ANNUAL REPORT
                                 TO SHAREHOLDERS


                           TABLE OF CONTENTS

                                                                   Page
Letter to Shareholders ........................................      2
Selected Consolidated Financial Data ..........................      4
Management's Discussion and Analysis ..........................      5
Report of Independent Auditors ................................     16
Consolidated Balance Sheets ...................................     17
Consolidated Statements of Income .............................     18
Consolidated Statements of Changes in Shareholders' Equity.....     19
Consolidated Statements of Cash Flows .........................     20
Notes to Consolidated Financial Statements ....................     22
Directors and Officers ........................................     47
Shareholder Information .......................................     48


DESCRIPTION OF BUSINESS

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


                                       49


<PAGE>



MFB CORP.
--------------------------------------------------------------------------------
P.O. Box 528 Mishawaka, IN  46546-0528  219/255-3146  Fax 219/255-3044

TO OUR SHAREHOLDERS:

       On behalf of myself and the entire Board of  Directors,  it is a pleasure
to provide you with the 1996 Annual Report of MFB Corp., the holding company for
Mishawaka Federal Savings (the "Bank"). In March of 1994, after the formation of
MFB Corp.,  the Bank  converted to a federal  stock savings bank and this report
depicts only the second full year of operations as a stock company.

       This past year has been one of many changes for our company. The emphasis
has been on growth within our market that allows us to  effectively  utilize our
capital,  generate  improved returns on your investment and enhance the value of
the company's  stock.  We have improved our product and service  offerings which
has created  opportunities  to attract new customers and secure our relationship
with  existing  customers.  As we look at the  financial  highlights of the past
year, I believe you will agree that the changes we've  instituted are propelling
the Company and the Bank forward toward the achievement of the above goals.

       In 1996,  the Company  began  offering a wider array of loan  products to
meet the  needs of the  community  we serve.  These  products,  combined  with a
concerted effort to increase the awareness level of the Bank in the marketplace,
resulted in net loan portfolio growth of $30.9 million, the greatest single year
of such growth in our 106 year history.  At the same time, asset quality has not
just remained  unchanged,  but has improved  over the prior year.  The Bank also
began to develop a small business banking division that will allow us to attract
local  businesses  that  desire to receive a level of personal  service  that is
critical to their success.  Growth of this segment of our business in the coming
years will be an important focus.

       Deposit based product offerings have also been enhanced.  The emphasis on
core  relationships,  competitive  terms  and the  highest  quality  service  to
customers  has  resulted in an increase  in our  deposit  base of $14.4  million
during the year. Non-interest bearing demand accounts increased significantly as
did our certificate of deposit account base.

       In  addition  to the growth  discussed  above,  the  Company  undertook a
leveraging  strategy during this past year designed to further enhance earnings.
The success of this strategy  contributed to net earnings and helped improve the
overall return on equity during the year.

     A major legislative event effecting our Company took place on September 30,
1996.  President  Clinton  signed into law a bill that  included a provision  to
recapitalize the Savings Association Insurance Fund ("SAIF"). This bill resulted
in a one time special assessment to all SAIF insured institutions  equivalent to
 .657%  of  total  assessable  deposits  as of  March  31,  1995.  This  one time
assessment  amounted to $955,000  for our  Company,  or $577,000 on an after tax
basis. Had this assessment not been incurred,  the net income for the year would
have been $l.5  million  or $.76 per share.  This  assessment  will  result in a
reduction  in future  insurance  premiums and is expected to result in a payback
period of approximately 3.6 years.



<PAGE>


       In April and May of 1996, the Company  repurchased over 103,000 shares of
its common  stock.  This  activity  resulted in a reduction  of the total shares
outstanding.,  an  improvement  in the book value of the  remaining  outstanding
shares and had a positive impact on our return on equity. In addition, I am sure
you are aware of the  payment of our  initial  dividend  in August,  1996 in the
amount of $.06 per  outstanding  share.  These events are part of our systematic
approach to enhancing the long term value of your investment in our Company.

       It has indeed been a year of change.  The following  pages of this report
provide  more  details  about the past year's  results.  Management  will remain
vigilant  in our  effort  to  identify  additional  opportunities  to serve  the
financial needs of our community effectively and profitably. We are committed to
growing  the  long  term  value of your  investment  in a  prudent,  intelligent
fashion.  We appreciate  the  confidence you have shown in MFB Corp. and we will
continue to operate the Company in an effort to reward that confidence.





                                           /s/ Charles J. Viater
                                           Charles J. Viater
                                           President and Chief Executive Officer


                                                        51


<PAGE>


                SELECTED CONSOLIDATED FINANCIAL DATA OF
                       MFB CORP. AND SUBSIDIARY

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

<TABLE>
<CAPTION>

                                                                  At September 30,
                                                                   (In Thousands)
                                              1996         1995         1994         1993         1992
                                            --------     --------     --------     --------     --------
Summary of Financial Condition:
<S>                                         <C>          <C>          <C>          <C>          <C>     
Total assets                                $225,809     $187,065     $183,753     $168,581     $164,554
Loans receivable, net                        152,052      121,181      115,297      108,212      112,226
Cash and cash equivalents                      1,734        7,454        6,153       20,820        7,888
Securities                                    68,099       53,293       56,107       16,624       21,714
Interest-bearing time deposits in other
  financial institutions                         495        1,880        3,365       20,469       20,108
Deposits                                     158,964      144,552      143,604      149,220      146,681
FHLB advances                                 24,500           --           --           --           --
Shareholders' equity                          37,599       37,999       37,705       16,964       15,677
</TABLE>


<TABLE>
<CAPTION>


                                                               Years Ended September 30,
                                                                   (In Thousands)
                                             1996          1995          1994          1993           1992
                                           --------      --------      --------      --------       --------
Summary of Operating Results:
<S>                                        <C>           <C>           <C>           <C>            <C>     
Interest income                            $ 14,182      $ 12,383      $ 11,545      $ 11,931       $ 13,684
Interest expense                              8,057         6,788         6,019         6,559          8,445
                                           --------      --------      --------      --------       --------
     Net interest income                      6,125         5,595         5,526         5,372          5,239
Provision for loan losses                        30            30            30           192             27
                                           --------      --------      --------      --------       --------
     Net interest income after
       provision for
       loan losses                            6,095         5,565         5,496         5,180          5,212
Noninterest income
     Insurance commissions                      127           128           127           126            133
     Net gain from sales of securities            3            --            --            10             --
     Other                                      232           189           151           159            160
                                           --------      --------      --------      --------       --------
         Total noninterest income               362           317           278           295            293
Noninterest expense
     Salaries and employee benefits           2,153         2,336         1,969         1,600          1,483
     Occupancy and equipment expense            422           406           379           378            409
     SAIF deposit insurance premium           1,291           332           341           280            321
     Other expense                              969           753           666           621            580
                                           --------      --------      --------      --------       --------
         Total noninterest expense            4,835         3,827         3,355         2,879          2,793
Income before income
  taxes and cumulative
  effect of change in
  accounting principles                       1,622         2,055         2,419         2,596          2,712
Income tax expense                              647           819           887         1,121          1,011
                                           --------      --------      --------      --------       --------
Income before cumulative effect
  of change in accounting principles            975         1,236         1,532         1,475          1,701
Cumulative effect of change in
  accounting for income taxes                    --            --            --          (188)            --
                                           --------      --------      --------      --------       --------
     Net income                            $    975      $  1,236      $  1,532      $  1,287       $  1,701
                                           ========      ========      ========      ========       ========

Supplemental Data:
Return on assets (1)                            .49%          .67%          .86%          .77%          1.04%
Return on equity (2)                           2.61          3.25          5.60          7.75          11.30
Interest rate spread (3)                       2.13          2.12          2.57          2.85           2.74
Net yield on average interest-
   earning assets (4)                          3.11          3.10          3.18          3.28           3.26
Dividend pay-out ratio (5)                    12.24            --            --            --             --

Net interest income to
     operating expenses (6)                  126.68        146.20        164.71        186.59         187.58
Equity-to-assets (7)                          16.65         20.31         20.52         10.06           9.53
Average interest-earning assets to
     average interest-bearing
     liabilities                             123.95        126.12        117.61        110.73         109.68
Non-performing assets to total assets           .09           .17           .07           .16            .11
Non-performing loans to total loans             .13           .25           .09           .21            .16
Allowance for loan losses to
     total loans, net                           .22           .26           .24           .23            .05
Allowance for loan losses to
     non-performing loans                    171.72        100.65        261.68        112.11          32.77
Earnings per share (8)                     $    .49      $    .59      $    .43           $--            $--
Earnings per share fully diluted (8)       $    .48      $    .59      $    .43           $--            $--
Dividends declared per share               $    .06           $--           $--           $--            $--
Book value per share                       $  19.05      $  18.29      $  17.24           $--            $--
Number of offices                                 4             4             4             4              4
</TABLE>
------------------
(1)      Net income divided by average total assets.
(2)      Net income divided by average total equity.
(3)      Interest  rate spread is calculated  by  subtracting  average
         interest rate cost from average interest rate earned.
(4)      Net  interest  income  divided  by  average  interest-earning
         assets.
(5)      Dividends declared per share divided by earnings per share.
(6)      Operating expenses consist of other expenses less taxes.
(7)      Total equity divided by total assets.
(8)      Earnings per common and common equivalent share subsequent to
         conversion.

<PAGE>

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

          The  principal  business  of the Bank has  historically  consisted  of
attracting  deposits  from the  general  public  and  making  loans  secured  by
residential  and  other  real  estate.  The Bank is  significantly  affected  by
prevailing  economic  conditions as well as government  policies and regulations
concerning,  among  other  things,  monetary  and fiscal  affairs,  housing  and
financial  institutions.  Deposit  flows are  influenced by a number of factors,
including interest rates paid on competing  investments,  account maturities and
level of personal income and savings. In addition, deposit growth is affected by
how customers  perceive the stability of the  financial  services  industry amid
various  current events such as regulatory  changes and financing of the deposit
insurance fund.  Lending  activities are influenced by the demand for and supply
of housing lenders,  the availability and cost of funds and various other items.
Sources  of  funds  for  lending   activities  of  the  Bank  include  deposits,
borrowings, payments on loans and income provided from operations. The Company's
earnings  are  primarily  dependent  upon the Bank's net  interest  income,  the
difference between interest income and interest expense.

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

ASSET/LIABILITY MANAGEMENT

         The  Company is subject to  interest  rate risk to the degree  that its
interest-bearing  liabilities,  primarily  deposits  with short and  medium-term
maturities,  mature or reprice  at  different  rates  than its  interest-earning
assets.  Although having  liabilities  that mature or reprice less frequently on
average than assets will be beneficial in times of rising interest  rates,  such
an  asset/liability  structure will result in lower net income during periods of
declining  interest  rates,  unless offset by other factors such as  noninterest
income.
         A key element of the Company's  asset/liability  plan is to protect net
earnings  from  changes in interest  rates by reducing the maturity or repricing
mismatch between its interest-earning assets and rate-sensitive liabilities. The
Company's one year  interest  rate gap has been between a negative  36.01% and a
positive 9.14% at the end of each year from September 30, 1992, to September 30,
1996. This assumes that deposit accounts reprice based on assumptions  indicated
below the following table. The Company's interest rate gap was a negative 36.01%
as of  September  30, 1996. A negative  interest  rate gap leaves the  Company's
earnings  vulnerable to periods of rising  interests  rates because  during such
periods the interest  expense paid on liabilities  will generally  increase more
rapidly  than the interest  income  earned on assets.  Conversely,  in a falling
interest rate environment,  the total expense paid on liabilities will generally
decrease  more  rapidly than the interest  income  earned on assets.  A positive
interest  rate gap would have the  opposite  effect.  The  Company's  management
believes  that the Company's  interest rate gap in recent  periods has generally
been maintained  within an acceptable  range in view of the prevailing  interest
rate environment.

<PAGE>

         The  Office of Thrift  Supervision  (the  "OTS")  also  provides  a Net
Portfolio  Value ("NPV")  approach to the  measurement of interest rate risk. In
essence,  this approach  calculates the difference  between the present value of
expected  cash flows from  assets and the present  value of expected  cash flows
from liabilities,  as well as cash flows from off-balance  sheet contracts.  The
difference is the NPV. As of June 30, 1996, (the most recently  available data),
after a 200 basis point rate change, the Bank's NPV ratio was 13.34%. Management
reviews  the  quarterly   OTS   measurements   on  a  quarterly   basis  as  the
implementation of the Company's  interest rate risk policy is done within limits
established  by the Board of  Directors  on the amount of change in NPV which is
acceptable given certain interest rate changes.

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

         The following table illustrates the projected  maturities and repricing
of the major  consolidated  asset and liability  categories of the Company as of
September 30,1996.  Maturity and repricing dates have been projected by applying
the  assumptions  set  forth  below to  contractual  maturity,  call  dates  and
repricing  dates.  The  information  presented in the following table is derived
from data maintained by the Company and is not adjusted for  prepayments.  Since
most of the loans are adjustable rate loans which are due to reprice within five
years  or  less,  management  feels  that  loan  prepayments  will  not  have  a
significant impact on the results of the table below.


