SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549
                                   FORM 10-KSB
                   [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR
                  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2001

                                       OR

                 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
                  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

                        For the transition period from to

                        Commission File Number: 333-32245

                           HEARTLAND BANCSHARES, INC.
             (Exact name of registrant as specified in its charter)

Indiana                                                          35-2017085
(State or Other Jurisdiction of Incorporation             (IRS Employer Id. No.)
 or Organization)

420 North Morton Street
Franklin, Indiana                                                 46131
(Address of principal executive offices)                        (Zip Code)

Registrant's telephone number, including area code:  (317) 738-3915

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:  None

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

                           Yes      X        No
                                 -----          -----

Indicate by check mark if disclosure of delinquent filers pursuant to Rule
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in part III of this FORM 10-KSB or any
amendment to this FORM 10-KSB.  [X]
                               -----
Aggregate  market  value of common  stock  held by  non-affiliates  computed  by
reference  to the sale  price of such  stock as of March  18,  2002 of $8.15 per
share $10,441,812

Shares of common stock outstanding as of March 18, 2002: 1,394,172



<PAGE>


DOCUMENTS INCORPORATED BY REFERENCE:
1. Portions of the Annual Report to Shareholders of Heartland  Bancshares,  Inc.
   for the year ended  December  31,  2001,  to the extent  stated  herein,  are
   incorporated by reference from Exhibit 13 into Parts I and II.
2. Portions of the Proxy Statement of Heartland Bancshares,  Inc. for the Annual
   Meeting of its  Shareholders  to be held April 22, 2002, to the extent stated
   herein, are incorporated by reference from Exhibit 99.1 into Part III.



<PAGE>




                          FORM 10-KSB TABLE OF CONTENTS

PART I                                                              Page

Item  1.  Description of Business                                     4
Item  2.  Description of property                                    18
Item  3.  Legal Proceedings                                          18
Item  4.  Submission of Matters to a Vote of Security Holders        19

PART II

Item  5.  Market for Registrant's Common Equity and
          Related Stockholder Matters                                20
Item  6.  Management's Discussion and Analysis of Financial
          Condition and Results of Operations                        20
Item  7.  Financial Statements and Supplementary Data                20
Item  8.  Changes in and Disagreements with Accountants on
          Accounting and Financial Disclosure                        20

PART III

Item  9.  Directors Executive Officers Promoters and Control
          Persons of Heartland                                       21
Item 10.  Executive Compensation                                     21
Item 11.  Security Ownership of Certain Beneficial Owners
          and Management                                             22
Item 12.  Certain Relationships and Related Transactions             22
Item 13.  Exhibits and Reports on Form 8-K                           23
Signatures                                                           25



<PAGE>


                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS  (Dollar  amounts are in thousands,  except per
share data.)

GENERAL

Heartland  Bancshares,  Inc.  (Heartland or "The Company") is a one-bank holding
company  incorporated May 27, 1997.  Heartland raised  approximately  $11,731 in
equity capital through the sale of 1,394,172 shares of Heartland's  common stock
at $9.07 per share, net of underwriting  discounts and offering costs.  Proceeds
were used to capitalize Heartland Community Bank (the Bank), Heartland's primary
asset, a wholly-owned banking subsidiary, an Indiana-chartered  commercial bank.
The Bank received  regulatory approval to open in the fall of 1997 and commenced
banking operation December 17, 1997.

The Bank operates from offices located in Franklin, Greenwood, and Bargersville,
Indiana.  As of  December  31,  2001,  the  Bank  had 76  full  time  equivalent
employees.  The Bank utilizes a leased employee  arrangement  with a third party
company,  where-by  all  employees  are leased to the Bank from the third  party
company.  The arrangement  allows for employees to participate in group benefits
of the third  party  company.  The third  party  company  also  administers  the
majority of human  resource  activities  including  payroll,  payroll  taxes and
policy administration. Heartland has no full time employees.

Heartland is subject to regulation by the Federal Reserve Board.

The Bank's  deposits are insured to the maximum  extent  permitted by law by the
Federal  Deposit  Insurance   Corporation   (FDIC).   The  Bank  is  subject  to
comprehensive regulation,  examination and supervision by the Indiana Department
of Financial Institutions ("DFI") and the FDIC.

The business of the Bank  consists  primarily of  attracting  deposits  from the
general public,  originating  commercial,  residential  real estate and consumer
loans  and  purchasing  certain  investment  securities.  The  Bank  operates  a
full-service  brokerage  department  in order to sell  mutual  funds  and  other
non-deposit investment products and a certificate of deposit brokerage program.

Heartland  offers  commercial  loans to area  businesses in addition to new home
construction loans and business lines of credit.  Consumer loans include,  among
others,  new and used automobile and other secured and unsecured personal loans.
Heartland originates adjustable rate first mortgage loans, second mortgage loans
and home equity lines of credit secured by single-family homes.

SERVICE AREA

The Bank's primary service area is Johnson County,  Indiana.  Johnson County was
ranked the third  fastest  growing  County in  Indiana  since 1990 by the United
States  Census  Bureau in the 2000 census.  Census data may be obtained from the
Census  Bureau  Internet  site  WWW.Census.gov.   The  majority  of  Heartland's
customers reside in Johnson County.  The Bank has one branch in Franklin and two
in Greenwood,  which are the two largest  cities in the county,  and a branch in
Bargersville, in southwestern Johnson County.

Note. Dollar amounts in thousands except per share data.


<PAGE>


COMPETITION

Heartland and the Bank face strong  competition  for  deposits,  loans and other
financial services from numerous Indiana and out-of-state banks, thrifts, credit
unions and other financial  institutions as well as other entities which provide
financial services,  including consumer finance companies,  securities brokerage
firms,  mortgage brokers,  equipment  leasing  companies,  insurance  companies,
mutual funds and other lending sources and investment alternatives.  Some of the
financial institutions and financial services organizations with which Heartland
competes are not subject to the same degree of regulation as Heartland.  Many of
the  financial  institutions  aggressively  compete for business in  Heartland's
market areas.  Many of these  competitors  have been in business for many years,
have established  customer bases, have substantially  higher lending limits than
Heartland,  are larger and will be able to offer certain services that Heartland
does not currently offer, including international banking services. In addition,
most of these entities have greater  capital  resources than  Heartland,  which,
among  other  things,  may allow them to price  their  services  at levels  more
favorable to the customer and to provide  larger  credit  facilities  than could
Heartland.

REGULATION AND SUPERVISION OF HEARTLAND

Heartland  is a bank  holding  company  within the  meaning of the Bank  Holding
Company Act of 1956,  as amended  ("BHCA"),  and is  registered as such with the
Board of Governors of the Federal Reserve System ("Federal Reserve").  Heartland
is examined,  regulated and supervised by the Federal Reserve and is required to
file annual reports and other information  regarding its business and operations
and the business and operations of its  subsidiaries  with the Federal  Reserve.
The Federal Reserve has the authority to issue cease and desist orders against a
bank holding company if it determines  that  activities  represent an unsafe and
unsound practice or a violation of law.

Under the BHCA, a bank holding company is, with limited  exceptions,  prohibited
from  acquiring  direct or indirect  ownership or control of voting stock of any
company  which is not a bank,  and from  engaging  in any  activity  other  than
managing or controlling  banks. A bank holding company may, however,  own shares
of a company engaged in activities that the Federal Reserve has determined to be
so closely related to banking or managing or controlling banks as to be a proper
incident  thereto.  Under  the  amendments  to the  BHCA  made  in  1999  by the
Gramm-Leach-Bliley  Act, a bank holding company  meeting  certain  financial and
other  requirements may elect to be treated as a "financial holding company" and
engage  in  or  own  shares  of  companies   that  are  engaged  in,   insurance
underwriting,  securities  underwriting,  merchant banking,  and other financial
services  activities.  Heartland  has not  elected to be treated as a  financial
holding company.

Acquisitions by Heartland of banks and savings  associations are also subject to
regulation. Any acquisition by Heartland of more than five percent of the voting
stock of any bank requires prior approval of the Federal Reserve.

A bank holding  company and its  subsidiaries  are  prohibited  from engaging in
certain tie-in  arrangements  in connection  with the extension of credit or the
provision of any property or service.  With certain  exceptions,  a bank holding
company, a bank, and a subsidiary or affiliate  thereof,  may not extend credit,
lease or sell property or furnish any services or fix or vary the  consideration
for the foregoing on the condition  that (i) the customer must obtain or provide
some additional  credit,  property or services from, or to, any of them, or (ii)
the  customer  may not obtain  some other  credit,  property  or service  from a
competitor, except to the extent reasonable conditions are imposed to assure the
soundness of credit extended.

Note. Dollar amounts in thousands except per share data.

<PAGE>


REGULATION AND SUPERVISION OF THE BANK

The Bank is  supervised,  regulated  and  examined  by the DFI  and,  as a state
nonmember  bank,  by the FDIC. A cease and desist order may be issued by the DFI
and FDIC against the Bank if the respective  agency finds that the activities of
the Bank represent an unsafe and unsound  banking  practice or violation of law.
The DFI and FDIC on March 11, 2002,  have requested that the Bank consent to the
issuance of such an order,  as  described  below.  The  deposits of the Bank are
insured by the FDIC.

Branching by banks in Indiana is subject to the  jurisdiction,  and requires the
prior approval of, the Bank's primary federal regulatory  authority and the DFI.
Under Indiana law, the Bank may branch anywhere in the state.

Heartland is a legal  entity  separate  and  distinct  from the Bank.  There are
various  legal  limitations  on the extent to which the Bank can supply funds to
Heartland.  The principal source of Heartland's funds consists of dividends from
the Bank.  State and federal laws restrict the amount of dividends  which may be
paid by banks.  In  addition,  the Bank signed a  regulatory  agreement in April
2001,  which (among other  provisions)  requires the Bank to maintain a ratio of
Tier 1 capital to total  assets of not less than 7.5% and  refrain  from  paying
dividends  that would cause that ratio  requirement  to be violated.  The Bank's
Tier I Capital to total assets ratio at December 31, 2001 was 8.43%.

On March 11, 2002, the FDIC and DFI requested that the Bank consent to the entry
by those agencies of a formal order under federal and state banking laws,  under
which  the  Bank  and its  Directors  would  be  required  to take a  number  of
affirmative steps to address regulatory concerns,  including but not limited to,
maintaining  the  Bank's  ratio of Tier 1  capital  to  assets  at 8% or  above;
committing not to declare or pay dividends to the Corporation  that would result
in the Bank's violation of the required capital ratio;  limiting growth in total
assets to no more than three percent in any three month period  without  advance
approval by the regulators, or more than 12% annually; adopting and implementing
plans to resolve certain  criticized  assets;  eliminating or restricting future
lending to borrowers  whose loans have been  criticized by the  regulators;  and
adopting and implementing plans to reduce the volume of the Bank's  acquisition,
development  and  construction  loans,  commercial  real-estate  loans  and high
loan-to-value  loans, as defined by FDIC regulation Part 365, in relation to its
capital.

Although  the Bank intends to request  that the  regulators  revise or eliminate
certain  provisions of the proposed order,  Heartland believes that it is likely
that the restrictions  described will result from the regulators' request. These
restrictions  may  adversely  affect  the  Bank's  net  interest  income and net
interest margin in 2002 and future periods, if the restrictions require that the
Bank reduce the outstanding  balances of  higher-yielding  types of loans. These
restrictions are also likely to result in increased  non-interest expense during
2002  due  to  increased  consulting,  legal,  accounting,  staffing  and  other
compliance costs associated with responding to these restrictions.

In addition,  the Bank is subject to certain restrictions imposed by the Federal
Reserve on  extensions  of credit to  Heartland or any of its  subsidiaries,  or
investments in the stock or other securities as collateral for loans.


Note. Dollar amounts in thousands except per share data.

<PAGE>


The  commercial  banking  business  is  affected  not only by  general  economic
conditions  but  also by the  monetary  policies  of the  Federal  Reserve.  The
instruments  of monetary  policy  employed by the  Federal  Reserve  include the
discount  rate on member  bank  borrowing  and  changes in reserve  requirements
against  member bank  deposits.  Federal  Reserve  monetary  policies have had a
significant  effect on the operating results of commercial banks in the past and
are expected to continue to do so in the future. In view of changing  conditions
in the  national  economy  and in the money  markets,  as well as the  effect of
actions by  monetary  fiscal  authorities,  including  the Federal  Reserve,  no
prediction can be made as to possible future changes in interest rates,  deposit
levels, loan demand or the business and earnings of Heartland and the Bank.

Forward-Looking Statements

Heartland  from  time to time  in its  oral  and  written  communications  makes
statements  relating to its  expectations  regarding the future.  These types of
statements are considered "forward-looking statements" within the meaning of the
Private  Securities   Litigation  Reform  Act  of  1995.  Such  forward  looking
statements  can include  statements  about adequacy of allowance for loan losses
and the quality of the Company's loans and other assets;  simulations of changes
in interest rates; litigation results;  dividend policy; estimated cost savings,
plans and objectives for future operations; and expectations about the Company's
financial  and  business  performance  and  other  business  matters  as well as
economic and market  conditions and trends.  They often can be identified by the
use of words like "expect," "may," "will," "would," "could," "should", "intend,"
"project," "estimate," "believe" or "anticipate," or similar expressions.

Heartland may include forward-looking  statements in filings with the Securities
and Exchange  Commission  ("SEC"),  such as this Form 10-KSB,  in other  written
materials,  and in  oral  statements  made by  senior  management  to  analysts,
investors,  representatives  of the media, and others. It is intended that these
forward-looking  statements  speak  only  as of the  date  they  are  made,  and
Heartland  undertakes no obligation to update any  forward-looking  statement to
reflect  events or  circumstances  after  the date on which the  forward-looking
statement is made.

Readers are  cautioned  that, by their nature,  forward-looking  statements  are
based on assumptions and are subject to risks, uncertainties, and other factors.
Actual results may differ  materially from the  expectations of the Company that
are  expressed  or  implied by any  forward-looking  statement.  The  discussion
incorporated  by  reference  into  Item 7 of  this  Form  10-KSB,  "Management's
Discussion and Analysis of Financial Condition and Results of Operations," lists
some of the  factors  that  could  cause the  Company's  actual  results to vary
materially  from those expressed or implied by any  forward-looking  statements.
Other  uncertainties  that  could  cause the  Company's  actual  results to vary
materially  from those  expressed  or implied by any  forward-looking  statement
include the effects of changes in competitive conditions,; acquisitions of other
businesses by the Company and costs of integrations of such acquired businesses;
the  introduction,  withdrawal,  success and timing of business  initiatives and
strategies;  changes in customer  borrowing,  repayment,  investment and deposit
practices;  changes in fiscal, monetary and tax policies;  inflation; changes in
interest rates and financial and capital  markets;  changes in general  economic
conditions,  either nationally or regionally,  resulting in, among other things,
credit quality  deterioration;  the impact,  extent and timing of  technological
changes; capital management activities; actions of the Federal Reserve Board and
legislative  and regulatory  actions and reforms;  and the impact on the Bank of
the proposed asset growth,  capital,  loan  concentration  reduction,  and other
provisions  of the formal order  requested on March 11, 2002 by the FDIC and the
DFI. Investors should consider these risks, uncertainties,  and other factors in
addition to those  mentioned  by Heartland in its other SEC filings from time to
time when considering any forward-looking statement.

Note. Dollar amounts in thousands except per share data.


<PAGE>


Selected Financial Data

The information presented below should be read in conjunction with the
consolidated financial statements, which are incorporated by reference into Item
7 of this Report from Exhibit 13, and  "Management's  Discussion and Analysis of
Financial  Condition  and  Results  of  Operations,"  which is  incorporated  by
reference into Item 6 of this Report from Exhibit 13.



                        Year Ended     Year Ended     Year Ended
                       December 31,   December 31,   December 31,
Income Statement Data:     2001           2000           1999
                           ----           ----           ----

Total interest
  income               $  14,409      $  12,476      $   7,478
Total interest
  expense                  6,789          6,347          3,612
                       ---------      ---------      ---------
Net interest
  income                   7,620          6,129          3,866
Provision for
  loan losses              2,967          1,744            656
Noninterest
  income                   1,596            767            297
Noninterest
  expense                  5,416          3,929          2,352
Provision for
  income taxes               304            472            182
                       ---------      ---------      ---------
Net income             $     529      $     751      $     973
                       =========      =========      =========
Net income
  per share                  .38            .54      $     .70
Average shares         1,394,172      1,394,172      1,394,172

                                      May 27, 1997
                                       (inception)
                        Year Ended       through
                       December 31,   December 31,
Income Statement Data:     1998           1997
                           ----           ----

Total interest
  income               $   3,140      $     165
Total interest
  expense                  1,307             12
                       ---------      ---------
Net interest
  Income                   1,833            153
Provision for
  loan losses                700             46
Noninterest
  income                      56              -
Noninterest
  expense                  1,817            347
Provision for
  income taxes                 -              -
                       ---------      ---------
Net income/(loss)      $    (628)     $    (240)
                       =========      =========
Net income/(loss)
per share              $    (.45)     $    (.17)
Average shares         1,394,172      1,394,172

Note. Dollar amounts in thousands except per share data.

<PAGE>

                            At             At             At
                       December 31,   December 31,   December 31,
                           2001           2000           1999
                           ----           ----           ----
Balance Sheet Data:
Total Assets           $ 189,636      $ 164,916      $ 110,139
Loans, Net
  of Allowance
  for Loan Losses        143,236         129,882        89,680
Demand & Savings
  Deposits                86,341         64,598         38,135
Time Deposits             74,650         74,622         50,384
Shareholders'
  Equity                  13,263         12,658         11,643
Book Value Per
  Share                $    9.51      $    9.08      $    8.35
Equity to Asset
  Ratio                     6.99%          7.68%         10.57%


                            At             At
                        December 31,   December 31,
                           1998           1997
                           ----           ----
Balance Sheet Data:
Total Assets           $  64,660      $  14,519
Loans, Net
  of Allowance
  for Loan Losses         48,700          3,912
Demand & Savings
  Deposits                17,738          1,591
Time Deposits             35,016            488
Shareholders'
  Equity                  10,916         11,504
Book Value Per
  Share                $    7.83      $    8.25
Equity to Asset
  Ratio                    16.88%         79.23%


Note. Dollar amounts in thousands except per share data.

<PAGE>


AVERAGE  BALANCES,  INCOME,  EXPENSES AND RATES. The following tables depict for
the years ended December 31, 2001, 2000, and 1999, certain  information  related
to  Heartland's  average  balance  sheets and its  average  yields on assets and
average  costs of  liabilities.  Such yields are  derived by dividing  income or
expense by the  average  balance  of the  corresponding  assets or  liabilities.
Average balances have been derived from daily averages.



                                  Year Ended                 Year Ended
                               December 31, 2001          December 31, 2000
                             Average/      Yield/       Average/      Yield/
                              Balance       Rate         Balance       Rate
                              -------       ----         -------       ----
Interest earning assets
   Short-term investments    $  6,060       3.71%        $ 3,409        5.75%
   Taxable securities          18,586       7.34          16,435        6.79
   Non-taxable securities       1,489       4.50             669        3.74
   Loans                      145,961       8.74         113,182        9.84
                             --------                    -------
Total interest earning
 assets                      $172,096       8.37         $133,695       9.33
                             ========                    ========

Interest bearing liabilities
   Interest-bearing demand,
     Money Market and Savings
      Deposits               $ 59,639       2.99%        $37,843        4.35%
   Time deposits               81,071       5.59          65,807        6.16
   Short-term borrowings        6,174       3.61           6,791        5.05
   Other borrowings             4,222       5.95           4,665        6.50
                             --------                    -------
Total interest bearing
 liabilities                 $151,106       4.49         $115,106       5.51
                             ========                    ========

                                                   Year Ended
                                                  December 31,
                                                      1999
                                                Average/  Yield/
                                                 Balance   Rate
                                                 -------   ----
Interest earning assets
   Federal funds sold                          $   1,818   5.28%
   Taxable securities                             12,057   6.00
   Non-taxable securities                            605   3.64
   Loans                                          72,340   9.17
                                               ---------
Total interest earning assets                  $  86,820   8.61
                                               =========

Interest bearing liabilities
   Interest-bearing demand,
     Money Market and
     Savings Deposits                          $  21,285   3.96%
   Time deposits                                  47,088   5.45
   Short-term borrowings                           1,151   4.26
   Other borrowings                                2,745   5.68
                                               ---------
Total interest bearing
   Liailities                                  $  72,269   5.00
                                               =========

Note. Dollar amounts in thousands except per share data.




<PAGE>



                                            2001     2000      1999
                                            ----     ----      ----
Average yield on interest-earning
  assets                                    8.37%    9.33%     8.61%
Average rate paid on interest
  -bearing liabilities                      4.49     5.51      5.00
Net interest spread                         3.88     3.82      3.61
Net interest margin (net interest
  earnings divided by average
  total interest-earning assets)            4.43     4.58      4.45
Return on average assets                     .29      .54      1.09
Return on average equity                    3.95     6.21      8.54


The table below  describes  the extent to which  changes in  interest  rates and
changes in volume of interest-earning  assets and  interest-bearing  liabilities
have  affected  Heartland's  interest  income and  expense  during  the  periods
indicated.  For each category of  interest-earning  assets and  interest-bearing
liabilities,  information is provided on changes  attributable to (i) changes in
volume  (change in volume  multiplied by prior year rate),  (ii) changes in rate
(change in rate multiplied by prior year volume) and (iii) total changes in rate
and  volume.  The  combined  effects of changes in both  volume and rate,  which
cannot be separately  identified,  have been  allocated  proportionately  to the
change due to volume and the change due to rate.

<TABLE>

                                                           Year ended December 31,

                                                  2001 vs. 2000               2000 vs. 1999
                                                  --------------              -------------

                                               Increase (Decrease)         Increase (Decrease)
                                                     due to                      due to
                                            Volume    Rate    Total     Volume    Rate     Total
                                            ------    ----    -----     ------    ----     -----
<CAPTION>
Interest income attributable to:
<S>                                        <C>       <C>      <C>      <C>        <C>     <C>
  Loans                                    $ 2,965   $(1,352) $1,613   $ 3,988    $  514  $4,502
  Securities                                   189       102     291       290       106     396
  Other interest-earning assets(1)             115       (86)     29        91         9     100
                                           -------   -------  ------   -------    ------  ------

   Total interest-earning assets             3,269    (1,336)  1,933     4,369       629   4,998
                                           -------   -------  ------   -------    ------  ------

Interest expense attributable to:
  Money Market and
    Savings Deposits                           756      (617)    139       713        89     802
  Time deposits                                878      (403)    475     1,120       372   1,492
  Short-term borrowings                        (29)      (91)   (120)      283        11     294
  Other borrowings                             (27)      (25)    (52)      122        25     147
                                           -------   -------  ------   -------    ------  ------

   Total interest-bearing liabilities        1,578    (1,136)    442     2,238       497   2,735
                                           -------   -------  ------   -------    ------  ------

Increase (decrease) in net interest income $ 1,691   $  (200) $1,491   $ 2,131    $  132  $2,263
                                           =======   =======  ======   =======    ======  ======

</TABLE>

(1)   Includes  federal  funds  sold  and  interest-bearing  deposits  in  other
      financial institutions.


Note. Dollar amounts in thousands except per share data.


<PAGE>


LOANS.  Heartland's gross loans, excluding those held for sale, totaled $146,636
at December  31, 2001,  $132,549 at December  31, 2000,  $91,045 at December 31,
1999, $49,442 at December 31, 1998 and $3,958 at December 31, 1997.

