Total loans less deferred net loan fees and loans in process.
(3)     Interest rate spread is calculated by subtracting  average interest rate
        cost from average interest rate earned for the period indicated.
(4)     The net  yield on  average  interest-earning  assets  is  calculated  by
        dividing net interest income by average  interest-earning assets for the
        period indicated.

                                     - 12 -
<PAGE>



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



                                                                      --------Year Ended September 30, 1997-------
                                                                         Average                          Average
                                                                         Balance         Interest       Yield/Cost
                                                                         -------         --------       ----------
                                                                                  (Dollars in thousands)
INTEREST-EARNING ASSETS
<S>                                                                   <C>             <C>                  <C>
     Interest-bearing deposits                                        $      1,856    $         96         5.17%
     Securities (1)                                                         30,808           2,112         6.86
     Mortgage-backed securities (1)                                         22,246           1,436         6.46
     FHLB stock                                                              1,783             144         8.08
     Loans held for sale                                                        35               -            -
     Loans receivable (2)                                                  175,726          13,897         7.91
                                                                      ------------    ------------
         Total interest-earning assets                                $    232,454          17,685         7.61
                                                                      ============

INTEREST-BEARING LIABILITIES
     Savings accounts                                                 $     10,359             278         2.68%
     NOW and money market accounts                                          26,770             768         2.87
     Certificates of deposit                                               126,202           7,135         5.65
     Repurchase agreements                                                      97               4         4.12
     FHLB advances                                                          34,960           1,972         5.64
                                                                      ------------    ------------
         Total interest-bearing liabilities                           $    198,388          10,157         5.12
                                                                      ============    ------------

Net interest earning assets                                           $     34,066
                                                                      ============

Net interest income                                                                   $      7,528
                                                                                      ============

Interest rate spread (3)                                                                                   2.49%

Net yield on average interest-earning assets (4)                                                           3.24%

Average interest-earning assets to
  average interest-bearing liabilities                                      117.17%
</TABLE>
--------------------------------------------------------------------------------
(1)     Average  balance does not reflect  unrealized  gain (loss) on securities
        available for sale and yield is based on amortized cost.
(2)     Total loans less deferred net loan fees and loans in process.
(3)     Interest rate spread is calculated by subtracting  average interest rate
        cost from average interest rate earned for the period indicated.
(4)     The net  yield on  average  interest-earning  assets  is  calculated  by
        dividing net interest income by average  interest-earning assets for the
        period indicated.


                                     - 13 -
<PAGE>


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

C.      The following  tables  describes the extent to which changes in interest
        rates and changes in volume of  interest-related  assets and liabilities
        have  affected  MFB  Corp.'s  consolidated  interest  income and expense
        during the periods  indicated.  For each  category  of  interest-earning
        asset and interest-bearing liability, information is provided on changes
        attributable to (1) changes in rate (i.e., changes in rate multiplied by
        old  volume)  and  (2)  changes  in  volume  (i.e.,  changes  in  volume
        multiplied by old rate).  Changes  attributable  to both rate and volume
        have been allocated  proportionally  to the change due to volume and the
        change due to rate.
<TABLE>
<CAPTION>
                                                                              Increase (Decrease) in
                                                                                Net Interest Income
                                                                   Total Net           Due to            Due to
                                                                    Change              Rate             Volume
                                                                                   (In thousands)
<S>                                                              <C>               <C>               <C>
Year ended September 30, 1999 compared
  to year ended September 30, 1998
      Interest-earning assets
         Interest-bearing deposits                               $        53       $       (73)      $        126
         Securities                                                      148              (101)               249
         Mortgage-backed securities                                      474                34                440
         FHLB stock                                                      160                 -                160
         Loans held for sale                                             913               (10)               923
         Loans receivable                                              1,668              (216)             1,884
                                                                 -----------       ------------      ------------
             Total                                                     3,416              (366)             3,782

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

Change in net interest income                                    $     1,172       $       207       $        965
                                                                 ===========       ===========       ============

</TABLE>

                                     - 14 -
<PAGE>


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

<TABLE>
<CAPTION>
                                                                              Increase (Decrease) in
                                                                                Net Interest Income
                                                                   Total Net           Due to            Due to
                                                                    Change              Rate             Volume
                                                                    ------              ----             ------
                                                                                   (In thousands)
<S>                                                              <C>               <C>               <C>
Year ended September 30, 1998 compared
  to year ended September 30, 1997
      Interest-earning assets
         Interest-bearing deposits                               $       464       $        13       $        451
         Securities                                                   (1,212)              (62)            (1,150)
         Mortgage-backed securities                                      (79)             (140)                61
         FHLB stock                                                      132                (1)               133
         Loans held for sale                                             178                 -                178
         Loans receivable                                              3,670               120              3,550
                                                                 -----------       -----------       ------------
             Total                                                     3,153               (70)             3,223

      Interest-bearing liabilities
         Savings accounts                                                 (7)              (17)                10
         NOW and money market accounts                                    84                (9)                93
         Certificates of deposit                                         130              (102)               232
         Repurchase agreements                                            63                 -                 63
         FHLB advances                                                 1,777                10              1,767
                                                                 -----------       -----------       ------------
             Total                                                     2,047              (118)             2,165
                                                                 -----------       -----------       ------------

Change in net interest income                                    $     1,106       $        48       $      1,058
                                                                 ===========       ===========       ============
</TABLE>


                                     - 15 -
<PAGE>

II.     INVESTMENT PORTFOLIO
<TABLE>
<CAPTION>

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

                                                           At September 30,
                                  1999                           1998                              1997
                      --------------------------       --------------------------      ----------------------------
                         Amortized        Fair          Amortized         Fair          Amortized         Fair
                           Cost           Value           Cost            Value           Cost            Value
                      -----------    ------------      -----------     ----------      ----------     -----------
                                                              (In thousands)
<S>                   <C>            <C>               <C>             <C>             <C>            <C>
Debt securities
     U.S. Government
       and federal
       agencies       $     7,745    $      7,563      $     4,219     $    4,254      $   23,618     $    23,720
     Mortgage-
       backed              27,112          26,450           22,259         22,267          15,589          15,579
     Other securities           -               -            8,929          8,929               -               -
     Corporate notes        3,959           3,728            5,945          5,863               -               -
                      -----------    ------------      -----------     ----------      ----------     -----------

