Exhibit  13.  The  Issuer's  Annual  Report to  Shareholders  for the year ended
December 31, 2003.




                                                                  March 22, 2004


Dear Shareholders and Friends:

We are pleased to report to you the  results for the year of 2003 and  encourage
you to read about the detailed  results in the following  pages. The past couple
of years have presented some unprecedented challenges for our young company from
which we are emerging a stronger and more fundamentally  sound bank. In 2003, we
continued to work  diligently to improve  asset  quality  created by poor credit
decisions and weak  processes from previous  years.  We were also faced with the
lowest  level of interest  rates in over 40 years,  causing  declining  interest
margins.

With the focus on asset  quality  improvement  and not on growth,  total  assets
declined  from $177 million at December 31, 2002 to $167 million at December 31,
2003.  Despite the decline in total assets,  we still have a solid hold on third
place in terms of deposit  market  share in Johnson  County  among a total of 16
financial  institutions.  In fact, we showed a slight  improvement  to 12.18% at
June 30, 2003 from 11.58% at June 30, 2002.  The  shrinkage of totals gave us an
opportunity to  restructure  our deposit mix resulting in more core deposits and
less  interest  bearing time  deposits.  This helped offset the effects that the
lower interest rate environment had on our net interest margin.

In 2003, we recorded a  considerable  improvement  in earnings with $414,000 net
income  for the year as  compared  to a  $1,213,000  loss for 2002.  Most of the
improvement was a result of lower loan loss provision, and losses on real estate
acquired in  foreclosure,  which came through  improved asset  quality.  Earning
assets were positively impacted by reductions in non-performing loans.

Our mortgage loan production has been fueled by refinancings due to low interest
rates.  Our hard working mortgage loan staff was positioned to handle the record
number of refinances. The related gain on sale of mortgage loans continues to be
an excellent  source of  non-interest  income.  During 2003, we  originated  $65
million in first  residential  mortgages and recorded over $1 million in gain on
sale of loans.  We realize that the refinancing  activity will eventually  slow,
but feel that our  reputation  as a mortgage  loan  provider  in the market will
continue to provide us with a good source of revenue.

In last year's  annual  report,  we reported that the Bank entered into a formal
order with the Federal Deposit Insurance  Corporation and the Indiana Department
of  Financial  Institutions  that  required  us to  address  several  regulatory
concerns.  I am  pleased  to  announce  that  due to the  efforts  of  extremely
dedicated  staff of  employees  and  particularly  the  Board of  Directors,  we
received written  notification on February 23, 2004 from the regulatory agencies
of their  intent to release the Bank from the May 2002 order with our  agreement
to continue to operate under  stipulations  that we consider to be good business
practice.

We have been pleased to see our stock price  increase with our  improvements  in
operating  results  during  2003.  The stock  opened 2003 at $7.91 per share and
closed  the year at  $10.58  per  share  for a 33.8%  increase.  The book  value
increased to $9.00 per share at December 31, 2003.



<PAGE>


The past few months  there have been three  mergers  announced  that will affect
banks in our market along with the  announcement of openings of offices of three
new banks to our market.  Banking is a relationship business where the bank with
the best  people  will  eventually  prevail  over  time.  We have some top notch
employees who excel in giving customer service. Our ability to compete with much
larger banks as well as banks our size is dependent on our employees.

Heartland has not changed its focus of delivering  quality products and services
to our community. Our commitment to be involved with the community and serve the
needs of our customers the best way we know is stronger than ever.

As we go through 2004, we will continue to work on improving  asset quality with
an  eye  to  growth.  We  will  work  on  improving  shareholder  value  through
improvement of earnings and increasing market share.

We would like to thank our  customers,  employees  and board  members  for their
contributions,  continued  support and confidence in helping us through a couple
of difficult years.  Despite the uncertain economy,  we are anticipating 2004 to
be a good year for Heartland.





Steve Bechman                           Jeffrey L. 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.)