The following table sets forth information concerning the composition of
Heartland's  loan portfolio in dollar amounts and percentages as of December 31,
2001, 2000, 1999, 1998 and 1997.

                                    2001                  2000
                                 Percent of            Percent of
                              Amount      Loans     Amount     Loans
                              ------      -----     ------     -----
TYPE OF LOAN
Commercial loans and leases  $ 76,097      51.90%  $  63,766    48.11%
Real estate construction       23,150      15.79      24,719    18.65
Residential mortgages
 (1-4 family homes)            24,795      16.91      21,942    16.55
Consumer                       22,594      15.40      22,122    16.69
                             --------   --------   ---------  -------
Gross loans                  $146,636     100.00%  $ 132,549   100.00%
                             ========   ========   =========  =======

                                    1999                  1998
                                 Percent of            Percent of
                              Amount      Loans     Amount     Loans
                              ------      -----     ------     -----
TYPE OF LOAN
Commercial loans and leases   $42,778      46.99%   $ 26,475    53.55%
Real estate construction       17,109      18.79       7,409    14.99
Residential mortgages
 (1-4 family homes)            15,069      16.55       6,241    12.62
Consumer                       16,089      17.67       9,317    18.84
                               ------   --------    --------  -------
Gross loans                   $91,045     100.00%   $ 49,442   100.00%
                              =======   ========    ========  =======

                                    1997
                                 Percent of
                              Amount      Loans
                              ------      -----
TYPE OF LOAN
Commercial loans and leases   $ 2,960      74.79%
Real estate construction          136       3.44
Residential mortgages
 (1-4 family homes)               189       4.77
Consumer                          673      17.00
                              -------   --------
Gross loans                   $ 3,958     100.00%
                              =======   ========


Note. Dollar amounts in thousands except per share data.

<PAGE>


LOAN MATURITY  SCHEDULE.  The following table sets forth certain  information at
December 31, 2001  regarding the dollar amount of loans  maturing in Heartland's
loan  portfolio  based on the date that final payment is due. This schedule does
not reflect the effects of possible  prepayments  or  enforcement of due-on-sale
clauses.  Management  expects  prepayments  will cause actual  maturities  to be
shorter than contractual maturities. Certain mortgage loans such as construction
loans and second  mortgage loans are included in the commercial and  installment
loan totals below.

                                            Remaining  Maturities
                                            One Year   Over one to  Over five
                                 Amount      or less   five years     years
                                 ------      -------   ----------     -----
TYPE OF LOAN

  Commercial loans and leases   $ 76,097     $21,408    $11,258     $43,431
  Real estate construction        23,150      22,278        872           -
  Residential mortgages
   (1-4 family homes)             24,795           -        385      24,410
  Consumer                        22,594       4,208     13,704       4,682
                                --------     -------    -------     -------
  Total                         $146,636     $47,894    $26,219     $72,523
                                ========     =======    =======     =======

Commercial  loans and leases with remaining  maturities over one year consist of
$13,761 with fixed interest rates and $40,928 with variable  interest  rates, at
December 31, 2001. Real estate construction loans with remaining maturities over
one year  consist  of $ 832 with  fixed  interest  rates  and $40 with  variable
interest rates.

Nonperforming  loans  include  non  accrual  loans and  accruing  loans that are
contractually past due 90 days or more as to interest or principal payments. The
following  table sets forth certain  information  regarding the dollar amount of
nonperforming loans at December 31.

Nonperforming loans:      2001       2000        1999        1998       1997
                          ----       ----        ----        ----       ----

Non-accrual loans       $    663    $  992     $   138     $     0    $     0
Accruing loans past
  due 90 or more days         86         0         137           0          0
                        --------    ------     -------     -------    -------
Total nonperforming
   loans                $    749    $  992     $   275     $     0    $     0
                        ========    ======     =======     =======    =======

At December 31, 2001,  non-accrual loans included $368 in commercial loans, $130
in residential real estate loans and $165 in consumer loans.

ALLOWANCE  FOR LOAN LOSSES.  The Bank  maintains an allowance for loan losses to
provide for probable  incurred losses in the loan portfolio.  Senior  management
reviews  on a monthly  basis the  allowance  for loan  losses as it relates to a
number of  relevant  factors.  The  Board of  Directors  of the  Bank,  not less
frequently  than  quarterly,  reviews  with senior  management  its  recommended
allowance. For more information concerning the factors considered in determining
the adequacy of the  allowance  for loan and lease  losses,  see  "Nonperforming
Assets and  Allowance for Loan Losses"  under the section  headed  "Management's
Discussion  and Analysis of Financial  Condition and Results of  Operations"  of
Heartland's  Annual Report for 2001 attached as Exhibit 13, which  discussion is
incorporated herein by reference.  At December 31, 2001,  Heartland's  allowance
for loan losses totaled $3,400.

Note. Dollar amounts in thousands except per share data.

<PAGE>


The following table provides an allocation of Heartland's allowance for possible
loan losses as of each of the following dates:

                                                 At December 31,

                              2001       2000        1999       1998       1997
                              ----       ----        ----       ----       ----
 Loan type
  Commercial and leases      $1,466   $  1,284   $   641   $ $    397    $    34
  Real estate construction      789        497       257          111          2
  Residential mortgages         679        441       226           94          2
  Consumer                      466        445       241          140          8
                           --------   --------   -------     --------    -------

                           $  3,400   $  2,667   $ 1,365     $    742    $    46
                          =========  ========   =========    ========    =======


The activity in the allowance  for loan losses for the years ended  December 31,
is as follows:
                               2001       2000      1999     1998       1997
                               ----       ----      ----     ----       ----

   Beginning balance         $ 2,667   $  1,365   $   742   $     46   $     -
   Provision charged
    to operations              2,967      1,744       656        700        46
   Loans charged-off          (2,300)      (446)      (34)        (4)        -
   Recoveries on loans
    previously charged-off        66          4         1          -         -
                             -------   --------   -------   --------   -------

   Ending balance            $ 3,400   $  2,667   $ 1,365   $    742   $    46
                             =======   ========   =======   ========   =======


The following table sets forth certain  information  regarding the dollar amount
of charge-offs for the years ended December 31:

                               2001       2000      1999     1998       1997
                               ----       ----      ----     ----       ----
Charge-off's by loan type:
   Commercial                $   997   $    194   $     -   $      -   $     -
   Real estate construction      927          -         -          -         -
   Residential mortgages          72        147         -          -         -
   Consumer                      304        105        34          4         -
                             -------   --------   -------   --------   -------

   Total charge-off's        $ 2,300   $    446   $     4   $      4   $     -
                             =======   ========   =======   ========   =======

In 2001,  recoveries included $43 in commercial loans and $23 in consumer loans.
All recoveries in 2000, 1999 and 1998 were consumer loans.

The following table sets forth certain asset quality ratios at and for the years
ended December 31:

                                 2001      2000       1999     1998      1997
                                 ----      ----       ----     ----      ----

   Allowance for loan losses
    to nonperforming loans      453.9%    371.0%     201.0%       -%        -%
   Net charge-offs to
    average loans                 1.5        .3         -          -         -
   Provision to average
    loans                         2.0       1.5        0.9       1.0        1.5


Note. Dollar amounts in thousands except per share data.

<PAGE>


SECURITIES.  The following  table sets forth the carrying  value of  Heartland's
investment portfolio as of December 31:

                                                    Gross       Gross
                                        Fair     Unrealized  Unrealized
                                        Value       Gains      Losses
                                        -----       -----      ------
2001
   U.S. Government and its agencies    $ 5,381     $    93     $   (12)
   Obligations of states and
    political subdivisions               2,345          15          (2)
   Mortgage backed securities            8,880         130          (8)
   Corporates                              997          32           -
                                       -------     -------     -------
                                       $17,603     $   270     $   (22)
                                       =======     =======     =======

                                                    Gross       Gross
                                        Fair     Unrealized  Unrealized
                                        Value       Gains      Losses
                                        -----       -----      ------
2000
   U.S. Government and its agencies    $11,897     $   139     $   (46)
   Obligations of states and
    political subdivisions               1,441           1          (5)
   Mortgage backed securities            7,459          56          (9)
   Corporates                              952           2         (20)
                                       -------     -------     -------
                                       $21,749     $   198     $   (80)
                                       =======     =======     =======

The  following  table sets forth the  maturities  of  investment  securities  at
December 31, 2001 and the weighted-average  yield (on a tax equivalent basis) on
such securities.


Fair Values                                 Remaining  Maturities
                                One Year   Over one toOver five to  Over ten
                                 or less   five years   ten years     years
                                 -------   ----------   ---------     -----
TYPE OF SECURITY

 U.S. Government and its
  agencies                      $      -     $ 2,993    $ 2,387     $     -
 Obligations of states and
   political subdivisions            236         552        155       1,402
 Corporates                            -         787        211           -
 Mortgage-backed securities            -           -          -       8,880
                                --------     -------    -------     -------
  Total                         $    236     $ 4,332    $ 2,753     $10,282
                                ========     =======    =======     =======

Weighted Average Yields                     Remaining   Maturities
                                One Year   Over one to Over five to  Over ten
                                 or less   five years   ten years     years
                                 -------   ----------   ---------     -----
TYPE OF SECURITY

 U.S. Government and its
  agencies                             -%       5.05%      6.98%          -%
 Obligations of states and
   political subdivisions           5.51        6.43       6.88        7.25
 Corporates                         -           5.97       8.00        -
 Mortgage-backed securities         -           -          -           6.75
  Total                             5.51%       5.39%      7.06%       6.82%

1. Computation of yields is based on amortized cost.

Note. Dollar amounts in thousands except per share data.

<PAGE>


The  following  table sets forth the  amounts  of  Heartland's  interest-earning
assets and interest-bearing  liabilities outstanding at December 31, 2001, which
are scheduled to reprice or mature in each of the time periods shown. The amount
of assets and  liabilities  shown which reprice or mature in a given period were
determined in accordance with the  contractual  terms of the asset or liability.
In addition,  securities  expected to be called by the issuer due to the current
rate  environment  are included in the  categories  based on the  expected  call
dates.  Loans held for sale are included in the categories based on the expected
sale  date.  This  table  does not  necessarily  indicate  the impact of general
interest rate movements on Heartland's net interest income because the repricing
of certain  categories of assets and liabilities is subject to the interest rate
environment,  competition  and other factors beyond  Heartland's  control.  As a
result,  certain  assets  and  liabilities  may in fact  mature  or  reprice  at
different times and in different volumes than indicated.

<TABLE>
<CAPTION>
                            Within 3    4 - 12    1 through 5
                             Months     Months       years      Over 5 years   Total
                             ------     ------       -----      ------------   -----
Interest-earning assets:
<S>                          <C>        <C>         <C>           <C>         <C>
  Federal funds sold         $  9,305   $      -    $      -      $      -    $ 9,305
  Time deposits with other
    Financial institutions          -        500           -             -        500
  Securities                    2,897      3,536        8,379        2,791     17,603
  Loans held for sale           4,597          -            -            -      4,597
  Loans                        65,824     13,855       45,368       21,589    146,636
  FHLB stock                      512          -            -            -        512
                             ---------  --------    ---------     --------  ---------

   Total interest-earning
       assets                  83,135     17,891       53,747       24,380    179,153
                             --------   ---------   ---------     --------  ---------

Interest-bearing
liabilities:
  Interest bearing
   demand     and savings
   deposits                    68,654          -            -           -      68,654
  Time deposits                24,267     24,515       25,868           -      74,650
  Federal Funds Purchased           -          -            -           -           -
  Repurchase Agreements         5,554          -            -           -       5,554
  Other borrowings                  -          -        4,000           -       4,000
  Subordinated debentures       5,000          -            -           -       5,000
                             --------   --------     --------     -------    --------
   Total interest-bearing
   liabilities                103,475     24,515       29,868           -     157,858
                             --------   --------     --------     -------    --------

Interest-earning assets
  less
  Interest-bearing           $(20,340) $  (6,624)    $ 23,879    $ 24,380    $ 21,295
                             ========  ========= =   ==========  =========   ========
  liabilities

Cumulative interest-rate
sensitivity gap              $(20,340) $ (26,964)    $ (3,085)   $ 21,295
                             ========  ========= =   ========    ========

Cumulative interest-rate
  gap as a percentage of
  total interest earning
  assets                       (11.3)%     (15.0)%      (1.7)%      11.8%
                             =======   =========    ========     =======


</TABLE>



Note. Dollar amounts in thousands except per share data.

<PAGE>


CERTIFICATES OF DEPOSIT.  The following table presents the amount of Heartland's
jumbo  certificates of deposit with principal  balances greater than $100 by the
time remaining until maturity as of December 31, 2001:

                                               At December 31,
               Maturity                              2001
               --------                              ----
               Three months or less                $   13,250
               Over 3 months to 6 months                3,470
               Over 6 months to 12 months               6,419
               Over 12 months                           5,543
                                                   ----------

                  Total                            $   28,682
                                                   ==========


SHORT-TERM   BORROWINGS.   The  following  table  presents  certain  information
pertaining to Heartland's repurchase agreements:

                                                 2001        2000
                                                 ----        ----
Balance outstanding at December 31             $ 5,554     $ 9,273

Maximum amount outstanding at any month-end    $ 8,802     $11,872

Average balance outstanding                    $ 6,174     $ 6,791

Weighted average rate                             3.61%       5.05%

Note. Dollar amounts in thousands except per share data.

<PAGE>


ITEM 2.  DESCRIPTION OF PROPERTY

Heartland  owns its home office at 420 North Morton Street,  Franklin,  Indiana.
The facility is used as the main banking  office and  Heartland's  headquarters.
The 5,700 square foot building was  constructed  over 25 years ago and underwent
an extensive renovation in 1997 prior to the opening of Heartland.

The Bank leases two branch offices in Greenwood,  Indiana, and the land on which
the branch office in Bargersville, Indiana stands. The Bank also leases a 12,500
square foot facility that was constructed in 2001 in Franklin,  Indiana for loan
production and loan and deposit operations, not as a branch facility.

Heartland  and the Bank  presently  do not invest in real estate other than real
estate acquired for purposes of operations and mortgage interests in real estate
securing loans made by the Bank in the ordinary course of business. The Board of
Directors of the Bank from time to time specifies its policies as to the amounts
and types of mortgage  loans that the Bank may  originate or acquire,  and these
policies may be changed without action by Heartland shareholders. Mortgage loans
are made for interest income purposes, not for capital gain.


ITEM 3.  LEGAL PROCEEDINGS

Other  than the March 11,  2002,  request  by the FDIC and the DFI that the Bank
consent to the entry of a formal  order  under  federal and state  banking  laws
disclosed  under  "Regulation  and  Supervision  of the  Bank" in Item 1 of this
Report,  which  disclosure  is  incorporated  herein by  reference,  and routine
litigation  incidental to the business,  Heartland and the Bank are not involved
in any legal proceedings.


Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to a vote of security  holders through the  solicitation
of proxies or otherwise, during the quarter ended December 31, 2001.


Note. Dollar amounts in thousands except per share data.

<PAGE>




                                           PART II

Item 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
         MATTERS

Information  required  for this item is included in the section  headed  "COMMON
STOCK." in Exhibit 13 (the  Registrant's  Annual Report to Shareholders  for the
year  ended  December  31,  2001),  which  section  is  incorporated  herein  by
reference.  The description of legal and regulatory  restrictions that limit the
ability  of  the  Bank  to pay  dividends  to  Heartland,  and  which  therefore
indirectly limit the ability of Heartland to pay dividends to its  shareholders,
that is included in Item 1 of this report,  Description  of Business,  under the
caption  "Regulation and  Supervision of the Bank",  is  incorporated  herein by
reference.


ITEM 6. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.

Information   required  for  this  item  is  included  in  the  section   headed
"MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS." in Exhibit 13 (the  Registrant's  Annual Report to Shareholders for
the year ended  December 31,  2001),  which  section is  incorporated  herein by
reference.


ITEM 7.  FINANCIAL STATEMENTS.

Information  required for this item is included in the section headed "FINANCIAL
STATEMENTS." in Exhibit 13 (the  Registrant's  Annual Report to Shareholders for
the year ended  December 31,  2001,)  which  section is  incorporated  herein by
reference.


ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
         AND FINANCIAL DISCLOSURE.

None



<PAGE>


                                    PART III

ITEM 9. DIRECTORS EXECUTIVE OFFICERS,  PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(a) OF THE EXCHANGE ACT

Information  relating  to  directors  and  executive  officers of  Heartland  is
included in the section headed "Election of Directors" in Exhibit 99.1, the 2002
Proxy Statement of Heartland, which section is incorporated herein by reference.
Addition  information  relating  to  non-director  executive  officers is listed
below.

Executive Officers:

John M. Morin1
Senior Vice President, Consumer Lending
Age 52

R. Trent McWilliams2
Vice President, Business Development
Age 50

Jeff Joyce3
Vice President and Chief Financial Officer
Age 31

Eric Johnson4
Chief Credit Officer
Age 52

1 Mr. Morin served in various positions at Citizens Bank of Central Indiana from
  1985 until his  resignation in 1997, most recently as Vice President in charge
  of retail lending.
2 Mr. McWilliams served in various positions at Union Federal Savings Bank until
  his  resignation  in 1997,  most  recently  as Vice  President  in  charge  of
  Marketing.
3 Mr. Joyce is a Certified  Public  Accountant who served in various  positions,
  including Staff Accountant and Senior Accountant in the Financial Institutions
  Group at Crowe,  Chizek and  Company  LLP from 1992 until his  resignation  in
  1997.
4 Mr.  Johnson served in various  positions at Michigan  National Bank, NKA from
  1991 to November 2001,  most recently as Vice  President and  Commercial  Loan
  officer.

Section 16(a) Compliance:

Heartland has no class of equity securities registered with the Commission under
Section 12 of the Securities Exchange Act of 1934, as amended, and Section 16(a)
is therefore inapplicable to its securities.


ITEM 10.   EXECUTIVE COMPENSATION

Information  relating to  compensation  of  Heartland's  executive  officers and
Directors is included under the captions "Executive  Compensation" and "Election
of  Directors  Compensation  of  Directors"  in  Exhibit  99.1,  the 2002  Proxy
Statement of Heartland, which sections are incorporated herein by reference.





<PAGE>


ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information  required by this item is included  under the captions  "ELECTION OF
DIRECTORS"  and  "PRINCIPAL  OWNERS OF COMMON  SHARES" in Exhibit 99.1, the 2002
Proxy Statement of Heartland, which section is incorporated herein by reference.
In tabular format, the information  required by Item 403 of Regulation S-B is as
follows:

                      Name and                 Amount and
  Title of     Address of Beneficial      Nature of Beneficial      Percent of
    Class              Owner                    Ownership              Class

Common         Hot Creek Investors, LP            109,800              7.8%
               PO Box 3178
               Gardnerville, NV  89410

Common         Hot Creek Capital, LLC             109,800              7.8%
               PO Box 3178
               Gardnerville, NV  89410

Common         David M.W. Harvey                  109,800              7.8%
               PO Box 3178
               Gardnerville, NV  89410


According to a Schedule 13G filed by the above beneficial owners, all securities
beneficially  owned by them as of  February  19,  2002  were  held by Hot  Creek
Investors, L.P. ("Investors").  The other two beneficial owners stated that they
were joining in the Schedule 13G because they  exercised  voting and  investment
power over the shares held by Investors.


ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information  required  by this item is  included  under the  caption  "EXECUTIVE
COMPENSATION  -CERTAIN  RELATIONSHIPS AND RELATED TRANSACTIONS" in Exhibit 99.1,
the 2002 Proxy Statement of Heartland,  which section is incorporated  herein by
reference.




<PAGE>


ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K.

Exhibit NO.     Description

3.1             Amended and Restated  Articles of  Incorporation  of  Heartland
                Bancshares, Inc.,   which  are   incorporated   by  reference
                to  Exhibit  3.1  in  the Registration  Statement Form SB-2,
                filed July 28, 1997, as amended,  ("Form SB-2")
3.2             Amended and Restated Bylaws of Heartland Bancshares, Inc., which
                are incorporated by reference to Exhibit 3.2 in the Form SB-2.
4.1             Rights   Agreement   dated   as  of  June   23,   2000   between
                Heartland Bancshares,  Inc.,  and  Heartland  Community  Bank,
                as  Rights  Agent,  is incorporated by reference to Exhibit 4.01
                to Form 8-K filed June 30, 2000.
4.2             Terms of Common Shares and Preferred  Shares are included in the
                Amended and  Restated  Articles of  Incorporation  of  Heartland
                Bancshares, Inc., which are incorporated by reference to Exhibit
                3.1 to the  Registration  Statement on Form SB-2, filed July 28,
                1997, as amended.
4.3             Terms of Series A Preferred  Shares are included in the Articles
                of   Amendment  of  Articles  of   Incorporation   of  Heartland
                Bancshares,  Inc., as filed with the Indiana  Secretary of State
                on June 27, 2000, which are incorporated by reference to Exhibit
                3.01 to Form 8-K filed June 30, 2000.
10.1            1997 Stock Option Plan, as amended,  which is  incorporated  by
                reference to Exhibit  10.1 in the  Registrant's  Quarterly
                Report on the Form 10-QSB for quarter ended June 30, 1999
10.2            1997 Stock Option Plan for  Nonemployee  Directors,  as amended,
                which  is  incorporated  by  reference  to  Exhibit  10.1 in the
                Registrant's  Quarterly  Report on the Form  10-QSB for  quarter
                ended June 30, 1999
10.3            Deferred  Compensation  Master Plan Agreement dated as of
                July 1, 2001
10.4            Split Dollar Endorsement Agreement dated as of January 1, 2001
                between Heartland Community Bank and Steven L. Bechman
13              The  Registrant's  Annual  Report to  Shareholders  for the year
                ended  December  31, 2001.  As permitted by paragraph  (b) under
                Supplemental  Information  requirements  applicable  to  Section
                15(d) filers, and except to the extent specifically incorporated
                herein by reference,  the Registrant disclaims that this exhibit
                is "filed" or  subject to the  liabilities  of Section 18 of the
                Exchange Act or other liabilities.
21              Subsidiaries  of the  Registrant  and names  under which the
                Registrant  isdoing business
99.1            The Registrant's 2002 Proxy Statement. As permitted by paragraph
                (b) under Supplemental  Information  requirements  applicable to
                Section  15(d)  filers,  and except to the  extent  specifically
                incorporated herein by reference,  the Registrant disclaims that
                this exhibit is "filed" or subject to the liabilities of Section
                18 of the Exchange Act or other liabilities.
99.2            Form of Proxy for 2002 Annual Meeting. As permitted by paragraph
                (b) under Supplemental  Information  requirements  applicable to
                Section  15(d)  filers,  and except to the  extent  specifically
                incorporated herein by reference,  the Registrant disclaims that
                this exhibit is "filed" or subject to the liabilities of Section
                18 of the Exchange Act or other liabilities.


Reports on Form 8-K

One report on Form 8-K was filed  during the three  months  ended  December  31,
2001. On December 18, 2001, the  Registrant  filed a report on Form 8-K for Item
5. Other  Events  regarding  the  issuance  of  certain  floating  rate  capital
securities.


<PAGE>


SIGNATURES

Pursuant to the requirements of Section 15(d) of the Securities  Exchange Act of
1934,  Heartland  has duly  caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, this 29th day of March, 2002.

HEARTLAND BANCSHARES, INC.