                           38,816          37,741           41,352         41,313          39,207          39,299

Marketable equity
  securities                  543             429              543            506             300             329
                      -----------    ------------      -----------     ----------      ----------     -----------

                      $    39,359    $     38,170      $    41,895     $   41,819      $   39,507     $    39,628
                      ===========    ============      ===========     ==========      ==========     ===========



The following  table sets forth the amortized  cost and fair value of securities
held to maturity:

                                                           At September 30,
                                  1999                           1998                              1997
                      --------------------------       --------------------------      -------------------------
                         Amortized        Fair          Amortized         Fair          Amortized         Fair
                           Cost           Value           Cost            Value           Cost            Value
                                                              (In thousands)
Debt securities
Corporate notes          $3,984         $3,709         $   -            $   -            $   -            $   -
                         ------         ------         -----            -----            -----            -----
                         $3,984         $3,709         $   -            $   -            $   -            $   -
                         ======         ======         =====            =====            =====            =====


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

                                                           At September 30,
                                  1999                           1998                              1997
                      --------------------------       --------------------------      --------------------------
                                        Estimated                      Estimated                        Estimated
                         Amortized       Market         Amortized        Market         Amortized        Market
                           Cost           Value           Cost            Value           Cost            Value
                                                              (In thousands)
Other securities
FHLB stock, at
   cost               $     5,511    $      5,511      $     4,636     $    4,636      $    2,400     $     2,400
                      ===========    ============      ===========     ==========      ==========     ===========
</TABLE>


                                     - 16 -
<PAGE>


II.     INVESTMENT PORTFOLIO (Continued)

B.   The maturity  distribution  and  weighted  average  interest  rates of debt
     securities available for sale, excluding mortgage-backed securities, are as
     follows:
<TABLE>
<CAPTION>
                                          Amount at September 30, 1999, which matures in
               ---------------------------------------------------------------------------------------------------------
                       One               One to             Over Five to            Over 10
                  Year or Less         Five Years             Ten Years               Years                 Totals
               ----------------    ------------------    ------------------    ------------------    -------------------
               Amortized  Fair     Amortized    Fair     Amortized    Fair     Amortized    Fair     Amortized     Fair
                  Cost    Value      Cost       Value      Cost       Value      Cost       Value      Cost        Value
               ----------------    ---------    -----    ---------    -----    ---------    -----    ---------     -----

                                                                (Dollars in thousands)
<S>              <C>      <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>         <C>
U.S. Government
  and federal
  agencies       $501     $  501     $2,498     $2,464     $4,000     $3,894     $  746     $  704     $ 7,745     $ 7,563
Corporate
  notes             -          -          -          -          -          -      3,959      3,728       3,959       3,728
                 ----     ------     ------     ------     ------     ------     ------     ------     -------     -------
                 $501     $  501     $2,498     $2,464     $4,000     $3,894     $4,705     $4,432     $11,704     $11,291
                 ====     ======     ======     ======     ======     ======     ======     ======     =======     =======


Weighted
average yield   5.41%                  5.81%                 6.69%                 6.00%                  6.17%
</TABLE>




       The maturity  distribution  and weighted  average  interest rates of debt
       securities held to maturity, excluding mortgage-backed securities, are as
       follows:
<TABLE>
<CAPTION>
                                                 Amount at September 30, 1999, which matures in
                             --------------------------------------------------------------------------------------
                                       One                One to             Over five to
                                 Year or Less           Five Years             Ten Years             Totals
                             --------------------  --------------------  --------------------  --------------------
                             Amortized    Fair     Amortized    Fair      Amortized   Fair     Amortized    Fair
                               Cost       Value      Cost       Value       Cost      Value      Cost       Value
                             ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------
                                                              (Dollars in thousands)

<S>                          <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>
Corporate notes              $     501  $     501  $       -  $       -  $   3,483  $   3,208  $   3,984  $   3,709
                             ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------

                             $     501  $     501  $       -  $       -  $   3,483  $   3,208  $   3,984  $   3,709
                             =========  =========  =========  =========  =========  =========  =========  =========


Weighted average yield            5.85%                  n/a                  7.13%                 6.97%
</TABLE>


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

C.   Excluding  those  holdings of the  investment  portfolio  in U.S.  Treasury
     securities  and  other  agencies  of the  U.S.  Government,  there  were no
     investments  in  securities  of any one issuer  which  exceeded  10% of the
     shareholders' equity of the Company at September 30, 1999.



                                     - 17 -
<PAGE>


III.     LOAN PORTFOLIO

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


<TABLE>
<CAPTION>
                                            ----------------------------------September 30,------------------------------
                                                        1999                      1998                      1997
                                                            Percent                   Percent                     Percent
                                                              of                        of                          of
                                               Amount        Total       Amount        Total        Amount         Total
                                               ------        -----       ------        -----        ------         -----
                                                                                                   (Dollars in thousands)
Mortgage loans
<S>                                         <C>              <C>      <C>              <C>       <C>               <C>
     Residential                            $   191,480      70.62%   $    183,151     78.49%    $    164,598      86.91%
     Residential construction                    11,158       4.12           8,233      3.53            8,245       4.35
     Multi-family                                 3,299       1.22             120       .05              130        .07

Commercial and other loans
     Commercial loans                            47,399      17.48          30,775     13.19            8,833       4.66
     Home equity and second
       mortgage loans                            13,308       4.91           9,067      3.89            7,177       3.79
     Financing leases                                17        .01              83       .03              325        .17
     Other                                        4,461       1.64           1,914       .82               96        .05
                                            -----------    -------    ------------   -------     ------------   --------
         Gross loans receivable                 271,122     100.00%        233,343    100.00%         189,404     100.00%
                                                           =======                   =======                    ========

Less
     Allowance for loan losses                     (638)                      (454)                      (370)
     Deferred net loan fees                        (933)                      (798)                      (653)
     Loans in process                               (87)                      (485)                      (117)
                                            ------------              ------------               ------------

         Net loans receivable               $   269,464               $    231,606               $    188,264
                                            ===========               ============               ============

Mortgage-backed securities
     FHLMC certificates                     $       868               $      2,316               $      3,508
     CMO - REMIC                                 25,582                     19,951                     12,071
                                            -----------               ------------               ------------
         Net mortgage-backed securities     $    26,450               $     22,267               $     15,579
                                            ===========               ============               ============

