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                                    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, 2004
                                       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)

4100 Edison Lakes Parkway, P.O. Box 528 Mishawaka, Indiana             46546
 (Address of principal executive offices)                             Zip Code

Registrant's telephone number, including area code:
                                                                 (574) 273-7600

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. 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. _______

Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act)  Yes _____     No   X
                                                    -----

The aggregate market value of the issuer's voting stock held by non-affiliates,
as of March 31, 2004, was $35,228,798.

The number of shares of the registrant's common stock, without par value,
outstanding as of December 5, 2004, was 1,331,460 shares.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of Registrant's Annual Report to Shareholders for the fiscal year ended
September 30, 2004 are incorporated by reference into Part II.

Portions of the Proxy Statement for the 2004 Annual Meeting of the Shareholders
are incorporated into Part I and Part III.

                            Exhibit Index on Page 49
                               Page 1 of 52 pages


<PAGE>


                                    MFB CORP.
                                    Form 10-K
                                      INDEX
<TABLE>
<CAPTION>


PART I
<S>  <C>                                                                                                          <C>
Item 1.             Business                                                                                      1
Item 2.             Properties                                                                                   41
Item 3.             Legal Proceedings                                                                            42
Item 4.             Submission of Matters to a Vote of Security Holders                                          42
Item 4.5            Executive Officers of Registrant                                                             43

PART II

Item 5.             Market for Registrant's Common Equity, Related Stockholder
                           Matters and Issuer Purchases of Equity Securities                                     44
Item 6.             Selected Financial Data                                                                      45
Item 7.             Management's Discussion and Analysis of Financial
                           Condition and Results of Operations                                                   45
Item 7A.            Quantitative and Qualitative Disclosures
                           About Market Risk                                                                     45
Item 8.             Financial Statements and Supplementary Data                                                  45
Item 9.             Changes in and Disagreements with Accountants on
                           Accounting and Financial Disclosure                                                   45
Item 9A.            Controls and Procedures                                                                      45
Item 9B.            Other Information                                                                            45

PART III

Item 10.            Directors and Executive Officers of the Registrant                                           46
Item 11.            Executive Compensation                                                                       46
Item 12.            Security Ownership of Certain Beneficial Owners
                           and Management and Related Stockholder Matters                                        46
Item 13.            Certain Relationships and Related Transactions                                               47
Item 14.            Principal Accountant Fees and Services                                                       47

PART IV

Item 15.            Exhibits and Financial Statement Schedules                                                   47
Signatures                                                                                                       48
Exhibit List                                                                                                     49
Certifications                                                                                                   51

</TABLE>

                                     PART 1


Item 1.           Business.

General

MFB Corp. ("MFB" or the "Company") is an Indiana corporation organized in
December, 1993, and parent company of its wholly owned savings bank subsidiary,
MFB Financial ("MFB Financial" or the "Bank"). MFB Corp. became a unitary
savings and loan holding company upon the conversion of Mishawaka Federal
Savings 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.

In August 2004, MFB Financial completed the acquisition of certain assets and
assumption of certain liabilities of Sobieski Bank located in South Bend,
Indiana. MFB Financial paid Sobieski Bank $407,000 to acquire assets with a fair
value of $106.3 million and liabilities with a fair value of $105.9 million. The
Bank recorded intangibles of $5.1 million including goodwill of $2.4 million as
part of this transaction. The assets acquired included $7.3 million in cash,
$35.9 million in investments, $53.7 million in net loans and $9.4 million in
other assets. The liabilities assumed included $69.3 million in deposits, $35.7
million in FHLB advances and $884,000 in other liabilities. In addition, MFB
incurred $440,000 of professional fees related to this transaction.

MFB Financial offers a number of consumer and business 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) statement
and passbook savings accounts; (viii) certificates of deposit; (ix) consumer and
commercial demand deposit accounts; (x) individual retirement accounts; (xi)
trust, investment management; and brokerage services; and (xii) a variety of
insurance products through Mishawaka Financial Services, Inc., its insurance
agency subsidiary. The Bank's wholly-owned subsidiaries, MFB Investments I,
Inc., MFB Investments II, Inc. and MFB Investments, LP are Nevada corporations
and a Nevada limited partnership that manage a portion of the Bank's investment
portfolio. MFB Financial provides its banking services through its eleven
offices in St. Joseph and Elkhart counties, Indiana.

Lending Activities

General. The Company's principal source of revenue is interest income from
residential mortgage loans, construction loans, commercial loans and consumer
loans. MFB Financial has concentrated its mortgage 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. At
September 30, 2004, $200.3 million, or 50.1% of the Company's total loan
portfolio, consisted of mortgage loans and residential construction loans on
one-to-four family residential real property, and multi-family loans 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. In an effort to diversify
the asset mix of the Bank and enhance growth, commercial loans have been
generated over the past nine years. Commercial loans include term loans,
construction loans for commercial buildings, working capital lines of credit and
letters of credit. At September 30, 2004 Commercial loans totaled $161.0
million, or 40.2% of the Company's loan portfolio. Consumer loans include loans
secured by deposits, home equity and second mortgage loans, new and used car
loans, boat and recreational vehicle loans and personal loans. At September 30,
2004, 9.7% of the loan portfolio consists of consumer loans. MFB acquired $40.2
million of mortgage loans, $9.3 million of commercial loans and $4.7 million of
consumer loans as part of the acquisition mentioned above.

Residential Mortgage Loans. Residential mortgage loans consist of one-to-four
family loans. MFB Financial 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 the secondary market to assure that they meet
the investor quality guidelines.

A significant number of the residential mortgage loans made and retained in the
loan portfolio 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 seven
years. Initial offering rates, adjustment caps and margins are adjusted
periodically to reflect market conditions and the loans are underwritten to
secondary market standards to allow salability as an option.

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

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 $700,000 must be approved by a majority
of the four members of MFB Financial's Board of Directors who sit on the Loan
Committee. Loans under that amount are approved by loan officers subject to
their individual lending limit.

Construction Loans. MFB Financial offers construction loans on residential and
commercial real estate to builders or developers constructing such properties
and to owners who are to occupy the premises. Both residential and commercial
construction and development loans to builders are underwritten in the
commercial loan department with consistent underwriting standards, including
adequate collateral and sufficient debt coverage ratios. The loan reviews are
based on current economic conditions and personal guarantees are generally
required. Residential construction loans to owners who will occupy the premises
are underwritten in the mortgage loan department.

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 may also be charged for these loans. MFB
Financial normally requires an 80% or less 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 to
twelve months.

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

When appropriate, MFB Financial uses guaranteed lending programs, such as the
Small Business Administration and the Indiana Department of Finance Authority,
to reduce risk. Lending activity is controlled with individual loan officer
lending limits and a loan committee consisting of four board members and the
Commercial loan officers. 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 Bank'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 institution's ability to make consumer loans.

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

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 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
mitigate interest rate risk by committing forward sales utilizing a Best Efforts
program in which no penalties are incurred for non-delivery of a loan, or
utilize FHLMC mandatory delivery programs. Adjustable rate mortgages continue to
be originated by the Bank utilizing standard industry notes and mortgages. They
also can be sold 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. 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 corporate office.

A savings institution generally may not make any loans to one 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.

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 in-house
appraisers who are state-certified residential appraisers. 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 loan fee income from late
charges, origination fees, and miscellaneous fees. MFB Financial charges
application fees for most loan applications, but such fees 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.

Nonperforming and Classified Assets

Nonperforming assets. Nonperforming assets were $4.25 million and $4.55 million
at September 30, 2004 and 2003, respectively. Nonperforming assets include
nonperforming loans (loans delinquent 90 days or more and non-accrual loans),
other real estate owned, repossessions and nonperforming investment securities.
Included in nonperforming assets at September 30, 2004 are $999,000 of
nonperforming loans acquired from Sobieski Bank. Total nonperforming loans for
MFB Financial were $2.72 million and $3.84 million at September 30, 2004 and
2003, respectively. The decrease in nonperforming loans from last year was due
primarily to loan repayments, sale of collateral and charge off of those loans.
Impaired loans consist of non-accrual loans and other loans where principal and
interest may not be collected in accordance with the original loan terms.
Impaired loans were $2.2 million and $4.0 million at September 30, 2004 and
2003, respectively. Impaired loans declined from last year due to charge offs
and payments on those loans. Other real estate owned were $1.5 million and
$705,000 at September 30, 2004 and 2003, respectively.

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 Bank 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, 2004, the Bank had classified $13.2 million of its assets as
"special mention," $11.0 million as "substandard", $-0- as "doubtful", $-0- as
"loss" for regulatory purposes.

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 on pools or types of loans, which have been
established to recognize the inherent risk associated with lending activities.
Unlike specific allowances, general 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 the
identified loss to or to charge off such amount. An institution's determination
as to the classification of its assets and the amount of its valuation
allowances is subject to review by the OTS which can order the establishment of
additional general or specific loss allowances. MFB Financial regularly reviews
its loan portfolio to determine whether any loans require classification in
accordance with applicable regulations.

The Company has also adopted an internal risk classification system, and all
commercial loans are assigned a risk grade based on factors such as capacity to
repay, capital, collateral, character of the borrower, and economic conditions.
The risk grading process assists in identifying classified assets for regulatory
purposes, as well as determining the general and specific loss allowances for
classified commercial loans.