<TABLE>
<CAPTION>
                                                                                  At September 30, 1996
                                                                               maturing or Repricing Within
                                                ---------------------------------------------------------------------------------
                                                  Less                        6 Months                                      5 to
                                                 Than 3          3 to 6          to         1 to 3         3 to 5            10
                                                 Months          Months        1 Year        Years          Years           Years
                                                 ------          ------        ------        -----          -----           -----
<S>                                             <C>            <C>            <C>           <C>           <C>            <C>        
Adjustable rate mortgages                       $ 16,671       $ 12,613       $ 35,427      $ 33,223      $ 16,551       $ 15,851   
Fixed rate mortgages                                   4             11             10           202           625          1,787   
Equity Loans                                       3,522             --             --            --            91            177   
Financing leases                                      --             --             37            --           190            898   
Consumer loans                                        22             17             35             9            --             --   
Securities                                        15,509          6,038          5,789        13,515         1,838             --   
Mortgage-backed securities                         4,537             --             --         5,013            --             --   
Interest -earning time deposits                      297            198                                                             
Stock in FHLB of Indianapolis                                                                                                       
Deferred loan fees                                   (16)           (14)           (22)           (9)           (15)          (21)  
Loans in process                                    (441)           (12)            (9)         (402)          (420)         (269)  
                                                  40,105         18,851         41,267        51,551         18,860        18,423   
                                                  ------         ------         ------        ------         ------        ------   
Interest-bearing Liabiliites                                                                                             
Certificates of deposit                           25,426         20,163         39,940        32,923          3,466           325   
Savings acoounts                                   9,695             --             --            --             --            --   
NOW and money market accounts                     25,085             --             --            --             --            --   
 FHLB advances                                    15,000          1,000             --         8,500             --            --   
                                                  ------         ------         ------        ------          -----           ---   
                                                  75,206         21,163         39,940        41,423          3,466           325   
                                                  ------         ------         ------        ------          -----           ---   
Excess (deficiency) of interest-earning                                                                                  
assets over interest bearing liabilities         (35,101)        (2,312)         1,327        10,128         15,394        18,098   
                                                 =======         ======          =====        ======         ======        ======   
                                                                                                                         
Cumulative excess (deficiency) of                                                                                        
 interest-earning assets over interest 
 bearing liabilities                             (35,101)       (37,413)       (36,086)      (25,958)      (10,564)         7,534   
Cumulative interest rate gap to total                                                                                   
 interest-earning assets                          -87.52%        -63.46%        -36.01%       -17.10%        -6.19%          3.99%  
Off balance sheet assets (1)                       2,771          7,303          2,994           402           727          6,625   
</TABLE>

<PAGE>

                                                   At September 30, 1996
                                                maturing or Repricing Within
                                           -------------------------------------
                                             10 to
                                              20          Over 20
                                             Years         Years        Total
                                             -----         -----        -----
Adjustable rate mortgages                       $---        $---       $130,336 
Fixed rate mortgages                         13,448        3,372         19,459 
Equity Loans                                     --           --          3,790 
Financing leases                                 --           --          1,125 
Consumer loans                                   --           --             83 
Securities                                       --           --         42,689 
Mortgage-backed securities                    5,007        9,517         24,074 
Interest -earning time deposits                                             495 
Stock in FHLB of Indianapolis                              1,336          1,336 
Deferred loan fees                             (180)        (163)          (440)
Loans in process                               (408)          --         (1,961)
                                             17,867       14,062        220,986 
                                             ------       ------        ------- 
Interest-bearing Liabiliites                                                    
Certificates of deposit                          --           --        122,243 
Savings acoounts                                 --           --          9,695 
NOW and money market accounts                    --           --         25,085 
FHLB advances                                    --           --         24,500 
                                             ------       ------        ------- 
                                                 --           --        181,523 
                                             ------       ------        ------- 
                                                                                
Excess (deficiency) of interest-earning                                         
assets over interest bearing liabilities     17,867       14.062         39,463 
                                             ======       ======         ====== 
                                                                                
Cumulative excess (deficiency) of
 interest-earning assets over interest 
 bearing liabilities                         25,401       39,463         39,463 
 Cumulative interest rate gap to total                                          
 interest-earning assets                      12.28%       17.86%         17.86%
Off balance sheet assets (1)                    408           --         21,230
-----------
(1)   Includes loan commitments and loans in process  
                                             

<PAGE>

         It is assumed that fixed maturity  deposits are not withdrawn  prior to
maturity,  that other  deposits are withdrawn or reprice in three months or less
due to  the  likelihood  that  such  deposits  will  reprice  in  the  event  of
significant  changes in the overall  level of interest  rates  available  in the
marketplace and that callable securities are repricing at the call date.

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

         The  adjustable  rate  first  mortgage  loans  the  Bank  holds  in its
portfolio  are  primarily  indexed  to the  National  Median  Cost of Funds  and
interest rate adjustments on these loans may lag behind changes in market rates.
At September 30,1996, these loans totaled $130.3 million, or 84.2% of the Bank's
total loan portfolio. In August, 1996 the Bank began originating adjustable rate
mortgage loans using the One Year Treasury Index. As a general rule, market rate
adjustments on loans indexed to the National Median Cost of Funds lag

<PAGE>

behind  changes  in  market  rates  due to the fact  that  the  index is tied to
variables that may not reprice on a basis as quickly as market rates (e. g., the
One Year Treasury).  In a period of rising interest rates, the Bank's adjustable
rate residential  loans may not adjust upward as quickly as market rates thereby
adversely affecting the Company's net interest income.  Conversely,  in a period
of declining  interest rates, the Bank's  adjustable rate residential  loans may
not adjust downward as quickly as market rates thereby positively  affecting the
Company's net interest  income.  In any case, such adjustments may be limited by
loan terms which restrict  changes in interest  rates on a short-term  basis and
over the life of the loan.


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

<TABLE>
<CAPTION>
                                                                        1996            1995             1994
                                                                       Average         Average          Average
                                                                     Outstanding     Outstanding      Outstanding
                                                                       Balance         Balance          Balance
                                                                       -------         -------          -------
Assets:                                                                            (In thousands)
Interest-earning assets:
<S>                                                                <C>              <C>             <C>         
     Interest-bearing deposits                                     $       6,709    $      7,995    $     24,117
     Securities (1)                                                       35,392          39,841          27,093
     Mortgage-backed securities (1)                                       19,717          12,558          10,698
     Loans receivable (2)                                                133,670         118,735         110,540
     Stock in FHLB of Indianapolis                                         1,303           1,223           1,149
                                                                   -------------    ------------    ------------
         Total interest-earning assets                                   196,791         180,352         173,597
Non-interest earning assets, net
  of allowance for loan losses                                             3,792           3,517           3,546
                                                                   -------------    ------------    ------------

              Total assets                                         $     200,583    $    183,869    $    177,143
                                                                   =============    ============    ============

Liabilities and shareholders' equity:
Interest-bearing liabilities:
     Savings accounts                                              $       9,746    $      9,774    $      9,646
     NOW and money market accounts                                        26,006          26,672          30,662
     Certificates of deposit                                             113,570         106,556         107,294
     FHLB borrowings                                                       9,625               -               -
                                                                   -------------    ------------    ------------
         Total interest-bearing liabilities                              158,947         143,002         147,602

Other liabilities                                                          4,229           2,838           2,200
                                                                   -------------    ------------    ------------
     Total liabilities                                                   163,176         145,840         149,802

     Shareholders' equity
         Common stock                                                     19,064          20,527          10,524
         Retained earnings                                                19,718          19,117          17,802
         Less common stock acquired by:
              Employee stock ownership plan                               (1,007)         (1,208)           (675)
              Recognition and retention plans                               (235)           (407)           (310)
              Unrealized gain (loss) on securities
                available for sale                                          (133)              -               -
                                                                   -------------    ------------    ------------
         Total shareholders' equity                                       37,407          38,029          27,341
                                                                   -------------    ------------    ------------

         Total liabilities and shareholders' equity                $     200,583    $    183,869    $    177,143
                                                                   =============    ============    ============
</TABLE>
------------
(1)  Average  outstanding  balance reflects unrealized gain (loss) on securities
     available for sale.
(2)  Total loans less deferred net loan fees and loans in process.


<PAGE>

INTEREST RATE SPREAD

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

                                                  Year ended September 30,
                                                  1996      1995      1994
                                                  ----      ----      ----
Average interest rate earned on:
   Interest-earning deposits                      6.29%     6.03%     3.82%
   Securities(l)                                  6.17%     5.77%     5.53%
   Mortage-backed securities(l)                   6.15%     5.51%     5.48%
   Loans receivable                               7.67%     7.42%     7.67%
   Stock in FHLB of Indianapolis                  7.90%     7.60%     5.22%
      Total interest-earning assets               7.20%     6.87%     6.65%

Average interst rate of:

   Savings accounts                               2.77%     2.80%     2.75%
   NOW and money market accounts                  3.12%     3.24%     2.65%
   
   Certificates of depoist                        5.68%     5.30%     4.61%
   FHLB advances                                  5.50%      ---       ---
      Total interst-bearing liabilities           5.07%     4.75%     4.08%
   
Interst rate spread (2)                           2.13%     2.12%     2.57%
Net yield on interest-eaming assets (3)           3.11%     3.10%     3.18%
---------------
(1)      Yield is based on amortized cost without adjustment for unrealized gain
         (loss) on securities available for sale

(2)      Interest rate spread is calculated by subtracting the average  interest
         rate  cost  from  the  average  interest  rate  earned  for the  period
         indicated.

(3)      The net  yield on  average  interest-earning  assets is  calculated  by
         dividing net interest income by the average interest-earning assets for
         the period indicated.

<PAGE>

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

<TABLE> 
<CAPTION>                                                                                                            
                                                                                                                     
                                                                               Increase (Decrease) in                
                                                                                Net Interest Income                  
                                                                 ------------------------------------------------    
                                                                   Total Net           Due to            Due to      
                                                                    Change              Rate             Volume      
                                                                 -----------       -----------       ------------    
                                                                                    (In thousands)                   
Year ended September 30, 1996 compared                                                                               
  to year ended September 30, 1995                                                                                   
      Interest-earning assets                                                                                        
<S>                                                              <C>               <C>               <C>             
         Interest-bearing deposits                               $       (60)      $        20       $        (80)   
         Securities                                                     (114)              154               (268)   
         Mortgage-backed securities                                      533                97                436    
         Loans receivable                                              1,430               293              1,137    
         Stock in FHLB of Indianapolis                                    10                 4                  6    
                                                                 -----------       -----------       ------------    
             Total                                                     1,799               568              1,231    
                                                                                                                     
      Interest-bearing liabilities                                                                                   
         Savings accounts                                                 (4)               (3)                (1)   
         NOW and money market accounts                                   (52)              (31)               (21)   
         Certificates of deposit                                         796               411                385    
         FHLB borrowings                                                 529                 -                529    
                                                                 -----------       -----------       ------------    
             Total                                                     1,269               377                892    
                                                                 -----------       -----------       ------------    
                                                                                                                     
Change in net interest income                                    $       530       $       191       $        339    
                                                                 ===========       ===========       ============    
</TABLE>      


<TABLE>
<CAPTION>


                                                                             Increase (Decrease) in
                                                                              Net Interest Income
                                                                   Total Net           Due to            Due to
                                                                    Change              Rate             Volume
                                                                 -----------       -----------       ------------
                                                                                    (In thousands)
Year ended September 30, 1995 compared
  to year ended September 30, 1994
      Interest-earning assets
<S>                                                              <C>               <C>               <C>          
         Interest-bearing deposits                               $      (440)      $       367       $       (807)
         Securities                                                      802                69                733
         Mortgage-backed securities                                      106                 4                102
         Loans receivable                                                337              (278)               615
         Stock in FHLB of Indianapolis                                    33                29                  4
                                                                 -----------       -----------       ------------
             Total                                                       838               191                  647

      Interest-bearing liabilities
         Savings accounts                                                  9                 5                  4
         NOW and money market accounts                                    50               164               (114)
         Certificates of deposit                                         710               744                (34)
                                                                 -----------       -----------       ------------
             Total                                                       769               913                (144)
                                                                 -----------       -----------       -------------

Change in net interest income                                    $        69       $      (722)      $        791
                                                                 ===========       ===========       ============
</TABLE>

<PAGE>


COMPARISON OF FISCAL YEARS ENDED SEPTEMBER 30,1996 AND SEPTEMBER
30, 1995.

         Consolidated  net income for the Company  for the year ended  September
30,1996 was $975,000  compared to $1.2 million for the same period in 1995.  The
decrease of $261,000  resulted  primarily from a one time special  assessment to
recapitalize  the Savings  Association  Insurance  Fund  ("SAIF")  of  $955,000,
partially offset by a $530,000 increase in net interest income from $5.6 million
in 1995 to $6.1  million in 1996 and a $172,000  decrease in income tax expense.
Had the  special  assessment  not been  incurred,  net income for the year ended
September 30, 1996 would have amounted to $1.6 million.

         The  increase in net  interest  income was due to increases in both the
volume of  interest-earning  assets and higher rates earned which was  partially
offset by  increases  in the volume of  interest-bearing  liabilities  and rates
paid. The average rate paid on interest-bearing  liabilities  increased 32 basis
points from 4.75% in 1995 to 5.07% in 1996, while the yield on  interest-earning
assets  increased  33 basis  points  from  6.87% in 1995 to 7.20% in 1996.  As a
result, the interest rate spread increased one basis point from 2.12% in 1995 to
2.13% in 1996.

         As of September 30, 1996 net loans were $152.1  million,  $30.9 million
more  than net  loans of $121.2  million  as of  September  30,  1995.  Deposits
increased  $14.4 million to $159.0  million as of September 30, 1996 from $144.6
million as of September 30, 1995.

         Cash and cash  equivalents  decreased $5.8 million from $7.5 million as
of September  30, 1995 to $1.7 million as of September  30, 1996  primarily as a
result of a $5.4 million  decrease in  interest-bearing  time  deposits in other
financial institutions.