Mortgage loans
     Adjustable rate                        $   142,756      69.32%   $    153,897     80.36%    $    139,665      80.74%
     Fixed rate                                  63,181      30.68          37,607     19.64           33,308      19.26
                                            -----------    -------    ------------   -------     ------------   --------

         Total                              $   205,937     100.00%   $    191,504    100.00%    $    172,973     100.00%
                                            ===========    =======    ============   =======     ============   ========
</TABLE>




<PAGE>
<TABLE>
<CAPTION>

                                            --------------------September 30,-------------------
                                                       1996                      1995
                                                             Percent                     Percent
                                                               of                          of
                                              Amount          Total       Amount          Total
                                              ------          -----       ------          -----

Mortgage loans
<S>                                          <C>              <C>       <C>               <C>
     Residential                             $    143,751     92.87%    $    119,720      97.60%
     Residential construction                       5,005      3.23            2,106       1.72
     Multi-family                                     163       .10              189        .15

Commercial and other loans
     Commercial loans                                 876       .57              206        .17
     Home equity and second
       mortgage loans                               3,790      2.45              375        .30
     Financing leases                               1,125       .73                -          -
     Other                                             83       .05               74        .06
                                             ------------   -------     ------------  ---------
         Gross loans receivable                   154,793    100.00%         122,670     100.00%
                                                            =======                   =========

Less
     Allowance for loan losses                       (340)                      (310)
     Deferred net loan fees                          (440)                      (370)
     Loans in process                              (1,961)                      (809)
                                             ------------               ------------

         Net loans receivable                $    152,052               $    121,181
                                             ============               ============

Mortgage-backed securities
     FHLMC certificates                      $      5,013               $     11,905
     CMO - REMIC                                   19,061                          -
                                             ------------               ------------
         Net mortgage-backed securities      $     24,074               $     11,905
                                             ============               ============

Mortgage loans
     Adjustable rate                         $    130,336     87.01%    $    113,394      92.78%
     Fixed rate                                    19,459     12.99            8,827       7.22
                                             ------------   -------     ------------  ---------

         Total                               $    149,795    100.00%    $    122,221     100.00%
                                             ============   =======     ============  =========
</TABLE>


                                     - 18 -
<PAGE>

III.    LOAN PORTFOLIO (Continued)

        B. Loan Maturity.  The following table sets forth certain information at
           September 30, 1999,  regarding the dollar amount of loans maturing in
           MFB Corp.'s  consolidated loan portfolio based on the date that final
           payment is due under the terms of the loan.  Demand  loans  having no
           stated  schedule of repayments and no stated  maturity and overdrafts
           are  reported  as due in one year or  less.  This  schedule  does not
           reflect  the  effects  of  possible  prepayments  or  enforcement  of
           due-on-sale clauses. Management expects prepayments will cause actual
           maturities to be shorter.
<TABLE>
<CAPTION>


                                     Balance                        Due during years ended September 30,
                                   Outstanding                                         2003        2005        2010        2015
                                at September 30,                                       and         to          to           and
                                      1999        2000         2001       2002         2004        2009        2014       Following
                                      ----        ----         ----       ----         ----        ----        ----       ---------
                                                                          (In thousands)
Mortgage Loans
<S>                                <C>          <C>         <C>        <C>         <C>         <C>          <C>          <C>
      Residential                  $ 191,480    $     29    $   190    $    264    $  1,266    $  10,809    $ 44,664     $ 134,258
      Residential construction        11,158      10,752        406           -           -            -           -             -
      Multi-family                     3,299          80         40       1,132       1,906           71          70             -

Commercial and other Loans
      Commercial loans                47,399      15,529        676       2,743      23,969        3,763         719             -
      Home equity and
          second mortgage             13,308         517        292         366       6,426        5,471          81           155
      Financing leases                    17           -          -           -           -           17           -             -
      Other                            4,461         290        341         781       2,755          215           -            79
                                   ---------    --------    -------    --------    --------    ---------    --------     ---------

      Total                        $ 271,122    $ 27,197    $ 1,945    $  5,286    $ 36,322    $  20,346    $ 45,534     $ 134,492
                                   =========    ========    =======    ========    ========    =========    ========     =========
</TABLE>


The following  table sets forth, as September 30, 1999, the dollar amount of all
loans due  after one year  which  have  fixed  interest  rates and  floating  or
adjustable interest rates.
<TABLE>
<CAPTION>
                                                     Due After September 30, 2000
                                                               Variable
                                              Fixed Rates        Rates           Total
                                                            (In thousands)
Mortgage loans
<S>                                           <C>             <C>            <C>
      Residential                             $     49,093    $   142,358    $  191,451
      Multi-family                                   3,126             93         3,219
      Residential construction                         169            237           406

Commercial and other loans
      Commercial loans                              31,290            580        31,870
      Home equity and second mortgage                8,432          4,359        12,791
      Financing leases                                  17              -            17
      Other                                          4,092             79         4,171
                                              ------------    -----------    ----------

      Total                                   $     96,219    $   147,706    $  243,925
                                              ============    ===========    ==========
</TABLE>





                                     - 19 -
<PAGE>

III.     LOAN PORTFOLIO (Continued)

         C.    Risk Elements

              1.  Nonaccrual, Past Due and Restructured Loans

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


                                                                  At September 30,
                                       1999            1998             1997            1996              1995
                                       ----            ----             ----            ----              ----
                                                               (Dollars in thousands)

<S>                                 <C>              <C>             <C>             <C>              <C>
Accruing loans delinquent
  more than 90 days                 $       96       $     124       $       261     $      198       $       308
Non-accruing loans (1)                       -               -                 -              -                 -
Troubled debt
  restructurings                             -               -                 -              -                 -
                                    ----------       ---------       -----------     ----------       -----------
      Total non-performing
        loans                               96             124               261            198               308
Real estate owned, net                     100             145                 -              -                18
                                    ----------       ---------       -----------     ----------       -----------

      Total non-performing
        assets                      $      196       $     269       $       261     $      198       $       326
                                    ==========       =========       ===========     ==========       ===========

Non-performing loans to
  total loans, net (2)                   .03%             .05%             .14%           .13%              .25%
Non-performing assets to
  total assets                           .06%             .09%             .10%           .09%              .17%
</TABLE>


Management  believes that the allowance for loan losses balance at September 30,
1999 is adequate to absorb any losses on  nonperforming  loans, as the allowance
balance is  maintained by  management  at a level  considered  adequate to cover
losses that are currently  anticipated  based on past loss  experience,  general
economic  conditions,  information about specific borrower situations  including
their financial  position and collateral values, and other factors and estimates
which are subject to change over time.