The Company maintains an internal loan review function reporting directly to the
President and Chief Executive Officer. Loan review focuses on the commercial
loan portfolio. The primary objectives are to evaluate the credit risk of
individual loan relationships, as well as the aggregate credit risk associated
with the entire commercial loan portfolio, to help ensure that underwriting
standards are followed and provide a foundation for assessing the adequacy of
the allowance for loan losses. The Company has established a goal of reviewing
60% of all commercial loans annually, based on dollar amounts outstanding.
During the twelve months ending September 30, 2004, 64% of the commercial loans
were reviewed at least once. The Company reviews all "special mention" loans at
least semi-annually and all "substandard," "doubtful" and "loss" assets at least
quarterly. In addition, a report of all classified assets is reviewed monthly by
the Loan Committee.

All mortgage and consumer 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.

When a loan is 30 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 or
repossession proceedings for any loan upon making a determination that it is
prudent to do so. All loans on which foreclosure or repossession proceedings
have been commenced are placed on non-accrual status.

Allowance for Loan Losses

The allowance for loan losses is maintained through the provision for loan
losses, which is charged to earnings. The provision is determined in conjunction
with management's review and evaluation of current economic conditions, changes
in the character and size of the loan and lease portfolio, delinquencies
(current status as well as past trends) and adequacy of collateral securing loan
delinquencies, historical and estimated net charge-offs, and other pertinent
information derived from a review of the loan and lease portfolio. During the
fiscal year ended September 30, 2004, the Bank continued to experience growth in
the commercial loan portfolio. Total commercial loans at September 30, 2004 were
$160.6 million compared to $130.4 million at September 30, 2003, a 23.3%
increase including $9.3 million of commercial loans acquired from Sobieski.
Concurrently, the Bank continued to improve its loan review and risk assessment
procedures and experienced improvement in the quality of its commercial loan
portfolio. Based on the factors above, the provision for loan losses was reduced
from $1.1 million during the year ended September 30, 2003 to $800,000 for the
year ending September 30, 2004. The balance of the allowance for loan losses at
September 30, 2004 was $6.1 million or 1.53% of loans, compared to $5.2 million
or 1.63% of loans, one year ago. In management's opinion, MFB Financial's
allowance for loan losses is adequate to absorb probable incurred losses
existing at September 30, 2004, in light of an improving loan portfolio offset
by an allowance determined to be necessary for of an additional $54.3 million in
new loans from the Sobieski acquisition.

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 ALCO Committee, is designed primarily to maximize the yield on the
investment portfolio subject to 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, municipal bonds, mortgage-backed securities,
corporate debt securities, equity securities and Federal Home Loan Bank ("FHLB")
stock. Investment securities increased from $50.0 million at September 30, 2003
to $79.0 million at September 30, 2004 primarily due to purchase of certain
assets and assumption of certain liabilities of Sobieski Bank, offset by
continued principal pay downs of the Company's mortgage-backed securities
related to the mortgage refinancing volume during the period. Investment
securities acquired from Sobieski Bank totaled $36 million. During the fiscal
year ended September 30, 2004, the Company recorded a $109,000 write down on
corporate stock held by MFB Corp. based on current estimates of fair value.

Management evaluates securities for other-than-temporary impairment at least on
a quarterly basis, and more frequently when economic or market concerns warrant
such evaluation. Consideration is given to (1) the length of time and the extent
to which the fair value has been less than cost, (2) the financial condition and
near-term prospects of the issuer, and (3) the intent and ability of the Company
to retain its investment in the issuer for a period of time sufficient to allow
for any anticipated recovery in fair value.

Of the total gross unrealized losses of $1,185,000 in securities available for
sale at September 30, 2004, $875,000 relates to the reduced value of floating
rate preferred stocks of government sponsored agencies. This decline in value is
primarily attributable to the current level of interest rates, and the timing of
scheduled coupon adjustments, which occur every one to two years. Such
adjustments resulted in coupons being set at a level lower than today's market.
Credit issues are not considered to be a significant factor relative to the
current unrealized losses. As the level of interest rates rise, and coupons are
adjusted, the value of the preferred stock issues is expected to increase. Based
on current interest rate forecasts and the resulting estimates of recovery
obtained by the Company from outside experts, management currently expects
recovery of the unrealized losses.

Related to the unrealized losses for debt securities classified as corporate
notes, $167,000 of unrealized losses is attributable to a trust preferred bond
issued by a regional banking organization. This unrealized loss is primarily
attributable to the low interest rate environment, and the variable interest
rate structure of the bond. Such interest rate adjustments resulted in coupons
being set at a level lower than today's market. As interest rates rise and the
bonds coupon rate increases, management anticipates recovery of the unrealized
losses. Management has the ability to hold this bond to maturity, at which time
the face value of the bond would be realized. Credit issues are not considered
to be a significant factor relative to the current unrealized losses.

Liquidity. Liquidity relates primarily to the Company's ability to fund loan
demand, meet deposit customers' withdrawal requirements and provide for
operating expenses. Liquid assets include cash, certain certificates of deposit
of insured banks and savings institutions, certain bankers' acceptances and
securities available for sale. 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. The Financial Regulatory Relief and Economic
Efficiency Act of 2000, which was signed into law on December 27, 2000, repealed
the former statutory requirement that all savings associations maintain an
average daily balance of liquid assets in a minimum amount of not less than 4%
or more than 10% of their withdrawable accounts plus short-term borrowings.
Savings associations remain subject to the OTS regulation that requires them to
maintain sufficient liquidity to ensure their safe and sound operation. Liquid
assets were $96.1 million as of September 30, 2004 comparable to the $81.4
million at September 30, 2003, and management believes the liquidity level as of
September 30, 2004 is sufficient to meet anticipated liquidity needs.

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,
secondary market loan sales, Federal Home Loan Bank advances and income provided
from operations. While scheduled loan payments and income on earning assets are
relatively stable sources of funds, deposit inflows and outflows and secondary
market sales can vary widely and are influenced by prevailing interest rates,
market conditions and levels of competition. Borrowings from the FHLB of
Indianapolis are used to compensate for reductions in deposits or deposit
inflows at less than projected levels.

Deposits. Deposits are attracted principally from within St. Joseph and Elkhart
counties through the offering of a broad selection of deposit instruments
including NOW, business checking and other transaction accounts, 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. At
September 30, 2004, noninterest bearings demand deposits totaled $32 million,
Savings, NOW, MMDA deposits were $136 million and time deposits were $190
million. MFB acquired $47 million of certificates of deposits and $22 million of
all other deposits from Sobieski Bank.

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 manages the pricing of its deposits in keeping
with its asset/liability management and profitability objectives. Based on its
experience, the Bank's savings, NOW and non-interest-bearing checking accounts
have been relatively stable sources of deposits. However, the ability of the
Bank to attract and maintain certificates of deposit, and the rates paid on
these deposits, has been and will continue to be significantly affected by
market conditions.

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

MFB Financial's borrowings consist mainly of advances from the FHLB of
Indianapolis secured by a blanket collateral agreement and based on percentage
of unencumbered loans and investment securities held by the bank. 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, 2004, MFB
Financial had $133.4 million in Federal Home Loan Bank borrowings outstanding at
an average rate of 5.53% compared to $98.8 million at September 30, 2003 at an
average rate of 5.47%. Of the total advances held by MFB Financial $35.7 million
were assumed from Sobieski Bank. The Company's additional borrowing capacity
with FHLB is $17.7 million at September 30, 2004. The Company also borrowed $6.5
million at a rate of 4.33% this year from one of its correspondent banks to
provide capital for the Bank in its acquisition of certain assets and
liabilities of Sobieski Bank.

Bank Subsidiaries

The Bank's insurance agency subsidiary, Mishawaka Financial Services, Inc. ("MFB
Insurance"), was organized in 1975 and currently is engaged in the sale of
credit life, general fire and accident, auto, property and health and life
insurance, as agent to the Bank's customers and the general public. During the
fiscal year 2004, Mishawaka Financial received approximately $190,000 in
commissions versus approximately $171,000 in commissions received during the
fiscal year 2003. During the fiscal year ending September 30, 2002, the Company
established three new wholly-owned subsidiaries of the Bank to manage a portion
of its investment portfolio. MFB Investments I, Inc. and MFB Investments II,
Inc. are Nevada corporations which jointly own MFB Investments, LP, a Nevada
limited partnership which holds and manages investment securities previously
owned by the Bank. A total of $33.7 million in investment securities are, as of
September 30, 2004, managed by MFB Investments, LP. All intercompany balances
and transactions between all of the subsidiaries have been eliminated in the
consolidation.

Employees

As of September 30, 2004, MFB Financial employed 167 persons on a full-time
basis and 24 persons on a part-time basis. None of MFB Financial's employees are
represented by a collective bargaining group. Management considers its employee
relations to be excellent.