By:/s/ Steven L. Bechman
   ---------------------------------
Steven L. Bechman,
Chief Executive Officer and President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities and on the dates indicated:

Signatures and Title(s) Date

/s/ Steven L. Bechman   March 29, 2002
- -----------------------------
Steven L. Bechman, Director
(principal executive officer)

/s/ Gordon Dunn         March 29, 2002
- -----------------------------
Gordon Dunn, Chairman

/s/ Sharon Acton        March 29, 2002
- -----------------------------
Sharon Acton, Director

/s/ Jeffrey L. Goben    March 29, 2002
- -----------------------------
Jeffrey L. Goben, Director

/s/ J. Michael Jarvis   March 29, 2002
- -----------------------------
J. Michael Jarvis, Director

/s/ John Norton         March 29, 2002
- -----------------------------
John Norton, Director

/s/ Robert Richardson   March 29, 2002
- -----------------------------
Robert Richardson, Director

/s/ Patrick A. Sherman  March 29, 2002
- -----------------------------
Patrick A. Sherman, Director

/s/ Jeffery D. Joyce    March 29, 2002
- -----------------------------
Jeffery D. Joyce, Chief Financial Officer
(principal financial and accounting officer)

<PAGE>


EXHIBIT 10.3


                                DEFERRED COMPENSATION
                                MASTER PLAN AGREEMENT

      THIS  AGREEMENT  is made and entered into this 1st day of July,  2001,  by
Heartland  Community  Bank with  principle  offices and place of business in the
state of Indiana, hereinafter referred to as the "Corporation."

                                     WITNESSETH:

      WHEREAS, the Corporation wishes to establish a deferred  compensation plan
to provide additional  retirement  benefits for a select group of management and
highly compensated employees; and

      WHEREAS,  the  Corporation  intends  that the Plan  shall at all  times be
administered  and  interpreted  in such a manner as to  constitute  an  unfunded
deferred   compensation  plan  for  a  select  group  of  management  or  highly
compensated  employees,  so as to qualify for all available  exemptions from the
provisions of ERISA;

      NOW, THEREFORE,  in consideration of the premises,  the Corporation hereby
adopts the following Deferred Compensation Plan.

                                    DEFINITIONS:

      Accrued Benefit. The sum of all amounts deferred hereunder by or on behalf
of a  Participant,  including  (i) any  contributions  made  by the  Corporation
pursuant to paragraph 1.02 hereof, (ii) any interest credited to the Participant
or his or her  beneficiaries  pursuant  to this Plan and  (iii)  any  investment
earnings  or  losses  credited  pursuant  to  Article  Four  hereof,  minus  any
distributions to such Participant or his or her beneficiaries hereunder.

      Affiliate. Any corporation,  partnership,  joint venture,  association, or
similar  organization  or  entity,  which is a member of a  controlled  group of
corporations  which  includes,  or which  is  under  common  control  with,  the
Corporation under Section 414(b) or 414(c) of the Code.

      Calendar Year.  January 1 to December 31.

      Code.  The Internal Revenue Code of 1986, as amended from time to time.

      Completed  Year  of  Service.  One  year  of  service  shall  mean  twelve
consecutive months of continuous employment with Heartland Community Bank.

      Effective Date.  July 1, 2001.

      Eligible  Employee.  Any employee of the  Corporation  or an Affiliate who
      is selected to participate herein in accordance with the provisions of
      paragraph 1.01 hereof.

      ERISA.  The Employee  Retirement  Income Security Act of 1974, as amended
      from time to time.

      Normal Retirement Date.  The date the Participant attains 65 years of age.


<PAGE>





      Participant.  An Eligible Employee who is participating in the Plan.

      Plan.  This Plan, together with any and all amendments or supplements
             thereto.

      Plan Administrator.  The Board of Directors of the Corporation or their
                           Designee.

      Plan Year.  The Calendar Year.

      Retirement Account. Book entries maintained by the Corporation  reflecting
the Participant=s Accrued Benefit; provided, however, that the existence of such
book  entries and the  Retirement  Account  shall not  create,  and shall not be
deemed to create, a trust of any kind, or a fiduciary  relationship  between the
Corporation and the  Participant,  his or her designated  beneficiary,  or other
beneficiaries under this Plan.

      Year of Plan  Participation.  Shall mean a period of twelve (12) months of
continuous   employment  with  Heartland  Community  Bank  commencing  with  the
Participant=s  date of entry into this plan. All participants in this Plan as of
the Plan  Effective Date shall measure a Year of Plan  Participation  commencing
July 1, 2001.

                                     ARTICLE ONE

      1.1  Eligibility.  (a) An employee is eligible to become a Participant  in
the  Plan if such  employee  is  designated  as a  Participant  by the  Board of
Directors  or the  Plan  Administrator,  in  their  complete  discretion  and in
writing. As a condition of participation, the Plan Administrator may require the
employee  to  execute a  participation  agreement  in (or  similar  to) the form
annexed hereto as Exhibit A. (b) Once an employee  becomes a Participant,  he or
she shall remain a Participant  until his or her  termination of employment with
the Corporation and its Affiliates,  and thereafter  until all benefits to which
he or she (or his or her  beneficiary) is entitled under the Plan have been paid
unless otherwise so provided  herein.  (c) In the case of any employee who first
becomes a Participant  after the Effective  Date, the Plan  Administrator  shall
specify the date as of which his or her participation shall commence.

      1.2 Corporate  Contributions.  The Corporation will make  contributions to
the  Participant=s  Retirement  Account at the written direction of the Board of
Directors  in  amounts  determined  at  the  sole  discretion  of the  Board  of
Directors.  The amounts so  determined  shall be  credited to the  Participant=s
Retirement Account within (30 days) after the date on which they are declared.

                                     ARTICLE TWO



<PAGE>


      2.1   Responsibility   for  Administration  of  the  Plan.  (a)  The  Plan
Administrator   shall  be  responsible   for  the   management,   operation  and
administration  of the Plan. The Plan  Administrator may employ others to render
advice with regard to its responsibilities under this Plan. It may also allocate
its  responsibilities  to others and may exercise any other powers necessary for
the  discharge  of its  duties.  (b)  The  primary  responsibility  of the  Plan
Administrator  is to administer the Plan for the benefit of the Participants and
their  beneficiaries,  subject  to the  specific  terms  of the  Plan.  The Plan
Administrator  shall  administer the Plan in accordance with its terms and shall
have the  power to  determine  all  questions  arising  in  connection  with the
administration,   interpretation   and   application   of  the  Plan.  Any  such
determination  shall  be  conclusive  and  binding  upon all  persons.  The Plan
Administrator  shall have all powers  necessary or appropriate to accomplish its
duties under the Plan.

      2.2 Information from Corporation. The Corporation and each Affiliate shall
supply full and timely  information to the Plan  Administrator on all matters as
may be required properly to administer the Plan. The Plan Administrator may rely
upon the correctness of all such information as is so supplied and shall have no
duty or responsibility to verify such information.  The Plan Administrator shall
also  be  entitled   to  rely   conclusively   upon  all   tables,   valuations,
certifications,  opinions  and reports  furnished  by any  actuary,  accountant,
controller,   counsel  or  other   person   employed  or  engaged  by  the  Plan
Administrator with respect to the Plan.

      2.3  Investments.  The Plan  Administrator  shall  determine,  in its sole
discretion,  whether, and if so, to what extent,  contributions made to the Plan
on behalf of a  Participant  shall be  invested  in the  funds  selected  by the
Corporation.   In  its  discretion,   the  Plan   Administrator   may  (i)  hold
contributions as part of its general assets and/or (ii) invest  contributions in
investments other than the funds selected by the Corporation.

                                    ARTICLE THREE

      3.1 Vesting of Benefits. In the event of the Participant=s  termination of
employment  for any reason  other  than  termination  "for  cause" as defined in
Paragraph  8.02,  the  Retirement  Account  balance  attributable  to  Corporate
Contributions  under  Paragraph 1.02 and investment  earnings or losses thereon,
will be vested pursuant to the vesting schedule attached hereto as Exhibit B.

                                    ARTICLE FOUR

      4.1 Investment  Earnings or Losses on Deferred  Amounts.  The  Corporation
hereby  agrees that it will credit the  Participant=s  Retirement  Account in an
amount  equal  to  the  investment  earnings  or  losses  attributable  to  such
Participant=s   Retirement   Account.   The  amount  actually  credited  to  the
Participant=s  Retirement  Account shall be determined at the sole discretion of
the  Plan   Administrator  as  provided   herein,   regardless  of  whether  the
contributions  are  actually  invested as directed  by the  Corporation.  If any
federal,  state or local tax is imposed  on the  Corporation  or any  Affiliate,
attributable  to investment  earnings on any such fund,  then the amount of such
tax shall be charged to the Participant=s Retirement Account.

      4.2  Investment  of Accounts  Credited to Deferred  Compensation  Account.
While this Agreement is an unfunded  agreement to provide the  participant  with
deferred compensation, the Corporation shall nevertheless hold and/or invest all
amounts credited to the Participant=s  Deferred  Compensation Account as it sees
fit in its sole  discretion,  including but not limited to the  descriptions  in
paragraphs 4.03 through 4.05.



<PAGE>


      4.3 Types of Investments. The Corporation may utilize and/or invest all or
part of the amounts credited to the Participant=s  Deferred Compensation Account
in any manner in its  absolute  discretion,  including  but not  limited to life
insurance,  mutual  funds,  stocks,  bonds,  certificates  of deposit,  interest
bearing  accounts,  etc.,  including  all costs,  premiums  and fees  associated
therewith.  The Corporation makes no representations or guarantees regarding any
return on the investments made by the Corporation, and the Participant agrees to
assume all risk in connection  with any decrease in value of the funds which are
invested or which continue to be invested in accordance with this Agreement.

      4.4 Life Insurance.  Any policy of life insurance acquired  hereunder,  if
any, or other investment made in accordance with this Agreement shall be in such
amounts  and contain  such terms as the  Corporation,  in its sole and  absolute
discretion,  shall  determine.  For example,  all or any amounts credited to the
Participant=s  Deferred  Compensation  Account may be treated as used, but shall
not be required to be used, to pay premiums on any life insurance  policy on the
Participant=s life ("the policy") which may be used to reimburse the Corporation
for  all or part  of the  Deferred  Compensation  to be  made  pursuant  to this
Agreement.  Any such policy may be in such face amount and contain such terms as
the Corporation may determine in its sole discretion.  Provided,  however,  that
the  Corporation  shall be under no  obligation  to purchase any life  insurance
policy or make any investments  with any amounts  credited to the  Participant=s
Deferred  Compensation  Account.  Nothing  contained in this Agreement  shall be
construed to alter,  abridge,  or in any manner affect the rights and privileges
of the Participant in any split-dollar endorsement agreement entered into by the
Participant and the Corporation.

      4.5 Rights of Participant.  It is expressly agreed and understood that the
Participant  shall have no right to any  amounts  associated  with the  Deferred
Compensation  Account  established  by  the  Corporation  in  the  name  of  the
Participant  until and unless all terms and  conditions  of this  Agreement  are
satisfied.  The parties hereto  specifically  acknowledge that the Participant=s
Deferred  Compensation  account  is  merely  a book  reserve  maintained  by the
Corporation,  and  the  amounts,  if  any,  eventually  to  be  payable  by  the
Corporation as deferred  compensation to the  Participant  under this Agreement,
and  the  manner  and  extent  of,  and  conditions  on,  of  the  Corporations=
obligations to pay such amounts are set forth in Article Five below.

                                    ARTICLE FIVE

      5.1 Retirement  Benefit.  From and after the retirement of the Participant
from the service of the  Corporation  or an Affiliate,  upon reaching his or her
Normal Retirement Date, the Corporation shall thereafter pay to the Participant,
his  or  her  Accrued  Benefit.   Such  benefit  shall  be  payable  in  monthly
installments  for the  lifetime  of the  Participant  with a minimum  guaranteed
number of monthly  installments of two-hundred  forty (240).  The amount of each
monthly  installment  shall be  determined  at the sole  discretion  of the Plan
Administrator  based on the value of the  Participant=s  Accrued  Benefit at the
date of retirement and on prevailing  interest rates at that time. Such payments
shall  commence  as  of  the  first  day  of  the  first  month   following  the
Participant=s  attaining  age 65. In the event the  Participant  does not retire
upon attaining age 65, the Participant  shall have the option to defer receiving
payments  until the first day of the first  month  following  the  Participant=s
actual retirement date.



<PAGE>


      5.2 Accelerated  Payments.  The Plan Administrator may make payment of all
or a part of the  Participant=s  Retirement  Account balance before any payments
would otherwise be due, if the Plan Administrator  determines that a Participant
has or will receive  income under the Plan for federal  income tax purposes with
respect to amounts that are or will be payable under the Plan before they are to
be paid to the Participant. Such determination shall be based on a change in the
federal tax or revenue laws, a published ruling or similar  announcement  issued
by the Internal  Revenue  Service,  a regulation  issued by the Secretary of the
Treasury,  a  decision  by  a  court  of  competent   jurisdiction  involving  a
Participant or a beneficiary, or a closing agreement made under 7121 of the Code
that is approved by the Internal Revenue Service and involves a Participant.  In
the event any such  accelerated  payment  is  determined  to be  necessary,  all
Participants  will  receive  such  accelerated  payments  in the  same  form  of
distribution.

      5.3 Early Retirement.  If the Participant retires from employment with the
Corporation  before his or her Normal  Retirement  Date, the  Participant  shall
receive his vested  Accrued  Benefit.  Such benefit  shall be payable in monthly
installments  for the  lifetime  of the  Participant  with a minimum  guaranteed
number of monthly  installments of two-hundred  forty (240).  The amount of each
monthly  installment  shall be  determined  at the sole  discretion  of the Plan
Administrator  based on the value of the  Participant=s  Accrued  Benefit at the
date of retirement and on prevailing  interest rates at that time. Such payments
shall  commence  as  of  the  first  day  of  the  first  month   following  the
Participant=s retirement.

                                     ARTICLE SIX

      6.1 Disability  Retirement  Benefit.  The Participant shall be entitled to
receive payments  hereunder prior to his or her Normal  Retirement Date if it is
determined  by a duly  licensed  physician  selected  by the  Corporation  that,
because of ill health,  accident,  or disability,  the  Participant is no longer
able  properly  and  satisfactorily  to perform his or her regular  duties as an
employee.  If the  Participant=s  employment  is  terminated  pursuant  to  this
paragraph,  the  benefit  payable  hereunder  shall be the  vested  value of the
Participant=s  accrued  benefit  on  the  date  of  the  physician=s  disability
determination.  The  Disability  Retirement  Benefit  payable under this Article
shall be distributed in monthly installments for the lifetime of the Participant
with a minimum  guaranteed  number of monthly  installments of two-hundred forty
(240).  Such  payments  shall  commence  as of the first day of the first  month
following the determination of disability.

                                    ARTICLE SEVEN

      7.1 Death Benefit Prior to Commencement  of Benefits.  In the event of the
Participant=s  death while in the employment of the  Corporation or an Affiliate
and prior to commencement of benefit payments,  no benefits of any kind shall be
payable under the terms of this Agreement.

      7.2 Death Benefit After Commencement of Retirement Benefits.  In the event
of the Participant=s death after the commencement of benefit payments, but prior
to the completion of all such payments due and owing hereunder,  the Corporation
shall continue to make such payments,  in installments over the remainder of the
period  specified  in Article  Five or Article  Six hereof  that would have been
applicable to the Participant had he or she survived.  Such continuing  payments
shall be made to the Participant=s designated beneficiary in accordance with the
last such designation  received by the Corporation from the Participant prior to
his or her death. If no such  designation has been received by the  Corporation,
such payments shall be made to the Participant=s surviving legal spouse. If such
spouse  dies  before  receiving  all  payments  to which  he or she is  entitled
hereunder,  then  payments  shall  continue,  for the  remainder  of the payment
period, to such person or persons, including his or her estate, as he or she may
designate in the last beneficiary  designation  received by the Corporation from
such spouse prior to his or her death.  If the  Participant is not survived by a
legal  spouse,  or if such spouse shall fail to so appoint,  then said  payments
shall be made to the then living children of the  Participant,  if any, in equal
shares.  If there are no surviving  children,  the payments  will be made to the
estate  of the  later to die of the  Participant  and (if any) his or her  legal
spouse. Such continuing payments shall commence as of the first day of the first
month following the Participant=s death.


<PAGE>


                                    ARTICLE EIGHT

      8.1 Termination Benefits. In the event of the Participant=s termination of
employment  with the  Corporation  or an  Affiliate,  for any reason  other than
disability,  retirement,  death, or termination for cause, the Corporation shall
pay to the Participant a Termination  Benefit as if he or she had retired on the
date of  termination.  The amount  payable shall be equal to the vested  Accrued
Benefit at the date of termination,  pursuant to the vesting  schedule  attached
hereto as  Exhibit B, and shall be paid in  accordance  with the  provisions  of
Article Five.

      8.2  Termination  for  Cause.  Termination  "for  cause"  shall  mean  (i)
conviction of robbery, bribery, extortion,  embezzlement,  fraud, grand larceny,
burglary,  perjury,  income tax evasion,  misapplication of company funds, false
statements  in violation of 18 U.S.C.  Sec.  1001,  and any other felony that is
punishable by a term of  imprisonment  of more than one year, or (ii) any breach
of the participant=s duty of loyalty to the corporation, any acts of omission in
the  performance of his or her company duties not in good faith or which involve
intentional  misconduct or a knowing violation of law, or any transaction in the
performance of his or her company duties form which the  participant  derived an
improper  personal  benefit.  In  the  event  the  Participant=s  employment  is
terminated  for cause,  no benefits of any kind will be due or payable under the
terms of this Agreement and all rights under the Agreement of the Employee,  his
or her  designated  beneficiary,  executors,  or  administrators,  or any  other
person, to receive payments thereof shall be forfeited.

                                    ARTICLE NINE

      9.1 Beneficiary Designation.  The Participant shall have the right, at any
time,  to submit in  substantially  the form  attached  hereto as  Exhibit  C, a
written designation of primary and secondary beneficiaries to whom payment under
this  Plan  shall be made in the  event of his or her  death  prior to  complete
distribution of the benefits payable. Each beneficiary  designation shall become
effective   only  when  receipt   thereof  is  acknowledge  in  writing  by  the
Corporation.  The Corporation  shall have the right, in its sole discretion,  to
reject  any  beneficiary  designation  which  is not in  substantially  the form
attached hereto as Exhibit C. Any attempt to designate a beneficiary,  otherwise
than as provided in this Article, shall be ineffective.

                                     ARTICLE TEN

      10.1 No Trust Created. Nothing contained in this Plan, and no action taken
pursuant to its  provisions  by any person  shall  create,  or be  construed  to
create, a trust of any kind, or a fiduciary relationship between the Corporation
and any other person.



<PAGE>


      10.2 Benefits Payable Only From General Corporate Assets.  (a) Payments to
the  Participant or any  beneficiary  hereunder  shall be made from assets which
shall continue, for all purposes, to be part of the general, unrestricted assets
of the  Corporation;  no person  shall  have any  interest  in any such asset by
virtue of any provision of this Plan.  The  Corporation=s  obligation  hereunder
shall be an unfunded and  unsecured  promise to pay money in the future.  To the
extent that any person acquires a right to receive payments from the Corporation
under the  provisions  hereof,  such right shall be no greater than the right of
any unsecured general creditor of the Corporation;  no such person shall have or
acquire any legal or equitable right, interest or claim in or to any property or
assets  of the  Corporation.  (b) In the  event  that,  in its  discretion,  the
Corporation  purchases  an insurance  policy or policies  insuring the life of a
Participant (or any other property), to allow the Corporation to recover or meet
the cost of providing benefits, in whole or in part,  hereunder,  no Participant
or  beneficiary  shall have any  rights  whatsoever  therein or in the  proceeds
therefrom.  The Corporation  shall be the sole owner and beneficiary of any such
insurance policy or property and shall possess and may exercise all incidents of
ownership  therein.  However,  nothing  contained  in this  Agreement  shall  be
construed to alter,  abridge,  or in any manner affect the rights and privileges
of the Participant in any split-dollar endorsement agreement entered into by the
Participant and the Corporation.

      10.3  No  Contract  of  Employment.  Nothing  contained  herein  shall  be
construed  to be a  contract  of  employment  for  any  term  of  years,  nor as
conferring  upon the  Participant  the right to  continue  to be employed by the
Corporation in his or her present  capacity or in any capacity.  It is expressly
understood  that this Plan relates to the payment of deferred  compensation  for
the Participant=s  services,  payable after termination of his or her employment
with the Corporation, and is not intended to be an employment contract.

      10.4 Benefits Not  Transferable.  No Participant or beneficiary under this
Plan shall have any power or right to transfer, assign, anticipate,  hypothecate
or otherwise encumber any part of all of the amounts payable hereunder.  No such
amounts shall be subject to seizure by any creditor of any such  Participant  or
beneficiary,  by a  proceeding  at law or in equity,  nor shall such  amounts be
transferable by operation of law in the event of bankruptcy, insolvency or death
of the Participant or beneficiary. Any such attempted assignment shall be void.

      10.5  Corporate  Reorganization.  If the  Corporation  elects  to merge or
consolidate  into  or  with  another   corporation,   or  reorganize,   or  sell
substantially  all of its assets to another  corporation,  firm, or person,  the
Corporation  shall endeavor to have such  succeeding or continuing  corporation,
firm, or person assume and discharge the  obligations of the  Corporation  under
this Plan. Upon the occurrence of such event, the term  ACorporation@ as used in
this  agreement  shall  be  deemed  to  refer  to  such  successor  or  survivor
corporation.  Should the  successor  of the  Corporation  refuse to assume these
obligations,  then this agreement  shall be deemed  terminated as of the date of
the merger or consolidation  and the Corporation  shall establish a reserve upon
such terms and in such amounts as its Board of Directors deems reasonable in its
sole  discretion  for the  purpose of paying the vested  Accrued  Benefit to the
Participant under the terms and conditions specified under Article Five hereof.

                                   ARTICLE ELEVEN

      11.1 Claim Procedure. A person who believes that he or she is being denied
a benefit to which he or she is entitled under the Plan (hereinafter referred to
as a  "Claimant")  may file a written  request  for such  benefit  with the Plan
Administrator,  setting forth his or her claim. The request must be addressed to
the Plan Administrator at its then principal place of business.

      11.2 Claim Decision. Upon receipt of a claim, the Plan Administrator shall
advise the Claimant that a reply will be forthcoming within 90 days and the Plan
Administrator  shall, in fact,  deliver such reply within such period.  The Plan
Administrator  may,  however,  extend the reply period for an additional 90 days
for  reasonable  cause.  If the claim is  denied  in whole or in part,  the Plan
Administrator  shall adopt a written  opinion,  using language  calculated to be
understood by the Claimant, setting forth:



<PAGE>


      i.    The specific reason or reasons for such denial;
      ii.   Specific reference to pertinent  provisions of this plan on which
            such denial is based;
      iii.  A description  of any additional  material or information  necessary
            for the Claimant to perfect his or her claim and an explanation  why
            such material or such information is necessary;
      iv.   Appropriate  information  as to the steps to be taken if the
            Claimant  wishes to submit the claim for review; and
      v.    The  time  limits  for  submitting   additional   information  under
            subsection  iii and for  requesting  a review  under  subsection  iv
            hereof.

      11.3 Request for Review.  Within 60 days after  receipt by the Claimant of
the written opinion  described  above,  the Claimant may request in writing that
the Corporation review the Plan Administrator=s determination. Such request must
be addressed to the Secretary of the  Corporation at its then principal place of
business.  The Claimant or his or her duly  authorized  representative  may, but
need not,  review the  pertinent  documents  and submit  issues and  comments in
writing for consideration by the Corporation. If the Claimant does not request a
review of the determination within such 60 day period, he or she shall be barred
and estopped from challenging the determination.