--------------------------------------------------------------------------------
(1)  MFB Corp.  generally  places  mortgage  loans on a  nonaccrual  status when
     serious  doubt exists as to their  collectibility.  At September  30, 1999,
     there were no loans on nonaccrual.

(2)  Total loans less deferred net loan fees and loans in process.


                                     - 20 -
<PAGE>

III.     LOAN PORTFOLIO (Continued)

         C.     Risk Elements (Continued)

                2.    Potential Problem Loans

                      As of September  30, 1999,  there are no loans where there
                      are serious  doubts as to the  ability of the  borrower to
                      comply with present loan repayment terms, which may result
                      in  disclosure  of such loans  pursuant  to Item  III.C.1.
                      Consideration was given to loans classified for regulatory
                      purposes  as  loss,  doubtful,   substandard,  or  special
                      mention  that have not been  disclosed in Section 1 above.
                      Management  believes  that these loans do not represent or
                      result  from  trends  or  uncertainties  which  management
                      reasonably expects will materially impact future operating
                      results,  liquidity,  or capital resources,  or management
                      believes  that  these  loans  do  not  represent  material
                      credits about which management is aware of any information
                      which causes  management to have serious  doubts as to the
                      ability  of  such   borrowers  to  comply  with  the  loan
                      repayment terms.

                3.    Foreign Outstandings

                      None

                4.    Loan Concentrations

                      MFB  Corp.   historically  has  concentrated  its  lending
                      activities  on the  origination  of loans secured by first
                      mortgage   liens  for  the   purchase,   construction   or
                      refinancing  of  one-to-four   family   residential   real
                      property.  These  loans  continue to be the major focus of
                      MFB  Corp.'s  loan  origination  activities,  representing
                      74.74% of MFB Corp.'s  total loan  portfolio  at September
                      30, 1999.


         D.     Other Interest-Earning Assets

                There are no other interest-earning  assets, other than $100,000
                in foreclosed  real estate owned, as of September 30, 1999 which
                would be required to be  disclosed  under Item III.  C.1 or 2 if
                such assets were loans.





                                     - 21 -
<PAGE>

     IV.   SUMMARY OF LOAN LOSS EXPERIENCE

          A.   The allowance for loan losses is maintained through the provision
               for loan losses, which is charged to earnings.  The provision for
               loan losses is determined in conjunction with management's review
               and evaluation of current economic conditions (including those of
               MFB Corp.'s lending area), changes in the characteristic and size
               of the loan portfolio, loan delinquencies (current status as well
               as past  and  anticipated  trends)  and  adequacy  of  collateral
               securing  loan   delinquencies,   historical  and  estimated  net
               charge-offs,  and  other  pertinent  information  derived  from a
               review  of the  loan  portfolio.  In  management's  opinion,  MFB
               Corp.'s   allowance   for  loan  losses  is  adequate  to  absorb
               anticipated future losses from loans at September 30, 1999.

               The  following  table  analyzes   changes  in  the   consolidated
               allowance  for loan  losses  during  the past  five  years  ended
               September 30, 1999.
<TABLE>
<CAPTION>


                                                              Years Ended September 30,
                                       1999            1998             1997            1996              1995
                                       ----            ----             ----            ----              ----
                                                               (Dollars in thousands)
Balance of allowance at
<S>                               <C>              <C>             <C>               <C>             <C>
  beginning of period             $        454     $       370     $         340     $      310      $        280
Add
      Recoveries of loans
        previously charged-
        off--residential real
        estate loans                         -               -                 -              -                 -
Less charge offs
      Residential real estate
        loans                                -               -                 -              -                 -
      Commercial real estate
        loans                               45              36                 -              -                 -
      Consumer loans                         1               -                 -              -                 -
                                  ------------     -----------     -------------     ----------      ------------
Net charge-offs                             46              36                 -              -                 -
Provisions for loan losses                 230             120                30             30                30
                                  ------------     -----------     -------------     ----------      ------------

Balance of allowance at
  end of period                   $        638     $       454     $         370     $      340      $        310
                                  ============     ===========     =============     ==========      ============

Net charge-offs to total
  average loans out-
  standing for period                  *.02%             *.02%                 -%             -%                -%
Allowance at end of
  period to total loans, net
  at end of period (1)                 *.24%             *.20%               .20%           .22%              .26%
Allowance to total non-
  performing loans at
  end of period                      664.58%           366.13%            141.76%        171.72%           100.65%
</TABLE>



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



                                     - 22 -
<PAGE>



     IV.   SUMMARY OF LOAN LOSS EXPERIENCE (Continued)


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

<TABLE>
<CAPTION>
                                                                            September 30,
                               -------------------------------------------------------------------------------------------------
                                      1999                 1998                1997               1996               1995
                               ------------------   -------------------   ----------------  ------------------  ----------------
                                          Percent               Percent            Percent             Percent           Percent
                                         of loans              of loans           of loans            of loans          of loans
                                         in each               in each            in each             in each           in each
                                         category              category           category            category          category
                                         to total              to total           to total            to total          to total
                                Amount    Loans     Amount      Loans     Amount   Loans     Amount    Loans    Amount    Loans
                                ------    -----     ------      -----     ------   -----     ------    -----    ------    -----
                                                                                      (Dollars in thousands)
Balance at end of period
  applicable to

<S>                             <C>       <C>        <C>       <C>        <C>      <C>       <C>       <C>       <C>      <C>
      Residential               $ 110     70.62%     $ 181     78.49%     $ 323    86.91%    $ 311     92.87%    $ 281    97.60%

      Commercial                  387     17.48        213     13.19         19     4.66         1       .57         1      .17

      Multi-family                  3      1.22          1       .05          1      .07         1       .10         1      .15

      Residential construction     11      4.12          8      3.53          1     4.35         1      3.23         1     1.72

      Consumer loans (1)           45      6.56         26      4.74          1     4.01         1      3.23         1      .36

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

          Total                 $ 638    100.00%     $ 454    100.00%     $ 370   100.00%    $ 340    100.0%     $ 310   100.00%
                                =====   =======      =====   =======      =====   ======     =====    =====      =====   ======
</TABLE>