<PAGE>




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

                                       13
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>
                                                                        2004            2003             2002
                                                                       Average         Average          Average
                                                                     Outstanding     Outstanding      Outstanding
                                                                       Balance         Balance          Balance
Assets:                                                                            (In thousands)
Interest-earning assets:
<S>                                                                <C>              <C>             <C>
     Interest-bearing deposits                                     $      21,210    $     30,856    $     22,797
     Mortgage-backed securities (1)                                       18,741          25,852          26,261
     Other securities available for sale (1)                              24,235          24,412          30,216
     FHLB stock                                                            6,932           6,359           6,308
     Loans held for sale (2)                                               1,287           1,532             353
     Loans receivable (3)                                                343,545         316,223         314,210
                                                                   -------------    ------------    ------------
         Total interest-earning assets                                   415,950         405,234         400,145
Non-interest earning assets, net
  of allowance for loan losses                                            29,116          21,643          17,675
                                                                   -------------    ------------    ------------

              Total assets                                         $     445,066    $    426,877    $    417,820
                                                                   =============    ============    ============

Liabilities and shareholders' equity:
Interest-bearing liabilities:
     Savings accounts                                              $      35,309    $     28,714    $     19,249
     NOW and money market accounts                                        79,500          67,389          59,433
     Certificates of deposit                                             156,961         155,740         155,519
     Repurchase agreements                                                     -               -           9,988
      Other Borrowings                                                     1,078             155               -
     FHLB advances                                                       104,801         114,146         119,297
                                                                   -------------    ------------    ------------
         Total interest-bearing liabilities                              377,649         366,144         363,486
Other liabilities                                                         31,974          27,129          19,020
                                                                   -------------    ------------    ------------
     Total liabilities                                                   409,623         393,273         382,506

Shareholders' equity
         Common stock                                                     12,393          13,020          12,944
         Retained earnings                                                32,120          29,901          30,402
         Net unrealized gain(loss) on securities
              available for sale                                            (812)           (419)           (196)
         Treasury stock                                                   (8,258)         (8,898)         (7,836)
                                                                   --------------   ------------    ------------
         Total shareholders' equity                                       35,443          33,604          35,314
                                                                   -------------    ------------    ------------

         Total liabilities and shareholders' equity                $     445,066    $    426,877    $    417,820
                                                                   =============    ============    ============

</TABLE>


<PAGE>




(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.
                                       14
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, 2004-------
                                                                              -----------------------------

                                                                         Average                          Average
                                                                         Balance         Interest       Yield/Cost
                             (Dollars in thousands)

INTEREST-EARNING ASSETS
<S>                                                                   <C>             <C>                  <C>
     Interest-bearing deposits                                        $     21,210    $        174         0.82%
      Mortgage-backed securities (1)                                        18,808             604         3.21
     Other securities available for sale (1)                                25,013             771         3.08
     FHLB stock                                                              6,932             321         4.63
     Loans held for sale                                                     1,287              78         6.07
     Loans receivable (2)                                                  343,545          20,844         6.07
                                                                      ------------    ------------     --------
         Total interest-earning assets                                $    416,795          22,792         5.47
                                                                      ============    ------------     --------

INTEREST-BEARING LIABILITIES
     Savings accounts                                                 $     35,309             220         0.62%
     NOW and money market accounts                                          79,500             575         0.72
     Certificates of deposit                                               156,961           4,614         2.94
     Repurchase agreements                                                       -               -                 -
      Other Borrowings                                                         1,078            38         3.52
     FHLB advances                                                         104,801           5,642         5.38
                                                                      ------------    ------------     --------
         Total interest-bearing liabilities                           $    377,649          11,089         2.94
                                                                      ============    ------------     --------

Net interest-earning assets                                           $     39,146
                                                                      ============

Net interest income                                                                   $     11,703
                                                                                      ============

Interest rate spread (3)                                                                                   2.53%
                                                                                                           =====

Net yield on average interest-earning assets (4)                                                           2.81%
                                                                                                           =====


</TABLE>



<PAGE>




(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.
                                       16
I.     DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY; INTEREST
       RATES AND INTEREST DIFFERENTIAL (Continued)



<TABLE>
<CAPTION>
                                                                      --------Year Ended September 30, 2003-------
                                                                              -----------------------------
                                                                         Average                          Average
                                                                         Balance         Interest       Yield/Cost
                             (Dollars in thousands)

INTEREST-EARNING ASSETS
<S>                                                                   <C>             <C>                  <C>
     Interest-bearing deposits                                        $     30,856    $        341         1.11%
      Mortgage-backed securities (1)                                        25,800             574         2.22
     Other securities available for sale (1)                                24,982           1,040         4.16
     FHLB stock                                                              6,359             338         5.32
     Loans held for sale                                                     1,532             101         6.62
     Loans receivable (2)                                                  316,223          20,932         6.62
                                                                      ------------    ------------     --------
         Total interest-earning assets                                $    405,752          23,326         5.75
                                                                      ============    ------------     --------

INTEREST-BEARING LIABILITIES
     Savings accounts                                                 $     28,714             273          .95%
     NOW and money market accounts                                          67,389             508          .75
     Certificates of deposit                                               155,740           5,019         3.22
     Repurchase agreements                                                       -               -                 -
      Other Borrowings                                                            155            6         3.87
     FHLB advances                                                         114,146           6,438         5.64
                                                                      ------------    ------------     --------
         Total interest-bearing liabilities                           $    366,144          12,244         3.34
                                                                      ============    ------------     --------

Net interest-earning assets                                           $     39,608
                                                                      ============

Net interest income                                                                   $     11,082
                                                                                      ============

Interest rate spread (3)                                                                                   2.41%
                                                                                                           =====

Net yield on average interest-earning assets (4)                                                           2.73%
                                                                                                           =====

</TABLE>




<PAGE>


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


<TABLE>
<CAPTION>
                                                                      --------Year Ended September 30, 2002-------
                                                                              -----------------------------
                                                                         Average                          Average
                                                                         Balance         Interest       Yield/Cost
                             (Dollars in thousands)

INTEREST-EARNING ASSETS
<S>                                                                   <C>             <C>                  <C>
     Interest-bearing deposits                                        $     22,797    $        429         1.88%
      Mortgage-backed securities (1)                                        26,018           1,143         4.39
     Other securities available for sale (1)                                30,917           1,443         4.67
     FHLB stock                                                              6,308             398         6.31
     Loans held for sale                                                       353              25         7.24
     Loans receivable (2)                                                  314,210          22,749         7.24
                                                                      ------------    ------------     --------
         Total interest-earning assets                                $    400,603          26,188         6.54
                                                                      ============    ------------     --------

INTEREST-BEARING LIABILITIES
     Savings accounts                                                 $     19,249             216         1.12%
     NOW and money market accounts                                          59,433             700         1.18
     Certificates of deposit                                               155,519           5,984         3.85
     Repurchase agreements                                                   9,988             154         1.54
     FHLB advances                                                         119,297           6,775         5.68
                                                                      ------------    ------------     --------
         Total interest-bearing liabilities                           $    363,486          13,829         3.80
                                                                      ============    ------------     --------

Net interest-earning assets                                           $     37,117
                                                                      ============

Net interest income                                                                   $     12,359
                                                                                      ============

Interest rate spread (3)                                                                                   2.73%
                                                                                                           =====

Net yield on average interest-earning assets (4)                                                           3.08%
                                                                                                           =====

</TABLE>




<PAGE>



                                       17
I.      DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY; INTEREST
        RATES AND INTEREST DIFFERENTIAL (Continued)

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


<TABLE>
<CAPTION>
                                                                               Increase (Decrease) in
                              Net Interest Income
                             Total Net Due to Due to
                                                                    Change              Rate             Volume
                                 (In thousands)
Year ended September 30, 2004 compared
  to year ended September 30, 2003
      Interest-earning assets
<S>                                                              <C>               <C>               <C>
         Interest-bearing deposits                               $      (167)      $       (76)      $        (91)
         Mortgage-backed securities                                       30               212               (182)
         Other securities available for sale                            (269)             (270)                 1
         FHLB stock                                                      (17)              (46)                29
         Loans held for sale                                             (23)               (8)               (15)
         Loans receivable                                                (88)           (1,820)             1,732
                                                                 ------------      ------------      ------------
             Total                                                      (534)           (2,008)             1,474

      Interest-bearing liabilities
         Savings accounts                                                (53)             (107)                54
         NOW and money market accounts                                    67               (21)                88
         Certificates of deposit                                        (405)             (444)                39
         Repurchase agreements                                             -                 -                  -
             Other Borrowings                                             32                (1)                33
         FHLB advances                                                  (796)             (284)              (512)
                                                                 ------------      ------------      -------------
             Total                                                    (1,155)             (857)              (298)
                                                                 ------------      ------------      -------------

Change in net interest income                                    $       621       $    (1,151)      $      1,772
                                                                 ===========       ============      ============
</TABLE>



<PAGE>



                                       20
I.        DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY; INTEREST
          RATES AND INTEREST DIFFERENTIAL (Continued)



<TABLE>
<CAPTION>
                                                                               Increase (Decrease) in
                              Net Interest Income
                             Total Net Due to Due to
                                                                    Change              Rate             Volume
                                 (In thousands)
Year ended September 30, 2003 compared
  to year ended September 30, 2002
      Interest-earning assets
<S>                                                              <C>               <C>               <C>
         Interest-bearing deposits                               $       (88)      $      (210)      $        122
         Mortgage-backed securities                                     (569)             (559)               (10)
         Other securities available for sale                            (403)             (146)              (257)
         FHLB stock                                                      (60)              (63)                 3
         Loans held for sale                                              76                (2)                78
         Loans receivable                                             (1,818)           (1,962)               144
                                                                 ------------      ------------      ------------
             Total                                                    (2,862)           (2,942)                80