      11.4 Review the Decision.  Within 60 days after the Corporation=s  receipt
of a request for review, it will review the Plan Administrator=s  determination.
After  consideration  all materials  presented by the Claimant,  the Corporation
will render a written opinion,  written in a manner  calculated to be understood
by the  Claimant,  setting  forth the  specific  reasons  for the  decision  and
containing specific references to the pertinent provisions of this Plan on which
the  decision is based.  If special  circumstances  require that the 60 day time
period be extended,  the Corporation will so notify the Claimant and will render
the  decision as soon as possible,  but no later than 120 days after  receipt of
the request for review.

                                   ARTICLE TWELVE

      12.1  Arbitration.  Any controversy  relating to a claim arising out of or
relating to this Plan,  including,  but not limited to claims for  benefits  due
under  this Plan,  claims  for the  enforcement  of ERISA,  claims  based on the
federal common law of ERISA,  claims  alleging  discriminatory  discharge  under
ERISA,  claims based on state law, and  assigned  claims  relating to this Plan,
shall be settled by  arbitration  in accordance  with the then current  Employee
Benefit Claims  Arbitration Rules of the American  Arbitration  Association (the
"AAA") or any  successor  rules which are hereby  incorporated  into the Plan by
this  reference;  provided,  however,  both the  Corporation and the Participant
shall have the right at any time,  prior to submitting  the claim or controversy
to arbitration,  to seek equitable relief in court without  submitting the issue
to arbitration.

      12.2 Exhaustion of Administrative  Remedy. Neither the Participant (or his
or her  beneficiary)  nor the Plan  may be  required  to  submit  such  claim or
controversy to arbitration until the Participant (or his or her beneficiary) has
first  exhausted  the Plan=s  initial  appeals  procedures  set forth in Article
Eleven.  However,  if  the  Participant  (or  his or her  beneficiary)  and  the
Corporation  agree to do so,  they  may  submit  the  claim  or  controversy  to
arbitration at any point during the process of the dispute.



<PAGE>


      12.3 Costs. The Corporation will bear all costs of an arbitration,  except
that the Participant  will pay the filling fee set by the AAA and the arbitrator
shall have the power to apportion among the parties expenses such as pre-hearing
discovery,  travel, experts= fees, accountants= fees, and attorneys= fees except
as otherwise  provided herein. The decision of the arbitrator shall be final and
binding on all parties, and judgment on the arbitrator=s award may be entered in
any court of competent jurisdiction.

      12.4 Statute of  Limitations.  If there is a dispute as to whether a claim
is subject to  arbitration,  the arbitrator  shall decide that issue.  The claim
must be filed with the AAA within the applicable statute of limitations  period.
The  arbitrator  shall  issue  a  written  determination  sufficient  to  ensure
consistent application of the Plan in the future.

      12.5 Place of Hearing and Selection of Arbitrator. Any arbitration will be
conducted in accordance with the following provisions, notwithstanding the Rules
of the AAA. The  arbitration  will take place in a neutral  location  within the
metropolitan   area  in  which  the  Participant  was  or  is  employed  by  the
Corporation.  The arbitrator  will be selected from the attorney  members of the
Commercial  Panel of the AAA who  reside  in the  metropolitan  area  where  the
arbitration will take place and have at least 5 years of ERISA experience. If an
arbitrator  meeting such  qualifications is unavailable,  the arbitrator will be
selected  from the attorney  members of the National  Panel of Employee  Benefit
Claims Arbitrators established by the AAA.

      12.6 Discovery.  In any such arbitration,  each party shall be entitled to
discovery of any other party as provided by the Federal Rules of Civil Procedure
then in effect;  provided,  however, that discovery shall be limited to a period
of 60 days. The arbitrator may make orders and issue subpoenas as necessary. The
arbitrator  shall apply ERISA,  as construed in the federal Circuit in which the
arbitration  takes  place,  to the  interpretation  of the Plan and the  Federal
Arbitration Act to the interpretation of this arbitration provision.

                                  ARTICLE THIRTEEN

      13.1 Amendment.  This Plan may be amended or terminated by the Corporation
at any time, without notice to or consent of any person, pursuant to resolutions
adopted by its Board of Directors.  Any such amendment or termination shall take
effect as of the date specified therein and, to the extent permitted by law, may
have retroactive effect.  However, no such amendment or termination shall reduce
(i) the amount then credited to the Participant=s  Retirement  Account,  or (ii)
his or her vested  percentage  under  paragraph 3.01. If the Plan is terminated,
benefits  will  be  distributed  in  accordance  with  Article  Five,  as if the
termination  date  were the  Participant=s  Normal  Retirement  Date.  Any other
provision of this Plan to the contrary notwithstanding,  the Plan may be amended
by the  Corporation  at any time,  and  retroactively  if required to the extent
that, in the opinion of the  Corporation,  such amendment  shall be necessary in
order to ensure that the Plan will be  characterized  as a plan maintained for a
select group of  management  or highly  compensated  employees,  as described in
Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA, or to conform the Plan to the
requirements  of any  applicable  law,  including  ERISA and the  Code.  No such
amendment  shall be considered  prejudicial  to any interest of a Participant or
beneficiary hereunder.

                                  ARTICLE FOURTEEN



<PAGE>



      14.1  Notice.  Any notice,  consent or demand  required or permitted to be
given  under  the  provisions  of this Plan  shall be in  writing , and shall be
signed by the party giving or making the same. If such notice, consent or demand
is mailed,  it shall be sent by United States  certified mail,  postage prepaid,
addressed to the  addressee=s  last known address as shown on the records of the
Corporation.  The date of such  mailing  shall  be  deemed  the date of  notice,
consent or demand.  Any person may change the  address to which  notice is to be
sent by giving notice of the change of address in the manner aforesaid.

                                   ARTICLE FIFTEEN

      15.1 Facility of Payment.  If a distribution  is to be made to a minor, or
to a person who is otherwise  incompetent,  then the Plan  Administrator may, in
its discretion, make such distribution (i) to the legal guardian, or if none, to
a parent of minor payee with whom the payee  maintains his or her residence,  or
(ii) to the  conservator  or committee or, if none, to the person having custody
of an incompetent  payee. Any such  distribution  shall fully discharge the Plan
Administrator,  the  Corporation  and Plan from  further  liability  on  account
thereof.

                                   ARTICLE SIXTEEN

      16.1 Board  Authority.  The Board of  Directors  shall have full power and
authority to interpret,  construe, and administer this Agreement and the Board=s
interpretations and constructions thereof, and actions thereunder, including any
valuation of the Deferred Compensation Account or the amount or recipient of the
payment to be made therefrom, shall be binding and conclusive on all persons for
all purposes,  subject to the terms and conditions of Article Twelve.  No member
of the Board of Directors  shall be liable to any person for any action taken or
admitted  in  connection  with the  interpretation  and  administration  of this
Agreement unless attributable to their willful misconduct or lack of good faith.

                                  ARTICLE SEVENTEEN

      17.1 Governing Law. The Plan and the right and  obligations of all persons
hereunder  shall be governed by and construed in accordance with the laws of the
State of Indiana other than its laws regarding choice of law, to the extent that
such state law is not preempted by federal law.

      IN WITNESS  WHEREOF,  the Corporation has executed this Plan as of the day
and year above first written.


ATTEST:
                                    By:
                                    Title:








<PAGE>


                                      EXHIBIT A

                             DEFERRED COMPENSATION PLAN

                               PARTICIPATION AGREEMENT


Name of Participant:

Effective Date of Participation:                , 20

The Board of Directors and the undersigned  Plan  Administrator  have designated
the undersigned employee as a Participant in the above Plan. In consideration of
his/her designation as a Participant, the undersigned employee hereby agrees and
acknowledges as follows:

1.    That he/she has received a copy of the Plan, as currently in effect;

2. That  he/she  agrees to be bound by all of the  terms and  conditions  of the
Plan, and to perform any and all acts required from him/her thereunder;

3. That he/she has the right to designate the beneficiary or beneficiaries,  and
thereafter  to change the  beneficiary  or  beneficiaries,  of any death benefit
payable  under the Plan,  by  completing  and  delivering  to the  Corporation a
Beneficiary Designation in the form specified by the Plan Administrator.



IN WITNESS  WHEREOF,  this Agreement has been executed by the parties this _____
day of _________________, 20___.


            Witness                                   Employee

                                           By:
            Witness                             Its Duly Authorized Officer


<PAGE>


                                      EXHIBIT B

                             DEFERRED COMPENSATION PLAN

                                  VESTING SCHEDULE


      The Participant=s Accrued Benefit shall vest based upon the period of time
the  Participant  has been  employed  with the  Corporation,  measured as of the
anniversary  date of the  Participant=s  commencement  of  employment  with  the
Corporation:


      Up to the day before the 2nd anniversary                               20%

      From the 2nd anniversary to the day before the 4th anniversary         40%

      From the 4th anniversary to the day before the 6th anniversary         60%

      From the 6th anniversary to the day before the 8th anniversary         80%

      From the 8th anniversary on                                           100%


This  schedule  shall not apply in the event  the  Participant=s  employment  is
terminated for cause, as stated in Paragraph 8.02 of the Agreement.



<PAGE>


                                      EXHIBIT C
                              NOMINATION OF BENEFICIARY
      TO:   Heartland   Community   Bank,   (hereinafter   referred  to  as  the
"Corporation")  I, , in accordance with the rights granted to me in the Deferred
Compensation Plan agreement,  between me and the Corporation, do hereby nominate
as  Beneficiary  thereunder  to receive  payments  thereunder in the event of my
death:

      Primary Beneficiary:
      Relationship:

      1st Contingent Beneficiary:
      Relationship:

I further reserve the privilege of changing the Beneficiary  herein named at any
time or times without the consent of any such  beneficiary.  This  nomination is
made upon the following terms and conditions:

1.  The  word   "Beneficiary"   as  used  herein   shall   include  the  plural,
Beneficiaries,   wherever  the  Agreement  permits.  2.  For  purposes  of  this
Beneficiary  Designation,  no  person  shall  be  deemed  to have  survived  the
participant  if that person dies  within  thirty (30) days of the  Participant=s
death.  3.  Beneficiary  shall  mean the  Primary  Beneficiary  if such  Primary
Beneficiary  survives the  participant  by at least thirty (30) days,  and shall
mean the 1st Contingent  Beneficiary if the Primary Beneficiary does not survive
the  participant  by at least  thirty (30) days.  4. If the Primary  Beneficiary
shall be deceased on any annual payment date provided in said Agreement, any and
all remaining annual payments shall be payable to the 1st Contingent Beneficiary
unless the executors or administrators of said deceased Beneficiary are named as
Primary Beneficiary hereinabove. 5. If more than one Beneficiary is named within
the same class (i.e., Primary or 1st Contingent),  then annual payments shall be
made equally to such Beneficiaries unless otherwise provided hereinabove. If any
such Beneficiary dies while receiving annual payments under said Agreement,  any
and  all  remaining  payments  shall  continue  to  be  made  to  the  surviving
Beneficiaries of such class and to the legal heirs of the deceased  Beneficiary,
which  legal heirs shall  receive  the amount  which was being  received by said
deceased Beneficiary.  If all of the Beneficiaries of a class shall die, any and
all  remaining  payments  shall be made to the next class of  Beneficiaries,  as
provided  under  Paragraph  4  above.  6.  If none  of the  Beneficiaries  named
hereinabove  are living on any said annual  payment date,  any and all remaining
payments shall be made to my executors or administrators,  or upon their written
request,  to any person or persons so  designated by them. 7. If any such annual
payments shall be payable to any trust,  the Corporation  shall not be liable to
see to the application by the Trustee of any payment  hereunder at any time, and
may rely upon the sole  signature  of the  Trustee  to any  receipt,  release or
waiver,  or to any transfer or other instrument to whomsoever made purporting to
affect this nomination or any right hereunder.

      This  nomination  cancels and  supersedes  any  Nomination of  Beneficiary
heretofore  made by me with respect to said  Agreement  and the right to receive
payments thereunder.

Dated:                              Participant:
Received this _____ day of ______________, 20___By:



<PAGE>


EXHIBIT 10.4


                             Split-Dollar Endorsement Agreement

      THIS  AGREEMENT,  made and entered into this 1st day of January,  2001, by
and  between  the  Heartland  Community  Bank,  (hereinafter  referred to as the
"Corporation"), a Corporation organized and existing under the laws of the State
of Indiana, and Steven L. Bechman (hereinafter referred to as the "Employee").

      WHEREAS, the Employee has performed his duties in an efficient and capable
      manner; and WHEREAS, the Corporation is desirous of retaining the services
      of the Employee; and WHEREAS, the Corporation is desirous of assisting the
      Employee in paying for life
insurance on his own life; and
      WHEREAS,  the  Corporation  has determined  that this  assistance can best
      be provided under a  "split-dollar" arrangement; and
      WHEREAS,  the  Corporation  and the Employee  have  applied for  Insurance
Policy No.  1Y200102 (the  "Policy")  issued by the New England  Financial  Life
Insurance Company ("New England Financial") on the Employee's life; and
      WHEREAS, it is now understood and agreed that this split-dollar  agreement
is to be effective as of the date on which the Policy was issued by "New England
Financial".
      NOW,  THEREFORE,  for value  received and in  consideration  of the mutual
covenants contained herein, the parties agree as follows:

                                         ARTICLE I
                                       "Definitions"

For purposes of this  Agreement,  the following terms will have the meanings set
forth below:

      1. "Cash  Surrender  Value of the Policy"  will mean the Cash Value of the
Policy;  plus any dividends  and/or  earnings added hereto;  and less any Policy
Loan Balance.
      2.  "Cash  Value of the  Policy"  will mean the cash  value as  calculated
according to the provisions of the Policy.
      3.  "Corporation's  Interest in the Policy" will be defined in Articles IV
      and V. 4.  "Current  Loan Value of the Policy" will mean the Loan Value of
      the Policy reduced
by any outstanding Policy Loan Balance.
      5.  "Loan  Value of the  Policy"  will  mean the  amount  which  with loan
interest and Monthly  Deductions for the Cost of Insurance,  plus any applicable
Surrender  Charge,  will  equal  the Cash  Value of the  Policy on the next loan
interest due date.
      6.  "Policy Loan  Balance" at any time will mean policy loans  outstanding
plus interest accrued to date.

                                         ARTICLE II
                                "Allocation of Gross Premium"

The Corporation  will pay all premiums on the Policy when due,  according to the
Schedule of Premiums in the Policy.



<PAGE>


                                        ARTICLE III
                                    "Payment of Premiums"

Any  premium or portion  thereof  which is  payable  by the  Employee  under any
Article of the  Agreement  may at the election of the Employee be deducted  from
the cash  compensation  otherwise  payable to him and the Corporation  agrees to
transmit  that  premium or portion,  along with any  premium or portion  thereof
payable by it, to the Insurance Company on or before the premium due date.

                                         ARTICLE IV
                                   "Rights in the Policy"

The  Employee  will  have the sole  right to  designate  the  beneficiary  for a
specified amount of the death proceeds of the Policy.  The Corporation will have
and may exercise,  except as limited  hereinafter,  all ownership  rights in the
Policy.  The  Corporation  will not without the written  consent of the Employee
assign its rights in the Policy,  other than for the purpose of obtaining a loan
against the Policy, to anyone other than the Employee.  The Corporation will not
take any action in dealing  with the  Insurance  Company  that would  impair any
right or interest of the Employee in the Policy.  The Corporation  will have the
right to borrow  from the  Insurance  Company,  and to  secure  that loan by the
Policy, an amount which together with the unpaid interest accrued thereon,  will
at no time exceed the lesser of (a) the Corporation's Interest in the Policy and
(b) the Loan Value of the Policy.

During the Employee's life time "The Corporation's  Interest In The Policy" will
mean, at any time at which the value of such interest is to be determined  under
this Agreement,  the Cash Value of the Policy at such time,  reduced by any then
outstanding  Policy  Loan  Balance  with  respect  to any loans  made or charged
automatically against the Policy by the Corporation.

ARTICLE  V
                             "Rights to the Proceeds at Death"

Upon the death of the Employee while this Agreement is in force,  the Employee's
beneficiary  as named in the policy will be entitled to receive  from the Policy
proceeds an amount equal to three (3) times the Employee's base salary as of the
first day of January  preceding the Employee's  date of death.  The remainder of
the Policy  Proceeds will be paid to the  Corporation.  Within 60 days after the
death of the Employee, the Corporation will provide to "New England Financial" a
written  statement  indicating the amount of the Policy  proceeds the Employee's
beneficiary is entitled to receive.

                                         ARTICLE VI
                                 "Termination of Agreement"

This  Agreement  may be  terminated  at any time while the Employee is living by
written notice  thereof by either the  Corporation or the Employee to the other;
and,  in any event,  this  Agreement  will  terminate  upon  termination  of the
Employee's employment.

                                        ARTICLE VII
                                     "Plan Management"

For  purposes  of the  Employee  Retirement  Income  Security  Act of 1974,  the
Corporation  will  be  the  "Named  Fiduciary"  and  Plan  Administrator  of the
split-dollar  life insurance plan for which this Agreement is hereby  designated
the written plan instrument.  The Corporation's board of directors may authorize
a person or group of persons to fulfill the  responsibilities of the Corporation
as Plan Administrator.  The Named Fiduciary or the Plan Administrator may employ
others to render advice with regard to its responsibilities under this Plan. The
Named Fiduciary may also allocate fiduciary  responsibilities  to others and may
exercise  any other  powers  necessary  for the  discharge  of its duties to the
extent not in conflict with the Employee Retirement Income Security Act of 1974.


                                        ARTICLE VIII
                                     "Claims Procedure"

(1) Filing claims.  Any insured,  beneficiary or other  individual  (hereinafter
"Claimant")  entitled to benefits under the Plan or under the Policy will file a
Claim  request with the Plan  Administrator  with respect to benefits  under the
Plan and with "New  England  Financial",  with  respect  to  benefits  under the
Policy.  The Plan Administrator  will, upon written request of a Claimant,  make
available  copies of any claim forms or  instructions  provided by "New  England
Financial"  or advise  the  Claimant  where such  forms or  instructions  may be
obtained.  (2)  Notification  to  Claimant.  If a claim  request  is  wholly  or
partially denied,  the Plan  Administrator will furnish to the Claimant a notice
of the  decision  within 90 days in writing  and in a manner  calculated  to the
understood by the Claimant, which notice will contain the following information:
      (a)   The specific reason or reasons for the denial;
      (b)  Specific  reference to the  pertinent  Plan  provisions  upon which
           the denial is based;
      (c) A description of any additional material or information  necessary for
the  Claimant to perfect the Claim and an  explanation  of why such  material or
information is necessary; and
      (d) An  explanation of the Plan's claims review  procedure  describing the
steps to be taken by a Claimant  who wishes to submit his claim for review.  (3)
Review Procedure.  A Claimant or his authorized  representative may with respect
to any denied claim:
      (a) Request a review upon written  application  filed within 60 days after
receipt by the Claimant of notice of the denial of his claim;
      (b)   Review pertinent documents; and
      (c)   Submit issues and comments in writing
Any request or  submission  will be in writing and will be directed to the Named
Fiduciary (or his  designee).  The Named  Fiduciary (or its designee)  will have
sole  responsibility  for the review of any denied claim and will take all steps
appropriate  in the light of its  findings.  (4)  Decision on Review.  The Named
Fiduciary (or its designee) will render a decision upon review of a denied claim
within 60 days after receipt of a request for review.  If special  circumstances
warrant additional time, the decision will be rendered as soon as possible,  but
not later than 120 days after receipt of request for review.  Written  notice of
any such extension  will be furnished to the Claimant prior to the  commencement
of the  Extension.  The  decision on review will be in writing and will  include
specific  reasons  for  the  decision,  written  in a  manner  calculated  to be
understood  by the  Claimant,  as will as specific  references  to the pertinent
provisions of the Plan on which the decision is based. If the decision on review
is not furnished to the Claimant within the time limits  prescribed  above,  the
claim will be deemed denied on review.



<PAGE>


                                         ARTICLE IX
                                  "Satisfaction of Claim"

The Employee rights and interests, and rights and interests of any person taking
under or through  him,  will be  completely  satisfied  upon  compliance  by the
Corporation with the provisions of the Agreement.

                                         ARTICLE X
                                 "Amendment and Assignment"

This  Agreement may be altered,  amended or modified,  including the addition of
any extra policy  provisions,  by a written instrument signed by the Corporation
and the Employee.  Either party may,  subject to the  limitations of Article IV,
assign its interest and  obligations  under this Agreement,  provided,  however,
that any assignment will be subject to the terms of this Agreement.



                                         ARTICLE XI
                                   "Possession of Policy"

The Corporation will keep possession of the Policy.  The Corporation agrees from
time to time to make the policy  available  to the  Employee or to "New  England
Financial"  for the purpose of endorsing or filing any change of  beneficiary on
the Policy but the Policy will promptly be returned to the Corporation.

                                        ARTICLE XII
"Governing Law"

This Agreement sets forth the entire Agreement of the parties hereto,  and any
and all prior agreements,  to the extent  inconsistent  herewith,  are hereby
superseded.  This Agreement will be governed by the laws of the State of
Indiana.

                                        ARTICLE XIII
                                      "Interpretation"

Where appropriate in this Agreement, words used in the singular will include the
plural and words used in the masculine will include the feminine.



      IN WITNESS  WHEREOF,  the parties have  hereunto set their hand and seals,
the Corporation by its duly authorized  officer, on the day and year first above
written.


                                          ------------------------------------
                                          Employee

                                          -------------------------------------
                                          Officer




<PAGE>



March 18, 2002



Dear Shareholders and Friends:

Although Heartland  Bancshares Inc. grew its total assets by nearly 15% in 2001,
it was a disappointing year for the Board of Directors and Management. Heartland
recorded  net income of $529,000 for 2001  compared to $751,000 for 2000.  Asset
quality continued to impact the earnings of the Bank through increased loan loss
provision.  A combination of poor underwriting decisions and a weakening economy
contributed  to the  increased  level of loan  problems.  The Board  and  Senior
Management  have made a commitment  to improve the lending  process in the Bank,
including  hiring Eric  Johnson this month to be our Chief  Credit  Officer,  to
oversee the entire lending function.

The year was  challenging  for  management  with eleven rate cuts by the Federal
Reserve  and the  attack on  America on  September  11.  The  decline in our net
interest margin from 4.58% for the year ended December 31, 2000 to 4.43% for the
year ended  December  31,  2001 was driven by the rate cuts as the  majority  of
Heartland's  assets  quickly  repriced  downward as the discount rate  declined.
Still, net interest income increased by more than 24% from $6,129,000 in 2000 to
$7,620,000 in 2001.  Gross Loans  increased  10.5% from $133 million at December
31, 2000 to $147 million at December 31, 2001 and  accounted for the majority of
the increase in interest income.

Increased  non-interest income was a bright spot in 2001, increasing 108.1% from
$767,000 in 2000 to  $1,596,000  in 2001.  Deposit fees and service  charges and
brokered mortgage loan fees were the biggest contributors to the increase.

A decision at mid-year 2000 to establish a full-service mortgage department paid
off in 2001.  Over $48  million  of  mortgage  loans  were  originated  with the
majority  being sold into the secondary  market  through a variety of investors.
The fees generated from this activity increased from $81,000 in 2000 to $535,000
in 2001.  The new home  construction  industry  and  existing  home sales in our
market continue to be near the top in the state. We feel we have one of the most
respected  mortgage  departments  in the county,  which will continue to provide
revenue from home sales when refinancings slow.