         The securities portfolio consists of government,  government agency and
mortgage-related  securities.  Several changes occurred in this portfolio during
the year ended September 30,1996.  In November,  1995, the Financial  Accounting
Standards Board ("FASB") issued a special report, A Guide to  Implementation  of
SFAS No.115 on Accounting for Certain  Investments in Debt and Equity Securities
("Guide").  As permitted by the Guide,  on November 30, 1995, the Company made a
one-time  reassessment  and  transferred  securities  from the  held-to-maturity
portfolio to the available-for-sale  portfolio.  At the date of transfer,  these
securities had an amortized cost of $47.9  million,  and the transfer  increased
the unrealized  appreciation  on securities  available-for-sale  by $196,000 and
increased  shareholders'  equity by $119,000 net of tax of $77,000. In addition,
during  the year  ended  September  30,  1996,  the  Company  adopted  a capital
leveraging  strategy  that  involved the purchase of mortgage  related and other
securities funded primarily with Federal Home Loan Bank ("FHLB") advances.  This
leveraging portfolio represented $26.6 million of the total securities portfolio
at September 30, 1996. As of September 30, 1996 the total  securities  portfolio
amounted to $66.8  million,  an increase of $14.8  million from $52.0 million at
September  30, 1995.  This  increase is primarily  related to the $26.6  million
increase  in  the  leveraging  portfolio,  partially  offset  by net  sales  and
maturities of other securities of $11.8 million during the year.

         The $30.9 million  increase in net loans was funded  primarily from the
$14.4 million  increase in deposits,  the $5.8 million decrease in cash and cash
equivalents and the $11.8 million decrease in securities discussed above.
         Total  liabilities  increased  $39.1 million from $149.1  million as of
September 30, 1995 to $188.2  million as of September 30, 1996  primarily due to
the $14.4



<PAGE>




million  increase in deposits and a $24.5  million  increase in FHLB  borrowings
used to fund the leveraged securities portfolio.

         Total shareholders'  equity decreased $400,000 from $38.0 million as of
September 30, 1995 to $37.6  million as of September 30, 1996.  The decrease was
primarily  attributable  to the repurchase of the Company's  common stock during
the year in the  amount  of $1.5  million,  partially  offset  by net  income of
$975,000 for the year ended September 30, 1996.

         The book value of MFB Corp. Common stock, based on the actual number of
shares  outstanding  at each period,  increased  from $18.29 as of September 30,
1995 to $19.05 as of September 30, 1996.

         Interest income  increased $1.8 million during the year ended September
30, 1996  compared to the same period one year ago. The  increase was  primarily
related to increased volumes of loans receivable and mortgage-backed  securities
partially offset by a decrease in the volume of lower yielding  interest-bearing
deposits and  securities.  A general  increase in rates also  contributed to the
increase.  Interest  expense  increased  $1.3 million  during the most  recently
reported  twelve  month period  primarily  as a result of  increased  volumes of
certificates   of  deposit  and  FHLB   borrowings.   Increased  rates  paid  on
certificates of deposit also contributed to the interest expense  increase.  Net
interest income increased $530,00 for the year ended September 30, 1996 compared
to the year ended September 30, 1995.

         Noninterest income increased from $317,000 for the year ended September
30, 1995 to  $362,000  for the twelve  months  ended  September  30,  1996.  The
increase was  primarily due to increased  fee income  related to demand  deposit
accounts.  Non-interest  expense  increased  to $4.8  million for the year ended
September  30,  1996 from $3.8  million  for the same  period  last  year.  This
increase is primarily related to the one time special assessment to recapitalize
the SAIF of $955,000.

COMPARISON OF FISCAL YEARS ENDED SEPTEMBER 30,1995 AND SEPTEMBER
30,1994.

         Consolidated  net income for the Company  for the year ended  September
30, 1995 was $1.2 million  compared to $1.5 million for the same period in 1994.
The  decrease  of  $296,000  resulted  primarily  from a  $472,000  increase  in
noninterest expense from $3.4 million to $3.8 million for the comparative twelve
month periods,  which was partially offset by a $69,000 increase in net interest
income and a $68,000 decrease in income tax expense.

         As of September 30, 1995,  net loans  receivable  were $121.2  million,
$5.9  million more than net loans of $115.3  million as of  September  30, 1994.
Deposits  increased  $947,000 to $144.6  million as of  September  30, 1995 from
$143.6 million as of September 30, 1994.

         Cash and cash  equivalents  increased $1.3 million from $6.2 million as
of September  30, 1994 to $7.5  million as of September  30, 1995 as a result of
increasing the  interest-bearing  deposits in other financial  institutions from
$4.3 million to $5.4 million during the same period.

         Total  liabilities  increased  $3.1 million  from $146.0  million as of
September 30, 1994 to $149.1  million as of September 30, 1995  primarily due to
the  September,  1995  commitments  to purchase $2.0 million in securities  with
settlement dates in



<PAGE>

October, 1995. As a result of these security transactions,  accrued expenses and
other  liabilities  increased  from  $244,000 as of  September  30, 1994 to $2.3
million as of September 30, 1995.

         Total shareholders' equity increased from $37.7 million as of September
30, 1994 to $38.0 million as of September 30, 1995.  This increase was primarily
attributable  to the $1.2 million in net income for the year ended September 30,
1995,  along with the  amortization of $250,000  relative to the recognition and
retention plans contra equity account and $300,000  relative to the contribution
to fund the Employee Stock  Ownership Plan (ESOP) and market  adjustment of ESOP
shares.  Offsetting  these  increases was the purchase and retirement of 109,361
shares of common stock for $1.5 million.

         The book value of MFB Corp. Common stock, based on the actual number of
shares  outstanding  at each period,  increased  from $17.24 as of September 30,
1994 to $18.29 as of September 30, 1995.

         As the  $20.3  million  in net  proceeds  from the  March,  1994  stock
conversion was used primarily to purchase  securities,  $2.3 million in interest
income was generated from securities,  excluding mortgage-backed securities, for
the year  ended  September  30,  1995  versus  $1.6  million  for the year ended
September  30, 1994,  an $802,000  increase for the  comparative  periods.  Also
contributing  to the $838,000 total interest  income increase from $11.5 million
for the year  ended  September  30,  1994 to $12.4  million  for the year  ended
September  30,  1995 was the  increase  in the  volume of loans  receivable  and
decrease  in the volume of lower  yielding  interest-bearing  deposits  in other
financial institutions.

         Total noninterest  expense increased $472,000 from $3.4 million for the
year ended  September 30, 1994 to $3.8 million for the year ended  September 30,
1995.  The increase  was  primarily  due to a $367,000  increase in salaries and
employee benefits. Higher legal and auditing fees associated with the conversion
to a stock savings bank,  and costs  incurred in the search for a successor CEO,
also contributed to increasing noninterest expense for the comparable periods.

BIF/SAIF FUND RESOLUTION

         On  September  30,  1996,  the  president  signed  into law a bill that
included  a measure to  recapitalize  the  Savings  Association  Insurance  Fund
("SAIF") with a one-time special assessment. The Company accrued the expense for
this one-time assessment as of September 30, 1996 in the amount of $955,000,  or
65.7 basis points of the Bank's deposits at March 31, 1995. Beginning January 1,
1997 the regular  insurance  premium decreases from 23 basis points to 6.4 basis
points.  Based on deposits at September 30, 1996 annualized  insurance  premiums
will decreases approximately $264,000 from $366,000 to $102,000,  resulting in a
3.6 year recovery period for the special assessment.

LIQUIDITY AND CAPITAL RESOURCES

         A standard  measure of liquidity for savings  associations is the ratio
of cash and eligible  investments  to a certain  percentage of net  withdrawable
savings and



<PAGE>

borrowings due within one year.  The minimum  required ratio is currently set by
OTS  regulation  at 5%,  of which at least 1% must be  comprised  of  short-term
investments  (i.e.,  generally with a term of less than one year).  At September
30, 1996,  the Bank's  liquidity  ratio was 26.3% and the  short-term  liquidity
ratio was 5.3%.  Therefore,  the  Bank's  liquidity  is well  above the  minimum
regulatory requirements.

         Changes in the  Bank's  liquidity  occur as a result of its  operating,
investing and financing activities. These activities are discussed below for the
years ended September 30, 1996, 1995 and 1994.

         Liquidity  relates  primarily  to the  Company's  ability  to fund loan
demand,  meet  deposit  customers'  withdrawal   requirements  and  provide  for
operating expenses. Assets used to satisfy these needs consist of cash, deposits
with other financial institutions,  overnight interest-bearing deposits in other
financial  institutions,  interest-bearing  time  deposits  in  other  financial
institutions  and  securities,  excluding FHLB stock.  These assets are commonly
referred  to as  liquid  assets.  Liquid  assets  totaled  $69.0  million  as of
September  30, 1996 compared to $61.4 million as of September 30, 1995 and $64.4
million as of September 30, 1994.  The $7.6 million  increase in liquidity  from
September  30, 1995 to September  30, 1996 was  primarily due to a $14.7 million
increase in  securities,  partially  offset by a $5.4 million  decrease in short
term  interest-bearing  deposits  in other  financial  institutions.  Management
believes  the  liquidity  level of $69.0  million as of  September  30,  1996 is
sufficient to meet anticipated future loan growth.

         Liquidity  levels  decreased  $3.0 million from  September  30, 1994 to
September  30,  1995 due to a $1.5  million  decrease in  interest-bearing  time
deposits in other financial institutions, a $1.6 million decrease in securities,
a $1.2  million  decrease  in  mortgage-backed  securities  and a  $1.3  million
increase in cash and cash  equivalents.  This decrease in liquidity,  along with
increased customer deposits,  was primarily used to fund a $5.9 million increase
in net loans during that year.

         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 has historically not borrowed significant
amounts. However, during the year ended September 30, 1996 the Bank instituted a
capital leveraging  strategy that involved the purchase of earning assets funded
primarily with FHLB borrowings.  As of September 30, 1996, total FHLB borrowings
amounted to $24.5 million, all of which were used as part of this strategy.  The
Bank has  commitments to fund loan  originations  with borrowers  totaling $21.2
million at September  30, 1996.  In the opinion of  management,  the Company has
sufficient cash flow to meet current and anticipated  loan funding  commitments,
deposit customer withdrawal  requirements and operating expenses.  There were no
short-term borrowings or long-term debt as of September 30, 1995.

         The cash flow statements provide an indication of the Company's sources
and uses of cash as well as an  indication  of the  ability  of the  Company  to
maintain an adequate level of liquidity. A discussion of the changes in the cash
flow statements for the years ended September 30, 1996, 1995 and 1994 follows.
         During the year ended  September  30,  1996,  net cash  decreased  $5.8
million from $7.5 million at September 30, 1995 to $1.7 million at September 30,
1996.

         The  Company   experienced  a  net  increase  in  cash  from  operating
activities of $2.2 million  during the year that was primarily  attributable  to
net income as adjusted



<PAGE>

for  accrual  basis  accounting.  The $44.9  million  net  decrease in cash from
investing activities for the year ended September 30, 1996 was primarily related
to the net increase in loans of $30.9 million and net purchases of securities of
$15.2 million.

         Financing  activities  generated net cash of $37.0 million for the year
ended September 30, 1996. The net cash was provided primarily from $24.5 million
in new FHLB borrowings and a $14.4 million  increase in net deposits,  partially
offset by the use of $1.5 million to repurchase  the Company's  stock during the
year.

         For the year ended  September 30, 1995, net cash increased $1.3 million
from $6.2 million at September  30, 1994 to $7.5 million at September  30, 1995.
Net cash from operating  activities totaled $3.8 million.  Of this amount,  $2.0
million was related to the  September,  1995  commitment to purchase  securities
(settlement  October,  1995),  thereby  increasing  accrued  expenses  and other
liabilities  for 1995.  The remaining  $1.8 million  increase for the year ended
September  30,  1995 was a result of net income as adjusted  for  accrual  basis
accounting.

         The  Company  experienced  a $2.0  million  net  decrease  in cash from
investing  activities  for the year ended  September 30, 1995.  This decrease in
cash  resulted  primarily  from  the net  increase  in loans  exceeding  the net
decrease in securities  and  interest-bearing  time deposits in other  financial
institutions.

         The  Company  also  experienced  a $461,000  net  decrease in cash from
financing activities for the year ended September 30, 1995, as the purchases and
retirement of $1.5 million of MFB Corp.  common stock exceeded the net increases
in deposits and advance payments by borrowers for taxes and insurance.

         As of  September  30,  1996  management  is not  aware  of any  current
recommendations by regulatory authorities which, if they were to be implemented,
would have, or are reasonably  likely to have, a material  adverse effect on the
Company's liquidity, capital resources or operations.

CURRENT ACCOUNTING ISSUES

         Several new accounting standards have been issued by the FASB that will
apply for the year ending  September 30, 1997. SFAS No. 121,  Accounting for the
Impairment of  Long-Lived  Assets and for  Long-Lived  Assets To Be Disposed Of,
requires a review of  long-term  assets for  impairment  of  recorded  value and
resulting  write-downs  if the value is impaired.  SFAS No. 122,  Accounting for
Mortgage  Servicing  Rights,  requires  recognition  of an asset when  servicing
rights are retained on in-house  originated  loans that are sold.  SFAS No. 123,
Accounting  for Stock-  Based  Compensation,  encourages,  but does not require,
entities  to  use  "fair  value  based   methods  to  account  for   stock-based
compensation  plans and requires  disclosure  of the pro forma effect on the net
income and on earnings per share had the accounting been adopted.  SFAS No. 125,
Accounting for Transfer and Servicing of Financial Assets and  Extinguishment of
Liabilities,  provides  accounting  and  reporting  standard for  transfers  and
servicing  of  financial   assets  and   extinguishments   of  liabilities  when
extinguished.  SFAS No. 125 also  supersedes  SFAS No. 122,  and  requires  that
servicing  assets and  liabilities be  subsequently  measured by amortization in
proportion to and over the period of estimated net servicing  income or loss and
requires assessment for asset impairment or increased  obligation based on their
fair values.  SFAS No. 125 applies to transfers  and  extinguishments  occurring
after December 31, 1996, and early or retroactive  application is not permitted.
These



<PAGE>





statements  are  not  expected  to  have a  material  effect  on  the  Company's
consolidated financial position or results of operation.