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



                                     - 23 -
<PAGE>

V.       DEPOSITS

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

<TABLE>
<CAPTION>

                                                            1 9 9 9                    1 9 9 8                 1 9 9 7
                                                            -------                    -------                 -------
                                                      Average    Average         Average    Average      Average    Average
                                                      Amount      Rate           Amount      Rate        Amount      Rate
                                                                               (Dollars in thousands)
<S>                                               <C>              <C>       <C>              <C>     <C>             <C>
         Savings accounts                         $     12,277     2.39%     $     10,737     2.52%   $     10,359    2.68%
         Now and money market accounts                  36,422     2.75            30,065     2.83          26,770    2.89
         Certificates of deposit                       137,734     5.29           130,350     5.57         126,202    5.65
         Demand deposits (noninterest-bearing)           6,763                      3,554                    1,274
                                                  ------------               ------------             ------------

                                                  $    193,196               $    174,706             $    164,605
                                                  ============               ============             ============
</TABLE>



        Maturities  of time  certificates  of deposit and other time deposits of
$100,000 or more outstanding at September 30, 1999 is summarized as follows:

                                                               Amount
                                                           (In thousands)

         Three months or less                              $     11,679
         Over three months and through six months                 6,349
         Over six months and through twelve months                5,683
         Over twelve months                                       6,541
                                                           ------------

                                                           $     30,252
                                                           ============





                                     - 24 -
<PAGE>

VI.      RETURN ON EQUITY AND ASSETS

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


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

<S>                                         <C>                <C>               <C>
Average total assets                        $    336,193       $    277,897      $    237,050
                                            ============       ============       ===========

Average shareholders' equity                $     31,623       $     33,404      $     34,346
                                            ============       ============       ===========

Net income                                  $      2,204       $      2,236      $      2,002
                                            ============       ============       ===========

Return on average total assets                       .66%               .80%             .84%
                                            ============       ============       ===========

Return on average shareholders' equity              6.97%              6.69%            5.83%
                                            ============       ============       ===========

Dividend payout ratio (dividends
  declared per share divided by net
  income per share)                                22.76%             23.26%           26.45%
                                            ============       ============       ===========

Average shareholders' equity
  to average total assets                           9.41%             12.02%           14.49%
                                            ============       ============       ===========
</TABLE>



VII.     SHORT-TERM BORROWINGS

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


                                                                               September 30,
                                                              ---------------------------------------------
                                                                 1999              1998             1997
                                                                 ----              ----             ----
                                                                          (Dollars in thousands)
Maximum Balance:
<S>                                                           <C>             <C>               <C>
FHLB advances.............................................    $   110,226     $    92,726       $    47,500
Securities sold under agreements to repurchase..                    7,079           3,882               389

Average Balance:
FHLB advances:............................................        104,894          66,123            34,960
Securities sold under agreements to repurchase............          3,892           1,647                97

Average Rate Paid On:
FHLB advances.............................................           5.45%           5.67%             5.64%
Securities sold under agreements to repurchase............           3.80             4.07             4.12

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

                                                                               September 30,
                                                              ----------------------------------------------
                                                                 1999              1998             1997
                                                                 ----              ----             ----
                                                                          (Dollars in thousands)
Amounts Outstanding:
FHLB advances.............................................    $   104,226     $    92,726       $    47,500
Securities sold under agreements to repurchase............          6,566           2,366               389

Weighted Average Interest Rate:
FHLB Advances.............................................           5.37%           5.42%             5.66%
Securities sold under agreements to repurchase............           3.52            4.02              4.25
</TABLE>




                                     - 25 -
<PAGE>

                                   COMPETITION

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

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

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

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

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


                                     - 26 -
<PAGE>


                                   REGULATION

General

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

The OTS has extensive authority over the operations of savings institutions.  As
part of this authority,  the Bank is required to file periodic  reports with the
OTS and is subject to periodic  examinations  by the OTS and the FDIC.  The last
regular  OTS  examination  of the Bank was as of  January  5,  1999.  When these
examinations  are conducted by the OTS, the examiners may require the Company to
provide  for  higher  general  or  specific  loan  loss  reserves.  To fund  the
operations  of the OTS, all savings  institutions  are subject to a  semi-annual
assessment,  based on the total assets, condition, and complexity of operations.
The Bank's OTS  assessment  for the fiscal year ended  September  30, 1999,  was
approximately $71,000.

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

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


                                     - 27 -
<PAGE>


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

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

Safety and Soundness Standards

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

Federal Home Loan Bank System

The Bank is a member of the FHLB system,  which  consists of 12 regional  banks.
The Federal Housing Finance Board ("FHFB"), an independent agency,  controls the
FHLB System  including  the FHLB of  Indianapolis.  The FHLB  System  provides a
central  credit  facility  primarily  for  member  financial  institutions.   At
September 30, 1999, the Bank's  investment in stock of the FHLB of  Indianapolis
was $5.5 million.



                                     - 28 -
<PAGE>

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

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

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

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

Insurance of Deposits

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

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



                                     - 29 -
<PAGE>

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

In addition to the assessment for deposit  insurance,  institutions are required
to pay on  bonds  issued  in the  late  1980s by the  Financing  Corporation  to
recapitalize  the predecessor to the SAIF.  During 1998,  Financial  Corporation
payments for SAIF members approximated 6.10 basis points, while BIF members paid
1.22 basis points. By law, there will be equal sharing of Financing  Corporation
payments between the members of both insurance funds January 1, 2000. The Bank's
annual  deposit  insurance  premium  for the  year  ended  September  30,  1999,
including the Financial Corporation payments,  was approximately  $113,000 based
upon its current risk  classification  and the new assessment  schedule for SAIF
insured institutions. These premiums are subject to change in future periods.