Our  full-service   investment  department  showed  nearly  a  25%  increase  in
commissions  earned over the previous  year.  This came in a year when investors
were cautious,  the stock market was uncertain and many  investors  retreated to
the safety of FDIC insured deposits. Our investment  representatives have worked
hard to earn the trust and respect of their clients during 2001, which we expect
to provide long-term benefits.

Non-interest  expenses increased during the last half of the year as a result of
the  opening of the new  Operations  Center  located  adjacent  to the  Franklin
office.  The 12,500  square foot  facility is leased and houses loan and deposit
operations,  as well as the mortgage and commercial loan  departments.  It was a
much-needed  expansion and is home to nearly 50  employees.  Even with the added
overhead,  the  efficiency  ratio remained under 60% at 58.8% for the year ended
December 31, 2001. The new facility is expected to support additional growth for
many years.

To help support  growth,  Heartland  completed  the issuance of $5 million gross
proceeds in Trust Preferred Securities in December 2001.  Heartland  immediately
contributed  $2 million  into the Bank,  improving  the Bank's  Tier 1 equity to
asset  ratio to  8.43% at  December  31,  2001.  Although  the  Trust  Preferred
Securities are similar in many respects to long-term  debt, the Federal  Reserve
Bank allows a portion to be counted as Tier 1 Capital and the  remainder as Tier
2  capital.  The new funds will  support  future  growth  without  diluting  the
ownership of existing  shareholders  in the manner that a common stock  issuance
would.

The Corporation is still not in a position to pay a cash dividend, but did issue
a 5% stock dividend in November,  for the second consecutive year. Comparing the
stock price at December  31,  2000 of $7.94 per share to the  December  31, 2001
stock price of $7.80 per share,  there was an  appreciation  of 3.15%,  when the
dividend is considered.

Our market share of deposits  continues to increase.  A report  published by the
FDIC shows that our share of deposits  in Johnson  County was 12.93% at June 30,
2001 compared to 10.34% at June 30, 2000.  The same report  indicates that total
deposits  in the county grew by 7.50% from June 30,  2000 to June 30,  2001.  We
feel the  opportunities  for  continued  growth in our  market are good and will
continue to focus our efforts in Johnson County.

We operate on the belief that when we help build a better community,  we build a
better  bank.  Our  involvement  in civic  clubs,  events,  as well  as,  direct
contributions  to various  charitable  causes  throughout the year is our way of
giving back to the people and groups who have been so good to us.

Finally,  we would like to thank our Board  members and employees for their hard
work in making this Bank one of the most trusted  financial  institutions in our
market.  With our new credit  culture,  new  Operations  Center,  and additional
capital,  we are positioned to achieve growth and deliver continued  earnings in
the future. We look forward to the challenges that lie ahead in 2002.






Steve Bechman                       Jeff Goben
President & CEO                     Executive Vice President, COO, Secretary






<PAGE>


MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS. (Dollar amounts are in thousands, except per share data.),


SUMMARY

Heartland  Bancshares,   Inc.   ("Heartland")  is  a  one-bank  holding  company
incorporated May 27, 1997. Heartland's primary asset is its wholly owned banking
subsidiary,   Heartland  Community  Bank  ("the  Bank"),  an   Indiana-chartered
commercial  bank. The Bank received  regulatory  approval to open in the fall of
1997 and commenced  banking  operation  December 17, 1997.  Heartland's  primary
business consists of attracting deposits from the general public and originating
real estate,  commercial and consumer loans and purchasing  investments  through
its four offices located in Franklin, Greenwood, and Bargersville, Indiana.

At December 31, 2001,  Heartland  had $189,636 in total  assets,  an increase of
$24,720 or 15% from the December  31, 2000 total of $164,916.  Those assets were
primarily  comprised  of net loans of  $143,236  and  securities  of  $17,603 at
December 31, 2001  compared to December 31, 2000 totals of $129,882 and $21,749,
respectively.  Total  deposits at December  31, 2001 were  $160,991  compared to
$139,220  at  December  31,  2000.  Total  shareholders'  equity was $13,263 and
$12,658 at December 31, 2001 and  December 31, 2000.  The increase in equity was
due to the comprehensive income for the year ended December 31, 2001.

The Bank's  deposits are insured to the maximum  extent  permitted by law by the
Federal  Deposit  Insurance  Corporation  ("FDIC").   The  Bank  is  subject  to
comprehensive regulation,  examination and supervision by the Indiana Department
of Financial  Institutions  ("DFI") and the FDIC.  Heartland is  registered as a
bank holding  company with the Board of Governors of the Federal  Reserve System
("FRB") and is subject to its regulation, examination and supervision.

Heartland's  profitability is significantly influenced by the difference between
income on its loans and investments and the cost of its deposits and borrowings.
This  difference  is  referred  to as the  spread or net  interest  margin.  The
difference  between the amount of interest  earned on loans and  investments and
the interest  incurred on deposits and borrowings is referred to as net interest
income.  Interest  income from loans and investments is a function of the amount
of loans and  investments  outstanding  during the period and the interest rates
earned. Interest expense related to deposits and borrowings is a function of the
amount of deposits and borrowings outstanding during the period and the interest
rates paid.


RESULTS OF OPERATIONS

Heartland  has  experienced  growth  in  loans  and  deposits  each  year  since
inception.  Changes in  interest  income and  interest  expense  between the two
periods  discussed  relate  primarily  to the  difference  in average  loans and
deposits unless otherwise stated in the following discussion.

Heartland  recorded net income of $529 for the year ended  December 31, 2001, or
$.38 per share,  and net income of $751,  or $.54 per share,  for the year ended
December  31,  2000.  The  decrease  in net income is  attributable  to a higher
provision  for loan losses and growth of  non-interest  expenses,  substantially
offset by the growth of net interest and non-interest income.

Comprehensive  income consists of net income and other comprehensive income such
as unrealized gains and losses on securities  available for sale, which are also
recognized as separate components of equity.  Comprehensive  income was $609 for
the year ended  December 31, 2001 compared to $1,015 for the year ended December
31, 2000.

Interest  income of $14,409 was earned during the year ended  December 31, 2001,
compared  to $12,476  for the year ended  December  31,  2000 and was  primarily
generated  from  securities  and loans.  The  increase is  primarily  due to the
increase  in  average  loans  and  securities  outstanding  during  the year and
secondarily  due to increases in yields earned on  securities.  Decreases in the
yields earned on loans and short-term  investments partially offset the increase
in interest  income.  Overall,  the average yield on earning assets  declined 96
basis points to 8.37% for 2001 from 9.33% for 2000.

Interest  expense of $6,789 was incurred during the year ended December 31, 2001
and  $6,347  during  the year  ended  December  31,  2000.  Interest  expense is
primarily  related to deposits  during 2001 and 2000.  The increase is primarily
due to the increase in average deposits and other borrowings  outstanding during
the year,  partially  offset by the 102 basis point decrease in the average rate
paid on interest bearing liabilities during 2001.

Net interest  income for the year ended December 31, 2001 was $7,620 compared to
$6,129 for the year ended December 31, 2000.






Note. Dollar amounts in thousands except per share data.




<PAGE>


The  following  tables  depict for the years ended  December  31, 2001 and 2000,
certain  information  related  to  Heartland's  average  balance  sheets and its
average  yields on assets and costs of  liabilities.  Such yields are derived by
dividing income or expense by the average balance of the corresponding assets or
liabilities. Average balances have been derived from daily averages.

                                  Year Ended                 Year Ended
                               December 31, 2001          December 31, 2000
                             Average/      Yield/       Average/      Yield/
                              Balance       Rate         Balance       Rate
                              -------       ----         -------       ----
Interest earning assets
   Short-term investments    $  6,060       3.71%        $ 3,409        5.75%
   Taxable securities          18,586       7.34          16,435        6.79
   Non-taxable securities       1,489       4.50             669        3.74
   Loans                      145,961       8.74         113,182        9.84
                             --------                    -------
Total interest earning
 assets                      $172,096       8.37         $133,695       9.33
                             ========                    ========

Interest bearing liabilities
   Interest-bearing demand,
     Money Market and Savings
      Deposits               $ 59,639       2.99%        $37,843        4.35%
   Time deposits               81,071       5.59          65,807        6.16
   Short-term borrowings        6,174       3.61           6,791        5.05
   Other borrowings             4,222       5.95           4,665        6.50
                             --------                    -------
Total interest bearing
 liabilities                 $151,106       4.49         $115,106       5.51
                             ========                    ========


Note. Dollar amounts in thousands except per share data.

<PAGE>



                                                     2001        2000
                                                     ----        ----
Average yield on interest-earning assets             8.37%        9.33%
Average rate paid on interest-bearing
 liabilities                                         4.49         5.51
Net interest spread                                  3.88         3.82
Net interest margin (net interest earnings divided
 by average total interest-earning assets)           4.43         4.58
Return on average assets                              .29         .54
Return on average equity                             3.95         6.21

The  decrease in the average  yield on  interest-earning  assets and the average
cost of interest bearing liabilities  followed the falling interest rates in the
economy during 2001.

The net interest  margin  decreased to 4.43% in 2001 from 4.58% in 2000. The net
interest  margin is calculated by dividing net interest  income by average total
interest earning assets.  While the average cost of interest bearing liabilities
actually fell slightly more than the yield on interest earning assets, the ratio
of interest bearing  liabilities to interest earning assets increased  slightly,
from 86.1% for 2000 to 87.8% for 2001  resulting  in the  slight  decline in net
interest margin.

The  provision  for loan losses was $2,967 for the year ended  December 31, 2001
and $1,744 for the year ended  December 31, 2000.  Net  charge-offs  were $2,234
during the year ended  December 31, 2001 and $442 during the year ended December
31, 2000. Non performing  loans at December 31, 2001 decreased to $749 from $992
at the end of 2000. However,  impaired loans increased from $521 at December 31,
2000  to  $4,130  at  December  31,  2001.  These  factors,  combined  with  the
identification  of other  credits that,  while  performing,  were  demonstrating
weaknesses resulted in management determining that the allowance for loan losses
should be  increased.  The allowance for loan losses was 2.32% of gross loans at
December 31, 2001 compared to 2.01% at year-end  2000 and covers  non-performing
loans 4.5x at year-end 2001, compared to 2.7x in 2000.

Non-interest income was $1,596 for the year ended December 31, 2001 and $767 for
the year ended December 31, 2000 and consists  primarily of miscellaneous  fees,
service charges and other income. In July, 2000, Heartland expanded its mortgage
lending function by adding two new loan originators.  Gains related to the sale,
service  released,  of residential  real estate loans  increased to $535 in 2001
from $81 in 2000, as interest  rates rose and the fixed rate,  residential  real
estate loan market improved.  Net securities gains in 2001 and 2000 were $6 each
year.

Salaries  and benefits  expense for the year ended  December 31, 2001 was $3,186
compared to $2,283 for the year ended December 31, 2000. The number of full time
equivalent  employees was  increased to maintain  customer  service  through the
rapid  growth  of  loans  and  deposits.   Commissions  paid  to  mortgage  loan
originators  and  investment  department  representatives  also increased due to
higher  volumes  of  mortgage  loans   originated  and  investment   commissions
generated.

Occupancy and equipment expenses of $510 and $344 were incurred during the years
ended  December 31, 2001 and 2000.  Those  expenses  consist  primarily of lease
payments for the branch and operations  facilities,  depreciation  and utilities
expenses.  Occupancy and  equipment  expenses  increased  during 2001 due to the
opening of the new operations facility in September.

Data  processing  expense was $644 for the year ended December 31, 2001 compared
to $472 for the year ended  December 31, 2000.  The increase in data  processing
expenses is  correlated  with the  increase in loans and  deposits.  Many of the
expenses are volume based charges. The bank also began offering Internet banking
to customers, which carries a monthly fee to the data processing provider.

Professional fees increased to $260 during 2001 from $175 during 2000 due to the
implementation  of a mortgage  loan  quality  control  program  performed  by an
external  consulting firm,  increased loan collection issues and increased legal
fees.

The remaining expenses of $816 for the year ended December 31, 2001 and $655 for
the year  ended  December  31,  2000,  relate to  various  other  items  such as
printing, supplies, advertising, loan expenses, postage, insurance and training.
The increase is primarily due to the increase in volume of loans and deposits.

Income tax expense  decreased  to $304 for 2001  compared  to $472 in 2000.  The
effective tax rate for 2001 was 36.5%,  compared to 38.6% in 2000.  The decrease
in the effective tax rate is primarily due to the increased  average balance and
related interest income on non-taxable securities.

Note. Dollar amounts in thousands except per share data.

<PAGE>

LENDING ACTIVITIES

The following  table sets forth  information  concerning the  composition of the
Bank's loan portfolio in dollar  amounts stated in thousands and  percentages of
loans at December 31.

                                     2001                  2000
                                       Percent of            Percent of
                              Amount   Gross loans   Amount  Gross loans
TYPE OF LOAN
Commercial loans and leases  $ 76,097      51.90%  $  63,766      48.11%
Real estate construction and
 land development              23,150      15.79      24,719      18.65
Residential mortgages
 (1-4 family homes)            24,795      16.90      21,942      16.55
Consumer                       22,594      15.41      22,122      16.69
                             --------   --------   ---------   --------
Gross loans                  $146,636     100.00%  $ 132,549     100.00%
                             ========   ========   =========   ========

COMMERCIAL  LENDING.  Commercial  loans include loans secured by commercial real
estate;  and loans for business  purchases,  operations,  inventory and lines of
credit. At December 31, 2001,  commercial loans totaled $76,097 or 51.90% of the
Bank's total loan portfolio.  Commercial loans totaled $63,766, or 48.11% of the
Bank's loan portfolio at December 31, 2000. The Bank may be required during 2002
to reduce its  commercial  loans secured by commercial  real estate by agreement
with its regulatory agencies. See "Capital Adequacy".

REAL ESTATE  CONSTRUCTION AND LAND DEVELOPMENT  LOANS. Real estate  construction
and land development loans are secured by real estate and include commercial and
residential  construction loans and loans to develop land. At December 31, 2001,
real estate construction and land development loans totaled $23,150 or 15.79% of
the bank's  total  loan  portfolio  compared  to $24,719 or 18.65% of the bank's
total loan portfolio at December 31, 2000. The Bank may be required  during 2002
to reduce these types of loans by agreement  with its regulatory  agencies.  See
"Capital Adequacy".

RESIDENTIAL MORTGAGE LOANS. Residential mortgage loans are predominantly secured
by single-family homes. To reduce its exposure to changes in interest rates, the
Bank currently originates adjustable rate first mortgage loans ("ARMs"),  second
mortgage loans and home equity lines of credit,  also with adjustable  rates. At
December 31, 2001, the Bank's residential  mortgage loans totaled  approximately
$24,795 or 16.90% of the  Bank's  total loan  portfolio  compared  to $21,942 or
16.55% of the Bank's total loans at December 31, 2000.

The Bank has negotiated with third party mortgage companies an agreement whereby
the Bank would receive a fee for originating  fixed rate 1-4 family  residential
real estate mortgages. Underwriting and servicing would be the responsibility of
the third party mortgage company.  The bank also originates fixed rate mortgages
and sells them, servicing released, to various investors.  At year-end 2001, the
Bank held  $4,597 of such loans that had been  closed and were in the process of
being delivered to secondary market buyers.

CONSUMER LENDING. The Bank makes various types of consumer loans including loans
to  depositors  secured  by  pledges  of their  deposit  accounts,  new and used
automobile  loans,  and secured and unsecured  personal  loans.  At December 31,
2001, the Bank's consumer loans totaled  approximately  $22,594 or 15.41% of the
Bank's  total loan  portfolio  compared to $22,122 or 16.69% of the Bank's total
loans at December 31, 2000.

Note. Dollar amounts in thousands except per share data.

<PAGE>

NONPERFORMING ASSETS AND ALLOWANCE FOR LOAN LOSSES

Nonperforming assets consist of non-accrual and nonperforming loans, real estate
owned (acquired in foreclosure), and other repossessed assets. Non-accrual loans
include loans on which interest  recognition has been suspended because they are
90 days past due as to interest or principal and loans where there is a question
about the Bank's  ability to collect all principal  and interest.  Nonperforming
loans include accruing loans that are contractually  past due 90 days or more as
to interest or  principal  payments.  Nonperforming  assets  totaled  $1,143 and
$1,351 at December 31, 2001 and 2000.

The  provision  for loan losses  expense  represent  charges made to earnings to
maintain an adequate  allowance for loan losses.  The allowance is maintained at
an amount that we believe to be sufficient to absorb probable incurred losses in
the  loan  portfolio.  Monitoring  loan  quality  and  maintaining  an  adequate
allowance is an ongoing process overseen by our senior management.  On a monthly
basis,  a formal  analysis of the  adequacy  of the  allowance  is prepared  and
reviewed by  management  and the board of directors.  This analysis  serves as a
point in time assessment of the level of the allowance and serves as a basis for
current provisions for loan losses.

Our loan quality monitoring process includes assigning loan grades to commercial
loans  and the use of a watch  list to  identify  loans of  concern.  Management
evaluates  the credit  quality of  individual  loans and borrowers and assigns a
risk grade  based on the  various  factors  included  in the  evaluation.  Loans
receiving   substandard  risk  grades  are  monitored  regularly  for  repayment
performance  and  changes in the  borrowers'  ability to repay the loans.  These
loans do not  necessarily  meet the definition of  non-accrual or  nonperforming
loans and a substandard grade does not indicate that management expects a future
loan loss.  The  outstanding  balance of loans  with an  assigned  risk grade of
substandard was $16,338 and $10,120 at December 31, 2001 and 2000.

The  analysis  of the  allowance  for loan losses  includes  the  allocation  of
specific amounts of the allowance to individual  problem loans,  generally based
on  our  analysis  of the  collateral  securing  those  loans.  Portions  of the
allowance  are  allocated  to pools of loans,  based  upon a variety  of factors
including industry loss averages for similarly sized institutions,  our own loss
history,  considering  the fact  that our  growth  in  recent  years  makes  our
historical  experience less meaningful,  trends in delinquent and non-performing
loans,  and economic  trends  affecting our market.  These  components are added
together and compared to the balance of our allowance at the evaluation date.

At December 31, 2001, the balance of the allowance for loan losses was $3,400 or
2.32% of gross  loans  outstanding,  compared  to $2,667 or 2.01% of gross loans
outstanding at December 31, 2000.

Note. Dollar amounts in thousands except per share data.

<PAGE>

DEPOSIT ACTIVITIES

The Bank offers  several  types of deposit  programs  designed  to attract  both
short-term and long-term  savings by providing a wide assortment of accounts and
rates.  The Bank also  obtains  time  deposits on a bid basis from  customers or
potential  customers  wishing to deposit amounts of at least $100. Time deposits
from public entities such as state and local  government  entities,  schools and
hospitals  totaled  $12,349 or 7.67% of total  deposits at December 31, 2001 and
$14,183 or 10.19% at December 31, 2000.

Interest earned on statement  savings  accounts is paid from the date of deposit
to the date of withdrawal, compounded and credited quarterly. Interest earned on
money market demand  deposit  accounts is compounded and credited  monthly.  The
interest  rates on these  accounts are reviewed by  management of the Bank daily
and adjusted as often as deemed necessary.


BANK Liquidity and Interest Rate Sensitivity

Liquidity is a measure of the Bank's ability to meet its customers'  present and
future  deposit   withdrawals   and/or  increased  loan  demand  without  unduly
penalizing earnings. Interest rate sensitivity involves the relationship between
rate  sensitive  assets and  liabilities  and is an  indication  of the probable
effects of interest rate movements on the Bank's net interest  income.  The Bank
manages  both its  liquidity  and  interest  sensitivity  through a  coordinated
asset/liability management program directed by the Asset Liability Committee.

Liquidity is provided by projecting  loan demand and other  financial  needs and
then maintaining  sufficient funding sources and assets readily convertible into
cash to meet these  requirements.  The Bank has provided for its liquidity needs
by maintaining adequate balances in money market assets,  through growth in core
deposits,  maturing loans and  investments  in its  securities  portfolio and by
maintaining various short-term borrowing sources. At December 31, 2001, the Bank
had $17,603 or 9.28% of total assets in securities available-for-sale.  The Bank
also had $9,305 of federal funds sold and an additional  $3,000  available  from
unused federal funds purchased agreements with two large commercial banks.

Management believes that expected deposit growth, maturing investment securities
and unused  borrowing  sources will be adequate to meet the liquidity  needs for
the foreseeable future.

The Bank  attempts to manage its rate  sensitivity  position  through the use of
variable-rate loans and by matching funds acquired,  having a specific maturity,
with loans, securities or money market investments with similar maturities.  The
Bank  employs a variety of  measurement  techniques  to identify  and manage its
exposure to changing  interest rates. A simulation  model is used to measure the
Bank's net interest income volatility to changes in the level of interest rates,
interest rate spreads,  the shape of the yield curve and changing product growth
patterns and investment strategies. Additionally, a rate sensitivity position is
computed for various repricing intervals by calculating rate sensitivity gaps.

Note. Dollar amounts in thousands except per share data.

<PAGE>

CAPITAL ADEQUACY

Heartland  and  the  Bank  are  subject  to  regulatory   capital   requirements
administered by federal banking agencies. Capital adequacy guidelines and prompt
corrective action regulations involve  quantitative and qualitative  measures of
assets,   liabilities  and  certain  off-balance-sheet  items  calculated  under
regulatory accounting practices.

The most restrictive capital adequacy  requirement in place during 2000 and 2001
was from an  agreement  with the Bank's  regulators.  In April,  2001,  the Bank
executed a regulatory  agreement with the Federal Deposit Insurance  Corporation
and  the  Indiana  Department  of  Financial   Institutions  that,  among  other
requirements,  requires  the Bank to maintain a ratio of Tier 1 capital to total
assets of not less than 7.50% and refrain  from paying  dividends  to  Heartland
that would cause that ratio  requirement  to be violated,  and  restricts  asset
growth to no more than 5% per quarter. The Bank's Tier 1 Capital to total assets
ratio at December 31, 2001 was 8.43% and the Bank's  growth  during 2001 did not
exceed that allowed. See note 13 to the consolidated financial statements.

On March 11, 2002, the FDIC and DFI requested that the Bank consent to the entry
by those agencies of a formal order under federal and state banking laws,  under
which  the  Bank  and its  Directors  would  be  required  to take a  number  of
affirmative steps to address regulatory concerns,  including but not limited to,
maintaining  the  Bank's  ratio of Tier 1  capital  to  assets  at 8% or  above;
committing not to declare or pay dividends to Heartland that would result in the
Bank's violation of the required capital ratio;  limiting growth in total assets
to no more than three percent in any three month period without advance approval
by the regulators, or more than 12% annually; adopting and implementing plans to
resolve certain criticized assets;  eliminating or restricting future lending to
borrowers whose loans have been  criticized by the regulators;  and adopting and
implementing plans to reduce the volume of the Bank's  acquisition,  development
and construction  loans,  commercial  real-estate  loans and high  loan-to-value
loans, as defined by FDIC regulation Part 365, in relation to its capital.

Although  the Bank intends to request  that the  regulators  revise or eliminate
certain  provisions of the proposed order,  Heartland believes that it is likely
that the restrictions  described will result from the regulators' request. These
restrictions  may  adversely  affect  the  Bank's  net  interest  income and net
interest margin in 2002 and future periods, if the restrictions require that the
Bank reduce the outstanding  balances of  higher-yielding  types of loans. These
restrictions are also likely to result in increased  non-interest expense during
2002  due  to  increased  consulting,  legal,  accounting,  staffing  and  other
compliance costs associated with responding to these restrictions.

Note. Dollar amounts in thousands except per share data.