      Interest-bearing liabilities
         Savings accounts                                                 57               (36)                93
         NOW and money market accounts                                  (192)             (277)                85
         Certificates of deposit                                        (964)             (973)                 9
         Repurchase agreements                                          (154)                -               (154)
             Other Borrowings                                              6                 -                  6
         FHLB advances                                                  (337)              (47)              (290)
                                                                 ------------      ------------      -------------
             Total                                                    (1,584)           (1,333)              (251)
                                                                 ------------      ------------      -------------

Change in net interest income                                    $    (1,278)      $    (1,609)      $        331
                                                                 ============      ============      ============

</TABLE>


<PAGE>


II.     INVESTMENT PORTFOLIO


A.                    The following table sets forth the amortized cost and fair
                      value of securities available for sale: At September 30,
                      2004 2003 2002
<TABLE>
<CAPTION>
                         Amortized        Fair          Amortized         Fair          Amortized         Fair
                           Cost           Value           Cost            Value           Cost            Value
                                 (In thousands)
Debt securities
     U.S. Government
       and federal
<S>                   <C>            <C>               <C>             <C>             <C>            <C>
       agencies       $     9,303    $      9,351      $     9,369     $    9,563      $   12,485     $    12,814
     Municipal bonds  343            357               346             369             349            368
     Mortgage-
       backed              45,266          45,405           16,808         16,769          26,771          27,037
     Corporate debt         7,734           7,655            9,771          9,486           9,880           9,409
                      -----------    ------------      -----------     ----------      ----------     -----------

                           62,646          62,768           36,294         36,187          49,485          49,628

Marketable equity
  securities                4,128           3,253            4,237          3,841           4,237           3,957
                      -----------    ------------      -----------     ----------      ----------     -----------

                      $    66,774    $     66,021      $    40,531     $   40,028      $   53,722     $    53,585
                      ===========    ============      ===========     ==========      ==========     ===========



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

                                                           At September 30,
                      -------------------------------------------------------------------------------------------
                                  2004                           2003                              2002
                      --------------------------       --------------------------      --------------------------
                                        Estimated                      Estimated                        Estimated
                         Amortized       Market         Amortized        Market         Amortized        Market
                           Cost           Value           Cost            Value           Cost            Value
                                 (In thousands)
Other securities
FHLB stock, at
   cost               $     8,799    $      8,799      $     6,471     $    6,471      $    6,308     $     6,308
                      ===========    ============      ===========     ==========      ==========     ===========

</TABLE>


<PAGE>


II.  INVESTMENT PORTFOLIO (Continued)

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

<TABLE>
<CAPTION>
                                          Amount at September 30, 2004, 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     AmortizedFair
                         Cost       Value      Cost       Value      Cost       Value      Cost      Value       Cost Value
                         ----       -----      ----       -----      ----       -----      ----      ------      ---- -----

                                                                (Dollars in thousands)
U.S. Government and federal
<S>        <C>        <C>        <C>            <C>    <C>        <C>        <C>         <C>        <C>            <C>
  agencies $   3,445  $   3,490  $   5,633      5,636  $     225  $     225  $          $          $   9,303  $   9,351
Municipal bonds                        343        357                                                    343        357
Corporate debt   994      1,036      5,746      5,653                              994        966      7,734      7,655
                ----  ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------

           $    4,439 $   4,526  $  11,722  $  11,646  $     225  $     225  $     994  $     966  $  17,380  $  17,363
           ========== =========  =========  =========  =========  =========  =========  =========  =========  =========


Weighted
average yield               4.61 %   3.66%                 2.29%                 2.34%                 3.81%

</TABLE>


There were no securities held to maturity at September 30, 2004.

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.   There were no  investments  in  securities  of any one issuer  which
exceeded 10% of the  shareholders'  equity of the Company at
     September 30, 2004.



<PAGE>



                                       22
III.     LOAN PORTFOLIO

         A.    The following table sets forth 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,-----------------------------------------------
                             2004                    2003                    2002                   2001                 2000
                                Percent                 Percent                Percent                 Percent              Percent
                                  of                      of                     of                      of                    of
                     Amount      Total       Amount      Total        Amount     Total        Amount    Total      Amount    Total

                                                                  (Dollars in thousands)
Mortgage loans
<S>              <C>              <C>    <C>              <C>     <C>             <C>     <C>            <C>    <C>          <C>
Residential      $   176,817      44.10% $    129,472     40.60%  $    146,943    46.31%  $    157,187   50.29% $  185,267   58.23%
Residential const     20,259       5.05        22,066      6.92         15,863     5.00         18,658    5.97      13,146    4.13
Multi-family           3,899        .97         6,728      2.11          6,027     1.90          4,331    1.38       3,631    1.14

Commercial and other loans
Commercial loans     160,952      40.15       130,623     40.96        121,140    38.18        105,575   33.78      91,105   28.64
Home equity and second
 mortgage loans       32,006       7.98        24,535      7.70         21,151     6.67         20,275    6.49      18,917    5.95
Other                  6,973       1.75         5,462      1.71          6,165     1.94          6,537    2.09       6,089    1.91
                  -----------    -------    ----------   -------   ------------ --------    ----------  ------- -----------  ------
Gross loans
  receivable         400,906     100.00%      318,886    100.00%       317,289   100.00%       312,563  100.00%    318,155  100.00%

Less
Allowance for loan
        losses        (6,074)                  (5,198)                  (5,143)                 (4,632)             (1,672)
Deferred net loan fees  (843)                    (820)                    (794)                   (807)               (923)
     Loans in process   (138)                      89                     (104)                   (143)                (54)
                  ------------            ------------            -------------            -------------         -------------

Net loans
        receivable$  393,851             $    312,957             $    311,248             $    306,981       $    315,506

Mortgage-backed securities
FHLMC certificates$   25,767             $      6,966             $     13,748             $      3,617        $       610
CMO - REMIC           19,639                    9,803                   13,289                   16,703             13,602
                  -----------             ------------             ------------              ------------          ------------
Net mortgage-backed$  45,405             $     16,769             $     27,037              $    20,320        $    14,212
            Securities

Mortgage loans
Adjustable rate  $   122,473     60.94   $    113,639   71.80     $    132,836    78.68%    $   140,284  77.86%$    157,144  77.78%
Fixed rate            78,502     39.06         44,627   28.20           35,997    21.32          39,892  22.14       44,900  22.22
                 -----------    -------    ----------- -------     ------------ --------    ------------ ------ ------------ ------
Total            $   200,975    100.00%  $    158,266  100.00%    $    168,833   100.00%    $   180,176 100.00%$    202,044 100.00%


</TABLE>


<PAGE>



III. LOAN PORTFOLIO (Continued)

        B. Loan Maturity. The following table sets forth certain information at
           September 30, 2004, 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                                                        2008          2010        2015         2020
                at September 30,                                                       and           to          to          and
                      2004               2005         2006            2007            2009          2014        2019      Following

                                                                                    (In thousands)
Mortgage Loans
<S>                <C>             <C>            <C>             <C>            <C>              <C>       <C>          <C>
Residential        $    176,817    $     3,097    $      136      $       460    $     2,204      $  12,165 $    32,897  $  125,858
Residential
      construction       20,259         20,259             -                -              -              -          -            -
Multi-family              3,899            379             -            2,082          1,238             48          -          152
Commercial and other Loans-
Commercial loans        160,952         68,983         7,016           18,299         46,378         13,819      1,724        4,733
Home equity and second   32,006          1,991         1,397            2,423         10,674         13,353      2,090           78
    mortgage
Other                     6,973          1,514           960            1,374          2,254            367         84          420
                    ------------    -----------    ----------      -----------    -----------      ---------  ---------   ---------
Total              $    400,906    $    96,223    $    9,509      $    24,638    $    62,748      $  39,752 $   36,795   $  131,241
</TABLE>

The following table sets forth, as of September 30, 2004, the dollar amount of
all loans which have fixed interest rates and floating or adjustable interest
rates.
<TABLE>
<CAPTION>

                                                    Due After September 30, 2004
                                                                Variable
                                                Fixed Rates       Rates         Total
                                                                (In thousands)
Mortgage loans
<S>                                           <C>             <C>            <C>
      Residential & Construction              $     75,030    $   122,046    $  197,076
      Multi-family                                   3,472            427         3,899


Commercial and other loans
      Commercial loans                             103,306         57,646       160,952
      Home equity and second mortgage               10,937         21,069        32,006
      Other                                          5,743          1,230         6,973
                                              ------------    -----------    ----------

      Total                                   $    198,488    $   202,418    $  400,906
                                              ============    ===========    ========

</TABLE>


<PAGE>









                                       23
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 nonperforming assets. 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,
                                    -----------------------------------------------------------------------------
                                       2004            2003             2002            2001              2000
                                       ----            ----             ----            ----              ----
                                                               (Dollars in thousands)

Accruing loans delinquent
  more than 90 days                 $        -       $       -       $         -     $      152       $        60
<S>                                      <C>             <C>               <C>            <C>                   <C>
Non-accruing loans                       2,719           3,845             5,464          2,632                 6
                                    ----------       ---------       -----------     ----------       -----------
Total nonperforming
        loans                            2,719           3,845             5,464          2,784                66
Real estate owned, net                   1,527             704               365              -                 -
Nonperforming Investments                    -               -               120              -                 -
                                    ----------       ---------       -----------     ----------       -----------
      Total nonperforming
        assets                      $    4,246       $   4,549       $     5,949     $    2,784       $        66
                                    ==========       =========       ===========     ==========       ===========

Nonperforming loans to
  total loans                            .68%            1.21%            1.73%           .89%              .02%
Nonperforming assets to
  total loans                           1.07%            1.43%            1.88%           .89%              .02%
</TABLE>

Management believes that the allowance for loan losses balance at September 30,
2004 is adequate to absorb estimated 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.