IMPACT OF INFLATION

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

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

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

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

<PAGE>



                         REPORT OF INDEPENDENT AUDITORS



Board of Directors
MFB Corp.
Mishawaka, Indiana


We have audited the accompanying  consolidated balance sheets of MFB Corp. as of
September 30, 1996 and 1995 and the related  consolidated  statements of income,
changes in shareholders' equity and cash flows for the years ended September 30,
1996,  1995  and  1994.  These   consolidated   financial   statements  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the  financial  position of MFB Corp. as of
September  30,  1996 and 1995,  and the results of its  operations  and its cash
flows for the years ended  September 30, 1996,  1995 and 1994 in conformity with
generally accepted accounting principles.

As  discussed  in Note 1,  effective  October 1, 1994,  the Company  adopted the
provisions  of Statement of Financial  Accounting  Standards No. 115 and changed
its method of accounting for its Employee Stock Ownership Plan to conform to new
accounting guidance.




                                             /s/ Crowe, Chizek and Company LLP
                                             Crowe, Chizek and Company LLP
South Bend, Indiana
November 4, 1996



<PAGE>


                            MFB CORP. AND SUBSIDIARY


                           CONSOLIDATED BALANCE SHEETS
                           September 30, 1996 and 1995


<TABLE>
<CAPTION>

                                                                                   1996                 1995
                                                                                   ----                 ----
ASSETS
<S>                                                                          <C>                  <C>              
Cash and due from financial institutions                                     $       1,734,388    $       2,063,229
Interest-bearing deposits in other financial
  institutions - short-term                                                                  -            5,390,822
                                                                             -----------------    -----------------
     Cash and cash equivalents                                                       1,734,388            7,454,051
Interest- bearing time deposits in other financial institutions                        495,000            1,880,000
Securities available for sale                                                       66,762,558                    -
Securities held to maturity (fair value: 1995 - $51,704,000)                                 -           52,022,355
Federal Home Loan Bank (FHLB) stock, at cost                                         1,336,100            1,270,800
Loans receivable, net of allowance for loan losses of
  $340,000 in 1996 and $310,000 in 1995                                            152,052,092          121,181,162
Accrued interest receivable                                                            818,014              818,108
Premises and equipment, net                                                          1,969,264            1,976,527
Other assets                                                                           641,707              462,236
                                                                             -----------------    -----------------

     Total assets $                                                          $     225,809,123    $     187,065,239
                                                                             =================    =================

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
     Noninterest-bearing demand deposits                                     $       1,942,145    $         743,000
     Savings, NOW and MMDA deposits                                                 34,779,548           34,687,208
     Other time deposits                                                           122,242,796          109,121,562
                                                                             -----------------    -----------------
         Total deposits                                                            158,964,489          144,551,770
     FHLB advances                                                                  24,500,000                    -
     Advances from borrowers for taxes and insurance                                 1,864,427            2,169,578
     Accrued expenses and other liabilities                                          2,880,838            2,345,293
                                                                             -----------------    -----------------
         Total liabilities                                                         188,209,754          149,066,641

Shareholders' equity
     Common stock, no par value, 5,000,000
       shares authorized; shares issued
       and outstanding:  1996 - 1,973,980; 1995 - 2,077,873                         18,316,651           19,656,664
     Retained earnings - substantially restricted                                   20,588,797           19,732,086
     Net unrealized depreciation on securities available
       for sale, net of tax benefit of $144,252 in 1996                               (219,928)                   -
     Unearned Employee Stock Ownership Plan (ESOP) Shares                             (893,651)          (1,100,000)
     Unearned Recognition and Retention Plan (RRP) Shares                             (192,500)            (290,152)
                                                                             -----------------    -----------------
         Total shareholders' equity                                                 37,599,369           37,998,598
                                                                             -----------------    -----------------

              Total liabilities and shareholders' equity                     $     225,809,123    $     187,065,239
                                                                             =================    =================
</TABLE>

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

<PAGE>


                            MFB CORP. AND SUBSIDIARY


                        CONSOLIDATED STATEMENTS OF INCOME
                  Years ended September 30, 1996, 1995 and 1994


<TABLE>
<CAPTION>

                                                                 1996                1995                1994
                                                                 ----                ----                ----
<S>                                                         <C>                 <C>                <C>             
Interest income
     Loans receivable
         Mortgage loans                                     $     9,956,394     $     8,780,654    $      8,452,229
         Consumer and other loans                                   182,177              35,433              26,506
         Financing leases and commercial loans                      107,321                   -                   -
     Securities - taxable                                         3,514,380           3,085,427           2,143,983
     Other interest-earning assets                                  421,984             482,044             922,372
                                                            ---------------     ---------------    ----------------
                                                                 14,182,256          12,383,558          11,545,090
Interest expense
     Deposits                                                     7,528,321           6,788,376           6,019,113
     FHLB advances                                                  529,025                   -                   -
                                                            ---------------     ---------------    ----------------
                                                                  8,057,346           6,788,376           6,019,113

Net interest income                                               6,124,910           5,595,182           5,525,977

Provision for loan losses                                            30,000              30,000              30,000
                                                            ---------------     ---------------    ----------------

Net interest income after provision
  for loan losses                                                 6,094,910           5,565,182           5,495,977

Noninterest income
     Insurance commissions                                          126,819             127,766             126,420
     Net realized gains from sales of securities
       available for sale                                             3,731                   -                   -
     Other income                                                   231,766             189,648             151,349
                                                            ---------------     ---------------    ----------------
                                                                    362,316             317,414             277,769

Noninterest expense
     Salaries and employee benefits                               2,152,656           2,336,230           1,969,110
     Occupancy and equipment expense                                422,388             405,998             378,972
     SAIF deposit insurance premium                               1,291,288             332,175             340,511
     Other expense                                                  968,951             752,635             666,135
                                                            ---------------     ---------------    ----------------
                                                                  4,835,283           3,827,038           3,354,728
                                                            ---------------     ---------------    ----------------

Income before income taxes                                        1,621,943           2,055,558           2,419,018

Income tax expense                                                  646,793             819,452             887,452
                                                            ---------------     ---------------    ----------------

Net income                                                  $       975,150     $     1,236,106    $      1,531,566
                                                            ===============     ===============    ================

Earnings per common and common equiva-
  lent share subsequent to conversion                             $     .49           $     .59           $     .43
Earning per share-assuming full dilution-
  subsequent to conversion                                              .48                 .59                 .43


</TABLE>
--------------------------------------------------------------------------------
The  accompanying  notes are an integral  part of these  consolidated  financial
statements.



<PAGE>


                            MFB CORP. AND SUBSIDIARY


                      CONSOLIDATED STATEMENTS OF CHANGES IN
                        SHAREHOLDERS' EQUITY Years ended
                        September 30, 1996, 1995 and 1994

<TABLE>
<CAPTION>
                                                                                                            Net Unrealized
                                                                                                             Depreciation
                                                                                                             on Securities
                                                                                                               Available     
                                                                                           Retained            For Sale,     
                                                                     Common Stock          Earnings           Net of Tax     
                                                                     ------------          --------           ----------     

<S>                                                               <C>                 <C>                 <C>               
Balances at September 30, 1993                                     $              -    $     16,964,414    $            -    

Issuance of 2,302,351 shares of common stock                             22,426,665                   -                      
Purchase and retirement of 115,117 shares of common stock                (1,377,925)                  -                      
Common stock acquired by ESOP - 140,000 shares                                    -                   -                      
Common stock acquired by RRP - 70,000 shares                                      -                   -                      
Effect of contribution to fund ESOP                                               -                   -                      
Amortization of RRP contribution                                                  -                   -                      
Net income for the year ended September 30, 1994                                  -           1,531,566                      
                                                                   ----------------    ----------------    --------------    

Balance at September 30, 1994                                            21,048,740          18,495,980                      

Purchase and retirement of 109,361 shares of common stock                (1,530,486)                  -                      
Effect of contribution to fund ESOP                                               -                   -                      
Market adjustment of 22,516 ESOP shares committed to be released             99,592                   -                      
Amortization of RRP contribution                                                  -                   -                      
Tax benefit related to employee stock plans                                  38,818                   -                      
Net income for the year ended September 30, 1995                                  -           1,236,106                      
                                                                   ----------------    ----------------    --------------    



Balance at September 30, 1995                                            19,656,664          19,732,086                      

Purchase and retirement of 103,893 shares of common stock                (1,499,024)                  -                 -    
Net unrealized appreciation on securities available for
  sale, net of tax $77,821 from transfer of securities                            -                   -           118,648    
Cash dividends declared - $.06 per share                                          -            (118,439)                -    
Effect of contribution to fund ESOP                                               -                   -                 -    
Market adjustment of 21,515 ESOP shares committed to be released            117,247                   -                 -    
Amortization of RRP contribution                                                  -                   -                 -    
Tax benefit related to employee stock plans                                  41,764                   -                 -    
Net change in unrealized depreciation on securities
  available for sale, net of tax of ($222,073)                                    -                   -          (338,576)   
Net income for the year ended September 30, 1996                                  -             975,150                 -    
                                                                   ----------------    ----------------    --------------    

Balance at September 30, 1996                                      $     18,316,651    $     20,588,797    $     (219,928)   
                                                                   ================    ================    ==============    

</TABLE>

<PAGE>

<TABLE>
<CAPTION>

                                                                                                             Total           
                                                                        Unearned          Unearned       Shareholders'       
                                                                       ESOP Shares       RRP Shares         Equity           
                                                                       -----------       ----------         ------           
                                                         
<S>                                                                <C>               <C>              <C>                  
Balances at September 30, 1993                                      $            -    $          -     $16,964,414          
                                                                                                                            
Issuance of 2,302,351 shares of common stock                                     -               -      22,426,665           
Purchase and retirement of 115,117 shares of common stock                        -               -      (1,377,925)          
Common stock acquired by ESOP - 140,000 shares                          (1,400,000)              -      (1,400,000)          
Common stock acquired by RRP - 70,000 shares                                     -        (700,000)       (700,000)            
Effect of contribution to fund ESOP                                        100,000               -         100,000              
Amortization of RRP contribution                                                 -         159,948         159,948              
Net income for the year ended September 30, 1994                                 -               -       1,531,566            
                                                                    --------------    ------------     -----------            
                                                                                                                            
Balance at September 30, 1994                                           (1,300,000)       (540,052)     37,704,668           
                                                                                                                            
Purchase and retirement of 109,361 shares of common stock                        -               -      (1,530,486)          
Effect of contribution to fund ESOP                                        200,000               -         200,000              
Market adjustment of 22,516 ESOP shares committed to be released                 -               -          99,592               
Amortization of RRP contribution                                                 -         249,900         249,900              
Tax benefit related to employee stock plans                                      -               -          38,818               
Net income for the year ended September 30, 1995                                 -               -       1,236,106            
                                                                    --------------    ------------     -----------            
                                                                                                                            
                                                                                                                            
                                                                                                                            
Balance at September 30, 1995                                           (1,100,000)       (290,152)     37,998,598           
                                                                                                                            
Purchase and retirement of 103,893 shares of common stock                        -               -      (1,499,024)          
Net unrealized appreciation on securities available for                                                                     
  sale, net of tax $77,821 from transfer of securities                           -               -         118,648              
Cash dividends declared - $.06 per share                                         -               -        (118,439)            
Effect of contribution to fund ESOP                                        206,349               -         206,349              
Market adjustment of 21,515 ESOP shares committed to be released                 -               -         117,247              
Amortization of RRP contribution                                                 -          97,652          97,652               
Tax benefit related to employee stock plans                                      -               -          41,764               
Net change in unrealized depreciation on securities                                                                         
  available for sale, net of tax of ($222,073)                                   -               -        (338,576)            
Net income for the year ended September 30, 1996                                 -               -         975,150              
                                                                    --------------    ------------      ----------              
                                                                                                                            
Balance at September 30, 1996                                       $     (893,651)   $   (192,500)    $37,599,369          
                                                                    ==============    ============     ===========

</TABLE>

<PAGE>


                            MFB CORP. AND SUBSIDIARY


                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  Years ended September 30, 1996, 1995 and 1994

<TABLE>
<CAPTION>

                                                                    1996             1995              1994
                                                                    ----             ----              ----
Cash flows from operating activities
<S>                                                           <C>               <C>              <C>            
     Net income                                               $       975,150   $     1,236,106  $     1,531,566
     Adjustments to reconcile net income
       to net cash provided by operating activities
         Depreciation and amortization, net of
           accretion                                                  272,595           315,899          330,675
         Amortization of RRP contribution                              97,652           249,900          159,948
         Provision for loan losses                                     30,000            30,000           30,000
         Net realized gains from sales of
           securities available for sale                               (3,731)                -                -
         Market adjustment of ESOP shares committed
           to be released                                             117,247            99,592                -
         ESOP expense                                                 206,349           200,000          100,000
         Net change in:
              Accrued interest receivable                                  94           (70,836)        (365,179)
              Other assets                                            (44,501)         (301,900)         100,176
              Accrued expenses and other liabilities                  586,591         2,050,282          (65,551)
                                                              ---------------   ---------------  ---------------
                  Total adjustments                                 1,262,296         2,572,937          290,069
                                                              ---------------   ---------------  ---------------
                      Net cash provided by operating
                        activities                                  2,237,446         3,809,043        1,821,635