<PAGE>

PARENT COMPANY LIQUIDITY

Heartland's parent company liquidity improved during December 2001 as the result
of the issuance of $5,000 of long-term  subordinated  debentures  in  connection
with the issuance by its trust  subsidiary of trust  preferred  securities  (see
Note 8 to the consolidated  financial statements) and the application of some of
the  proceeds  by  Heartland  to retire  its short term note  payable.  Although
Heartland had approximately  $2,022 of parent-company  cash that would have been
available  at  December  31,  2001,  for  the  payment  of  interest  and  other
obligations  on the  subordinated  debentures,  Heartland  expects  to rely upon
dividends  from  the  Bank as the  primary  source  of its  funds  to  meet  its
obligations under the subordinated debentures.  At December 31, 2001, the Bank's
Tier 1 capital to total assets ratio was 8.43% and it could have paid  dividends
of $817  without  violating  the capital  ratio  maintenance  provisions  of the
proposed  regulatory  order as discussed  under the "Capital  Adequacy"  caption
above.  If the Bank's Tier 1 capital to total assets ratio should fall below the
proposed  requirement of 8.0% or the Bank otherwise cannot lawfully or prudently
pay  dividends  to  Heartland  for the  purpose  of  Heartland's  payment of its
obligations in respect of the subordinated  debentures,  and if Heartland should
not at the time of the payment  obligation  continue to have  sufficient cash on
hand to pay such obligations,  Heartland would be forced to defer  distributions
on the subordinated debentures (which Heartland may elect to do for a period not
to exceed 20 consecutive quarters without being in default thereunder) or obtain
alternative sources of funds.

The restrictions may also reduce Heartland's  parent-company liquidity by making
it  unlikely  that the Bank will be a position  to pay  dividends  to  Heartland
during the period of such restrictions,  and Heartland may be required to infuse
additional capital into the Bank from time to time if necessary in order for the
Bank to maintain any required  capital ratio.  At March 20, 2002,  Heartland had
sufficient  liquid assets to pay the interest  payable under on the subordinated
debentures related to the trust preferred  securities during 2002, and Heartland
may elect to defer the  payment  of  interest  on such  debentures  for  certain
periods of time in any event.  Heartland  therefore does not expect that any new
maintenance  requirements  with  respect  to the  Bank's  capital  ratio will be
material to parent-company liquidity during 2002.

Note. Dollar amounts in thousands except per share data.


<PAGE>


SERVICE AREA

The Bank's primary service area is Johnson County, Indiana.  Johnson County lies
on the Southern border of Marion County and Indianapolis,  Indiana. The Bank has
one branch in Franklin and two in Greenwood, which are the two largest cities in
the  county.  The Bank  also  operates  from a fourth  branch  in  Bargersville,
Indiana.  Bargersville,  also in Johnson County, is approximately six miles west
of Franklin and seven miles south of Greenwood.


COMMON STOCK

Heartland  had  1,394,172  shares of Common  Stock  issued  and  outstanding  to
approximately  1,500  shareholders  (including  beneficial owners who held their
shares in street name) on March 4, 2002.  The number of  shareholders  of record
was 164 on March 4, 2002.

The Common  Stock has been quoted on the NASD  Over-the-Counter  Bulletin  Board
under the symbol HRTB since October 3, 1997. The following  table sets forth the
reported high and low bid prices of the Common Stock for the quarters  indicated
as reported on the NASD Over-the-Counter  Bulletin Board. (Data is retroactively
adjusted  for the five  percent  stock  dividends  issued  in  October  2000 and
November 2001).

                            High               Low

First Quarter 2000          $7.67             $5.83
Second Quarter 2000          6.97              5.50
Third Quarter 2000           8.53              6.69
Fourth Quarter 2000          9.41              6.90
First Quarter 2001           7.54              6.47
Second Quarter 2001          7.85              6.58
Third Quarter 2001           7.93              6.64
Fourth Quarter 2001          8.10              6.85

The prices  quoted above  represent  prices  between  dealers and do not include
adjustments  for mark-ups,  mark-downs  or  commissions  and do not  necessarily
represent actual transactions.

Heartland  has not  paid  cash  dividends  since  its  inception  and  does  not
anticipate  doing so in the  foreseeable  future.  In October  2000 and again in
November 2001,  Heartland issued five percent stock dividends on all outstanding
shares. Share and per share information (except market values) has been restated
to give effect to those dividends.


<PAGE>






FINANCIAL STATEMENTS

The items listed below are presented on the  following  pages for your review in
conjunction with the foregoing discussion:

o     Report of Independent Auditors on consolidated financial statements.

o     Consolidated Balance Sheets at December 31, 2001 and 2000.

o     Consolidated Statements of Income for the years ended December 31, 2001
      and 2000.

o  Consolidated  Statements  of  Changes in  Shareholders'  Equity for the years
   ended December 31, 2001 and 2000.

o  Consolidated  Statements of Cash Flows for the years ended  December 31, 2001
and 2000.

o     Notes to consolidated financial statements.
o

<PAGE>


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







                               REPORT OF INDEPENDENT AUDITORS



Board of Directors and Shareholders
Heartland Bancshares, Inc.
Franklin, Indiana


We have  audited  the  accompanying  consolidated  balance  sheets of  Heartland
Bancshares,  Inc. as of December 31, 2001 and 2000 and the related  consolidated
statements  of income,  changes in  shareholders'  equity and cash flows for the
years ended  December  31, 2001 and 2000.  These  financial  statements  are the
responsibility of the Corporation's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  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  Heartland
Bancshares,  Inc.  as of  December  31,  2001 and 2000,  and the  results of its
operations  and its cash flows for the years ended December 31, 2001 and 2000 in
conformity with accounting principles generally accepted in the United States of
America.





                                          Crowe, Chizek and Company LLP

Indianapolis, Indiana
February 19, 2002,
except for Note 13, Capital  Requirements  and Other Regulatory  Matters,  as to
which the date is March 11, 2002.



<PAGE>




                           HEARTLAND BANCSHARES, INC.
                           CONSOLIDATED BALANCE SHEETS
                           December 31, 2001 and 2000
                          (Dollar amounts in thousands)

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


                                                             2001        2000
                                                             ----        ----
ASSETS
Cash and due from banks                                    $  7,202   $  7,070
Federal funds sold                                            9,305        169
                                                           --------   --------
      Total cash and cash equivalents                        16,507      7,239

Time deposits with other financial institutions                 500          -
Securities available-for-sale                                17,603     21,749
Loans held for sale                                           4,597          -
Loans, net of allowance of $3,400 and $2,667                143,236    129,882
Premises and equipment, net                                   2,853      2,323
Federal Home Loan Bank stock                                    512        450
Accrued interest receivable and other assets                  3,828      3,273
                                                           --------   --------

                                                           $189,636   $164,916
                                                           ========   ========


LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
   Noninterest-bearing deposits                            $ 17,687   $ 14,238
   Interest-bearing demand and savings deposits              68,654     50,360
   Interest-bearing time deposits                            74,650     74,622
                                                           --------   --------
      Total deposits                                        160,991    139,220
   Repurchase agreements                                      5,554      9,273
   Other borrowings                                           4,000      3,000
   Accrued interest payable and other liabilities               828        765
                                                           --------   --------
      Subtotal                                              171,373    152,258

Guaranteed preferred beneficial interest in Corporation's
  subordinated debentures                                     5,000          -

Shareholders' equity
   Common stock, no par value:  10,000,000 shares
     authorized; 1,394,172 (2001) and 1,328,194 (2000)
     shares issued and outstanding                            1,394      1,328
   Additional paid-in capital                                11,360     10,912
   Retained earnings                                            358        347
   Accumulated other comprehensive income                       151         71
                                                           --------   --------
                                                             13,263     12,658
                                                           --------   --------
                                                           $189,636   $164,916
                                                           ========   ========






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

                             See accompanying notes.




<PAGE>



                           HEARTLAND BANCSHARES, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                           December 31, 2001 and 2000
                          (Dollar amounts in thousands)

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


                                                             2001        2000
                                                             ----        ----
Interest income
   Loans, including related fees                           $ 12,752    $11,139
   Securities:
      Taxable                                                 1,365      1,116
      Non-taxable                                                67         25
   Short-term investments                                       225        196
                                                           --------    -------
                                                             14,409     12,476

Interest expense
   Deposits                                                   6,315      5,701
   Short-term borrowings                                        223        343
   Other borrowings                                             251        303
                                                           --------    -------
                                                              6,789      6,347

Net interest income                                           7,620      6,129

Provision for loan losses                                     2,967      1,744
                                                           --------    -------

Net interest income after provision for loan losses           4,653      4,385

Noninterest income
   Deposit service charges and fees                             545        296
   Commissions on investment sales                              392        314
   Gain on sale of securities                                     6          6
   Brokered mortgage loan fees                                  535         81
   Other                                                        118         70
                                                           --------    -------
                                                              1,596        767

Noninterest expense
   Salaries and employee benefits                             3,186      2,283
   Occupancy and equipment, net                                 510        344
   Data processing                                              644        472
   Advertising                                                  102        140
   Professional fees                                            260        175
   Other                                                        714        515
                                                           --------    -------
                                                              5,416      3,929

Income before income taxes                                      833      1,223

Income taxes                                                    304        472
                                                           --------    -------

Net income                                                 $    529    $   751
                                                           ========    =======

Basic and diluted earnings per share                       $   . 38    $  . 54
                                                           ========    =======




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

                             See accompanying notes.




<PAGE>




                           HEARTLAND BANCSHARES, INC.
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                 Years ended December 31, 2001 and 2000 (Dollar
                  amounts in thousands, except per share data)

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

                                                       Accumulated
                                 Additional               Other       Total
                        Common     Paid-in  Retained  ComprehensiveShareholders'
                         Stock     Capital  Earnings     Income      Equity

Balance January 1, 2000   $1,265     $10,466     $  105    $ (193)    $11,643

Stock dividend of 5%
  (63,194 shares)             63         446       (509)        -          -
Comprehensive income
   Net income for 2000         -           -        751         -        751
   Change in net unrealized
     gain/(loss)               -           -          -       264        264
                                                                     -------
Total comprehensive income                                             1,015
                          ------     -------     ------    ------    -------

Balance December 31, 2000  1,328      10,912        347        71     12,658
Stock dividend of 5%
   (65,978 shares)            66         448       (518)        -         (4)
Comprehensive income
   Net income for 2001         -           -        529         -        529
   Change in net unrealized
     gain/(loss)               -           -          -        80         80
                                                                     -------
Total comprehensive income                                               609
                          ------     -------     ------    ------    -------

Balance December 31, 2001 $1,394     $11,360     $  358    $  151    $13,263
                          ======     =======     ======    ======    =======




















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

                             See accompanying notes.



<PAGE>




                           HEARTLAND BANCSHARES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     Years ended December 31, 2001 and 2000
                          (Dollar amounts in thousands)

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

                                                             2001        2000
                                                             ----        ----
Cash flows from operating activities
   Net income                                              $    529   $    751
   Adjustments to reconcile net income to net
     cash from operating activities
      Depreciation and amortization                             110        151
      (Gain)/loss on sale of securities                          (6)        (6)
      Provision for loan losses                               2,967      1,744
      Change in assets and liabilities:
         Change in loans held for sale                       (4,597)         -
         Accrued interest receivable and other assets          (558)    (1,948)
         Accrued interest payable and other liabilities          13        261
                                                           --------   --------
            Net cash from operating activities               (1,542)       953

Cash flows from investing activities
   Purchase of time deposits with other banks                  (500)         -
   Purchase of securities available-for-sale                (13,378)   (17,184)
   Proceeds from sales, calls and maturities of securities
     available-for-sale                                      17,801      9,183
   Loans made to customers, net of payments collected       (16,321)   (41,946)
   Purchase of FHLB stock                                       (62)       (50)
   Net purchases of property and equipment                     (778)      (845)
                                                           --------   --------
      Net cash from investing activities                    (13,238)   (50,842)

Cash flows from financing activities
   Net change in deposit accounts                            21,771     50,701
   Net change in short-term borrowings                       (3,719)     5,754
   Draws on note payable                                        917      1,000
   Repayments on note payable                                (1,917)         -
   Draws on FHLB advances                                     6,000     11,000
   Repayments on FHLB advances                               (4,000)   (15,000)
   Cash paid in lieu of fractional shares                        (4)         -
   Proceeds from trust preferred offering                     5,000          -
                                                           --------   --------

      Net cash from financing activities                     24,048     53,455
                                                           --------   --------

Net change in cash and cash equivalents                       9,268      3,566

Cash and cash equivalents at beginning of period              7,239      3,673
                                                           --------   --------

Cash and cash equivalents at end of period                 $ 16,507   $  7,239
                                                           ========   ========

Supplemental  disclosures of cash flow  information  Cash paid during the period
   for:
      Interest                                             $  6,881   $  6,357
      Income taxes                                            1,033        357







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

                             See accompanying notes.


                             See accompanying notes.
                           HEARTLAND BANCSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     Years ended December 31, 2001 and 2000
                          (Dollar amounts in thousands)

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


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description  of Business:  The  consolidated  financial  statements  include the
accounts  of  Heartland  Bancshares,  Inc.  (Corporation)  and its  wholly-owned
subsidiaries, Heartland Community Bank (Bank) and Heartland (IN) Statutory Trust
I (Trust),  after  elimination  of  significant  intercompany  transactions  and
accounts.

The  Corporation  is engaged in the business of commercial  and retail  banking,
with operations  conducted through its main office located in Franklin,  Indiana
and additional  branch  locations in Greenwood and  Bargersville,  Indiana.  The
majority of the Bank's  income is derived from  commercial  and retail  business
lending activities and investments. The majority of the Bank's loans are secured
by specific items of collateral  including  business  assets,  real property and
consumer assets.

Trust was formed during 2001 to issue the guaranteed beneficial interests in the
Corporation's subordinated debentures.

Use of Estimates:  To prepare financial statements in conformity with accounting
principles generally accepted in the United States of America,  management makes
estimates and assumptions  based on available  information.  These estimates and
assumptions  affect the amounts  reported in the  financial  statements  and the
disclosures  provided,  and future results could differ.  The allowance for loan
losses and the fair values of financial  instruments are particularly subject to
change.

Securities:  Securities  are classified as available for sale when they might be
sold before maturity.  Securities  available for sale are carried at fair value,
with unrealized  holding gains and losses reported  separately in  shareholders'
equity,  net of tax. Other  securities  such as Federal Home Loan Bank stock are
carried at cost.

Interest income includes amortization of purchase premium or discount. Gains and
losses on sales are based on the amortized cost of the security sold. Securities
are written down to fair value when a decline in fair value is not temporary.

Loans: Loans are reported at the principal balance outstanding,  net of unearned
interest,  deferred  loan fees and  costs,  and an  allowance  for loan  losses.
Interest income is reported on the interest method and includes  amortization of
net  deferred  loan fees and costs over the loan  term.  Loans held for sale are
mortgage loans closed by the Bank and in the process of being  delivered to loan
brokers. These loans are carried at the lower of cost or market, on an aggregate
basis.

Interest income is not reported when full loan repayment is in doubt,  typically
when payments are  significantly  past due.  Payments received on such loans are
reported as principal reductions.

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

                                   (Continued)

<PAGE>


                           HEARTLAND BANCSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     Years ended December 31, 2001 and 2000
                          (Dollar amounts in thousands)

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

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Allowance  for Loan  Losses:  The  allowance  for  loan  losses  is a  valuation
allowance for probable  incurred  credit losses,  increased by the provision for
loan losses and decreased by charge-offs less recoveries.  Management  estimates
the allowance  balance required using past loan loss experience,  the nature and
volume of the  portfolio,  information  about specific  borrower  situations and
estimated collateral values, economic conditions, and other factors. Allocations
of the allowance  may be made for specific  loans,  but the entire  allowance is
available for any loan that, in  management's  judgment,  should be charged-off.
Loan losses are charged  against the  allowance  when  management  believes  the
uncollectibility of a loan balance is confirmed.

A loan is  impaired  when full  payment  under the loan  terms is not  expected.
Impairment  is evaluated in total for  smaller-balance  loans of similar  nature
such as  residential  mortgage,  consumer,  and  credit  card  loans,  and on an
individual loan basis for other loans.  If a loan is impaired,  a portion of the
allowance is allocated so that the loan is reported,  net, at the present  value
of  estimated  future cash flows using the loan's  existing  rate or at the fair
value of collateral if repayment is expected solely from the collateral.

Premises  and  Equipment:  Premises  and  equipment  are  stated  at  cost  less
accumulated depreciation.  Depreciation expense is recognized over the estimated
useful  lives of the assets,  principally  on the  straight-line  method.  These
assets are reviewed for impairment  when events indicate the carrying amount may
not be recoverable.

Repurchase  Agreements:   Substantially  all  repurchase  agreement  liabilities
represent amounts advanced by various customers. Securities are pledged to cover
these liabilities, which are not covered by federal deposit insurance.

Stock Compensation:  Expense for employee  compensation under stock option plans
is recorded  only if options are granted  below market price at grant date.  Pro
forma  disclosures  of net income and  earnings per share are provided as if the
fair value were used for stock based compensation.

Income  Taxes:  Income tax expense is the sum of the current year income tax due
or refundable  and the change in deferred tax assets and  liabilities.  Deferred
tax assets and liabilities are the expected future tax consequences of temporary
differences   between  the  carrying   amounts  and  tax  bases  of  assets  and
liabilities, computed using enacted tax rates. A valuation allowance, if needed,
reduces deferred tax assets to the amount expected to be realized.

Financial Instruments: Financial instruments include credit instruments, such as
commitments to make loans and standby letters of credit, issued to meet customer
financing  needs.  The face amount for these items  represents  the  exposure to
loss, before considering customer collateral or ability to repay.

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

                                   (Continued)

<PAGE>


                           HEARTLAND BANCSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     Years ended December 31, 2001 and 2000
                          (Dollar amounts in thousands)

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

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Statement of Cash Flows:  Cash and cash  equivalents are defined to include cash
on hand, amounts due from banks, and federal funds sold. The Corporation reports
net cash  flows  for  customer  loan  transactions,  deposit  transactions,  and
short-term borrowings.

Earnings  Per  Share:  Basic  earnings  per share is net  income  divided by the
weighted  average  number of  shares  outstanding  during  the  period.  Diluted
earnings per share includes the dilutive effect of additional  potential  shares
issuable under stock options.

Comprehensive  Income:  Comprehensive  income  consists  of net income and other
comprehensive  income.  Other comprehensive income includes unrealized gains and
losses on securities  available  for sale which are also  recognized as separate
components of equity.

Dividend  Restriction:  Banking  regulations require maintaining certain capital
levels and may limit the dividends paid by the bank to the holding company or by
the holding company to shareholders.


Fair Values of Financial  Instruments:  Fair values of financial instruments are
estimated using relevant market information and other assumptions, as more fully
disclosed separately.  Fair value estimates involve uncertainties and matters of
significant  judgment regarding interest rates,  credit risk,  prepayments,  and
other factors,  especially in the absence of broad markets for particular items.
Changes in assumptions or in market  conditions could  significantly  affect the
estimates.  The fair value  estimates  of  existing  on- and  off-balance  sheet
financial  instruments does not include the value of anticipated future business
or the values of assets and liabilities not considered financial instruments.

Industry  Segment:  Internal  financial  information  is primarily  reported and
aggregated in one line of business, i.e., banking.

Loss  Contingencies:  Loss  contingencies,  including  claims and legal  actions
arising in the ordinary course of business, are recorded as liabilities when the
likelihood  of loss is probable and an amount or range of loss can be reasonably
estimated. Management does not believe there now are such matters that will have
a material effect on the financial statements.

New  Accounting  Pronouncements:  Beginning  January 1, 2001,  a new  accounting
standard  required  all  derivatives  to  be  recorded  at  fair  value.  Unless
designated  as hedges,  changes in these fair values are  recorded in the income
statement.  Fair value changes  involving  hedges will  generally be recorded by
offsetting  gains and  losses on the hedge and on the hedged  item,  even if the
fair  value of the  hedged  item is not  otherwise  recorded.  Adoption  of this
standard did not have a material effect on the Corporation.

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

                                   (Continued)

<PAGE>


                           HEARTLAND BANCSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     Years ended December 31, 2001 and 2000
                          (Dollar amounts in thousands)

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

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

New accounting standards require all business  combinations to be recorded using
the purchase method of accounting for any  transaction  initiated after June 30,
2001. Under the purchase method, all identifiable tangible and intangible assets
and  liabilities of the acquired  company must be recorded at fair value at date
of acquisition, and the excess of cost over fair value of net assets acquired is
recorded as goodwill.  Identifiable  intangible  assets must be  separated  from
goodwill.  Identifiable  intangible  assets  with  finite  useful  lives will be
amortized  under the new standard,  whereas  goodwill,  both amounts  previously
recorded and future amounts  purchased,  will cease being amortized  starting in
2002.  Annual  impairment  testing will be required for goodwill with impairment
being  recorded  if the  carrying  amount of goodwill  exceeds its implied  fair
value.  Adoption  of this  standard  on January 1, 2002 will not have a material
effect on the Corporation's financial statements.

NOTE 2 - SECURITIES

The fair value of securities available for sale and the related gains and losses
recognized in other comprehensive income/loss were as follows:

                                                           Gross      Gross
                                                 Fair   Unrealized Unrealized
                                                 Value     Gains     Losses
                                                 -----     -----     ------
2001
   U.S. Government and its agencies            $ 5,381   $     93   $   (12)
   Obligations of states and political
     subdivisions                                2,345         15        (2)
   Mortgage backed securities                    8,880        130        (8)
   Corporates                                      997         32         -
                                               -------   --------   -------

                                               $17,603   $    270   $   (22)
                                               =======   ========   =======

2000
   U.S. Government and its agencies            $11,897   $    139   $   (46)
   Obligations of states and political
     subdivisions                                1,441          1        (5)
   Mortgage backed securities                    7,459         56        (9)
   Corporates                                      952          2       (20)
                                               -------   --------   -------

                                               $21,749   $    198   $   (80)
                                               =======   ========   =======

During 2001 and 2000,  gross  proceeds from sales of securities  were $1,502 and
$4,648. Recognized gains were $7 and $15 and recognized losses were $1 and $9.

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

                                   (Continued)

<PAGE>


                           HEARTLAND BANCSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     Years ended December 31, 2001 and 2000
                          (Dollar amounts in thousands)

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

NOTE 2 - SECURITIES (Continued)

The fair value of securities at December 31, 2001, by contractual maturity,  are
shown below.

   Due in one year or less                                         $    236
   Due after one year through five years                              4,280
   Due after five years through ten years                             2,805
   Due after ten years                                                1,402
   Mortgage backed securities                                         8,880
                                                                   --------
                                                                   $ 17,603
                                                                   ========

Securities with a carrying value of $12,438 and $14,471 at December 31, 2001 and
2000 were pledged to secure borrowings and for other purposes.

NOTE 3 - LOANS

Loans at year-end are comprised of the following:

                                                          2001        2000
                                                          ----        ----
   Commercial loans and leases                          $ 76,097   $ 63,766
   Real estate construction and land development          23,150     24,719
   Residential real estate                                24,795     21,942
   Consumer                                               22,594     22,122
                                                        --------   --------
                                                        $146,636   $132,549
                                                        ========   ========

Certain of the  Corporation's  officers and directors were loan customers of the
Bank. The balance of loans outstanding to these individuals was $342 and $279 at
December 31, 2001 and 2000. New loans  originated and advances on existing loans
during 2001 were $289 and repayments were $226.