<PAGE>


                                       24
III. LOAN PORTFOLIO (Continued)

         C. Risk Elements (Continued)

                2.    Potential Problem Loans

                      As of September 30, 2004, impaired loans totaled $2.2
                      million. Loans are classified as impaired loans if 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. The
                      impaired loans had specific loan loss allowances totaling
                      $995,000 at September 30, 2004. A total of $1.4 million of
                      the impaired loans are nonaccrual loans and included in
                      the nonperforming loans of $2.7 million in the table
                      above.

                3.    Foreign Outstandings

                      None

                4.    Loan Concentrations

                      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 and multi-family
                      residential real property. These loans continue to be a
                      major focus of MFB Financial's loan origination
                      activities, representing 50.1% of the total loan portfolio
                      at September 30, 2004. However, MFB Financial continues to
                      place increased emphasis on diversifying its balance sheet
                      and improving earnings with significant growth in
                      commercial lending, which represent 40.2% of the total
                      loan portfolio at September 30, 2004.


         D.     Other Interest-Earning Assets

                There are no other interest-earning assets as of September 30,
                2004 which would be required to be disclosed under Item III. C.1
                or 2 if such assets were loans.



<PAGE>






*      Not including loans held for sale
                                       25
     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
            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  probable
            incurred  losses from loans at  September 30,  2004,  in light of
            an improving  loan  portfolio  offset by an allowance
            determined to be necessary for an additional $54.3 million in new
            loans from the Sobieski acquisition.

            The following table analyzes changes in the consolidated
            allowance for loan losses during the past five years ended
            September 30, 2004.

<TABLE>
<CAPTION>
                                                              Years Ended September 30,
                                  -------------------------------------------------------------------------------
                                       2004            2003             2002            2001              2000
                                       ----            ----             ----            ----              ----
                                                               (Dollars in thousands)
Balance of allowance at
<S>                               <C>              <C>             <C>               <C>             <C>
  beginning of period             $      5,198     $     5,143     $       4,632     $    1,672      $        638
Add: recoveries
   Mortgage Residential loans     -                -               14                4               -
   Residential Construction                  8               -                 -              -                 -
   Commercial real estate                    5             333                 -              -                 -
   Commercial Loans                          2               -                 -              -                 -
   Other loans                               2               -                 -              -                 -
Less charge offs:
   Commercial real estate                      (11)       (305)           (2,826)           (91)              (51)
   Commercial loans                       (508)         (1,060)                -              -                 -
   Home Equity                               -              (7)                -              -                 -
   Other loans                             (24)            (16)              (46)           (50)              (21)
                                  -------------    -----------     -------------     ----------      ------------
Net charge-offs                           (526)         (1,055)           (2,858)          (137)              (72)

Allowance acquired through
   acquisition                             602               -                 -              -                 -
Provisions for loan losses                 800           1,110             3,369          3,097             1,106
                                  ------------     -----------     -------------     ----------      ------------

Balance of allowance at
  end of period                   $      6,074     $     5,198     $       5,143     $    4,632      $      1,672
                                  ============     ===========     =============     ==========      ============

Net charge-offs to total
  average loans out-
  standing for period *                 .13%            .33%             .91%            .04%                .02%
Allowance at end of
  period to total loans
  at end of period  *                  1.52%           1.63%           1.63%                 1.49%            .53%

</TABLE>


<PAGE>




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

                                       26


     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,

                                 2004              2003                   2002            2001                  2000
                                    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              $    318   44.11%     $   94   40.60%     $   121  46.31%    $   96    50.77%   $    99     58.23%
Commercial                  5,126   40.15       4,591   40.96        4,814  38.18      4,359    33.45      1,379     28.64
Multi-family                    8     .97           7    2.11            6   1.90          4     1.37          4      1.14
Residential construction       40    5.05          22    6.92           16   5.50         19     5.91         13      4.13
Consumer loans (1)            153    9.72          70    9.41           67   8.61         70     8.50         65      7.86
Unallocated                   429                 414                  119                84                 112
                              -------------       -----------        ------------         -----------         ------------
Total                   $   6,074  100.00%     $5,198  100.00%     $ 5,143  100.00%   $4,632   100.00%   $ 1,672   $100.00%

</TABLE>




<PAGE>


                                       27

V.       DEPOSITS

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


                                                    2 0 0 4                      2 0 0 3                         2 0 0 2
                                                    -------                      -------                         -------
                                            Average        Average         Average        Average        Average         Average
                                             Amount          Rate           Amount          Rate          Amount           Rate
                                             ------          ----           ------          ----          ------           ----
                                                                       (Dollars in thousands)
<S>                                     <C>                  <C>       <C>                  <C>        <C>                 <C>
Savings accounts                        $     35,309         0.62%     $     28,714         0.95%      $    19,249         1.12%
Now and money market accounts                 79,500         0.72            67,389         0.75            59,433         1.18
Certificates of deposit                      156,961         2.94           155,740         3.22           155,519         3.85
Demand deposits (noninterest-bearing)         28,923                         23,833                         16,939
                                            ------------                   ------------                   ------------
                                        $    300,693                   $    275,676                    $   251,140
</TABLE>



        Maturities of time certificates of deposit and other time deposits of
        $100,000 or more outstanding at September 30, 2004 is summarized as
        follows:
                                                                       Amount
                                                                  (In thousands)

         Three months or less                                      $      8,326
         Over three months and through six months                         6,527
         Over six months and through twelve months                        8,890
         Over twelve months                                              18,993
                                                                    ------------

                                                                   $     42,736




<PAGE>





                                       28
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,
                                                              ----------------------------------------------
                                                                 2004              2003             2002
                                                                 ----              ----             ----
                                                                          (Dollars in thousands)

<S>                                                           <C>               <C>              <C>
        Average total assets                                  $    445,066      $    426,877     $    417,820
                                                              ============      ============     ============

        Average shareholders' equity                          $     35,443      $     33,604     $     35,314
                                                              ============      ============     ============

        Net income                                            $      1,790      $      2,400     $        649
                                                              ============      ============     ============

        Return on average total assets                                .40%            .56%              .16%
                                                              ============      ==========       ==========

        Return on average shareholders' equity                       5.05%           7.14%            1,.84%
                                                              ============      ==========       ==========

        Dividend payout ratio (dividends
          declared per share divided by net
          income per share)                                         34.56%            23.26%           84.69%
                                                              ============      ============     ===========

        Average shareholders' equity
          to average total assets                                    7.96%           7.87%             8.45%
                                                              ============      ==========       ==========
</TABLE>

VII.     SHORT-TERM AND FEDERAL HOME LOAN BANK 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,
                                                                 2004              2003             2002
                                                                 ----              ----             ----
                             (Dollars in thousands)
Maximum Balance:
<S>                                                           <C>             <C>               <C>
FHLB advances.............................................    $133,443        $   119,215       $   119,685
Securities sold under agreements to.................                --             --                14,330
        repurchase

Average Balance:
FHLB advances:............................................     104,801            114,146           119,297
Securities sold under agreements to.......................           --            --                 9,988
        repurchase

Average Rate Paid On:
FHLB advances.............................................           5.38%           5.64%             5.68%
Securities sold under agreements to.......................           --             --                 1.54
        repurchase
</TABLE>

The following table sets forth the Bank's borrowings at the dates indicated:
<TABLE>
<CAPTION>
                                                                               September 30,
                                                                 2004              2003             2002
                                                                 ----              ----             ----
                             (Dollars in thousands)
Amounts Outstanding:
<S>                                                           <C>             <C>               <C>
FHLB advances.............................................    $   133,443     $    98,790       $   119,215
Securities sold under agreements to.......................              -               -            -
        Repurchase

Weighted Average Interest Rate:
FHLB Advances.............................................           5.53%           5.47%             5.60%
Securities sold under agreements to repurchase............           -               -                    -
</TABLE>


<PAGE>


                                       53
                                                     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. In total, there are 32 financial institutions located in our
two county market area. These financial institutions consist of 14 commercial
banks, one savings banks and 16 credit unions. 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.

The primary factors influencing competition for deposits are interest rates,
service and convenient access. 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.

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

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





<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 by the Office of Thrift Supervision (the "OTS") 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.

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 September 30, 2003. 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, 2004, was
approximately $97,000.

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

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



<PAGE>


The Bank is also subject to federal 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.

Recent Legislative Developments

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. This law
establishes a comprehensive framework to permit affiliations among commercial
banks, insurance companies, securities firms and other financial service
providers. As a result of this legislation, bank holding companies will be
permitted to engage in a wider variety of financial activities than permitted
under prior law, particularly with respect to insurance and securities
activities. To the extent the law permits banks, securities firms and insurance
companies to affiliate, the financial services industry may experience further
consolidation. This could result in a growing number of larger financial
institutions that offer wider varieties of financial services than are currently
offered by MFB and that could aggressively compete in the markets currently
served by MFB. The statute grandfathered MFB's status as a unitary savings and
loan holding company and its authority to engage in commercial activities. The
legislation also provides, however, that a company that acquires a unitary
savings and loan holding company through a merger or other business combination
may engage only in those activities that are permissible for a multiple savings
and loan holding company or for a financial holding company. This provision
likely could reduce the number of potential acquirers 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.