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

Regulatory Capital

Currently,   savings   institutions   are  subject  to  three  separate  minimum
capital-to-assets  requirements:  (i) a leverage limit,  (ii) a tangible capital
requirement,  and (iii) a risk-based  capital  requirement.  The leverage  limit
requires that savings  associations  maintain  "core  capital" of at least 4% of
total assets. Core capital is generally defined as common  stockholders'  equity
(including retained income), noncumulative perpetual preferred stock and related
surplus,  certain minority equity interests in subsidiaries,  purchased mortgage
servicing  rights and purchased  credit card  relationships  (subject to certain
limits), less nonqualifying intangibles. Under the tangible capital requirement,


                                     - 30 -
<PAGE>

a savings bank must maintain  tangible capital (core capital less all intangible
assets except  purchased  mortgage  servicing  rights and purchased  credit card
relationships  which may be included subject to certain limits) of at least 1.5%
of total assets. Under the risk-based capital requirements,  a minimum amount of
capital must be maintained  by a savings bank to account for the relative  risks
inherent in the type and amount of assets held by the  savings  bank.  The total
risk-based  capital  requirement  requires a savings  bank to  maintain  capital
(defined  generally  for these  purposes as core capital plus general  valuation
allowances and permanent or maturing capital instruments such as preferred stock
and  subordinated  debt less assets  required to be  deducted)  equal to 8.0% of
risk-weighted  assets.  Assets are  ranked as to risk in one of four  categories
(0-100%)  with a credit  risk-free  asset such as cash  requiring no  risk-based
capital and an asset with a significant  credit risk such as a non-accrual  loan
being  assigned a factor of 100%.  At September  30, 1999,  based on the capital
standards then in effect,  the Bank was in compliance  with its fully  phased-in
capital requirements.

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

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

Prompt Corrective Action

Certain  regulatory  action is mandated or recommended for savings  institutions
that   are   deemed   to   be   well   capitalized,    adequately   capitalized,
undercapitalized,      significantly     undercapitalized     and     critically
undercapitalized. At each successively lower capital category, an institution is
subject to more restrictive and numerous  mandatory or discretionary  regulatory
actions  or  limits,  and the OTS has less  flexibility  in  determining  how to
resolve the problems of the  institution.  OTS regulations  define these capital
levels as follows: (1) well-capitalized  institutions must have total risk-based
capital of at least 10%, core risk-based capital  (consisting only of items that
qualify for inclusion in core capital) of at least 6% and a leverage ratio of at
least 5% and are not  subject  to any order or written  directive  of the OTS to
maintain  a specific  capital  level for any  capital  measure;  (2)  adequately
capitalized  associations  are those that meet the  regulatory  minimum of total


                                     - 31 -
<PAGE>

risk-based  capital of 8%, core risk-based capital of 4% and a leverage ratio of
4%, but which are not well capitalized;  (3)  undercapitalized  institutions are
those that do not meet the requirements for adequately capitalized institutions,
but   that   are   not   significantly   undercapitalized;   (4)   significantly
undercapitalized  institutions  have total  risk-based  capital of less than 6%,
core  risk-based  capital of less than 3% and a leverage  ratio of less than 3%;
and (5) critically undercapitalized institutions are those with tangible capital
of less  than 2% of  total  assets.  In  addition,  the  OTS  can  downgrade  an
institution's designation  notwithstanding its capital level, based on less than
satisfactory  examination  ratings  in  areas  other  than  capital  or  if  the
institution  is  deemed  to  be  in  an  unsafe  or  unsound   condition.   Each
undercapitalized  institution must submit a capital  restoration plan to the OTS
within 45 days  after it  becomes  undercapitalized.  Such  institution  will be
subject  to  increased  monitoring  and asset  growth  restrictions  and will be
required to obtain prior  approval for  acquisitions,  branching and engaging in
new lines of business. Significantly undercapitalized institutions must restrict
the  payment  of  bonuses  and  raises  to  their  senior  executive   officers.
Furthermore,  a  critically  undercapitalized  institution  must  be  placed  in
conservatorship   or   receivership   within  90  days   after   reaching   such
capitalization  level,  except  under  limited  circumstances.  It will  also be
prohibited from making payments on any subordinate  debt securities  without the
prior  approval  of the FDIC  and  will be  subject  to  significant  additional
operating  restrictions.  The Bank's  capital at September  30, 1999,  meets the
standards for a well-capitalized institution.

Capital Distributions Regulation

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


Real Estate Lending Standards

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



                                     - 32 -
<PAGE>

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

Federal Reserve System

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

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

Transactions with Affiliates

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

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

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

The restrictions  contained in Section 22(h) of the Federal Reserve Act on loans
to  executive  officers,  directors  and  principal  shareholders  also apply to
savings associations.  Under Section 22(h), loans to an executive officer and to
a  greater  than  10%  shareholder  of a  savings  bank  (18%  in  the  case  of
institutions  located  in an area  with less then  30,000  in  population),  and
certain  affiliated  entities of either,  may not exceed together with all other
outstanding  loans to such  person and  affiliated  entities  the  association's
loan-to-one-borrower   limit  (generally  equal  to  15%  of  the  institution's
unimpaired capital and surplus and an additional 10% of such capital and surplus
for loans fully secured by certain readily marketable collateral). Section 22(h)
also  prohibits  certain  loans,  above amounts  prescribed  by the  appropriate
federal banking agency,  to directors,  executive  officers and greater than 10%


                                     - 33 -
<PAGE>

shareholders  of a savings bank, and their  respective  affiliates,  unless such
loan is  approved  in  advance by a majority  of the board of  directors  of the
institution  with any  "interested"  director not  participating  in the voting.
Currently,  the FRB requires  board of director  approval  for certain  loans to
directors, officers, and 10% shareholders (including all other outstanding loans
to such  persons)  above the greater of $25,000 or 5% of capital and surplus (up
to  $500,000).  Further,  the FRB requires  that loans to  directors,  executive
officers and principal  shareholders be made on terms  substantially the same as
offered in comparable transactions to other unaffiliated parties.  Section 22(g)
of the Federal Reserve Act, which imposes limitations on loans made to executive
officers, also applies to savings institutions.

Holding Company Regulation

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

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

The Company's Board of Directors  presently  intends to operate MFB as a unitary
savings and loan holding  company.  Under  current law,  there are  generally no
restrictions  on the  permissible  business  activities of a unitary savings and
loan holding company.  However,  if the Director of OTS determines that there is
reasonable  cause to believe that the continuation by a savings and loan holding
company of an  activity  constitutes  a serious  risk to the  financial  safety,
soundness,  or stability of its subsidiary savings bank, the Director of the OTS
may impose  such  restrictions  as deemed  necessary  to  address  such risk and
limiting (i) payment of dividends by the savings bank, (ii) transactions between
the savings bank and its  affiliates,  and (iii) any  activities  of the savings
bank that  might  create a  serious  risk that the  liabilities  of the  holding
company and its affiliates may be imposed on the savings bank.