MANAGEMENT OVERVIEW

This discussion  provides  information  concerning  changes in the  consolidated
financial condition and results of operations of Heartland and the Bank for 2003
and 2002.  The  comments are  intended to  supplement  and should be reviewed in
conjunction  with the  consolidated  financial  statements,  related  notes  and
selected financial data presented elsewhere herein.

Heartland  Bancshares,  Inc.  ("Heartland" or the  "Corporation")  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  operations  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 one office located in Franklin,  two offices located in
Greenwood, and one office located in Bargersville, Indiana.

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.

Improving  asset  quality  and  meeting  regulatory  requirements  have been the
primary  objectives  for the Bank  over the past two  years.  Poor  underwriting
practices led to  deterioration  of the Bank's loan portfolio,  which caused the
banking regulators to issue additional  requirements to be followed by the Bank.
Additional  information  regarding  those  requirements  is  included  under the
caption  "CAPITAL  ADEQUACY"  and  in  Note  13 to  the  Consolidated  Financial
Statements. During 2003, the Bank's efforts resulted in lower provision for loan
losses,  net charge-offs  and  non-performing  loans compared to 2002.  Detailed
discussions  of these areas can be found under the "RESULTS OF  OPERATIONS"  and
"NONPERFORMING  ASSETS AND ALLOWANCE FOR LOAN LOSSES" captions on the pages that
follow.

Effective May 11, 2002, with the consent of the Bank, the FDIC and DFI entered a
formal order (May 2002 Order) under federal and state banking laws,  under which
the Bank and its Directors are required to take a number of affirmative steps to
address  regulatory  concerns.  On February 23, 2004, the Bank received  written
notification  from  the  FDIC and the DFI  indicating  that  the  Bank  would be
released  from the May  2002  Order  subject  to the  stipulation  that the Bank
continue to maintain a Tier 1 capital to assets  ratio at 8% or above;  to limit
growth  in total  assets to no more  than  three  percent  per  quarter  without
regulatory  approval and to maintain the levels of acquisition,  development and
construction loans at or below 125% of Tier 1 capital and commercial real-estate
loans at or below 250% of Tier 1 capital.  As of February 23,  2004,  the Bank's
Tier 1  capital  ratio  was  9.49%,  total  assets  had  declined  to  $166,178,
acquisition, development and construction loans totaled 61.75% of Tier 1 capital
and commercial  real-estate loans totaled 203.51% of Tier 1 capital. On February
23,  2004 the Bank's  board of  directors  adopted a  resolution  accepting  the
stipulations  as  presented by the FDIC and DFI and notified the FDIC and DFI of
the resolution and intent to abide by the stipulations.

                                                                              3.
<PAGE>


Note: Dollar amounts in thousands, except per share data.

Competition with other  depository and lending  institutions has been increasing
in the Bank's  market area and  includes at least 30  federally  insured  banks,
credit unions, mortgage companies and consumer finance companies at December 31,
2003. The most significant challenge facing Heartland is achieving growth in the
face of the high and rising  level of  competition  and  within  the  regulatory
constraints  previously  discussed.  Heartland's  efforts to meet this challenge
include providing exceptional customer service to existing customers and seeking
new customer opportunities through personal involvement in the local communities
and  additional  awareness  by  potential  customers  in our market area through
marketing efforts.

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 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.   Additional
information regarding net interest income and non-interest income is included in
"RESULTS OF OPERATIONS" below.  During 2003, interest rates in general declined.
The interest yields earned by Heartland on interest earning assets declined more
rapidly and more significantly  than rates paid on interest bearing  liabilities
causing Heartland's net interest income in 2003 to decline by $225 from 2002 net
interest income.