On October 26, 2001, President Bush signed the USA Patriot Act of 2001 (the
"Patriot Act"). The Patriot Act is intended to strengthen the ability of U.S.
Law Enforcement to combat terrorism on a variety of fronts. The potential impact
of the Patriot Act on financial institutions is significant and wide-ranging.
The Patriot Act contains sweeping anti-money laundering and financial
transparency laws and requires financial institutions to implement additional
policies and procedures with respect to, or additional measures designed to
address, any or all the following matters, among others: money laundering,
suspicious activities and currency transaction reporting, and currency crimes.

On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002
(the "Sarbanes-Oxley Act"). The Sarbanes-Oxley Act represents a comprehensive
revision of laws affecting corporate governance, accounting obligations and
corporate reportings. The Sarbanes-Oxley Act is applicable to all companies with
equity or debt securities registered under the Securities Exchange Act of 1934
(the "1934 Act"). In particular, the Sarbanes-Oxley Act establishes: (i) new
requirements for audit committees, including independence, expertise, and
responsibilities; (ii) additional responsibilities regarding financial
statements for the Chief Executive Officer and Chief Financial Officer of the
reporting company; (iii) new standards for auditors and regulation of audits;
(iv) increased disclosure and reporting obligations for the reporting company
and their directors and executive officers; and (v) new and increased civil and
criminal penalties for violation of the securities laws.

The Securities and Exchange Commission has adopted final rules implementing
Section 404 of the Sarbanes-Oxley Act of 2002. Commencing with its 2005 Annual
Report on Form 10-K, the Company will be required to include a report of
management on the Company's internal control over financial reporting. The
internal control report must include a statement of management's responsibility
for establishing and maintaining adequate control over financial reporting of
the Company, identify the framework used by management to evaluate the
effectiveness of the Company's internal control over financial reporting,
provide management's assessment of the effectiveness of the Company's internal
control over financial reporting and state that the Company's independent
accounting firm has issued an attestation report on management's assessment of
the Company's internal control over financial reporting. Management expects that
significant efforts will be required to comply with Section 404 and that the
cost of such compliance may be material.


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, 2004, the Bank's investment in stock of the FHLB of Indianapolis
was $8.80 million.

All 12 FHLB's are required to provide funds to establish affordable housing
programs through direct loans or interest subsidies on advances to members to be
used for lending at subsidized interest rates for low- and moderate-income,
owner-occupied housing projects, affordable rental housing, and certain other
community projects.

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

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

Insurance of Deposits

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

Deposit accounts in the Bank are insured by the SAIF within prescribed statutory
limits which generally provide a maximum of $100,000 coverage for each insured
account. As a condition to such insurance, the FDIC is authorized to issue
regulations and, in conjunction with the OTS, conduct examinations and generally
supervise the operations of its insured members.

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

In addition to the assessment for deposit insurance, savings institutions are
required to pay on bonds issued in the late 1980s by the Financing Corporation
to recapitalize the predecessor to the SAIF. By law, payments on Financing
Corporation obligations have been shared equally between the members of both
insurance funds since January 1, 2000. The Bank's annual deposit insurance
premium for the year ended September 30, 2004, including the Financing
Corporation payments, was approximately $76,000 based upon its current risk
classification and the new assessment schedule for SAIF insured institutions.
These premiums are subject to change in future periods.

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

Regulatory Capital

Currently, savings institutions are subject to three separate minimum
capital-to-assets requirements: (i) a leverage limit, (ii) a tangible capital
requirement, and (iii) a risk-based capital requirement. The leverage limit
requires that savings associations with the highest rating for safety and
soundness maintain "core capital" of at least 3% of total assets, with other
savings associations maintaining core capital of 4% to 5% of total assets,
depending on their condition. Core capital is generally defined as common
shareholders' equity (including retained income), noncumulative perpetual
preferred stock and related surplus, certain minority equity interests in
subsidiaries, purchased mortgage servicing rights and purchased credit card
relationships (subject to certain limits), less nonqualifying intangibles. Under
the tangible capital requirement, a savings bank must maintain tangible capital
(core capital less all intangible assets except purchased mortgage servicing
rights and purchased credit card relationships which may be included subject to
certain limits) of at least 1.5% of total assets. Under the risk-based capital
requirements, a minimum amount of capital must be maintained by a savings bank
to account for the relative risks inherent in the type and amount of assets held
by the savings bank. The total risk-based capital requirement requires a savings
bank to maintain capital (defined generally for these purposes as core capital
plus general valuation allowances and permanent or maturing capital instruments
such as preferred stock and subordinated debt less assets required to be
deducted) equal to 8.0% of risk-weighted assets. Assets are ranked as to risk in
one of four categories (0-100%) with a credit risk-free asset such as cash
requiring no risk-based capital and an asset with a significant credit risk such
as a non-accrual loan being assigned a factor of 100%. At September 30, 2004,
based on the capital standards then in effect, the Bank was in compliance with
all capital requirements imposed by law.

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

Prompt Corrective Action

Applicable Federal law requires that federal bank regulatory authorities take
"prompt corrective action" with respect to institutions that do not meet minimum
capital requirements. For these purposes, five capital tiers have been
established: well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized and critically undercapitalized. At each
successively lower capital category, an institution is subject to more
restrictive and numerous mandatory or discretionary regulatory actions or
limits, and the OTS has less flexibility in determining how to resolve the
problems of the institution. OTS regulations define these capital levels as
follows: (1) well-capitalized institutions must have total risk-based capital of
at least 10%, core risk-based capital (consisting only of items that qualify for
inclusion in core capital) of at least 6% and a leverage ratio of at least 5%
and are not subject to any order or written directive of the OTS to maintain a
specific capital level for any capital measure; (2) adequately capitalized
associations are those that meet the regulatory minimum of total risk-based
capital of 8%, core risk-based capital of 4% and a leverage ratio of 4%, but
which are not well capitalized; (3) undercapitalized institutions are those that
do not meet the requirements for adequately capitalized institutions, but that
are not significantly undercapitalized; (4) significantly undercapitalized
institutions have total risk-based capital of less than 6%, core risk-based
capital of less than 3% and a leverage ratio of less than 3%; and (5) critically
undercapitalized institutions are those with tangible capital of less than 2% of
total assets. In addition, the OTS can downgrade an institution's designation
notwithstanding its capital level, based on less than satisfactory examination
ratings in areas other than capital or if the institution is deemed to be in an
unsafe or unsound condition. Each undercapitalized institution must submit a
capital restoration plan to the OTS within 45 days after it becomes
undercapitalized. Such institution will be subject to increased monitoring and
asset growth restrictions and will be required to obtain prior approval for
acquisitions, branching and engaging in new lines of business. Significantly
undercapitalized institutions must restrict the payment of bonuses and raises to
their senior executive officers. Furthermore, a critically undercapitalized
institution must be placed in conservatorship or receivership within 90 days
after reaching such capitalization level, except under limited circumstances. It
will also be prohibited from making payments on any subordinate debt securities
without the prior approval of the FDIC and will be subject to significant
additional operating restrictions. The Bank's capital at September 30, 2004,
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. In addition, the Bank is
subject to dividend limitations by the OTS in conjunction with the approval of
the acquisition of certain assets and liabilities of Sobieski Bank. Under the
terms of the agreement, the Bank must remain "well -capitalized" for one year
after the acquisition date.

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.



Transactions with Affiliates

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

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

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

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




Holding Company Regulation

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

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

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

Notwithstanding the above rules as to permissible business activities of unitary
savings and loan holding companies, if the savings bank subsidiary of such a
holding company fails to meet the Qualified Thrift Lender ("QTL") test, then
such unitary holding company must, within one year of the savings association's
failure to meet the QTL test, register as a bank holding company and become
subject to all of the provisions of the Bank Holding Company Act of 1956.
See-"Qualified Thrift Lender." At September 30, 2004, the Bank's asset
composition was in excess of that required to qualify the Bank as a Qualified
Thrift Lender.

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.

Federal Securities Law

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

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

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

Loans to One Borrower

Under OTS regulations, the Bank may not make a loan or extend credit to a single
or related group of borrowers in excess of 15% of its unimpaired capital and
surplus. Additional amounts may be lent, not in excess of 10% of unimpaired
capital and surplus, if such loans or extensions of credit are fully secured by
readily marketable collateral, including certain debt and equity securities but
not including real estate. In some cases, a savings bank may lend up to 30% of
unimpaired capital and surplus to one borrower for purposes of developing
domestic residential housing, provided that the savings bank meets its
regulatory capital requirements and the OTS authorizes the savings bank to use
this expanded lending authority. At September 30, 2004, the Bank did not have
any loans or extensions of credit to a single or related group of borrowers in
excess of its regulatory lending limits. Management does not believe that the
loans-to-one-borrower limits will have a significant impact on the Bank's
business operations or earnings.




Qualified Thrift Lender

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

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

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

At September 30, 2004, 83.87% of the Bank's portfolio assets (as defined on that
date) were invested in qualified thrift investments (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 must be disclosed. This disclosure includes both a four
tier descriptive rating using terms such as satisfactory and unsatisfactory and
a written evaluation of each institutions performance. The Bank offers programs
that meet the needs of all buyers including loans to first time homebuyers that
require no down payment. Borrowers living or purchasing homes in low-income
areas pay reduced closing costs. The Bank is also actively involved with lending
consortiums that provide market rate loans to low and moderate-income families
that are unable to obtain mortgages through the traditional lending channels.
The OTS has determined that the Bank has a satisfactory record of meeting
community credit needs.