Cash flows from investing activities
     Net change in interest-bearing time
       deposits in other financial institutions                     1,385,000         1,485,000       17,104,126
     Net change in loans receivable                               (30,900,930)       (5,914,327)      (7,114,736)
     Proceeds from:
         Sales of securities available for sale                    10,212,124                 -                -
         Principal payments of mortgage-backed
           and related securities                                   2,280,597         1,283,272          474,928
         Maturities of securities available for sale               16,697,252                 -                -
         Maturities of securities held to maturity                  4,300,000        14,350,000                -
         Maturities of investment securities                                -                 -       16,300,000
     Purchase of:
         Securities available for sale                            (48,218,517)                -                -
         Securities held to maturity                                 (500,000)      (12,910,926)               -
         Investment securities                                              -                 -      (56,479,171)
         FHLB stock                                                   (65,300)          (95,300)               -
         Premises and equipment, net                                 (137,440)         (244,856)        (170,745)
                                                              ---------------   ---------------  ---------------
              Net cash used in investing activities               (44,947,214)       (2,047,137)     (29,885,598)
</TABLE>

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


<PAGE>


                            MFB CORP. AND SUBSIDIARY


                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  Years ended September 30, 1996, 1995 and 1994

<TABLE>
<CAPTION>

                                                                    1996             1995              1994
                                                                    ----             ----              ----

<S>                                                           <C>               <C>                   <C>       
Cash flows from financing activities
     Proceeds from stock issue, net of conversion
       costs and stock acquired by ESOP and RRP               $             -   $             -       20,326,665
     Purchase of MFB Corp. common stock                            (1,499,024)       (1,530,486)      (1,377,925)
     Net change in deposits                                        14,412,719           947,319       (5,615,081)
     Proceeds from FHLB advances                                   24,500,000                 -                -
     Net change in advances from
       borrowers for taxes and insurance                             (305,151)          122,579           63,005
     Cash dividends paid                                             (118,439)                -                -
                                                              ---------------   ---------------  ---------------
         Net cash provided by (used in) financing
           activities                                              36,990,105          (460,588)      13,396,664
                                                              ---------------   ---------------  ---------------

Net change in cash and cash equivalents                            (5,719,663)        1,301,318      (14,667,299)

Cash and cash equivalents at beginning of period                    7,454,051         6,152,733       20,820,032
                                                              ---------------   ---------------  ---------------

Cash and cash equivalents at end of period                    $     1,734,388   $     7,454,051  $     6,152,733
                                                              ===============   ===============  ===============

Supplemental disclosures of cash flow information
     Cash paid during the year for
         Interest                                             $     7,459,231   $     6,786,274  $     6,019,588
         Income taxes                                                 974,755           883,000
837,119

Supplemental schedule of noncash investing activities Transfer from:
         Investment securities to securities
           held to maturity                                   $             -   $    54,931,715  $             -
         Securities held to maturity to securities
           available for sale                                      47,898,025                 -                -

</TABLE>

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

<PAGE>


                            MFB CORP. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        September 30, 1996, 1995 and 1994



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

On November 1, 1996, the Bank changed its name to MFB Financial.

Nature of Business  and  Concentrations  of Credit Risk:  The primary  source of
income for the Company  results from granting  commercial and  residential  real
estate loans in Mishawaka and the surrounding area. Loans secured by real estate
mortgages comprise approximately 99% of the loan portfolio at September 30, 1996
and are  primarily  secured  by  residential  mortgages.  The  Company  operates
primarily  in the  banking  industry  which  accounts  for more  than 90% of its
revenues, operating income and assets.

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

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

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

<PAGE>


                            MFB CORP. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        September 30, 1996, 1995 and 1994



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Securities:  On October 1, 1994, the Company adopted the provisions of Statement
of  Financial  Accounting  Standards  (SFAS) No.  115,  "Accounting  for Certain
Investments  in  Debt  and  Equity   Securities."  The  Company  now  classifies
securities  into held to maturity,  available  for sale and trading  categories.
Held to maturity  securities are those which the Company has the positive intent
and ability to hold to maturity,  and are reported at amortized cost.  Available
for sale  securities  are those the  Company  may  decide to sell if needed  for
liquidity,  asset-liability  management  or other  reasons.  Available  for sale
securities are reported at fair value, with unrealized gains and losses included
as a separate component of shareholders'  equity, net of tax. Trading securities
are bought principally for sale in the near term, and are reported at fair value
with unrealized gains and losses included in earnings.  Adoption of SFAS No. 115
had no impact on the equity of the  Company  because all  investment  securities
held by the Company were classified as securities held to maturity as of October
1, 1994.

The Financial  Accounting  Standards Board ("FASB") issued a Special Report,  "A
Guide to Implementation of SFAS No. 115 on Accounting for Certain Investments in
Debt and Equity  Securities  ("Guide")." As permitted by the Guide,  on November
30, 1995, the Company made a one-time  reassessment  and transferred  securities
from the held to maturity portfolio to the available for sale portfolio.  At the
date of transfer, these securities had an amortized cost of $47,898,025, and the
transfer increased the unrealized  appreciation on securities available for sale
by  $196,469  and  increased  shareholders'  equity by  $118,648,  net of tax of
$77,821.

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

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

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

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

<PAGE>


                            MFB CORP. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        September 30, 1996, 1995 and 1994



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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

SFAS No. 114,  "Accounting by Creditors for Impairment of a Loan," as amended by
SFAS No. 118, was adopted effective October 1, 1995 and requires  recognition of
loan  impairment.  Loans are  considered  impaired if full principal or interest
payments are not  anticipated  in accordance  with the  contractual  loan terms.
Impaired  loans are carried at the present  value of expected  future cash flows
discounted  at the loan's  effective  interest  rate or at the fair value of the
collateral if the loan is collateral  dependent.  A portion of the allowance for
loan losses is allocated to impaired  loans if the value of such loans is deemed
to be less than the unpaid balance. If these allocations cause the allowance for
loan losses to require increase, such increase is reported as a component of the
provision  for loan  losses.  The effect of  adopting  these  standards  was not
material to the consolidated financial statements.

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


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

<PAGE>


                            MFB CORP. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        September 30, 1996, 1995 and 1994



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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

Foreclosed Real Estate:  Real estate properties acquired through, or in lieu of,
loan  foreclosure  are  initially   recorded  at  fair  value  at  the  date  of
acquisition, establishing a new cost basis. Any reduction to fair value from the
carrying  value of the related loan at the time of  acquisition is accounted for
as a loan loss and charged against the allowance for loan losses. Valuations are
periodically  performed by  management  and  valuation  allowances  are adjusted
through a charge to income for changes in fair value or estimated selling costs.
Foreclosed real estate amounted to  approximately  $-0- and $18,000 at September
30,  1996  and  1995,  respectively,  and is  included  in other  assets  in the
consolidated balance sheets.

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

Premises and Equipment:  Land is carried at cost. Buildings and improvements and
furniture and equipment are carried at cost, less  accumulated  depreciation and
amortization  computed  principally by using the  straight-line  method over the
estimated useful lives of the assets.

Employee  Stock  Ownership Plan (ESOP):  Effective  October 1, 1994, the Company
began to account for its ESOP under AICPA  Statement of Position (SOP) 93-6. The
cost of shares issued to the ESOP,  but not yet allocated to  participants,  are
presented  as a  reduction  of  shareholders'  equity.  Compensation  expense is
recorded  based on the  average  market  price  of the  shares  committed  to be
released for allocation to  participant  accounts.  The  difference  between the
market  price and the cost of shares  committed to be released is recorded as an
adjustment to common stock. Dividends on allocated ESOP shares are recorded as a
reduction of retained earnings;  dividends on unearned ESOP shares are reflected
as a reduction of debt and accrued interest.

ESOP shares are  outstanding  for  earnings per share  calculations  as they are
committed to be released; unearned shares are not considered outstanding.

Prior to the  adoption of SOP 93-6,  the  expense  was limited to the  principal
repayment  on the  loan and the  earnings  per  share  calculation  included  as
outstanding all 140,000 ESOP shares.

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

<PAGE>


                            MFB CORP. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        September 30, 1996, 1995 and 1994



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Financial  Instruments with  Off-Balance-Sheet  Risk: The Company, in the normal
course of business,  makes  commitments to make loans which are not reflected in
the  consolidated  financial  statements.  A  summary  of these  commitments  is
disclosed in Note 11.

Earnings Per Share: Earnings per common share is computed by dividing net income
by the weighted  average  number of common shares  outstanding  and common share
equivalents  which would arise from  considering  dilutive  stock  options.  The
weighted average number of shares for calculating earnings per common share is:

                          1996                  1995                  1994
                          ----                  ----                  ----
Primary                 2,008,323             2,083,528             2,232,132
Fully diluted           2,035,087             2,106,785             2,229,058

Reclassifications:  Certain amounts in the 1995 and 1994 consolidated  financial
statements were reclassified to conform with the 1996 presentation.


NOTE 2 - SECURITIES

The  amortized  cost and  fair  value of  securities  available  for sale are as
follows:

<TABLE>
<CAPTION>

                                           .........................September 30, 1996..........................
                                                                    Gross            Gross
                                               Amortized         Unrealized       Unrealized          Fair
                                                 Cost               Gains           Losses            Value
                                         --------------         ------------     -------------    --------------
<S>                                      <C>                    <C>              <C>                  <C>        
Debt securities
     U.S. Government and
       federal agencies                  $   40,159,602         $    142,886     $     (95,325)       $40,207,163
     Mortgage-backed                         24,473,181                    -          (399,246)        24,073,935
                                             64,632,783              142,886          (494,571)        64,281,098
Marketable equity securities                  2,493,955                    -           (12,495)         2,481,460
                                         ---------------        ------------     -------------    ---------------
                                         $   67,126,738         $    142,886     $    (507,066)   $    66,762,558
                                         ==============         ============     =============    ===============
</TABLE>
--------------------------------------------------------------------------------

<PAGE>


                            MFB CORP. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        September 30, 1996, 1995 and 1994



NOTE 2 - SECURITIES (Continued)

The amortized cost and fair value of securities held to maturity are as follows:
<TABLE>
<CAPTION>


                                           .........................September 30, 1995..........................
                                                                    Gross            Gross
                                               Amortized         Unrealized       Unrealized         Fair
                                                 Cost               Gains           Losses           Value
                                          ---------------     ------------     -------------     ---------------
 <S>                                        <C>                <C>              <C>                  <C>         
Debt securities
     U.S. Government and
       federal agencies                    $   40,116,970     $    216,334     $    (153,304)       $ 40,180,000
     Mortgage-backed                           11,905,385                -          (381,385)         11,524,000  
                                          ---------------     ------------     -------------     ---------------
                                                                                                  
                                           $   52,022,355     $    216,334     $    (534,689)       $ 51,704,000
                                           ==============     ============     =============        ============
</TABLE>

                                                      

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

<TABLE>
<CAPTION>


                                                  .........September 30, 1996........
                                                     Amortized             Fair
                                                       Cost                Value

<S>                                               <C>                 <C>            
     Due in one year or less                      $      6,836,633    $     6,849,522
     Due after one year through five years              32,972,969         33,019,125
     Due after five years through ten years                350,000            338,516
                                                  ----------------    ---------------
                                                        40,159,602         40,207,163
     Mortgage-backed securities                         24,473,181         24,073,935
                                                  ----------------    ---------------

                                                  $     64,632,783    $    64,281,098
                                                  ================    ===============
</TABLE>


Proceeds from sales of securities available for sale were $10,212,124 during the
year ended  September  30,  1996.  Gross  gains of $25,154  and gross  losses of
$21,423 were  realized on these sales.  The Company did not sell any  securities
during the years ended September 30, 1995 and 1994.

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

<PAGE>


                            MFB CORP. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        September 30, 1996, 1995 and 1994



NOTE 3 - LOANS RECEIVABLE, NET

Loans receivable, net at September 30 are summarized as follows:

<TABLE>
<CAPTION>
                                                                                   1996                  1995
                                                                                   ----                  ----
First mortgage loans (principally conventional)
     Principal balances
<S>                                                                          <C>                  <C>              
         Secured by one-to-four family residences                            $     143,750,857    $     119,719,473
         Construction loans                                                          5,004,730            2,106,358
         Commercial                                                                    876,348              206,363
         Other                                                                         162,643              189,189
                                                                             -----------------    -----------------
                                                                                   149,794,578          122,221,383
         Less undisbursed portion of construction and
           other mortgage loans                                                     (1,961,107)            (809,280)
         Net deferred loan-origination fees                                           (439,921)            (369,870)
                                                                             -----------------    -----------------

              Total first mortgage loans                                           147,393,550          121,042,233

Consumer and other loans:
     Principal balances
         Home equity and second mortgage                                             3,790,075              375,102
         Financing leases                                                            1,124,624                    -
         Other                                                                          83,843               73,827
                                                                             -----------------    -----------------
              Total consumer and other loans                                         4,998,542              448,929
Allowance for loan losses                                                             (340,000)            (310,000)
                                                                             -----------------    -----------------

                                                                             $     152,052,092    $     121,181,162
                                                                             =================    =================
</TABLE>


Activity in the allowance for loan losses is summarized as follows for the years
ended September 30:

<TABLE>
<CAPTION>

                                                                       1996            1995             1994
                                                                       ----            ----             ----

<S>                                                                <C>              <C>             <C>         
         Balance at beginning of year                              $     310,000    $    280,000    $    250,000
         Provision for loan losses                                        30,000          30,000          30,000
         Charge-offs                                                           -               -               -
         Recoveries                                                            -               -               -
                                                                   -------------    ------------    ------------

         Balance at end of year                                    $     340,000    $    310,000    $    280,000
                                                                   =============    ============    ============
</TABLE>

--------------------------------------------------------------------------------
<PAGE>


                            MFB CORP. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        September 30, 1996, 1995 and 1994



NOTE 3 - LOANS RECEIVABLE, NET (Continued)

At September 30, 1996, no portion of the allowance for loan losses was allocated
to impaired loan balances as there were no loans  considered  impaired  loans as
of, or for the year ended September 30, 1996.