At December 31, 2003,  Heartland  had  $167,929 in total  assets,  a decrease of
$8,883 or 5.02% from the  December  31, 2002 total of  $176,812.  The decline in
assets was primarily comprised of a decline in net loans of $6,167 or 5.30%. Net
loans were  $110,255 at December  31, 2003  compared to $116,422 at December 31,
2002. The decline in loans was primarily due to more stringent lending standards
used by  Heartland  and to the  formal  order  that the Bank  executed  with its
regulators  in May 2002 (the "May 2002  Order") that  required  that the Bank to
reduce the dollar  amount of certain  types of loans.  Total  deposits  declined
$10,893 or 7.34%,  during the year. Total deposits were $137,506 at December 31,
2003 compared to $148,399 at December 31, 2002. Deposits were allowed to decline
due to the decline in loans. Total shareholders'  equity was $12,552 and $12,200
at December 31, 2003 and  December  31, 2002.  The increase in equity was due to
$414 net income partially offset by other comprehensive loss of $62 for the year
ended December 31, 2003.


RESULTS OF OPERATIONS

Heartland experienced a decline in average balances of loans and deposits during
2003.  Market rates for loans and deposits were generally lower in 2003 compared
to 2002. Changes in interest income and interest expense between the two periods
discussed  relate  primarily to the difference in average loans and deposits and
the  decline  in  interest  rates  unless  otherwise  stated  in  the  following
discussion.

Heartland  recorded  net  income of $414 or $.30 per  share,  for the year ended
December  31, 2003 and net loss of $(1,213),  or $(.87) per share,  for the year
ended December 31, 2002.  Lower  provision for loan losses  accounted for $1,484
(after tax) of the improvement in net income. Growth in non-interest income also
contributed $198 (after tax) to the improvement in net income.

Comprehensive  income consists of net income and other comprehensive income such
as unrealized  gains and losses on securities  available for sale, which is also
recognized as a separate component of equity.  Comprehensive income was $352 for
the year ended December 31, 2003 compared to comprehensive  loss of $(1,063) for
the year ended December 31, 2002.

Note: Dollar amounts in thousands, except per share data.
                                                                              4.

<PAGE>


Interest  income of $9,230 was earned  during the year ended  December 31, 2003,
compared  to $10,972  for the year ended  December  31,  2002 and was  primarily
generated  from  securities  and loans.  Decreases in yields  earned on interest
earning  assets  accounted for $1,405 of the decline and the decrease in average
loans and other interest  earning assets  outstanding  during the year accounted
for $337 of the  decline.  Contributing  to the  decrease  in  yields  earned on
interest-earning  assets,  and  to  the  decrease  in  average  loans,  was  the
requirement  of the May 2002 Order that the Bank  decrease the dollar  volume of
certain  types of  higher-yielding  loans.  The  increase in average  securities
outstanding  contributed  an additional  $564 to offset the decrease in interest
income from other earning assets.  Overall,  the average yield on earning assets
declined 96 basis points to 5.61% for 2003 from 6.57% for 2002.

Interest  expense of $2,758 was incurred during the year ended December 31, 2003
and  $4,207  during  the year  ended  December  31,  2002.  Interest  expense is
primarily  related to deposits during 2003 and 2002. The decreases in rates paid
on interest  bearing  liabilities  accounted  for $1,164 of the decrease and the
decrease in average deposits and short-term  borrowings  outstanding  during the
year  accounted  for $285 of the  decrease in  interest  expense.  Overall,  the
average rate paid on interest  bearing  liabilities  declined 87 basis points to
1.97% for 2003 from 2.84% for 2002.

Net interest  income for the year ended December 31, 2003 was $6,472 compared to
$6,765 for the year ended December 31, 2002.

The  following  tables  depict for the years ended  December  31, 2003 and 2002,
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. Non-accrual
loan  balances  are  included  in the  average  balances  of  loans.  Yields  on
non-taxable securities are not presented on a tax-equivalent basis.