<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 occurring over a six-year period, the
commencement of which began with the Bank's taxable year ending September 30,
1999, since the Bank met certain residential lending requirements. In addition,
the pre-1988 reserve, for which no deferred taxes have been recorded, will not
have to be recaptured into income unless (i) the Bank no longer qualifies as a
bank under the Code, or (ii) excess dividends or distributions are paid out by
the Bank. The total amount of bad debt to be recaptured has been fully captured
in 2004.

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, the cash surrender value of bank owned life
insurance 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 its subsidiaries 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. Currently, income from the Bank's
subsidiaries MFB Investment, I, Inc., MFB Investments II, Inc. and MFB
Investments, LP is not subject to the FIT. Other applicable state taxes include
generally applicable sales and use taxes plus real and personal property taxes.
MFB's state income tax returns have not been audited in the last five years.


<PAGE>


Item 2.  Properties.
At September 30, 2004, MFB Financial conducted its business from its corporate
office at 4100 Edison Lakes Parkway, Mishawaka, Indiana 46545, and eleven full
service financial centers. Nine branch offices are owned by MFB Financial, while
the Wayne Street and Walnut offices, are leased. During the fiscal year ended
September 30, 2004, MFB Financial opened one new office in South Bend, Indiana
and acquired three additional offices in South Bend as part of the acquisition
of certain assets and liabilities of Sobieski Bank.

The following table provides certain information with respect to MFB Financial's
offices as of September 30, 2004:
<TABLE>
<CAPTION>
                                                      Year                                 Approximate
Description and Address                              Opened                              Square Footage
-----------------------                              ------                              --------------
<S>                                                     <C>                                  <C>
Corporate Headquarters                                  2004                                 120,000
4100 Edison Lakes Parkway
Mishawaka, In 46545

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

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

Branch Office
23132 U.S. 33
Elkhart, In. 46517                                      2003                                   2,750

Branch Office
2930 West Cleveland Rd.                                 2004                                   8,888
South Bend, In. 46628

Branch Office
740 S Walnut                                             2004                                  5,000
South Bend, In 46619

Branch Office
23761 Western Ave                                        2004                                  3,441
South Bend, In 46619

Branch Office
742 E Ireland Rd                                         2004                                  3,090
South Bend, In 46614

</TABLE>

MFB Financial also operates thirteen automatic teller machines (ATMs). 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. In 2003, MFB Financial also renegotiated
its contract for data processing and reporting services with BISYS, Inc. in
Houston, Texas. The cost of these data processing services was approximately
$632,000 for the year ended September 30, 2004 and $596,000 for the year ended
September 30, 2003.

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, 2004.



<PAGE>


Item 4.5.         Executive Officers of Registrant.

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

       Name                                  Position
       ----                                  --------
Charles J. Viater           President and Chief Executive Officer of MFB
                             and MFB Financial
Donald R. Kyle              Executive Vice President and Chief Operating Officer
                             of MFB Financial
Thomas J. Flournoy          Executive Vice President and Chief Financial Officer
                             of MFB Financial
James P. Coleman, III       Executive Vice President and Director of Wealth
                             Management of MFB Financial
M. Gilbert Eberhart Secretary of MFB and MFB Financial

Charles J. Viater (age 50) 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 57) has served as Executive Vice President and Chief
Operating Officer of MFB Financial since July, 1999. Previously, he served as
Regional President of National City Bank in Cleveland, Ohio.

Thomas J. Flournoy (age 49) began serving as Vice President and Chief Financial
Officer in October, 2001. Previously, he served as Vice President and Controller
of 1st Source Bank in South Bend, Indiana.

James P Coleman (age 58) joined MFB in June 2004 as Executive Vice President and
Director of Wealth Management. Previously, he served as President of STAR Wealth
Management in Fort Wayne, Indiana and as Senior Vice President of 1st Source
Bank in South Bend, Indiana prior to his employment with STAR .

M. Gilbert Eberhart (age 70) has served as Secretary of MFB Financial since 1987
and of MFB since its organization. He is also a dentist based in Mishawaka.



<PAGE>



                                     PART II

Item 5.  Market for Registrant's Common Equity, Related Stockholder Matters,
and Issuer Purchases of Securities.

Information concerning the market price of and dividends paid on the common
stock of MFB and related shareholder matters is incorporated by reference to
page 46 of MFB's Annual Report to Shareholders for the fiscal year ended
September 30, 2004 (the "Annual Report"). MFB sold no equity securities during
the period covered by this report that were not registered under the Securities
Act of 1933 (the "1933 Act").

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.

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.

See Item 12 for disclosure required about certain equity compensation plans.

MFB has no ongoing stock repurchase program as of the date of this report and
repurchased no shares during the quarter ended September 30, 2004.

In the quarter ended September 30, 2004, the Company borrowed $6.5 million from
a correspondent bank. This variable rate line of credit, tied to the one year
LIBOR rate plus 175 basis points (presently at 4.33% as of September 30, 2004),
matures on August 31, 2004, at which time it may be converted to a term loan to
be amortized over a five year period. The borrowing is collateralized by MFB
Financial stock and requires the Bank to remain "well-capitalized" as defined by
regulatory capital adequacy guidelines.

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
the Annual Report.


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

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

Item 7A.          Quantitative and Qualitative Disclosures About Market Risk

The information required by this item is incorporated by reference to pages 9
through 11 of the Annual Report.


Item 8.            Financial Statements and Supplementary Data

MFB's Consolidated Financial Statements and Notes thereto contained on pages 19
through 52 of the Annual Report are incorporated herein by reference. MFB's
Supplementary Data is contained on page 56 of the Annual Report and is
incorporated herein by reference.

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

Not Applicable.

Item 9A.          Controls and Procedures.

a)       Evaluation of disclosure controls and procedures. MFB's chief executive
         officer and chief financial officer, after evaluating the effectiveness
         of MFB's disclosure controls and procedures (as defined in Sections 13a
         - 15(e) and 15d - 15(e) of the Securities Exchange Act of 1934, as
         amended), as of September 30, 2004 (the "Evaluation Date"), have
         concluded that as of the Evaluation Date, MFB's disclosure controls and
         procedures were adequate and are designed to ensure that material
         information relating to MFB would be made known to such officers by
         others within MFB.

b)       Changes in internal controls. There were no significant changes in the
         Company's internal control over financial reporting identified in
         connection with the Company's evaluation of controls that occurred
         during the Company's last fiscal quarter that has materially affected,
         or is reasonably likely to materially affect, the Company's internal
         control over financial reporting

Item 9B. Other Information

         Not applicable.


<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 4-7 of MFB's Proxy Statement for its 2003 Annual
Shareholder Meeting (the "Proxy Statement"). Information concerning MFB's
executive officers is included in Item 4.5 in Part I of this report. Information
concerning compliance by such persons with Section 16(a) of the 1934 Act is
incorporated by reference to page 14 of the Proxy Statement.

Code of Ethics

The Company has adopted an Ethics Policy that applies to all officers, employees
and directors of the Company and its subsidiaries. A copy of the Ethics Policy
is attached on Exhibit 14 to this Annual Report.

Item 11.          Executive Compensation

The information required by this item with respect to executive compensation is
incorporated by reference to pages 7 through 13 of the Proxy Statement.

Item 12.Security Ownership of Certain Beneficial Owners and Management and
Related  Stockholder Matters.

The information on security ownership of management and certain beneficial
owners is incorporated by reference to pages 1 to 4 of the Proxy Statement.

The following table provides the information about MFB's common stock that may
be issued upon the exercise of options and rights under all existing equity
compensation plans as of September 30, 2004.
<TABLE>
<CAPTION>
                                                                                                      Number of securities remaining
                                                                                                       available for future issuance
                                                                                                     under equity compensation plans
                                       Number of securities to be                                          as of September 30, 2004
                                        issued upon exercise of          Weighted-average exercise   (excluding securities reflected
                                     outstanding options, warrants     price of outstanding options,            in column (a)
                                     and rights as of September 30,         warrants and rights                      (c)
                                                  2004                              (b)
                                                  (a)
          Plan category

<S>                                             <C>                          <C>                                   <C>
Equity compensation plans                       196,600                      $          22.69                      68,000
approved by security holders

Equity compensation plans not
approved by security holders                       -                                        -                          -

Total                                           196,600                      $           22.69                     68,000

</TABLE>

(1)      Includes the following plans: MFB's stock option plan, 1997 stock
option plan and 2002 stock option plan.

Item 13.          Certain Relationships and Related Transactions.

The information required by this item is incorporated by reference to page 13 of
the Proxy Statement.

Item 14. Principal Accountant Fees and Services.

The information required by this item is incorporated by reference to page 13
and 14 of the Proxy Statement.
                                                     PART IV

Item 15. Exhibits and Financial Statement Schedules.

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

                                                                                    Pages in the Annual
                                                                                  Report to Shareholders
Financial Statements
<S>                                                                                         <C>
Report of Independent Auditors                                                              21
Consolidated Balance Sheets at September 30, 2004 and 2003                                  22
Consolidated Statements of Income for the Years Ended September 30, 2004, 2003              23
     and 2002
Consolidated Statements of Shareholders' Equity for the Years ended September               24
     30, 2004, 2003 and 2002
Consolidated Statements of Cash Flows for the Years ended September 30, 2004,              25-26
     2003 and 2002
Notes to Consolidated Financial Statements                                                 27-51
</TABLE>

(b) The exhibits filed herewith or incorporated by reference herein are set
forth on the Exhibit Index on page 48.