Certain  directors  and  executive  officers of the Company and its  subsidiary,
including associates of such persons,  were loan customers during the year ended
September  30, 1996.  A summary of the related  party loan  activity,  for loans
aggregating $60,000 or more to any one related party, is as follows for the year
ended September 30, 1996:

           Balance - October 1, 1995                  $      592,367
                                                         ===========
           New loans                                         494,208
           Repayments                                        (54,081)
                                                      --------------

           Balance - September 30, 1996               $    1,032,494
                                                      ==============


NOTE 4 - PREMISES AND EQUIPMENT, NET

Premises and equipment at September 30 are summarized as follows:

<TABLE>
<CAPTION>


                                                                                  1996               1995
                                                                                  ----               ----

<S>                                                                          <C>                <C>           
     Land                                                                    $       558,681    $      558,681
     Buildings and improvements                                                    1,618,722         1,729,322
     Real estate held for future expansion                                           128,885           128,885
     Furniture and equipment                                                         868,737           731,307
                                                                             ---------------    --------------
         Total cost                                                                3,175,025         3,148,195

     Accumulated depreciation and amortization                                    (1,205,761)       (1,171,668)
                                                                             ---------------    --------------

                                                                             $     1,969,264    $    1,976,527
                                                                             ===============    ==============
</TABLE>


Depreciation and  amortization of premises and equipment,  included in occupancy
and equipment expense was approximately $145,000,  $129,000 and $110,000 for the
years ended September 30, 1996, 1995 and 1994, respectively.

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

<PAGE>


                            MFB CORP. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        September 30, 1996, 1995 and 1994



NOTE 5 - DEPOSITS

The aggregate amount of short-term jumbo certificates of deposit in denomination
of $100,000 or more was  approximately  $24,488,000 and $20,333,000 at September
30, 1996 and 1995, respectively.

At September 30, 1996, the scheduled  maturities of  certificates of deposit are
as follows for the years ended September 30:

            1997                                          $    85,529,043
            1998                                               27,132,879
            1999                                                5,789,996
            2000                                                3,233,687
            2001 and thereafter                                   557,191
                                                          ---------------
                                                          $   122,242,796
                                                          ===============


NOTE 6 - FEDERAL HOME LOAN BANK ADVANCES

At September 30, 1996,  advances from the Federal Home Loan Bank of Indianapolis
with fixed and  variable  rates  ranging  from 5.01% to 5.74% mature in the year
ending September 30 as follows:

         1997                                           $   15,000,000
         1998                                                3,000,000
         1999                                                6,500,000
                                                        --------------
                                                        $   24,500,000
                                                        ==============

FHLB advances are secured by all FHLB stock,  qualifying  first mortgage  loans,
government  agency and  mortgage  backed  securities.  At  September  30,  1996,
collateral  of  approximately  $206,000,000  is  pledged  to the FHLB to  secure
advances outstanding.


NOTE 7 - EMPLOYEE BENEFITS

Employee  Pension  Plan:  The  Bank  is  part  of  a  qualified  noncontributory
multiple-employer defined benefit pension plan covering substantially all of its
employees.   The  plan  is   administered  by  the  trustees  of  the  Financial
Institutions  Retirement Fund (Retirement  Fund). There is no separate valuation
of plan  benefits  nor  segregation  of plan  assets  specifically  for the Bank
because the plan is a multiple-employer  plan and separate actuarial  valuations
are  not  made  with  respect  to each  employer  nor are  the  plan  assets  so
segregated.  As of July 1, 1996, the latest actuarial valuation date, total plan
assets exceeded the actuarially  determined value of total vested benefits.  The
cost of the plan is set annually as an established  percentage of wages. Pension
plan  expense  for the  years  ended  September  30,  1996,  1995  and  1994 was
approximately $3,000, $179,000 and $140,000, respectively.  Pension plan expense
for the year ended September 30, 1996 was reduced due to a change in the benefit
formula from 2% of high 5 year average  salary for each year of benefit  service
to 1.5%

401(k) Plan: On July 1, 1996,  the Company  adopted a retirement  savings 401(k)
plan which covers all full time employees who are 21 or older and have completed
one year of service.  Beginning August 1, 1996, participants may defer up to 15%
of  compensation.  The Company  matches 50% of elective  deferrals  on 6% of the
participants' compensation.  Expense for the 401(k) was approximately $5,000 for
the year ended September 30, 1996.

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

<PAGE>


                            MFB CORP. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        September 30, 1996, 1995 and 1994




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

ESOP  expense was  approximately  $324,000,  $300,000 and $100,000 for the years
ended September 30, 1996, 1995 and 1994, respectively. Contributions to the ESOP
was  approximately  $206,000,  $200,000  and  $100,000  during  the years  ended
September 30, 1996, 1995 and 1994, respectively.

Company contributions to the ESOP and shares released from suspense proportional
to the repayment of the ESOP loan are allocated  among ESOP  participants on the
basis of compensation in the year of allocation.  Benefits generally become 100%
vested  after five years of  credited  service.  A  participant  who  terminates
employment   for  reasons  other  than  death,   normal   retirement  (or  early
retirement),  or  disability  prior to the  completion of five years of credited
service  does  not  receive  any  benefits  under  the  ESOP.   Forfeitures  are
reallocated among the remaining participating  employees, in the same proportion
as  contributions.  Benefits  are  payable  in the  form  of  stock  except  for
fractional  shares which are paid in cash upon  termination of  employment.  The
Company's contributions to the ESOP are not fixed, so benefits payable under the
ESOP cannot be estimated.

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

At September  30, 1996 and 1995,  21,515 and 22,516  shares with an average fair
value of $15.04  and  $13.31  per  share,  respectively,  were  committed  to be
released.


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

<PAGE>


                            MFB CORP. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        September 30, 1996, 1995 and 1994



NOTE 7 - EMPLOYEE BENEFITS PLANS (Continued)

The ESOP shares as of September 30 were as follows:

                                                 1996             1995
                                             ------------    ------------
     Allocated shares                              55,692          34,177
     Unearned shares                               84,308         105,823
                                             ------------    ------------
         Total ESOP shares                        140,000         140,000
                                             ============    ============
     Fair value of unearned 
          shares at September 30             $  1,560,000    $  1,720,000
                                             ============    ============

Recognition  and  Retention  Plans  (RRPs):   In  conjunction   with  its  stock
conversion,  the Company  established  RRPs as a method of providing  directors,
officers and other key employees of the Company with a  proprietary  interest in
the Company in a manner  designed to  encourage  such persons to remain with the
Company.  Eligible  directors,  officers and other key  employees of the Company
become  vested  in  awarded  shares  of  common  stock at a rate of 20% per year
commencing March 24, 1994. The RRPs acquired, in the aggregate, 70,000 shares of
common stock issued in the  conversion  at $10 per share and 70,000  shares were
awarded to RRP  participants at no cost to them. RRP expense for the years ended
September  30,  1996,  1995 and 1994 was  approximately  $98,000,  $250,000  and
$160,000, respectively.

Stock Option Plan:  The Board of Directors of the Company  adopted the MFB Corp.
Stock Option Plan (the "Option Plan").  The number of options  authorized  under
the Plan is 200,000  shares of common  stock.  Officers,  employees  and outside
directors of the Company and its  subsidiary  are eligible to participate in the
Option  Plan.  The  option  exercise  price must be no less than 85% of the fair
market  value of common  stock on the date of the  grant,  and the  option  term
cannot exceed ten years and one day from the date of the grant.

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

<PAGE>


                            MFB CORP. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        September 30, 1996, 1995 and 1994



NOTE 7 - EMPLOYEE BENEFITS PLANS (Continued)

Activity in the Option Plan for the years ended  September 30 is  summarized  as
follows:

<TABLE>
<CAPTION>

                                                                   Number of
                                                                    Options          Number of         Option
                                                                   Available          Options         Exercise
                                                                   For Grant        Outstanding         Price

<S>                                                                 <C>              <C>           <C>
     Balance at September 30, 1994                                     30,000           170,000            $10
     Options granted during the year                                  (20,000)           20,000            $15
                                                                -------------     -------------
     Balance at September 30, 1995                                     10,000           190,000        $10-$15
     Options granted during the year                                  (10,000)           10,000         $15.25
                                                                -------------     -------------

     Balance at September 30, 1996                                          -           200,000     $10-$15.25
                                                                =============     =============
</TABLE>



NOTE 8 - INCOME TAXES

The Company files consolidated federal income tax returns. If certain conditions
are met in determining  taxable income as reported on the  consolidated  federal
income tax return,  the Bank is allowed a special bad debt deduction  based on a
percentage of taxable income (presently 8%) or on specified experience formulas.
The Bank used the  percentage of taxable  income method for its tax return as of
September  1994.  For its tax return as of September 30, 1995,  the Bank did not
use the percentage of taxable income method. The Bank is not expected to be able
to use the percentage of taxable income method for the tax year ended  September
30, 1996. In future years, only the specified  experience formula method will be
allowed as, 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
will occur over a six-year  period,  the  commencement  of which will be delayed
until the first taxable year  beginning  after  December 31, 1997,  provided the
institution meets certain residential lending requirements.  The total amount of
bad debt to be recaptured is approximately $1,310,000.

--------------------------------------------------------------------------------
<PAGE>


                            MFB CORP. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        September 30, 1996, 1995 and 1994



NOTE 8 - INCOME TAXES (Continued)

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



<TABLE>
<CAPTION>
                                                      1996            1995             1994
                                                      ----            ----             ----
     Federal
<S>                                               <C>              <C>             <C>         
         Current                                  $     725,920    $    622,992    $    630,399
         Deferred                                      (225,467)         12,487          67,652
                                                  -------------    ------------    ------------
                                                        500,453         635,479         698,051
     State
         Current                                        225,213         176,270         195,220
         Deferred                                       (78,873)          7,703          (5,819)
                                                  -------------    ------------    ------------
                                                        146,340         183,973         189,401
                                                  -------------    ------------    ------------

              Total income tax expense            $     646,793    $    819,452    $    887,452
                                                  =============    ============    ============
</TABLE>


Total income tax expense differed from the amounts computed by applying the U.S.
Federal income tax rate of 34% to income before income taxes for the years ended
September 30 as a result of the following:

<TABLE>
<CAPTION>

                                                                       1996            1995             1994
                                                                       ----            ----             ----

<S>                                                                <C>              <C>             <C>          
Expected income tax expense at federal tax rate                    $     551,461    $    698,890    $     822,466
State taxes based on income, net of federal
  tax benefit                                                             96,584         121,422          125,005
Excess of fair value of ESOP shares released over cost                    39,864          33,861                -
Other                                                                    (41,116)        (34,721)         (60,019)
                                                                   -------------    ------------    -------------

     Total income tax expense                                      $     646,793    $    819,452    $       887,452
                                                                   =============    ============    ===============
</TABLE>


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

<TABLE>
<CAPTION>


                                                                                     1996             1995
                                                                                     ----             ----
     Deferred tax assets
<S>                                                                               <C>             <C>         
         RRP expense                                                              $     16,363    $     78,985
         Net deferred loan fees                                                        186,966         157,195
         Net unrealized depreciation on securities available for sale                  144,252               -
         SAIF assessment                                                               405,235               -
         Other                                                                               -          24,596
                                                                                  ------------    ------------
                                                                                       752,816         260,776
     Deferred tax liabilities
         Accretion                                                                     (28,817)        (48,161)
         Depreciation                                                                  (42,807)        (39,288)
         Bad debt deduction                                                           (300,895)       (248,232)
         Other                                                                         (27,354)        (20,744)
                                                                                  ------------    ------------
                                                                                      (399,873)       (356,425)
     Valuation allowance                                                                     -               -
                                                                                  ------------    ------------

         Net deferred tax asset (liability)                                       $    352,943    $    (95,649)
                                                                                  ============    ============
</TABLE>

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

<PAGE>


                            MFB CORP. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        September 30, 1996, 1995 and 1994



NOTE 8 - INCOME TAXES (Continued)

Retained  earnings  at  September  30,  1996  and  1995  includes  approximately
$4,596,000,  for  which  no  deferred  federal  income  tax  liability  has been
recognized  as it  represents  bad debt  deductions  for tax  purposes  only for
pre-1987 tax years.  Reduction of amounts so allocated  for purposes  other than
tax bad debt  losses  would  create tax return  income,  which would be taxed at
current income tax rates.  The unrecorded  deferred  income tax liability on the
above amount was approximately $1,563,000 at September 30, 1996 and 1995.


NOTE 9 - CAPITAL REQUIREMENTS AND RESTRICTIONS ON RETAINED EARNINGS

The Bank is subject to various regulatory capital requirements.  Failure to meet
minimum capital  requirements  can initiate  certain  mandatory or discretionary
actions by  regulators  that could have a direct  material  effect on the Bank's
financial  statements.  Under capital  adequacy  guidelines  and the  regulatory
framework for prompt corrective action, the Bank must meet specific quantitative
capital   guidelines   using  the  Bank's  assets,   liabilities,   and  certain
off-balance-sheet items as calculated under regulatory accounting practices. The
Bank's requirements are also subject to qualitative  judgments by the regulators
about components, risk weightings and other factors.

Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require the Bank to  maintain  minimum  amounts and ratios (set forth  below) of
tangible capital, leverage capital, and risk-based capital. Management believes,
as of September 30, 1996, that the Bank meets the capital adequacy requirements.

The following is a reconciliation of the Bank's capital under generally accepted
accounting  principles  (GAAP) to  regulatory  capital at September 30, 1996 and
1995.