                                  Year Ended                 Year Ended
                               December 31, 2003          December 31, 2002
                               -----------------          -----------------
                              Average      Yield/        Average      Yield/
                              Balance       Rate         Balance       Rate
                              -------       ----         -------       ----
Interest earning assets
   Short-term investments    $  9,396       1.56%        $12,992        1.77%
   Taxable securities          28,920       3.00          15,893        6.07
   Non-taxable securities       3,101       4.00           2,626        4.68
   Loans                      123,084       6.57         135,433        7.13
                             --------                    -------
Total interest earning
 assets                      $164,501       5.61         $166,944       6.57
                             ========                    ========

Interest bearing liabilities
   Interest-bearing demand,
     Money Market and Savings
      Deposits               $ 64,362       0.77%        $63,002        1.54%
   Time deposits               62,676       2.96          70,929        3.81
   Short-term borrowings        4,272       0.61           4,872        1.52
   Other borrowings             8,999       4.23           9,155        5.05
                             --------                    -------
Total interest bearing
 liabilities                 $140,309       1.97         $147,958       2.84
                             ========                    ========


Note: Dollar amounts in thousands, except per share data.
                                                                              5.

<PAGE>


                                                     2003        2002
                                                     ----        ----
Average yield on interest-earning assets             5.61%        6.57%
Average rate paid on interest-bearing
 liabilities                                         1.97         2.84
Net interest spread                                  3.64         3.73
Net interest margin (net interest income divided
 by average total interest-earning assets)           3.93         4.05
Return on average assets                             0.24         (.68)
Return on average equity                             3.35        (9.26)

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 2003. In addition,  the average yield on interest-earning  assets
during 2003 was adversely  affected by the Bank's  compliance  with the May 2002
Order,  which required that the Bank reduce the outstanding  balances of certain
higher-yielding  types  of  loans  during  2003.  See  Note  13  to  Heartland's
consolidated financial statements.

The net interest  margin  decreased to 3.93% in 2003 from 4.05% in 2002. The net
interest  margin is calculated by dividing net interest  income by average total
interest  earning  assets.  The average yield on interest  earning assets fell 9
basis points more than the cost of interest bearing  liabilities causing the net
interest  margin to decline.  The decline in net interest  margin was  partially
offset as the ratio of interest  bearing  liabilities to interest earning assets
decreased, to 85.3% for 2003 from 88.6% for 2002.

The provision for loan losses was $692 for the year ended  December 31, 2003 and
$3,150 for the year ended  December 31, 2002. Net  charge-offs  were $889 during
the year ended  December 31, 2003 and $3,052 during the year ended  December 31,
2002. Non performing  loans decreased to $3,023 at December 31, 2003 from $5,633
at the end of 2002. Impaired loans decreased to $1,945 at December 31, 2003 from
$4,689 at December 31, 2002.  The  allowance  for loan losses was 2.91% of gross
loans at December 31, 2003 and was 2.92% of gross loans at December 31, 2002 and
covers non-performing loans 1.1x at year-end 2003, compared to 0.6x in 2002. For
more  detail on this area,  see  "NONPERFORMING  ASSETS AND  ALLOWANCE  FOR LOAN
LOSSES" below.

Non-interest  income was $2,222 for the year ended  December 31, 2003 and $1,944
for the year ended  December  31, 2002 and consists  primarily of  miscellaneous
fees, service charges,  gain on sale of loans and other income. Gains related to
the sale,  service  released,  of loans increased to $1,009 in 2003 from $712 in
2002, as interest  rates fell and the fixed rate,  residential  real estate loan
market  improved.  Net securities  gains in 2003 and 2002 were $1 and $57. Other
income was $211 and $186 for 2003 and 2002 and  included  items such as increase
in cash surrender value of life  insurance,  income from other real estate owned
and miscellaneous other income items.

Salaries  and benefits  expense for the year ended  December 31, 2003 was $4,306
compared to $3,948 for the year ended December 31, 2002. The number of full time
equivalent  employees was increased in the lending area to implement  changes in
the credit process,  in part to comply with the May 2002 Order,  which accounted
for $102 of the increase in salaries and benefits expense. Wages and commissions
paid to mortgage  lending staff also  increased by $207 due to higher volumes of
mortgage loans originated.  The remaining  increase in salaries and benefits was
attributable to higher wages paid to other existing staff.