                                     - 34 -
<PAGE>

Notwithstanding the above rules as to permissible business activities of unitary
savings and loan holding  companies,  if the savings bank  subsidiary  of such a
holding  company fails to meet the Qualified  Thrift Lender  ("QTL") test,  then
such unitary holding company would become subject to the activities restrictions
applicable to multiple  holding  companies.  See-"Qualified  Thrift  Lender." At
September 30, 1999, the Bank's asset  composition was in excess of that required
to qualify the Bank as a Qualified Thrift Lender.

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

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

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


Branching

The OTS has adopted regulations which permit nationwide  branching to the extent
permitted  by  federal   statute.   Federal   statutes  permit  federal  savings
institutions to branch outside of their home state if the institution  meets the
domestic building and loan test in Section 7701 (a)(l 9) of the Internal Revenue
Code of 1986, as amended (the "Code") or the asset  composition  test of Section
770 1 (c) of the  Code.  Branching  that  would  result  in the  formation  of a
multiple savings and loan holding company  controlling  savings  institutions in
more than one state is  permitted  if the law of the state in which the  savings
bank to be  acquired  is  located  specifically  authorizes  acquisition  of its
state-chartered  institutions by  state-chartered  institutions or their holding
companies in the state where the  acquiring  institution  or holding  company is
located.



                                     - 35 -
<PAGE>

Federal Securities Law

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

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

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



                                     - 36 -
<PAGE>

Qualified Thrift Lender

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

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

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

At September 30, 1999, 88.24% of the Bank's portfolio assets (as defined on that
date) were invested in qualified  thrift  investment  (as defined on that date),
and  therefore  the Bank's asset  composition  was in excess of that required to
qualify  the Bank as a QTL.  Also,  the Bank does not  expect  to  significantly
change its lending or investment  activities  in the near future,  and therefore
expects  to  continue  to  qualify  as a QTL,  although  there  can  be no  such
assurance.

Community Reinvestment Act Matters

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




                                     - 37 -
<PAGE>

                                    TAXATION

Federal Taxation

Historically,  savings  institutions,  such as the Bank,  had been  permitted to
compute  bad debt  deductions  using  either the bank  experience  method or the
percentage of taxable income method.  However, in August, 1996,  legislation was
enacted that repealed the reserve  method of accounting  for federal  income tax
purposes.  As a result, the Bank must recapture that portion of the reserve that
exceeds the amount that could have been taken  under the  experience  method for
post-1987  tax years.  The  recapture is occuring  over a six-year  period,  the
commencement  of which began with the Bank's  taxable year ending  September 30,
1999, since the Bank met certain residential lending requirements.  In addition,
the pre-1988 reserve,  for which no deferred taxes have been recorded,  will not
have to be recaptured  into income unless (i) the Bank no longer  qualifies as a
bank under the Code, or (ii) excess dividends or  distributions  are paid out by
the  Bank.  The  total  amount  of bad debt to be  recaptured  is  approximately
$1,310,000.

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

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

State Taxation

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

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

                                     - 38 -
<PAGE>



Item 2.  Properties.

At September 30, 1999, MFB Financial conducted its business from its main office
at 121 South Church  Street,  Mishawaka,  Indiana  46544,  and five full service
branch offices. The main office and four branch offices in Mishawaka, South Bend
and  Elkhart  are owned by MFB  Financial,  while the  Goshen  branch  office is
leased.

The following table provides certain information with respect to MFB Financial's
offices as of September 30, 1999:

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

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

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

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

Branch Office
Wal*Mart Super Store
2304 Lincolnway East
Goshen, In. 46526                     1997                   500

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

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

MFB Financial  owns  computer and data  processing  equipment  which is used for
transaction processing and accounting.

MFB Financial also has contracted for the date processing and reporting services
of BISYS, Inc. in Houston,  Texas. The cost of these data processing services is
approximately $32,000 per month.



                                     - 39 -
<PAGE>


Item 3.  Legal Proceedings.

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

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

No matter was submitted to a vote of MFB's shareholders during the quarter ended
September 30,1999.



                                     - 40 -
<PAGE>

                                     PART II

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

The  Bank  converted  from  a   federally-chartered   mutual  savings  and  loan
association to a federally-chartered stock savings bank effective March 24, 1994
(the "Conversion") and simultaneously formed a savings and loan holding company,
MFB. MFB's common stock,  without par value ("Common  Stock"),  is quoted on the
National  Association of Security Dealers Automated Quotation System ("NASDAQ"),
National Market System,  under the symbol "MFBC." The following table sets forth
the high and low bid prices as reported by NASDAQ,  and  dividends  declared per
share  for  Common  Stock  for the  quarters  indicated.  Such  over-the-counter
quotations reflect  inter-dealer  prices,  without retail mark-up,  mark-down or
commission, and may not necessarily represent actual transactions.

           Quarter                                               Dividends
           Ended            High Trade       Low Trade           Declared
December 31, 1997             $30.38         $22.50           $ .08/share
March 31, 1998                 30.38          26.25             .085/share
June 30, 1998                  27.75          24.00             .085/share
September 30, 1998             25.50          18.00             .085/share
December 31, 1998              23.00          18.00             .085/share
March 31, 1999                 23.00          21.50             .09/share
June 30, 1999                  22.25          21.25             .09/share
September 30, 1999             22.00          19.75             .09/share

As of September 30, 1999, there were approximately 608 shareholders of record of
MFB's Common Stock.

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

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

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

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



                                     - 41 -
<PAGE>

Item 6.  Selected Financial Data.

The  information  required  by this item is  incorporated  by  reference  to the
material under the heading "Selected  Consolidated  Financial Data" on page 2 of
MFB's Annual Report to Shareholders for its fiscal year ended September 30, 1999
(the "Annual Report").

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

The  information  required by this item is  incorporated by reference to pages 3
through 16 of the Annual Report.

Item 7A. Quantitative and Qualitative Disclosures About Market Risks

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

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



                                     - 42 -
<PAGE>

Presented below, as of September 30, 1999, is an analysis of the Bank's interest
rate risk as  measured  by changes  in NPV for an  instantaneous  and  sustained
parallel shift in the yield curve,  in 100 basis point  increments,  up and down
300 basis points, in accordance with OTS regulations.