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

<PAGE>


                            MFB CORP. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        September 30, 1996, 1995 and 1994



NOTE 9 - CAPITAL REQUIREMENTS AND RESTRICTIONS ON RETAINED
  EARNINGS (Continued)

<TABLE>
<CAPTION>

                                                                    Tangible        Leverage        Risk-Based
                                                                     Capital         Capital          Capital
                                                                     -------         -------          -------
                                                                              (Dollars in thousands)

<S>                                                             <C>              <C>             <C>         
GAAP capital at September 30, 1996                               $     31,108     $     31,108    $     31,108
Additional capital items and capital adjustments
     Net unrealized depreciation on securities
       available for sale                                                 220              220             220
     Includable allowance for loan losses                                   -                -             340
                                                                 ------------     ------------    ------------

Regulatory capital at September 30, 1996                         $     31,328     $     31,328    $     31,668
                                                                 ============     ============    ============


GAAP capital at September 30, 1995                               $     29,844     $     29,844    $     29,844
Additional capital items
     Includable allowance for loan losses                                   -                -             306
                                                                 ------------     ------------    ------------

Regulatory capital at September 30, 1995                         $     29,844     $     29,844    $     30,150
                                                                 ============     ============    ============
</TABLE>


The Bank's actual capital and required  capital amounts and ratios are presented
below:

<TABLE>
<CAPTION>
                                                                                               Requirement to be
                                                                                            Well Capitalized Under
                                                              Requirement for Capital          Prompt Corrective
                                        Actual                   Adequacy Purposes             Action Provisions
                                 ----------------------      ------------------------      ------------------------
                                  Amount         Ratio         Amount          Ratio         Amount         Ratio
                                  ------         -----         ------          -----         ------         -----
                                                              (Dollars in thousands)
As of September 30, 1996
<S>                             <C>              <C>          <C>               <C>         <C>              <C>  
     Tangible Capital           $  31,328        13.85%       $   3,392         1.50%       $  6,785         3.00%
     Leverage Capital              31,328        13.85            6,785         3.00          13,570         6.00
     Risk-Based Capital            31,668        32.69            7,749         8.00           9,686        10.00

As of September 30, 1995
     Tangible Capital              29,844        16.06            2,787         1.50           5,574         3.00
     Leverage Capital              29,844        16.06            5,574         3.00          11,148         6.00
     Risk-Based Capital            30,150        40.77            5,916         8.00           7,395        10.00

</TABLE>

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

<PAGE>


                            MFB CORP. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        September 30, 1996, 1995 and 1994



NOTE 9 - CAPITAL REQUIREMENTS AND RESTRICTIONS ON RETAINED
  EARNINGS (Continued)

Regulations  of the Office of Thrift  Supervision  limit the amount of dividends
and  other  capital  distributions  that  may be paid by a  savings  institution
without  prior  approval  of the Office of Thrift  Supervision.  The  regulatory
restriction  is based on a  three-tiered  system with the  greatest  flexibility
being afforded to well-capitalized (Tier 1) institutions.  The Bank is currently
a Tier 1 institution.  Accordingly,  the Bank can make, without prior regulatory
approval,  distributions  during a calendar year up to 100% of its net income to
date during the  calendar  year plus an amount that would reduce by one-half its
"surplus  capital  ratio"  (the excess  over its  capital  requirements)  at the
beginning of the calendar year. Accordingly, at September 30, 1996 approximately
$12,000,000  of the  Bank's  retained  earnings  is  potentially  available  for
distribution to the Company under this calculation. See also Note 15.


NOTE 10 - OTHER NONINTEREST INCOME AND EXPENSE

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

<TABLE>
<CAPTION>

                                                                     1996            1995             1994
                                                                 ------------     ------------    ------------
      Other noninterest income
<S>                                                              <C>              <C>             <C>         
         Service charges and fees                                $    174,315     $    124,232    $     87,835
         Loan late charges                                              3,808            4,762           5,282
         Rental income                                                 32,989           39,725          35,975
         Other                                                         20,654           20,929          22,257
                                                                 ------------     ------------    ------------

                                                                 $    231,766     $    189,648    $    151,349
                                                                 ============     ============    ============

     Other noninterest expense
         Advertising and promotion                               $    190,614     $     15,000    $     59,000
         Data processing                                              200,940          175,734         163,918
         Professional fees                                            175,341          116,008          76,030
         Printing, postage, stationery,
           and supplies                                               123,215           87,229          95,563
         Telephone                                                     33,110           24,433          23,142
         Directors fees                                                70,186           56,940          57,411
         Direct loan origination costs deferred                      (203,332)         (99,228)       (104,034)
         Other                                                        378,877          376,519         295,105
                                                                 ------------     ------------    ------------

                                                                 $    968,951     $    752,635    $    666,135
                                                                 ============     ============    ============
</TABLE>






--------------------------------------------------------------------------------
<PAGE>


                            MFB CORP. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        September 30, 1996, 1995 and 1994



NOTE 11 - COMMITMENTS AND CONTINGENCIES AND FINANCIAL INSTRUMENTS
  WITH OFF-BALANCE-SHEET RISK

In the  ordinary  course  of  business,  the  Company  has  various  outstanding
commitments   and  contingent   liabilities   that  are  not  reflected  in  the
accompanying  consolidated  financial  statements.  In addition,  the Company is
involved in legal  actions  arising in the ordinary  course of business.  In the
opinion of  management,  after  consultation  with legal  counsel,  the ultimate
disposition  of these matters is not expected to have a material  adverse effect
on the  consolidated  financial  position  of the Company  and  Subsidiary.  The
principal commitments of the Company are as follows:

Loan Commitments

At September 30, 1996,  excluding loans in process,  the Company had outstanding
firm commitments to originate loans as follows:

<TABLE>
<CAPTION>

                                                             Fixed             Variable
                                                          Rate Loans          Rate Loans             Total
                                                       ----------------    ---------------     ---------------
<S>                                                    <C>                 <C>                 <C>            
     First mortgage loans                              $      1,680,256    $     7,500,852     $     9,181,108
     Unused lines of credit                                     307,028          7,059,117           7,366,145
     Unused construction loan lines of credit                         -          2,721,545           2,721,545
                                                       ----------------    ---------------     ---------------
                                                       $      1,987,284    $    17,281,514     $    19,268,798
                                                       ================    ===============     ===============
</TABLE>


Fixed rate loan commitments at September 30, 1996 are at rates primarily ranging
from 7.625% to 10.95%. These fixed rate loan commitments are primarily for terms
ranging from 15 to 30 year terms.  Rates on variable rate loans range from 6.50%
to 10.75% and are tied  primarily to the National  Monthly  Median Cost of Funds
Ratio to SAIF - Insured Institutions.

Commitments  to extend  credit are  agreements  to lend to a customer as long as
there is no violation of any condition established in the contract.  Commitments
generally  have fixed  expiration  dates or other  termination  clauses  and may
require  payment  of a fee.  Since  commitments  to make loans and fund lines of
credit may expire without being drawn upon, the total commitment  amounts do not
necessarily  represent  future cash  requirements.  The Company  evaluates  each
customer's  creditworthiness  on a case-by-case  basis. The amount of collateral
obtained,  if it is deemed necessary by the Company upon extension of credit, is
based on management's  credit evaluation of the  counterparty.  The Company uses
the same credit policies in making commitments and conditional obligations as it
does for on-balance-sheet  instruments. The Company's exposure to credit loss in
the event of nonperformance  by the other party to the financial  instrument for
commitments to extend credit is represented by the  contractual  amount of those
instruments. No losses are anticipated as a result of these transactions.



--------------------------------------------------------------------------------
<PAGE>


                            MFB CORP. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        September 30, 1996, 1995 and 1994



NOTE 11 - COMMITMENTS AND CONTINGENCIES AND FINANCIAL INSTRUMENTS
  WITH OFF-BALANCE-SHEET RISK (Continued)

The deposits of savings  associations  such as the Bank are presently insured by
the  Savings  Association   Insurance  Fund  (SAIF).  A  recapitalization   plan
formulated  by the Treasury  Department,  the FDIC,  the OTS and the Congress in
September 1996 required a one-time  assessment of  approximately  $955,000 which
has been accrued for as of September  30, 1996 and is included in the  Company's
noninterest expense for the year ended September 30, 1996.

Under  employment  agreements with certain  executive  officers,  certain events
leading to separation  from the Company  could result in cash payments  totaling
approximately $969,000 as of September 30, 1996.


NOTE 12 - PARENT COMPANY FINANCIAL STATEMENTS

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

                            CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>


                                                                                         September 30,
                                                                              -------------------------------------
                                                                                    1996                1995
ASSETS                                                                        ----------------    -----------------
<S>                                                                           <C>                 <C>              
Cash and cash equivalents                                                     $        887,580    $          68,948
Interest-bearing deposits in other financial institutions                                    -              948,366
Investment in Bank subsidiary                                                       31,108,173           29,843,715
Note receivable from Bank subsidiary                                                 4,750,000            5,750,000
Loan receivable from ESOP                                                              893,651            1,100,000
Other assets                                                                            31,501              319,160
                                                                              ----------------    -----------------

     Total assets                                                             $     37,670,905    $      38,030,189
                                                                              ================    =================

LIABILITIES
Accrued expenses and other liabilities                                        $         71,536    $          31,591

SHAREHOLDERS' EQUITY                                                                37,599,369           37,998,598
                                                                              ----------------    -----------------

         Total liabilities and shareholders' equity                           $     37,670,905    $      38,030,189
                                                                              ================    =================
</TABLE>


--------------------------------------------------------------------------------
<PAGE>


                            MFB CORP. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        September 30, 1996, 1995 and 1994



NOTE 12 - PARENT COMPANY FINANCIAL STATEMENTS (Continued)


                                          CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>


                                                                                                    Period From
                                                            Year Ended           Year Ended         March 24 to
                                                           September 30,        September 30,      September 30,
                                                               1996                 1995               1994
                                                               ----                 ----               ----

<S>                                                       <C>                 <C>                 <C>              
Interest income                                           $         74,390    $         85,212    $          53,924

Other expenses                                                     153,973             132,605               68,230
                                                          ----------------    ----------------    -----------------


Loss before income taxes and equity
  in undistributed net income of Bank
  subsidiary                                                       (79,583)            (47,393)            (14,306)

Income tax benefit                                                  32,887              19,326                5,667
                                                          ----------------    ----------------    -----------------


Loss before equity in undistributed net
  income of Bank subsidiary                                        (46,696)            (28,067)             (8,639)

Equity in undistributed net income of Bank
  subsidiary                                                     1,021,846           1,264,173              971,161
                                                          ----------------    ----------------    -----------------


Net income                                                $        975,150    $      1,236,106    $         962,522
                                                          ================    ================    =================
</TABLE>

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


<PAGE>


                            MFB CORP. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        September 30, 1996, 1995 and 1994



NOTE 12 - PARENT COMPANY FINANCIAL STATEMENTS (Continued)

                                        CONDENSED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>


                                                                                                     Period From
                                                                Year Ended       Year Ended          March 24 to
                                                               September 30,    September 30,       September 30,
                                                                   1996             1995                1994
                                                                   ----             ----                ----
Cash flows from operating activities
<S>                                                         <C>                 <C>                <C>             
     Net income                                             $       975,150     $     1,236,106    $        962,522
     Adjustments to reconcile net income to
       net cash  from operating activities
         Amortization, net of accretion                                   -              (4,237)                  -
         Equity in undistributed net income of
           Bank subsidiary                                       (1,021,846)         (1,264,173)           (971,161)
         Net change in other assets                                 287,659            (317,424)             (1,736)
         Net change in accrued expenses and
           other liabilities                                         40,417              27,738               3,853
                                                            ---------------     ---------------    ----------------
              Net cash provided by (used in)
                operating activities                                281,380            (321,990)             (6,522)

Cash flows from investing activities
     Net change in interest-bearing deposits
       in other financial institutions                              948,366                   -                   -
     Loan to ESOP                                                         -                   -          (1,400,000)
     Principal repayments on loan receivable
       from ESOP                                                    206,349             200,000
     100,000
     Loan to Bank subsidiary                                              -                   -          (6,750,000)
     Principal repayments on note receivable
       from Bank subsidiary                                       1,000,000           1,000,000                   -
     Investment in Bank subsidiary                                        -                   -          (9,226,665)
     Purchase of securities                                               -          (4,945,231)        (12,490,918)
     Proceeds from maturities of securities                               -           5,400,000          11,092,020
                                                            ---------------     ---------------    ----------------
         Net cash provided by (used in) investing
           activities                                             2,154,715           1,654,769         (18,675,563)

Cash flows from financing activities
     Proceeds from stock issue, net of conversion
       costs and stock acquired by ESOP and RRP                           -                   -          20,326,665
     Purchase of MFB Corp. common stock                          (1,499,024)         (1,530,486)         (1,377,925)
     Cash dividends paid                                           (118,439)                  -                   -
                                                            ---------------     ---------------    ----------------
         Net cash provided by (used in)
           financing activities                                  (1,617,463)         (1,530,486)         18,948,740
                                                            ---------------     ---------------    ----------------

Net change in cash and cash equivalents                             818,632            (197,707)            266,655

Cash and cash equivalents at beginning
  of period                                                          68,948             266,655                   -
                                                            ---------------     ---------------    ----------------

Cash and cash equivalents at end of period                  $       887,580     $        68,948    $        266,655
                                                            ===============     ===============    ================
</TABLE>


--------------------------------------------------------------------------------
<PAGE>


                            MFB CORP. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        September 30, 1996, 1995 and 1994



NOTE 13 - FAIR VALUE OF FINANCIAL INSTRUMENTS

The  following  table shows the estimated  fair values and the related  carrying
amounts of the Company's  financial  instruments at September 30, 1996 and 1995.
Items which are not financial instruments are not included.