NOTE 4 - ALLOWANCE FOR LOAN LOSSES

The activity in the allowance for loan losses is as follows:
                                                          2001        2000
                                                          ----        ----
   Beginning balance                                    $  2,667   $  1,365
   Provision charged to operations                         2,967      1,744
   Loans charged-off                                      (2,300)      (446)
   Recoveries on loans previously charged-off                 66          4
                                                        --------   --------
   Ending balance                                       $  3,400   $  2,667
                                                        ========   ========

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


                                   (Continued)

<PAGE>


                           HEARTLAND BANCSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     Years ended December 31, 2001 and 2000
                          (Dollar amounts in thousands)

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

NOTE 4 - ALLOWANCE FOR LOAN LOSSES (Continued)

Information about impaired loans is as follows:
                                                          2001        2000
                                                          ----        ----
                                                          ----        ----
   Year-end loans with no allowance
     for loan losses allocated                          $      -   $      -
   Year-end loans with allowance for
     loan losses allocated                                 4,130        521
   Amount of the allowance allocated                         625         78
   Average of impaired loans during the year               3,075        172
   Interest income recognized during impairment               92          -
   Cash-basis interest income received during impairment      45          -
   Loans on non accrual status at year end                   663        992
   Loans delinquent greater than 90 days
     and still accruing at year end                           86          -


NOTE 5 - PREMISES AND EQUIPMENT

Year-end premises and equipment were as follows:
                                                          2001        2000
                                                          ----        ----

   Land                                                 $    205   $    205
   Buildings and improvements                              1,788      1,342
   Leasehold improvements                                    272        251
   Furniture and equipment                                 1,259        951
                                                        --------   --------
      Total                                                3,524      2,749
   Accumulated depreciation                                  671        426
                                                        --------   --------

      Premises and equipment, net                       $  2,853   $  2,323
                                                        ========   ========

Depreciation expense was $248 and $181 for 2001 and 2000.


NOTE 6 - INTEREST-BEARING TIME DEPOSITS

Interest-bearing  time  deposits  issued  in  denominations  of $100 or  greater
totaled $28,682 and $33,481 at December 31, 2001 and 2000.

Scheduled maturities of time deposits for the next five years are as follows:

               2002                                     $ 48,782
               2003                                       22,500
               2004                                        3,024
               2005                                          122
               2006                                          222
               Thereafter                                      -
                                                        --------

                                                        $ 74,650
                                                        ========

Time  deposits  from  governmental  and  other  public  entities  such as school
corporations and hospitals in the Bank's market area totaled $12,349 at December
31, 2001 and $14,183 at December 31, 2000.

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

                                   (Continued)

<PAGE>



                           HEARTLAND BANCSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     Years ended December 31, 2001 and 2000
                          (Dollar amounts in thousands)

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

NOTE 7 - OTHER BORROWINGS

Other  borrowings  consist of advances from the Federal Home Loan Bank (FHLB) at
December 31, 2001 and 2000 and include a note  payable to a  commercial  bank at
December 31, 2000. The note payable was the outstanding balance of a $2,000 line
of credit secured by a pledge of the Bank's stock. It was variable rate, and had
a maturity date of September 22, 2001. The note was  refinanced  during 2001 and
repaid in full in December 2001.

                                                  2001       2000
                                                  ----       ----

            FHLB advances                       $  4,000   $ 2,000
            Note payable                               -     1,000
                                                --------   -------

                                                $  4,000   $ 3,000
                                                ========   =======

FHLB advances are payable at maturity, generally with a prepayment penalty. They
are   collateralized  by  a  blanket  pledge  of  mortgage  loans  and  eligible
securities. Interest is payable monthly.

FHLB advances are comprised of the following individual advances at December 31:

              Maturity date   Interest Rate       2001       2000
              -------------   -------------       ----       ----

               July 14, 2003      4.66%         $  2,000   $     -
               October 30, 2003   3.08             1,000         -
               November 1, 2004   3.68             1,000         -
               October 30, 2001   6.69                 -     2,000
                                                --------   -------

                                                $  4,000   $ 2,000
                                                ========   =======












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


                                   (Continued)

<PAGE>


                           HEARTLAND BANCSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     Years ended December 31, 2001 and 2000
                          (Dollar amounts in thousands)

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

NOTE 8 - GUARANTEED PREFERRED BENEFICIAL INTERESTS IN CORPORATION'S SUBORDINATED
DEBENTURES

On December 18, 2001, the Corporation issued $5,000 aggregate liquidation amount
of Floating  Rate Capital  Securities  ("Trust  Preferred  Securities")  through
Heartland (IN) Statutory Trust I, a subsidiary of the Corporation (the "Trust").
The  proceeds  of the  offering  were  loaned  by the  Trust  subsidiary  to the
Corporation in exchange for subordinated  debentures with terms that are similar
to the Trust Preferred  Securities,  which subordinated  debentures are the sole
asset of the  Trust.  Issuance  costs of $156 paid from the  proceeds  are being
amortized  over the first  five years of the  securities.  The  Corporation  has
guaranteed  that the Trust will make  distributions  to the holders of the Trust
Preferred Securities if the Trust has available funds to make such distribution,
and the Trust  Preferred  Securities  are  reflected on the balance sheet by the
guaranteed  preferred  beneficial  interest  in the  Corporation's  subordinated
debentures.   Distributions  on  the  Trust  Preferred  Securities  are  payable
quarterly  in arrears at the annual rate  (adjusted  quarterly)  of  three-month
LIBOR plus  3.60%,  and are  included in  interest  expense in the  consolidated
statement of income.  The annual rate cannot exceed 12.50% prior to December 18,
2006.

The Trust Preferred  Securities,  which mature December 18, 2031, are subject to
mandatory  redemption,  in whole or in part, upon repayment of the  subordinated
debentures  at  maturity  or  their  earlier   redemption  at  the   liquidation
preference.  The  subordinated  debentures are redeemable  prior to the maturity
date at the option of the  Corporation  on or after  December  18, 2006 at their
principal amount plus accrued but unpaid interest.  The subordinated  debentures
are also redeemable in whole or in part from  time-to-time,  upon the occurrence
of specific events defined within the trust  indenture.  The Corporation has the
option to defer  distributions on the subordinated  debentures from time-to-time
for a period not to exceed 20 consecutive quarters.


NOTE 9 - EMPLOYEE BENEFIT PLANS

A 401(k)  retirement  savings  plan is  maintained  for the  benefit of eligible
employees. The Plan requires employees to be 21 years of age before entering the
Plan.  Employee  contributions  are limited to a maximum of 15% of their salary.
The  Plan  provides  for a 50%  matching  of the  first  6% of  employee  salary
contributions and allows for an annual discretionary contribution.  Participants
are  fully  vested  in  salary   deferral   contributions.   Employer   matching
contributions  vest at a rate of 20% per year of employment and are fully vested
after the  completion  of 5 years of service  with the Bank after  entering  the
plan.  The 401(k)  contribution  charged to expense was $38 and $26 for 2001 and
2000.


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

                                   (Continued)

<PAGE>


                           HEARTLAND BANCSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     Years ended December 31, 2001 and 2000
                          (Dollar amounts in thousands)

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

NOTE 10 - STOCK OPTION PLAN

The  Corporation  maintains  two stock  option  plans:  an  employee  plan and a
non-employee  director  plan.  Under the terms of the plans,  options  for up to
292,162  shares  of  the  Corporation's  common  stock  may  be  granted  to key
management employees and directors of the Corporation and its subsidiaries.  The
exercise  price of the  options  will be  determined  at the time of grant by an
administrative  committee  appointed by the Board of Directors and in any event,
will not be less than fair  market  value of the  shares of common  stock at the
time the option is granted.

No options  were  granted  during 2000 or 2001.  Options  granted in prior years
under these plans included provisions that deferred the complete  exercisability
of the  options  pending  further  service to the  Corporation  by  vesting  the
exercise rights of the holders of such options in annual  installments  assuming
continued service.

A summary of the Corporation's  stock option activity,  and related  information
follows:

                                       2 0 0 1                 2 0 0 0
                                       -------                 -------
                                             Weighted-                Weighted-
                                              Average                  Average
                                             Exercise                 Exercise
                                  Options      Price       Options      Price
   Outstanding - beginning
     of period                     147,735    $  9.07      147,735    $  9.07
   Granted                               -         -             -         -
   Exercised                             -         -             -         -
   Forfeited                             -         -             -         -
                                 ---------    ------     ---------    ------

   Outstanding-end of period       147,735    $  9.07      147,735    $  9.07
                                 =========    =======    =========    =======

   Exercisable at end of period    139,860    $  9.07      114,660    $  9.07
                                 =========    =======    =========    =======


Pro forma  disclosures  are  required for  companies  that do not adopt the fair
value accounting  method for stock-based  employee  compensation.  The pro forma
information presents net income and earnings per share had the fair value method
been used to measure compensation cost for stock option plans. Compensation cost
actually recognized for stock options was $0.

For purposes of pro forma  disclosures,  the estimated fair value of the options
is amortized to expense over the options' vesting period.  The Corporation's pro
forma information follows:

                                                           2001       2000
                                                           ----       ----

   Pro forma net income                                  $    465   $   669
   Pro forma basic and diluted earnings per share        $    .33   $   .48

In future years, the pro forma effect of not applying this standard may increase
if additional options are granted.

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

                                   (Continued)

<PAGE>


                           HEARTLAND BANCSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     Years ended December 31, 2001 and 2000
                          (Dollar amounts in thousands)

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

NOTE 11 - INCOME TAXES

Income tax expense was as follows:
                                                           2001       2000
                                                           ----       ----

   Current                                               $    502   $   724
   Deferred                                                  (198)     (252)
                                                         --------   -------

      Total                                              $    304   $   472
                                                         ========   =======

Effective  tax rates differ from federal  statutory  rates  applied to financial
statement income due to the following:
                                                           2001       2000
                                                           ----       ----
   Federal statutory rate times
     financial statement income                          $    283   $   416
   Effect of:
      Tax-exempt income                                       (18)       (7)
      State taxes, net of federal benefit                      48        60
      Other, net                                               (9)        3
                                                         --------   -------

         Total                                           $    304   $   472
                                                         ========   =======

Year-end deferred tax assets and liabilities were due to the following:

                                                          2001       2000
                                                          ----       ----
   Deferred tax assets:
      Allowance for loan losses                          $  1,070   $   967
      Deferred compensation                                    36         -
      Other                                                     6        11
                                                         --------   -------
                                                            1,112       978
   Deferred tax liabilities:
      Depreciation                                            (83)      (62)
      Cash to accrual adjustment                             (319)     (449)
      Net unrealized gains on securities                      (97)      (47)
      Other                                                   (49)       (4)
                                                         --------   -------
                                                             (548)     (562)

      Total                                              $    564   $   416
                                                         ========   =======






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


                                   (Continued)

<PAGE>


                           HEARTLAND BANCSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     Years ended December 31, 2001 and 2000
                          (Dollar amounts in thousands)

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


NOTE 12 - PER SHARE DATA

Basic and diluted earnings per share were computed by dividing net income by the
weighted  average  number of shares  outstanding,  which was  1,394,172 for both
periods,  retroactively adjusted for all stock dividends.  The outstanding stock
options were not  dilutive in either  period,  but could become  dilutive in the
future.


NOTE 13 - CAPITAL REQUIREMENTS AND REGULATORY MATTERS

The Bank and the  Corporation  are subject to  regulatory  capital  requirements
administered by federal banking agencies. Capital adequacy guidelines and prompt
corrective action regulations involve  quantitative and qualitative  measures of
assets,   liabilities  and  certain  off-balance-sheet  items  calculated  under
regulatory accounting practices.

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

At year end 2001 and 2000, the Bank was well-capitalized.  Actual capital levels
and minimum required levels were:

                                                              Minimum Required
                                                                 To Be Well
                                           Minimum Required   Capitalized Under
                                              For Capital     Prompt Corrective
                               Actual      Adequacy Purposes Action Regulations
                           Amount    Ratio   Amount   Ratio    Amount    Ratio
                           ------    -----   ------   -----    ------    -----
2001 - Bank
Total capital
  (to risk weighted assets)$17,752   12.45%  $11,410   8%      $14,263   10%
Tier 1 capital
  (to risk weighted assets)15,949    11.18   5,705     4        8,558     6
Tier 1 capital
  (to average assets)      15,949     8.53   7,476     4        9,345     5

2001 - Corporation
Total capital
  (to risk weighted assets)$19,916   13.95%  $11,422   8%         N/A
Tier 1 capital
  (to risk weighted assets)16,391    11.48   5,711     4
Tier 1 capital
  (to average assets)      16,391     8.77   7,476     4


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

                                   (Continued)

<PAGE>


                           HEARTLAND BANCSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     Years ended December 31, 2001 and 2000
                          (Dollar amounts in thousands)

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

NOTE 13 - CAPITAL REQUIREMENTS AND REGULATORY MATTERS (Continued)

                                                              Minimum Required
                                                                 To Be Well
                                           Minimum Required   Capitalized Under
                                              For Capital     Prompt Corrective
                               Actual      Adequacy Purposes Action Regulations
                           Amount    Ratio   Amount   Ratio    Amount    Ratio
                           ------    -----   ------   -----    ------    -----

2000 - Bank
Total capital
  (to risk weighted assets)$15,016   11.35%  $10,580   8%      $13,225   10%
Tier 1 capital
  (to risk weighted assets)13,350    10.09   5,290     4        7,935     6
Tier 1 capital
  (to average assets)      13,350     8.26   6,466     4        8,082     5

2000 - Corporation
Total capital
  (to risk weighted assets $14,253   10.77%  $10,590   8%         N/A
Tier 1 capital
  (to risk weighted assets)12,587     9.51   5,295     4
Tier 1 capital
  (to average assets)      12,587     7.79   6,467     4

In April,  2001,  the Bank  executed a  regulatory  agreement  with the  Federal
Deposit  Insurance  Corporation  (FDIC) and the Indiana  Department of Financial
Institutions (DFI) that, among other requirements, requires the Bank to maintain
a ratio of Tier 1 capital  to total  assets of not less than  7.50% and  refrain
from paying dividends to the Corporation that would cause that ratio requirement
to be violated,  and restricts asset growth to no more than 5% per quarter.  The
Bank's Tier 1 Capital to total  assets  ratio at December 31, 2001 was 8.43% and
the Bank's growth during 2001 did not exceed that allowed.

On March 11, 2002, the FDIC and DFI requested that the Bank consent to the entry
by those agencies of a formal order under federal and state banking laws,  under
which  the  Bank  and its  Directors  would  be  required  to take a  number  of
affirmative steps to address regulatory concerns,  including but not limited to,
maintaining  the  Bank's  ratio of Tier 1  capital  to  assets  at 8% or  above;
committing not to declare or pay dividends to the Corporation  that would result
in the Bank's violation of the required capital ratio;  limiting growth in total
assets to no more than three percent in any three month period  without  advance
approval by the regulators, or more than 12% annually; adopting and implementing
plans to resolve certain  criticized  assets;  eliminating or restricting future
lending to borrowers  whose loans have been  criticized by the  regulators;  and
adopting and implementing plans to reduce the volume of the Bank's  acquisition,
development  and  construction  loans,  commercial  real-estate  loans  and high
loan-to-value  loans, as defined by FDIC regulation Part 365, in relation to its
capital.


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

                                   (Continued)

<PAGE>


                           HEARTLAND BANCSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     Years ended December 31, 2001 and 2000
                          (Dollar amounts in thousands)

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

NOTE 13 - CAPITAL REQUIREMENTS AND REGULATORY MATTERS (Continued)

Although  the Bank intends to request  that the  regulators  revise or eliminate
certain  provisions of the proposed order,  the Corporation  believes that it is
likely that the restrictions described will result from the regulators' request.
These  restrictions  may adversely affect the Bank's net interest income and net
interest margin in 2002 and future periods, if the restrictions require that the
Bank reduce the outstanding  balances of  higher-yielding  types of loans. These
restrictions are also likely to result in increased  non-interest expense during
2002  due  to  increased  consulting,  legal,  accounting,  staffing  and  other
compliance costs associated with responding to these restrictions.

The restrictions may also reduce the Corporation's  parent-company  liquidity by
making it  unlikely  that the Bank will be a position  to pay  dividends  to the
Corporation during the period of such  restrictions,  and the Corporation may be
required  to  infuse  additional  capital  into  the Bank  from  time to time if
necessary in order for the Bank to maintain any required capital ratio. At March
20, 2002,  the  Corporation  had  sufficient  liquid  assets to pay the interest
payable  under on the  subordinated  debentures  related to the trust  preferred
securities  during 2002, and the  Corporation  may elect to defer the payment of
interest  on such  debentures  for  certain  periods of time in any  event.  The
Corporation therefore does not expect that any new maintenance requirements with
respect to the Bank's capital ratio will be material to parent-company liquidity
during 2002.


NOTE 14 - COMMITMENTS AND CONTINGENT LIABILITIES

The Bank leases certain  facilities  and land under  operating  leases  expiring
through  2016.  The  related  lease  expense was $191 and $96 for 2001 and 2000.
Future minimum lease payments are as follows:

                  2002                              $    309
                  2003                                   311
                  2004                                   313
                  2005                                   288
                  2006                                   289
                  Thereafter                           2,619
                                                    --------

                     Total minimum lease payments   $  4,129


In the  ordinary  course  of  business,  the Bank  has  loans,  commitments  and
contingent  liabilities,  such as guarantees  and  commitments to extend credit,
which are not reflected in the  consolidated  balance sheet. The Bank's exposure
to  credit  loss in the  event  of  nonperformance  by the  other  party  to the
financial instrument for commitments to make loans and standby letters of credit
is represented by the contractual amount of those instruments. The Bank uses the
same credit  policy to make such  commitments  as it uses for  on-balance  sheet
items.


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

                                   (Continued)

<PAGE>


                           HEARTLAND BANCSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     Years ended December 31, 2001 and 2000
                          (Dollar amounts in thousands)

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

NOTE 14 - COMMITMENTS AND CONTINGENT LIABILITIES (Continued)

Off-balance sheet financial  instruments whose contract amount represents credit
risk are summarized as follows:

                                                            2001      2000
                                                            ----      ----

    Unused lines of credit                               $ 24,187   $18,968
    Commitments to make loans                               4,992     7,491
    Letters of credit                                       1,283     1,890

Since many  commitments to make loans expire without being used, the amount does
not necessarily  represent  future cash  commitments.  Collateral  obtained upon
exercise of the commitment is determined using management's credit evaluation of
the borrower, and may include accounts receivable, inventory, property, land and
other items.  These  commitments are generally  variable rate or carry a term of
one year or less.

The cash  balance  required  to be  maintained  on hand or on  deposit  with the
Federal  Reserve was $1,324 at December  31,  2001.  These  reserves do not earn
interest.


NOTE 15 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying  value and  estimated  fair values of the  Corporation's  financial
instruments were as follows at December 31:
                                       2 0 0 1                 2 0 0 0
                                       -------                 -------
                                 Carrying     Fair       Carrying     Fair
                                   Value      Value        Value      Value
   Financial assets:
      Cash and cash equivalents$ 16,507   $  16,507   $   7,239   $   7,239
      Time deposits with other
        financial institutions      500         500           -           -
      Securities
       available-for-sale        17,603      17,603      21,749      21,749
      Loans held for sale         4,597       4,634           -           -
      Loans, net                143,236     145,394     129,882     129,622
      FHLB stock                    512         512         450         450
      Accrued interest
       receivable                 1,228       1,228       1,496       1,496

   Financial liabilities:
      Deposits                $(160,991)  $(162,157)  $(139,220)  $(139,311)
      Repurchase agreements      (5,554)     (5,554)     (9,273)     (9,273)
      Other borrowings           (4,000)     (4,034)     (3,000)     (3,000)
      Trust preferred
       securities                (5,000)     (5,000)          -           -
      Accrued interest
       payable                     (243)       (243)       (335)       (335)


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

                                   (Continued)

<PAGE>


                           HEARTLAND BANCSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     Years ended December 31, 2001 and 2000
                          (Dollar amounts in thousands)

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

NOTE 15 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

Fair value  approximates  carrying  amount for all items except those  described
below.  Fair  value for  securities  is based on quoted  market  values  for the
individual  securities  or for  equivalent  securities.  Fair value for loans is
based on the rates  charged at year end for new loans with  similar  maturities,
applied  until the loan is assumed  to reprice or be paid.  Fair value for fixed
rate IRAs, time  certificates of deposit,  and borrowings are based on the rates
paid at year end for new deposits or borrowings,  applied until  maturity.  Fair
value for other financial instruments and off-balance-sheet loan commitments are
considered nominal.


NOTE 16 - PARENT COMPANY STATEMENTS

Presented  below are condensed  balance sheets and statements of income and cash
flows for the parent company.

                            CONDENSED BALANCE SHEETS

                                                             2001        2000
                                                             ----        ----
ASSETS
Cash                                                       $  2,022   $    173
Investment in bank                                           16,100     13,421
Other assets                                                    141         64
                                                           --------   --------

                                                           $ 18,263   $ 13,658
                                                           ========   ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities                                                $  5,000   $  1,000
Shareholders' equity                                         13,263     12,658
                                                           --------   --------

                                                           $ 18,263   $ 13,658
                                                           ========   ========


                         CONDENSED STATEMENTS OF INCOME

                                                             2001        2000
                                                             ----        ----

Interest income                                            $      5  $      14

Interest expense                                                (72)       (22)

Other expense                                                   (39)       (28)

Tax benefit                                                      36         11
                                                           --------   --------


Income before equity in undistributed earnings of bank          (70)       (25)

Equity in undistributed earnings of bank                        599        776
                                                           --------   --------


Net income                                                 $    529   $    751
                                                           ========   ========

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

                                   (Continued)


<PAGE>



                           HEARTLAND BANCSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     Years ended December 31, 2001 and 2000
                          (Dollar amounts in thousands)

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


NOTE 16 - PARENT COMPANY STATEMENTS (Continued)

                       CONDENSED STATEMENTS OF CASH FLOWS

                                                             2001        2000
                                                             ----        ----

Cash flows from operating activities
   Net income                                               $    529   $   751
   Adjustments to reconcile net income to net cash
     from operating activities
      Equity in undistributed earnings of bank                  (599)     (776)
      Other assets and other liabilities, net                    (77)      (53)
                                                            --------   -------
         Net cash from operating activities                     (147)      (78)

Cash flows from investing activities
   Capital contributions to bank subsidiary                   (2,000)   (1,100)

Cash flows from financing activities
   Proceeds from issuance of subordinated debt                 5,000         -
   Cash paid in lieu of fractional shares                         (4)        -
   Repayments on note payable                                 (1,917)        -
   Draws on note payable                                         917     1,000
                                                            --------   -------
      Net cash from financing activities                       3,996     5,000

Net change in cash and cash equivalents                        1,849      (178)

Beginning cash and cash equivalents                              173       351
                                                            --------   -------

Cash and cash equivalents at end of period                  $  2,022   $   173
                                                            ========   =======





<PAGE>










DIRECTORS AND OFFICERS

The following is a list of directors and officers of Heartland Community Bank as
of March 2002:


Directors:

Gordon R. Dunn,        Sharon Acton, Robert Richardson,  Steve Bechman,
Chairman of the Board  Director      Director            Director

Patrick A. Sherman,    John Norton,  J. Michael Jarvis,  Jeffrey L. Goben,
Vice Chairman          Director      Director            Director


Officers:

Steve Bechman,                              Mary Carter,
President and Chief Executive Officer       Assistant Vice President

Jeffrey L. Goben,                           Michael Schofield,
Executive Vice President                    Investment officer, Heartland
and Chief Operating                         Investment Services
Officer

John M. Morin,                              Dave Mote,
Senior Vice President, Consumer Loans       Assistant Vice President,
                                            Mortgage Loans

Eric Johnson,                               Judy Peel,
Chief Credit Officer                        Assistant Vice President,
                                            Loan Officer

Tony Anderson,                              Kathee Pruitt,
Vice President, Mortgage Loans              Assistant Vice President,
                                            Branch Manager

Pam Fender,                                 Terri Webb,
Vice President, Deposit Operations          Assistant Vice President,
                                            Loan Operations

Jeff Joyce,                                 Pat Purtell,
Vice President and Controller               Loan Officer

Robert Maher,                               Robert Henderson,
Vice President, CD Brokerage Program        Commercial Loan Officer

R. Trent McWilliams,                        Chad Riddle,
Vice President, Business Development        Commercial Loan Officer

Alexa McKnight,                             James Parcell,
Assistant Vice President, Branch Operations Commercial Loan Officer

Lisa Shirar,                                Michael Yovanoff,
Compliance officer and Portfolio manager    Portfolio manager




<PAGE>


Banking Facilities

Franklin:                              Greenwood:
420 North Morton Street (U.S. 31)      489 South State Road 135
Franklin, Indiana  46131               Greenwood, Indiana  46142
Phone (317) 738-3915                   Phone (317) 881-3915
FAX (317) 736-5022                     FAX (317) 859-3849

Bargersville:                          Greenwood:
507 Three Notch Lane                   800 S. US 31
Bargersville, Indiana 46106            Greenwood, IN  46143
Phone (317) 422-1370                   Phone (317) 885-7371
FAX (317) 422-1495                     Fax (317) 885-7305



Investor Relations/Analyst Contact

Jeff D. Joyce, Chief Financial Officer
(317) 738-2854
(317) 736-5022 facsimile
Jeff.Joyce@hcb-in.com



















ANNUAL REPORT ON FORM 10-KSB

UPON WRITTEN REQUEST HEARTLAND WILL PROVIDE TO EACH SHAREHOLDER, WITHOUT CHARGE,
A COPY (WITHOUT  EXHIBITS) OF HEARTLAND'S ANNUAL REPORT ON FORM 10-KSB FOR 2001,
AS FILED  WITH THE  SECURITIES  AND  EXCHANGE  COMMISSION.  REQUESTS  SHOULD  BE
DIRECTED TO JEFF JOYCE,  CFO,  HEARTLAND  BANCSHARES,  INC. PO BOX 469 FRANKLIN,
INDIANA 46131.