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

As  illustrated  in the June 30, 1998 table,  the Company's NPV declines both in
rising and falling interest rate environments.  This phenomenon occurs primarily
as a result of the  historically  low interest rate  environment that existed at
June 30, 1998,  the heavy  concentration  of  adjustable  rate loans in the loan
portfolio and the related prepayment assumption used in the OTS model.

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

                              At June 30, 1999
                            (Dollars in thousands)
           Change in
        Interest Rates
        (Basis Points)               $ Change                   % Change

            +300bp                $(13,302)                       (34%)
            +200 bp                   (8,254)                     (21%)
            +100 bp                   (3,657)                      (9%)
               0 bp
            -100 bp                    1,526                        4%
            -200 bp                    1,525                        4%
            -300 bp                    1,810                        5%



                               At June 30, 1998
                             (Dollars in thousands)
           Change in
        Interest Rates
        (Basis Points)               $ Change                   % Change

            +300bp                $( 7,027)                       (18%)
            +200 bp                   (3,801)                     (10%)
            +100 bp                   (1,125)                      (3%)
               0 bp
            -100 bp                     ( 821)                     (2%)
            -200 bp                   (2,890)                      (8%)
            -300 bp                   (4,847)                     (13%)






                                     - 43 -
<PAGE>

Item 8.  Financial Statements and Supplementary Data.

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

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

Not Applicable.



                                     - 44 -
<PAGE>


                                    PART III

Item 10.          Directors and Executive Officers of the Registrant.

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

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

       Name                                            Position

Charles J. Viater                President and Chief Executive Officer of MFB
                                   and MFB Financial
Donald R. Kyle                   Executive Vice President and Chief Operating
                                   Officer of MFB Financial
M. Gilbert Eberhart              Secretary of MFB and MFB Financial
Timothy C. Boenne                Vice President and Controller of MFB Financial
Michael J. Portolese             Vice President of MFB Financial
William L. Stockton, Jr.         Senior Vice President of MFB Financial

Charles J. Viater (age 45) has served as President and Chief  Executive  Officer
of MFB  Financial  since  September  1,  1995.  Previously,  he  served as Chief
Financial  Officer of Amity  Bancshares  and Executive  Vice  President of Amity
Federal Savings in Tinley Park, Illinois.

Donald  R.  Kyle  (age 52) has  served as  Executive  Vice  President  and Chief
Operating  Officer of MFB Financial since July, 1999.  Previously,  he served as
Regional President of a midwest money center bank.

M. Gilbert Eberhart (age 65) has served as Secretary of MFB Financial since 1987
and of MFB since its organization. He is also a dentist based in Mishawaka.

Timothy C. Boenne (age 53) has served as Vice  President  and  Controller of MFB
Financial since 1992.

Michael J.  Portolese  (age 48) has served as Vice  President  of MFB  Financial
since  1977.  He  also  serves  as  MFB  Financial's   Support   Services  Group
Administrator, Security Director and Compliance Coordinator.

William  L.  Stockton,  Jr.  (age 52)  serves as Senior  Vice  President  of MFB
Financial  and has been in  charge  of  residential  lending  operations  at MFB
Financial since 1992.




                                     - 45 -
<PAGE>

Item 11.          Executive Compensation

The information required by this item with respect to executive  compensation is
incorporated by reference to pages 4 through 6 of the Proxy Statement.

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

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

Item 13.          Certain Relationships and Related Transactions.

The  information  required by this item is  incorporated by reference to pages 6
and 7 of the Proxy Statement.



                                     - 46 -
<PAGE>

                                     PART IV

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

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

                                                           Pages in the Annual
                                                          Report to Shareholders
Financial Statements

Report of Independent Auditors                                        18

Consolidated Balance Sheets at September 30, 1999 and 1997            19

Consolidated Statements of Income for the Years                       20
     Ended September 30, 1999,
     1998 and 1997

Consolidated Statements of Shareholders' Equity                       21
     for the Years ended September 30, 1999, 1998 and 1997

Consolidated Statements of Cash Flows for the                       22-23
     Years ended September 30, 1999, 1998 and 1997

Notes to Consolidated Financial Statements                          24-43


(b) MFB filed four Form 8-K reports during the year ended September 30, 1999.
 Date of report: December 21, 1998
 Item reported :      News release dated October 21, 1998,  regarding
                      the  announcement  of  its  fourth  quarter  earnings  and
                      declaration of an $.085 per share cash  dividend,  payable
                      on  November  17,  1998,  to  shareholders  of  record  on
                      November 3, 1998.

Date of report: February 18, 1999
 Item reported:       News release dated January 20, 1999 regarding the
                      announcement of first quarter  earnings and declaration of
                      a $.09 per share cash dividend payable on February 16,
                      1999, to holders of record on February 2, 1999.

Date of report: May 14, 1999
Item reported:        News release dated April 21, 1999, regarding the
                      announcement of second quarter  earnings and declaration
                      of a $.09 per share cash dividend payable on May 18, 1999
                      to holders of record on May 4, 1999.



                                     - 47 -
<PAGE>


Date of report: August 13, 1999
 Item reported : News release dated July 21, 1999  regarding the
                      announcement of third quarter  earnings and declaration of
                      a $.09 per share cash dividend  payable on August 17, 1999
                      to holders of record on August 3, 1999.


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

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



                                     - 48 -
<PAGE>

                                   SIGNATURES

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

                                    MFB CORP.

Date: December 29, 1999                        By: /s/ Charles J. Viater
                                               --------------------------------
                                               Charles J. Viater, President and
                                               Chief Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the  report  has been  signed  below by the  following  persons on behalf of the
Registrant and in the capacities indicated on this 29th day of December, 1999.



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

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


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


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


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




                                     - 49 -
<PAGE>

                                  EXHIBIT LIST
Exhibit Index                                                              Page

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

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

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

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

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

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

     10(5)     Employment  Agreement  between MFB Financial and Michael J.
               Portolese dated December 1, 1998. *

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

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

     10(8)     Employment  Agreement  between MFB  Financial and Donald R.
               Kyle dated July 1, 1999. *

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

     13        Shareholder Annual Report.

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

     23        Consent of Crowe, Chizek and Company LLP.

     27        Financial Data Schedule

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


**   See  Notes 1 and 2 of Notes  to  Consolidated  Financial  Statements,
     included in the 1999  Shareholder  Annual Report  included as Exhibit
     13.

                                     - 50 -