<TABLE>
<CAPTION>

                                                   1 9 9 6                                   1 9 9 5
                                                   -------                                   -------
                                        Carrying             Estimated            Carrying             Estimated
                                         Amount             Fair Value             Amount             Fair Value
                                         ------             ----------             ------             ----------

<S>                                 <C>                 <C>                  <C>                  <C>              
Cash and cash equivalents           $      1,734,388    $       1,734,000    $       7,454,051    $       7,454,000
Interest-bearing time deposits
  in other financial institutions            495,000              495,000            1,880,000            1,882,000
Securities available for sale             66,762,558           66,763,000                    -                    -
Securities held to maturity                        -                    -           52,022,355           51,704,000
FHLB stock                                 1,336,100            1,336,000            1,270,800            1,271,000
Loans receivable, net of
  allowance for loan losses              152,052,092          152,341,000          121,181,162          121,857,000
Accrued interest receivable                  818,014              818,000              818,108              818,000
Noninterest bearing demand
  deposits                                (1,942,145)          (1,942,000)            (743,000)           (743,000)
Savings, NOW and MMDA
  deposits                               (34,779,548)         (34,780,000)         (34,687,208)        (34,687,000)
Other time deposits                     (122,242,796)        (122,579,000)        (109,121,562)       (109,607,000)
FHLB advances                            (24,500,000)         (24,337,000)                   -                    -
</TABLE>


For purposes of the above  disclosures  of estimated  fair value,  the following
assumptions  were used as of September  30, 1996 and 1995.  The  estimated  fair
value for cash and cash  equivalents  is considered  to  approximate  cost.  The
estimated  fair  value of  interest-bearing  time  deposits  in other  financial
institutions  is based upon  estimates of the rate the Company  would receive on
such deposits at September 30, 1996 and 1995,  applied for the time period until
maturity.  The  estimated  fair  value  for  securities  available  for sale and
securities  held to  maturity,  is  based  upon  quoted  market  values  for the
individual securities or for equivalent securities. The estimated fair value for
loans receivable is based upon estimates of the difference in interest rates the
Company  would  charge  the  borrowers  for  similar  such  loans  with  similar
maturities  made at September 30, 1996 and 1995,  applied for an estimated  time
period  until the loan is  assumed  to reprice  or be paid.  In  addition,  when
computing the estimated fair value for loans receivable,  the allowance for loan
losses was subtracted from the calculated fair value for consideration of credit
issues.  The estimated fair value for FHLB stock,  accrued interest  receivable,
noninterest  bearing demand  deposits,  savings,  NOW and MMDA deposits is based
upon their carrying  value.  The estimated fair value for other time deposits as
well as FHLB advances is based upon  estimates of the rate the Company would pay
on such deposits or  borrowings at September 30, 1996 and 1995,  applied for the
time  period  until  maturity.  The  estimated  fair  value of  other  financial
instruments and off-balance-sheet loan commitments  approximate cost and are not
considered significant to this presentation.


--------------------------------------------------------------------------------
<PAGE>


                            MFB CORP. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        September 30, 1996, 1995 and 1994



NOTE 13 - FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

While these  estimates of fair value are based on  management's  judgment of the
most  appropriate  factors,  there is no assurance that were the Company to have
disposed of such items at September 30, 1996 and 1995, the estimated fair values
would  necessarily  have been  achieved at that date,  since  market  values may
differ  depending  on  various  circumstances.  The  estimated  fair  values  at
September  30, 1996 and 1995 should not  necessarily  be  considered to apply at
subsequent dates.

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


NOTE 14 - IMPACT OF NEW ACCOUNTING STANDARDS

Several new  accounting  standards  have been issued by the FASB that will apply
for the year  ending  September  30,  1997.  SFAS No. 121,  "Accounting  for the
Impairment of Long-Lived  Assets and for  Long-Lived  Assets To Be Disposed Of,"
requires a review of  long-term  assets for  impairment  of  recorded  value and
resulting  write-downs if the value is impaired.  SFAS No. 122,  "Accounting for
Mortgage  Servicing  Rights,"  requires  recognition  of an asset when servicing
rights are retained on in-house  originated  loans that are sold.  SFAS No. 123,
"Accounting for  Stock-Based  Compensation,"  encourages,  but does not require,
entities  to  use a  "fair  value  based  method"  to  account  for  stock-based
compensation plans and requires disclosure of the pro forma effect on net income
and on  earnings  per share  had the  accounting  been  adopted.  SFAS No.  125,
"Accounting for Transfer and Servicing of Financial Assets and Extinguishment of
Liabilities,"  provides  accounting  and  reporting  standards for transfers and
servicing of financial assets and  extinguishments of liabilities and requires a
consistent  application  of a  financial-components  approach  that  focuses  on
control.  Under that approach,  after a transfer of financial  assets, an entity
recognizes the financial and servicing assets it controls and the liabilities it
has incurred and derecognizes  liabilities when extinguished.  SFAS No. 125 also
supersedes  SFAS No. 122, and requires that servicing  assets and liabilities be
subsequently  measured by  amortization  in proportion to and over the period of
estimated  net  servicing  income  or loss and  requires  assessment  for  asset
impairment  or increased  obligation  based on their fair  values.  SFAS No. 125
applies to transfers and extinguishments  occurring after December 31, 1996, and
early  or  retroactive  application  is  not  permitted.  Upon  adoption,  these
statements  are  not  expected  to  have a  material  effect  on  the  Company's
consolidated financial position or results of operations.



--------------------------------------------------------------------------------
<PAGE>


                            MFB CORP. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        September 30, 1996, 1995 and 1994



NOTE 15 - ADOPTION OF PLAN OF CONVERSION

The Bank  completed a conversion  from a mutual to a stock savings bank on March
24, 1994.  Simultaneous  with the  conversion  was the formation of the Company,
incorporated in the State of Indiana.  The initial  issuance of shares of common
stock in the  Company on March 24, 1994 was  2,302,351  shares at $10 per share,
resulting in proceeds net of costs of $22,426,665,  and was accomplished through
an offering to the Bank's  tax-qualified ESOP, RRPs, eligible account holders of
record,  and other members of the Bank. Costs associated with the conversion and
stock  offering  amounted to $596,845,  and were accounted for as a reduction of
the proceeds  from the issuance of common stock of the Company.  Upon closing of
the stock offering, the Company purchased all common shares issued by the Bank.

At the time of the conversion,  the Company established a liquidation account in
an  amount  equal to its net  worth as of the  date of the  latest  consolidated
financial  statements  contained in the final offering circular used to sell the
common stock  ($16,964,414 at September 30, 1993). The liquidation  account will
be maintained for the benefit of eligible depositors,  with deposits of at least
$50 as of the  December  31,  1992  eligibility  record  date,  who  continue to
maintain  their  deposits  in the Bank after the  conversion.  In the event of a
complete  liquidation (and only in such an event),  each eligible depositor will
be entitled to receive a liquidation  distribution from the liquidation account,
in the  proportionate  amount of the then current  adjusted  balance of deposits
then held,  before any liquidation  distribution may be made with respect to the
stockholders. Except for the repurchase of stock and payment of dividends by the
Bank,  the  existence  of the  liquidation  account will not restrict the use or
application of net worth. The Bank has not recalculated the liquidation  account
balance which would currently be less than the initial  $16,964,414  amount.  If
the liquidation  account balance was unchanged from the initial amount, the Bank
would be subject  to a divided  limitation  of  approximately  $3,800,000  as of
September 30, 1996.




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

<PAGE>


                            MFB CORP. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        September 30, 1996, 1995 and 1994



NOTE 16 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>


                                                       ..............Year Ended September 30, 1996..............
                                                                               1st 2nd 3rd 4th
(In thousands, except per share data)                       Quarter        Quarter         Quarter        Quarter
                                                            -------        -------         -------        -------

<S>                                                       <C>            <C>            <C>             <C>        
Interest income                                           $     3,215    $     3,400    $     3,633     $     3,934

Interest expense                                                1,834          1,932          2,050           2,241
                                                          -----------    -----------    -----------     -----------


Net interest income                                             1,381          1,468          1,583           1,693

Provision for loan losses                                           8              7              8               7
                                                          -----------    -----------    -----------     -----------


Net interest income after provision for loan
  losses                                                        1,373          1,461          1,575           1,686

Noninterest income                                                 83            121             91              67

Noninterest expense                                               871            924            963           2,077
                                                          -----------    -----------    -----------     -----------


Income before income taxes                                        585            658            703           (324)

Income tax expense                                                233            262            279           (127)
                                                          -----------    -----------    -----------     ----------


Net income                                                $       352    $       396    $       424     $     (197)
                                                          ===========    ===========    ===========     ==========

Earnings per common and common
  equivalent share                                        $      .17     $       .20    $       .22     $     (.10)
                                                          ==========     ===========    ===========     ==========
</TABLE>


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


<PAGE>





NOTE 16 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) (Continued)

<TABLE>
<CAPTION>


                                                          ..............Year Ended September 30, 1995..............
                                                                                1st 2nd 3rd 4th
(In thousands, except per share data)                       Quarter        Quarter         Quarter        Quarter
                                                            -------        -------         -------        -------

<S>                                                       <C>            <C>            <C>             <C>        
Interest income                                           $     3,051    $     3,063    $     3,125     $     3,145

Interest expense                                                1,590          1,636          1,743           1,820
                                                          -----------    -----------    -----------     -----------


Net interest income                                             1,461          1,427          1,382           1,325

Provision for loan losses                                           8              8              7               7
                                                          -----------    -----------    -----------     -----------


Net interest income after provision for loan
  losses                                                        1,453          1,419          1,375           1,318

Noninterest income                                                 75             81             80              82

Noninterest expense                                               936            956            935           1,000
                                                          -----------    -----------    -----------     -----------


Income before income taxes                                        592            544            520             400

Income tax expense                                                235            217            207             161
                                                          -----------    -----------    -----------     -----------


Net income                                                $       357    $       327    $       313     $       239
                                                          ===========    ===========    ===========     ===========

Earnings per common and common
  equivalent share                                        $      .17     $       .16    $       .15     $      .11
                                                          ==========     ===========    ===========     ==========
</TABLE>


--------------------------------------------------------------------------------
<PAGE>





                             DIRECTORS AND OFFICERS

MFB Corp. and Mishawaka Federal Savings Directors

         M. Gilbert  Eberhart (age 62) has served as Secretary of the Bank since
1987. He is also a dentist based in Mishawaka.

         Thomas F. Hums (age 63) served as President and Chief Executive Officer
of the Bank from 1972 until  September,  1995.  He also served as President  and
Chief Executive Officer of Mishawaka Financial from 1975 until September, 1995.

         Jonathan E. Kintner (Age 53) is an optometrist based in Mishawaka.

         Michael  J.  Marien  (Age 49) is a Sales  Representative  with  Signode
Corporation, a division of ITW.

         Marian K.  Torian  (age 75) has served as  Chairman  of the Bank and of
Mishawaka Financial since 1977. She also served as a teacher with School City of
Mishawaka.

         Charles J. Viater (age 41) has served as President and Chief  Executive
Officer of the Bank and Mishawaka Financial since September, 1995. He previously
served as Executive  Vice  President for Amity Federal Bank and Chief  Financial
Officer of Amity Bancshares, Inc. beginning in December, 1990.

         Reginald  H. Wagle (age 54) has served as Vice  President  of  Memorial
Health  Foundation  since  1992.  Until  1992,  he  was a  free-lance  political
consultant and until 1991, he also served as District Director for the Office of
United States Representative John P.
Hiler, Third Congressional District of Indiana.



                       MISHAWAKA FEDERAL SAVINGS OFFICERS

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


         M. Gilbert Eberhart                              Michael J. Portolese
         Secretary*                                       Vice President


         William L. Stockton, Jr.
         Vice President

         * Holds same position with MFB Corp.


                                                        95


<PAGE>





                             SHAREHOLDER INFORMATION

Market Information

         The common stock of MFB Corp. is traded on the National  Association of
Securities Dealers Automated Quotation System, National Market System, under the
symbol  "MFBC."  As  of  September  30,  1996,  there  were   approximately  900
shareholders of record and the Company  estimates  that, as of that date,  there
were an additional 811 beneficial  shareholders  in "street" name. The following
table sets forth market price information for the Company's common stock for the
periods indicated.

                                             High        Low
        Fiscal Quarters Ended                Bid         Bid

        December 31, 1995                    16.25       14.75
        March 31, 1996                       15.25       13.75
        June 30, 1996                        14.75       13.75
        September 30, 1996                   19.00       13.75

        Transfer Agent and Registrar           Special Counsel
        Registrar and Transfer Co.                 Barnes & Thornburg
        10 Commerce Drive                          1313 Merchants Building
        Cranford, New Jersey  07016                11 South Meridian Street
                                                   Indianapolis, Indiana 46204

                                                Independent Auditors
                                                    Crowe, Chizek & Co.
                                                    330 E. Jefferson Boulevard
                                                    South Bend, Indiana  46624

Shareholder and General Inquiries

                  The Company is required to file an Annual  Report on Form 10-K
for its fiscal year ended  September 30, 1996 with the  Securities  and Exchange
Commission.  Copies of this annual  report may be obtained  without  charge upon
written request to:

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

Office Locations

    Main Office          Branch Office              Mortgage Office
 121 S. Church St.       411 W. McKinley Ave.       227 S. Main St. Suite 110
 Mishawaka, IN  46544    Mishawaka, IN  46545       Elkhart, IN  46516


         Branch Office                      Branch Office
         402 W. Cleveland Rd.               2427 Mishawaka Ave.
         Mishawaka, IN  46545               South Bend, IN  46615


                                                        96