EXHIBIT 21

The  registrant  has two  subsidiaries,  Heartland  Community  Bank,  an Indiana
corporation, and Heartland (IN) Statutory Trust I, a Connecticut business trust.
Heartland  Community  Bank also operates a brokerage  department  under the name
Heartland Investment Services.



<PAGE>





                                 HEARTLAND BANCSHARES, INC.

                          NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
                                 TO BE HELD APRIL 22, 2002


     The Annual Meeting of  Shareholders of Heartland  Bancshares,  Inc. will be
held at the Hillview Country Club, 1800 E. King Street, Franklin, Indiana 46131,
on Monday, April 22, 2002, at 6:00 p.m., local time, for the following purposes:

      1.    To elect two  Directors to hold office  until the Annual  Meeting of
            Shareholders in the year 2005 and until their successors are elected
            and have qualified.

      2. To  transact  such  other  business  as may  properly  come  before the
meeting.

     Holders of record of Common  Shares of  Heartland  Bancshares,  Inc. at the
close of business on March 4, 2002, are entitled to notice of and to vote at the
Annual Meeting. Appetizers and beverages will be served.


      SHAREHOLDERS   ARE   INVITED  TO  ATTEND  THE   MEETING  IN  PERSON.   ALL
SHAREHOLDERS,  EVEN IF  THEY  PLAN TO  ATTEND  THE  MEETING,  ARE  REQUESTED  TO
COMPLETE,  SIGN AND DATE THE  ACCOMPANYING  PROXY AND RETURN IT  PROMPTLY IN THE
ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.


                                     By Order of the Board
                                     of Directors


                                     STEVE BECHMAN
                                     President and Chief Executive Officer
March 29, 2002
Franklin, Indiana


                                  (ANNUAL REPORT ENCLOSED)


<PAGE>







                                      PROXY STATEMENT

                             ANNUAL MEETING OF SHAREHOLDERS OF
                                 HEARTLAND BANCSHARES, INC.

                                       April 22, 2002


      This Proxy  Statement is being furnished to shareholders on or about March
29,  2002,  in  connection  with the  solicitation  by the Board of Directors of
Heartland  Bancshares,  Inc. (the  "Company"),  420 N. Morton Street,  Franklin,
Indiana 46131,  of proxies to be voted at the Annual Meeting of  Shareholders to
be held at 6:00 p.m., local time, on Monday, April 22, 2002, at Hillview Country
Club, 1800 E. King Street,  Franklin,  Indiana 46131.  The Company is the parent
holding company for Heartland Community Bank.

      At the close of business on March 4, 2002,  the record date for the Annual
Meeting,  there were 1,394,172 Common Shares outstanding and entitled to vote at
the Annual Meeting.  On all matters,  including the election of Directors,  each
shareholder will have one vote for each share held.

      If  the  enclosed  form  of  proxy  is  executed  and  returned,   it  may
nevertheless  be revoked at any time insofar as it has not been  exercised.  The
proxy may be revoked by either (a) filing with the  Secretary  (or other officer
or agent of the Company  authorized to tabulate votes) (i) a written  instrument
revoking the proxy or (ii) a  subsequently  dated proxy,  or (b)  attending  the
Annual Meeting and voting in person.  Unless revoked, the proxy will be voted at
the Annual Meeting in accordance  with the  instructions  of the  shareholder as
indicated on the proxy. If no instructions  are given,  the shares will be voted
as recommended by the Directors.

                                         PROPOSAL 1
                                   ELECTION OF DIRECTORS

                                          Nominees

      Two  Directors  are to be  elected  at the  Annual  Meeting.  The Board of
Directors,  which  currently  consists of eight  members,  is divided into three
classes with the term of one class expiring each year. Generally,  each Director
serves  until the annual  meeting of the  shareholders  held in the year that is
three years after such Director's  election and thereafter until such Director's
successor is elected and has  qualified  or until the earlier of the  Director's
resignation,  disqualification,  removal  or  death.  The  terms of the  current
Directors  expire as  follows:  2002 - Steve  Bechman  and Gordon R. Dunn;  2003
Sharon Acton,  Jeffrey L. Goben and John Norton;  and 2004 - J. Michael  Jarvis,
Robert Richardson and Patrick A. Sherman.

      Each  Director  will be  elected by a  plurality  of the votes cast in the
election.  Shares  present  but not  voted for any  nominee  do not  affect  the
determination of whether a nominee has received a plurality of the votes cast.

      It is the intention of the persons named in the accompanying form of proxy
to vote such proxy for the election to the Board of Directors  Steve Bechman and
Gordon R. Dunn,  each of whom is now a Director  whose present term expires this
year.  Each such person has indicated that he or she will accept  nomination and
election as a Director.  If, however,  any such person is unable or unwilling to
accept nomination or election,  it is the intention of the Board of Directors to
nominate such other person as Director as it may in its discretion determine, in
which event the shares subject to the proxy will be voted for that person.

THE BOARD OF DIRECTORS  RECOMMENDS THAT  SHAREHOLDERS  VOTE FOR THE TWO NOMINEES
IDENTIFIED ABOVE (ITEM 1 ON THE PROXY).

      The following  table  presents  certain  information  as of March 4, 2002,
regarding  the current  Directors  of the  Company,  including  the two nominees
proposed by the Board of Directors for election at this year's  Annual  Meeting.
All of the current  Directors  began  serving on the Board of  Directors  of the
Company during 1997.  Unless  otherwise  indicated in a footnote,  the principal
occupation  of each  Director has been the same for the last five years and such
Director  possesses sole voting and investment powers with respect to the shares
indicated as beneficially owned by such Director.  Unless specified otherwise, a
Director is deemed to share voting and investment  powers over shares  indicated
as held by a  spouse,  children  or  other  family  members  residing  with  the
Director.

          Name,                                                Percent of
      Present Principal              Shares Beneficially     Common Shares
      Occupation and Age                  Owned                Outstanding

      Sharon Acton                                    8,455 1            0.6%
      Manager, Franklin/Greenwood District of
        Cinergy/PSI (energy services company)
      Age 55

      Steve Bechman2*                                 59,8493 12         4.3
      President and Chief Executive Officer of
        the Company and Bank
      Age 50

      Gordon R. Dunn4*                                28,512 5           2.1
      Retired
      Age 80

      Jeffrey L. Goben6                               45,892 7           3.3
      Executive Vice President and Chief Operating
       Officer of the Company and Bank
      Age 49

      J. Michael Jarvis                               18,691 8           1.3
      President, Power Investments, Inc.
       Division of Delco Remy International, Inc.
       (engine remanufacturer)
      Age 58

      John Norton                                     15,188 9           1.1
      President and Owner, Norton Farms, Inc.
      Age 53

      Robert Richardson                               12,129 10          0.9
      President and Majority Owner, MegaSys, Inc.
       (logistics company)
      Age 40

      Patrick A. Sherman                              14,663 11          1.1
      President and Part Owner, Sherman &
        Armbruster P.C. (a public accounting firm)
      Age 53

      All Directors and Executive Officers
      as a group (12 persons)                         235,823 12,13     16.91%

*Nominee
1     Includes  7,718  shares Ms.  Acton has the right to acquire upon the
      exercise of stock options.
2     Mr.  Bechman  served as Regional  President  of  Citizens  Bank of Central
      Indiana  from 1993 until his  resignation  in 1997.  Mr.  Bechman was with
      Citizens Bank of Central  Indiana  beginning in 1975 and served in various
      other positions prior to 1993.
3     Includes  14,417 shares that Mr. Bechman holds jointly with his spouse and
      28,980  shares that he has the right to acquire upon the exercise of stock
      options.
4     Mr. Dunn is a retired  purchasing agent for L. S. Ayres department stores,
      where he was  employed  for 43 years.  Mr.  Dunn serves as Chairman of the
      Company's  Board of Directors and he previously  served as Chairman of the
      Board of Citizens Bank of Central Indiana.
5     Includes  850 shares that Mr. Dunn holds  jointly  with his spouse,  5,512
      shares held in a trust for which Mr. Dunn acts as trustee, 551 shares held
      jointly by his spouse and  father-in-law,  2,656  shares on which Mr. Dunn
      holds  voting  rights as power of attorney for his family and 7,718 shares
      that Mr. Dunn has the right to acquire upon the exercise of stock options.
6     Mr.  Goben  held the  position  of  Senior  Vice  President  in  charge of
      marketing  and  community  development,   in  addition  to  various  other
      management  positions,  with  Citizens  Bank of Central  Indiana from 1984
      until his resignation in 1997.
7     Includes  9,879  shares that Mr. Goben holds  jointly  with his wife,  375
      shares  held by Mr.  Goben's  children  and 24,413  shares that he has the
      right to acquire upon the exercise of stock options.
8     Includes  10,972 shares Mr. Jarvis holds jointly with his spouse and 7,718
      shares  Mr.  Jarvis has the right to acquire  upon the  exercise  of stock
      options.
9     Includes 110 shares held by Mr.  Norton's  spouse,  220 shares held by Mr.
      Norton's  children,  and 7,718  shares  that Mr.  Norton  has the right to
      acquire upon the exercise of stock options.
10    Includes 2,000 shares held by Mr.  Richardson's  children and 7,718 shares
      that Mr.  Richardson  has the right to acquire  upon the exercise of stock
      options.
11    Includes  7,718 shares that Mr.  Sherman has the right to acquire upon the
      exercise of stock options.
12    Includes  122,855  shares that  Directors and executive  officers have the
      right to acquire upon the exercise of stock options and 48,318 shares held
      jointly with or as custodian for family members.
13    Does not include  2,166 shares Mr.  Bechman may acquire,  2,165 shares Mr.
      Goben may acquire or 2,362  shares  other  executive  officers may acquire
      under  stock  options  that  are  not  yet  exercisable  but  will  become
      exercisable upon their continued employment with the Company.


      The Board of  Directors  consists of six  non-employee  directors  and two
employee  directors.  One  non-employee  director  resigned  from  the  Board of
Directors  effective  January 1, 2002.  The number of directors was reduced from
nine to eight at the January 2002 meeting of the Board of Directors.

Committees and Attendance

      The Board of Directors of the Company  held twelve  meetings  during 2001.
The Company's Board of Directors has a Stock Option  Committee but does not have
standing audit, nominating or compensation committees.  The members of the Stock
Option Committee are Directors Acton, Dunn, and Sherman, all of whom are outside
Directors.  The Stock Option  Committee  administers  the  Company's  1997 Stock
Option Plan,  which  provides  for the grant of options to key  employees of the
Company and Bank. The Stock Option Committee did not meet in 2001.

      All of the members of the Company's  Board of Directors  also serve on the
Bank's Board of Directors.  The Bank's Board of Directors has standing audit and
compensation committees. The members of the Audit Committee are Directors Acton,
Norton,  and  Sherman.  The Audit  Committee,  which met four times during 2001,
reviews  with the  Bank's  independent  auditors  the  scope of the  audit to be
undertaken and the results of the audit and also reviews  internal  audits.  The
members of the Compensation Committee are Directors Acton, Dunn and Sherman. The
Compensation  Committee,  which met three times during 2001,  sets  salaries and
bonuses for the President  and Chief  Executive  Officer.  Each of the Directors
attended at least 75 percent of the aggregate number of meetings of the Board of
Directors of the Company and Bank and the  committees  on which he or she served
during 2001.

Report of the Audit Committee

The Audit  Committee  of  Heartland  Bancshares  is  composed  of 3  independent
directors.

      Management is responsible for the Corporation's  internal controls and the
financial  reporting  process.  The independent  accountants are responsible for
performing an  independent  audit of the  Corporation's  consolidated  financial
statements  in  accordance  with auditing  standards  generally  accepted in the
United States of America and to issue a report  thereon.  The Audit  Committee's
responsibility is to monitor and review these processes.

        It is not the  Audit  Committee's  duty  or  responsibility  to  conduct
auditing or accounting  reviews or procedures.  The Audit Committee  members are
not  employees  of  the  Corporation  and,  other  than  Mr.  Sherman,  are  not
accountants  or  independent  auditors by profession or experts in the fields of
accounting  or auditing.  Therefore,  the Audit  Committee  members have relied,
without  independent  verification,  on  management's  representation  that  the
financial  statements  have been prepared with integrity and  objectivity and in
conformity with accounting principles generally accepted in the United States of
America and on the representations of the independent auditors included in their
report  on  the  Corporation's  financial  statements.   The  Audit  Committee's
oversight does not provide an independent basis to determine that management has
maintained   appropriate   accounting  and  financial  reporting  principles  or
policies,  or appropriate  internal  controls and procedures  designed to assure
compliance  with  accounting  standards  and  applicable  laws and  regulations.
Furthermore,   the  Audit  Committee's   discussions  with  management  and  the
independent  auditors do not assure that the Corporation's  financial statements
are presented in accordance with accounting principles generally accepted in the
United  States  of  America,  that  the  audit  of the  Corporation's  financial
statements has been carried out in accordance with auditing standards  generally
accepted in the United States of America, or that the Corporation's  independent
accountants are in fact "independent".

      In  this  context,  the  Committee  has  met  and  held  discussions  with
management  and  the  independent  accountants.  Management  represented  to the
Committee that the Corporation's consolidated financial statements as of and for
the year ended  December 31, 2001 were  prepared in  accordance  with  generally
accepted  accounting  principles,  and the  Committee has reviewed and discussed
these consolidated financial statements with management. The Committee discussed
with the independent  accountants  matters required to be discussed by Statement
on Auditing Standards No. 61 (Communication with Audit Committees).

      The  independent  accountants  also  provided to the Committee the written
disclosures  required  by  Independence  Standards  Board  No.  1  (Independence
Discussions  with  Audit  Committees),  and the  Committee  discussed  with  the
independent accountants that firm's independence.  The Committee also considered
whether the  independent  accountants'  provision of  non-audit  services to the
Corporation is compatible with maintaining that firm's independence.

Based  upon the  discussions  and  reviews  referred  to  above,  the  Committee
recommended to the Board of Directors that the financial  statements referred to
above be included in the Corporation's Annual Report on Form 10-KSB for the year
ended December 31, 2001.

SUBMITTED BY THE MEMBERS OF THE AUDIT COMMITTEE:

Patrick A. Sherman, Chair
Sharon Acton
John Norton


Disclosure of Principal Accountant's Fees

      Fees paid to Crowe,  Chizek and Company LLP for year 2001 services were as
follows:

--------------------------------------------------------------------------------
Audit Fees                                                               $29,685
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
All Other Fees                                                            22,950
--------------------------------------------------------------------------------

Included  in the  caption  "All Other  Fees" are fees for  quarterly  reviews of
financial  statements  to  be  included  in  Form  10-QSB  filings,  tax  return
preparation,  assistance in preparing  filings with the  Securities and Exchange
Commission and other services.

Compensation of Directors

      During 2001,  non-employee  Directors of the Bank  received $300 per month
(the  Chairman  received  $500 per  month)  regardless  of  attendance  at Board
meetings.  Directors did not receive any additional  compensation for serving on
the Company's Board or on Board committees of the Company or Bank.

EXECUTIVE COMPENSATION

      The following table sets forth information regarding  compensation paid to
the  Company's  Chief  Executive  Officer for 2001,  who was the only  executive
officer whose salary and bonus for 2001 exceeded $100,000.

                                 Summary Compensation Table
                                                      Long Term
                                                     Compensation
                                    Annual             Awards
                             Compensation
                                                      Securities
        Name and                                      Underlying      All Other
   Principal Position   Year   Salary($)  Bonus ($)     Options/    Compensation
                                                       SAR s (#)          ($)
     Steve Bechman,     2001   $126,500    $    0           0          $ 29,7491
          Chief         2000   $126,500    $    0           0          $      0
     Executive Officer  1999   $119,767    $3,916        8,250         $      0

      1 Includes  $29,301  that the  Company  contributed  to a defined  benefit
      retirement  plan in favor of Mr.  Bechman and $448 of economic  benefit of
      premiums  paid by the Company with respect to term life  insurance for the
      benefit of Mr.  Bechman  under a  split-dollar  life  insurance  agreement
      between the Company and Mr. Bechman.


                             Aggregated Option/SAR Exercises In
                            Last Fiscal Year and Fiscal Year-End
                                     Option/SAR Values

      No option  exercises  occurred during 2001. The following table sets forth
information  with  respect  to the value of  options  held by Mr.  Bechman as of
December 31, 2001.


                        Number of Unexercised         Value of Unexercised
                        Options/SARs at Fiscal    In-the-Money Options/SARs at
                             Year-End (#)              Fiscal Year-End ($)
        Name            Exercisable/Unexercisable Exercisable/Unexercisable
   Steve Bechman             28,980/2,166                     0 / 0

Certain Relationships And Related Transactions

      During 2001, the Bank had, and the Bank expects to continue to have in the
future,  banking transactions in the ordinary course of business with Directors,
officers and principal  shareholders of the Company and their associates.  These
transactions have been made on substantially the same terms,  including interest
rates,  collateral  and  repayment  terms  on  extensions  of  credit,  as those
prevailing at the same time for comparable  transactions with others and did not
involve more than the normal risk of collectibility or present other unfavorable
features.

                                  APPOINTMENT OF AUDITORS

      Crowe,  Chizek and Company LLP ("Crowe Chizek") served as auditors for the
Company in 2001.  Although it is anticipated that Crowe Chizek will be selected,
the Audit Committee has not yet considered the appointment of auditors for 2002.
Representatives of Crowe Chizek will be present at the Annual Meeting, will have
the  opportunity  to  make a  statement  if  they  desire  to do so and  will be
available to respond to appropriate questions.

                             PRINCIPAL OWNERS OF COMMON SHARES

      According  to a statement on Schedule  13G filed with the  Securities  and
Exchange  Commission by such  beneficial  owners on February 21, 2002, Hot Creek
Investors,   LP,  PO  Box  3178,   Gardnerville,   Nevada  89410  ("Hot  Creek")
beneficially  owned  72,800 of the  Company's  Common  Shares as of February 19,
2002, which  represented 5.2% of the Company's  outstanding  Common Shares as of
such date.  The  Company  was  notified  by Hot Creek on March 19, 2002 that Hot
Creek acquired an additional  37,000 (2.6%) of the Company's Common Shares as of
March 18, 2002 from another shareholder that had previously reported on Schedule
13G its  beneficial  ownership  of  more  than  five  percent  of the  Company's
outstanding  Common  Shares.  To the  best  of the  knowledge  of the  Company's
management,  no other person or group  beneficially owned more than five percent
of the Company's outstanding Common Shares as of March 18, 2002.

                                       OTHER MATTERS

      The  Board  of  Directors  knows of no  matters,  other  than the  matters
reported  above,  that are to be brought  before the  Annual  Meeting.  If other
matters properly come before the Annual Meeting, however, it is the intention of
the persons named in the enclosed form of proxy to vote such proxy in accordance
with their judgment on such matters.

                                          EXPENSES

      All expenses in connection with this solicitation of proxies will be borne
by the Company.

                                        HOUSEHOLDING

      The Company  intends to satisfy the  delivery  requirements  for proxy and
information  statements with respect to two or more security holders sharing the
same address by delivering a single proxy statement or information  statement to
those security holders.  Shareholders may obtain additional  material if desired
by contacting the Company in writing at 420 N. Morton Street, Franklin,  Indiana
46131.



<PAGE>


                                      PROXY

                      THIS  PROXY  IS  SOLICITED  ON  BEHALF  OF  THE  BOARD  OF
               DIRECTORS  FOR  THE  2002  ANNUAL  MEETING  OF   SHAREHOLDERS  OF
               HEARTLAND BANCSHARES, INC.

      I hereby appoint Steve Bechman and Jeffrey L. Goben,  and each of them, my
proxies, with power of substitution and revocation, to vote all Common Shares of
Heartland  Bancshares,  Inc. that I am entitled to vote at the Annual Meeting of
Shareholders to be held at Hillview Country Club, 1800 E. King Street, Franklin,
Indiana  46131,  on Monday,  April 22, 2002, at 6:00 p.m.,  local time,  and any
adjournments thereof, as provided herein:

1.    ELECTION OF DIRECTORS

q        FOR all  nominees  listed  below to serve  until the Annual  Meeting of
         Shareholders in the year 2005 as set forth in the Proxy Statement dated
         March  29,  2002   (except  as  marked  to  the   contrary   below--see
         "Instructions"):

                        Gordon R. Dunn

                        Steve Bechman

q     WITHHOLD AUTHORITY to vote for all nominees listed above

(Instructions:  To withhold authority to vote for any nominee, write that
                nominee's name in the space provided.)

                        (To Be Completed on Reverse Side)

2.

<PAGE>


In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the meeting.

      THIS PROXY WILL BE VOTED AS SPECIFIED.  IN THE ABSENCE OF SPECIFICATIONS,
      THIS PROXY WILL BE VOTED FOR ITEM 1.

      SHAREHOLDERS  SHOULD MARK, SIGN AND DATE THIS PROXY AND RETURN IT PROMPTLY
IN THE ENCLOSED POST-PAID ENVELOPE.  THIS PROXY MAY BE REVOKED AT ANY TIME PRIOR
TO ITS EXERCISE.

DATED: ________________


                             Signature or Signatures

                                    (Please sign exactly as your name appears on
                                    this proxy. If shares are issued in the name
                                    of two or more  persons,  all  such  persons
                                    should sign. Trustees,  executors and others
                                    signing in a representative  capacity should
                                    indicate the capacity in which they sign.)