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


<PAGE>


                                   SIGNATURES

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

                                    MFB CORP.

Date: December 16, 2004 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,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

 /s/ Charles J. Viater                               /s/ M. Gilbert Eberhart
Charles J. Viater                               M. Gilbert Eberhart, Director
President, Chief Executive Officer
and Director                                     Date: December 16, 2004
(Principal Executive Officer)
                                                      /s/ Thomas F. Hums
Date: December 16, 2004                               Thomas F. Hums,
                                                    Chairman of the Board

                                                  Date: December 16, 2004

/s/ Thomas J. Flournoy                                 /s/ Johnathan E. Kintner

Thomas J. Flournoy                                Jonathan E. Kintner, Director
Executive Vice President and
Chief Financial Officer                              Date: December 16, 2004
(Principal Financial and Accounting
Officer)                                             /s/ Christine A. Lauber
                                                Christine A. Lauber, Director
Date: December 16, 2004
                                                     Date: December 16, 2004


    /s/ Michael J. Marien                                /s/ Reginald H. Wagle
Michael J. Marien, Director                         Reginald H. Wagle, Director

Date: December 16, 2004                            Date: December 16, 2004

    /s/ Robert C. Beutter
Robert C. Beutter, Director

Date: December 16, 2004

<PAGE>


EXHIBIT LIST
Exhibit Index
3(l)         The Articles of Incorporation of the Registrant are 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  Registrant  is  incorporated  by reference
                to Item 7 - Exhibit 3 of the  Company's
             Form 8-K dated October 15, 1995.
10(1)        MFB Financial Recognition and Retention Plans and Trusts are
             incorporated by reference to Exhibit B to Registrant's definitive
             proxy statement in respect of its 1996 Annual Shareholder Meeting.*
10(2)        MFB Corp. Stock Option Plan is incorporated by reference to Exhibit
             A to Registrant's definitive proxy statement in respect of its 1996
             Annual Shareholder Meeting.*
10(3)        The MFB Corp. 1997 Stock Option Plan is incorporated by reference
             to Exhibit A to Registrant's definitive proxy statement in respect
             of its 1997 Annual Shareholder Meeting. *
10(4)        MFB Corp. 2002 Stock Option Plan is incorporated by reference to
             Exhibit A to Registrant's definitive proxy statement in respect of
             its 2001 Annual Shareholder Meeting. *
10(5)        Employment Agreement between MFB Financial and Charles J. Viater
             dated January 19, 1999 is incorporated by reference to Exhibit
             10(5) to Registrant's Form 10-K filed for the fiscal year ended
             September 30, 2004. *
10(6)        Employment Agreement between MFB Financial and Donald R. Kyle dated
             July 1, 1999 is incorporated by reference to Exhibit 10(8) to the
             Registrant's Form 10-K filed for its fiscal year end September 30,
             2001. *
10(7)        Employment Agreement between MFB Financial and Thomas J. Flournoy
             dated October 22, 2001 is incorporated by reference to Exhibit
             10(7) to the Registrant's Form 10-K filed for its fiscal year ended
             September 30, 2002. *
11           Statement regarding computation of earnings per share (**)
13           Shareholder Annual Report.
14           Code of Ethics is incorporated  by reference to Exhibit 14 to
                Registrant's  Form 10-K filed for the fiscal
             year ended September 30, 2004.
21           Subsidiaries of the Registrant is  incorporated  by reference to
                Exhibit 21 to Registrant's  Form 10-K for
             the fiscal year ended September 30, 2004..
23           Consent of Crowe Chizek and Company LLC.
31.1         Certification of Charles J. Viater.
31.2         Certification of Thomas J. Flournoy.
32           Certification of Officers.

* Management contracts and plans required to be filed as exhibits are included
as Exhibits 10(1) - 10(7).

** See Notes 1 and 2 of Notes to Consolidated Financial Statements, included in
the 2004 Shareholder Annual Report as Exhibit 13.


<PAGE>


                                  EXHIBIT 31.1
                                  CERTIFICATION

         I, Charles J. Viater , certify that:

1.                I have reviewed this annual report on Form 10-K of MFB Corp.;

2.                Based on my knowledge, this report does not contain any untrue
                  statement of a material fact or omit to state a material fact
                  necessary to make the statements made, in light of the
                  circumstances under which such statements were made, not
                  misleading with respect to the period covered by this report;
                  and

3.                Based on my knowledge, the financial statements, and other
                  financial information included in this report, fairly present
                  in all material respects the financial condition, results of
                  operations and cash flows of the registrant as of, and for,
                  the periods presented in this report.

4.                The registrant's other certifying officer and I are
                  responsible for establishing and maintaining disclosure
                  controls and procedures (as defined in Exchange Act Rules
                  13a-15(e) and 15d-15(e)) for the registrant and have:

a.                designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, to ensure that material information relating
                  to the registrant, including its consolidated subsidiaries, is
                  made known to us by others within those entities, particularly
                  during the period in which this report is being prepared;

b.                evaluated the effectiveness of the registrant's disclosure
                  controls and procedures and presented in this report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures as of the end of the period covered by this
                  report based on such evaluation; and

c.                disclosed in this report any change in the registrant's
                  internal control over financial reporting that occurred during
                  the registrant's most recent fiscal quarter (the registrant's
                  fourth fiscal quarter in the case of an annual report) that
                  has materially affected, or is reasonably likely to materially
                  affect, the registrant's internal control over financial
                  reporting.

5.                The registrant's other certifying officer and I have
                  disclosed, based on our most recent evaluation of internal
                  control over financial reporting, to the registrant's auditors
                  and the audit committee of the registrant's board of directors
                  (or persons performing the equivalent functions):

a.                all significant deficiencies and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonably likely to affect the
                  registrant's ability to record, process, summarize and report
                  financial information; and

b.                any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal control over financial reporting.

         Dated: December 16, 2004


                                 /s/ Charles J. Viater, Chief Executive Officer
                                        Charles J. Viater
                                      Chief Executive Officer



<PAGE>


                                  EXHIBIT 31.2
                                  CERTIFICATION

         I, Thomas J. Flournoy, certify that:

1.                I have reviewed this annual report on Form 10-K of MFB Corp.;

2.                Based on my knowledge, this report does not contain any untrue
                  statement of a material fact or omit to state a material fact
                  necessary to make the statements made, in light of the
                  circumstances under which such statements were made, not
                  misleading with respect to the period covered by this report;
                  and

3.                Based on my knowledge, the financial statements, and other
                  financial information included in this report, fairly present
                  in all material respects the financial condition, results of
                  operations and cash flows of the registrant as of, and for,
                  the periods presented in this report.

4.                The registrant's other certifying officer and I are
                  responsible for establishing and maintaining disclosure
                  controls and procedures (as defined in Exchange Act Rules
                  13a-15(e) and 15d-15(e)) for the registrant and have:

a.                designed such disclosure controls and procedures, or caused
                  such disclosure controls and procedures to be designed under
                  our supervision, to ensure that material information relating
                  to the registrant, including its consolidated subsidiaries, is
                  made known to us by others within those entities, particularly
                  during the period in which this report is being prepared;

b.                evaluated the effectiveness of the registrant's disclosure
                  controls and procedures and presented in this report our
                  conclusions about the effectiveness of the disclosure controls
                  and procedures as of the end of the period covered by this
                  report based on such evaluation; and

c.                disclosed in this report any change in the registrant's
                  internal control over financial reporting that occurred during
                  the registrant's most recent fiscal quarter (the registrant's
                  fourth fiscal quarter in the case of an annual report) that
                  has materially affected, or is reasonably likely to materially
                  affect, the registrant's internal control over financial
                  reporting.

5.                The registrant's other certifying officer and I have
                  disclosed, based on our most recent evaluation of internal
                  control over financial reporting, to the registrant's auditors
                  and the audit committee of the registrant's board of directors
                  (or persons performing the equivalent functions):

a.                all significant deficiencies and material weaknesses in the
                  design or operation of internal control over financial
                  reporting which are reasonably likely to affect the
                  registrant's ability to record, process, summarize and report
                  financial information; and

b.                any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal control over financial reporting.

         Dated: December 16, 2004


                                /s/ Thomas J. Flournoy, Chief Financial Officer
                                    Thomas J. Flournoy
                                     Chief Financial Officer



<PAGE>


                                   EXHIBIT 32
                                  CERTIFICATION

         By signing below, each of the undersigned officers hereby certifies
pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that, to his knowledge, (i) this report fully
complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 and (ii) the information contained in this report fairly
presents, in all material respects, the financial condition and results of
operations of MFB Corp.

         Signed this_____ day of December, 2004



     /s/ Thomas J. Flournoy                          /s/ Charles J. Viater
(Signature of Authorized Officer)              (Signature of Authorized Officer)

Thomas J. Flournoy                                   Charles J. Viater
-------------------------------         ---------------------------------------
(Typed Name)                                         (Typed Name)

Chief Financial Officer                          Chief Executive Officer
------------------------------             -----------------------------------
(Title)                                              (Title)



A signed original of this written statement required by Section 906 has been
provided to MFB Corp. and will be retained by MFB Corp. and forwarded to the
Securities and Exchange Commission or its staff upon request.





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