Occupancy and equipment expenses of $695 and $680 were incurred during the years
ended  December 31, 2003 and 2002.  Those  expenses  consist  primarily of lease
payments for the branch and operations  facilities,  depreciation  and utilities
expenses.

Note: Dollar amounts in thousands, except per share data.
                                                                              6.

<PAGE>


Data  processing  expense was $708 for the year ended December 31, 2003 compared
to $817 for the year ended  December 31, 2002.  The decrease in data  processing
expenses is related to $56 of one time costs  associated with  transferring  the
Bank's loan files to an imaging  system in 2002. The remainder of the decline in
data processing expense was due to lower volumes of loans and deposits and lower
contracted charges from data processing vendors.

FDIC  Insurance was $124 for 2003 compared to $227 for 2002. The decrease is due
to the change in the Bank's risk assessment by the FDIC.

Professional  fees  increased  to $425  during 2003 from $374 during 2002 due to
increased  loan  collection  issues.  The  increases  were  due in  part  to the
compliance requirements of the May 2002 Order.

Loss on sale and  write-down  of other real estate was $11 for 2003  compared to
$525 for 2002. Other real estate consists of properties  obtained in the process
of collection of loans. At the time other real estate is obtained, the estimated
fair value of the property is recorded as an asset and, if deemed uncollectable,
the remaining  balance of the loan is recorded as a charge against the allowance
for loan losses.  Subsequent  declines in  estimated  fair value are recorded as
expense.  When the property is subsequently  sold, any shortfall to the recorded
value is recognized as loss on sale. During 2002, Heartland recorded write-downs
and losses on the sale of several parcels of other real estate.

Loan  collection,  repossession  and other real estate expense was $314 for 2003
and $213 for 2002. The increase is primarily due to the payment of $105 for real
estate taxes owed on the  property  securing  one large  commercial  loan during
2003.

The remaining expenses of $829 for the year ended December 31, 2003 and $825 for
the year  ended  December  31,  2002,  relate to  various  other  items  such as
printing, supplies, advertising, loan expenses, postage, insurance and training.

Heartland  recorded  income tax expense of $176 for 2003  compared to income tax
benefit of $837 in 2002. The effective tax rate for 2003 was 29.83%, compared to
(40.8) %, in 2002.  The change in the effective tax rate is primarily due to the
net loss  before  taxes in 2002 and  secondarily  due to the  increased  average
balance and related  interest  income on non-taxable  securities and income from
the increase in cash surrender value of life insurance.


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.

                                     2003                  2002
                                       Percent of            Percent of
                              Amount   Gross loans   Amount  Gross loans
                              ------   -----------   ------  -----------
TYPE OF LOAN
Commercial loans and leases  $ 64,799      57.06%  $  66,861      55.76%
Real estate construction and
 land development              10,748       9.47      12,489      10.41
Residential mortgages
 (1-4 family homes)            24,668      21.72      23,952      19.97
Consumer                       13,341      11.75      16,618      13.86
                             --------   --------   ---------   --------
Gross loans                  $113,556     100.00%  $ 119,920     100.00%
                             ========   ========   =========   ========




Note: Dollar amounts in thousands, except per share data.
                                                                              7.

<PAGE>

Generally,  declines in loan totals from  December 31, 2002 to December 31, 2003
were a result of principal  repayments  by borrowers and loan  charge-offs.  The
Bank was  required  during  2002 and 2003 to  reduce  certain  types of loans by
agreement with its regulatory  agencies.  See "Capital  Adequacy".  During 2002,
Heartland implemented lending practices more stringent than previously in place.
Heartland also implemented more aggressive collection practices. The new lending
and collection  practices  combined to effectively limit new loan production and
to accelerate repayment of some existing loans in 2002 and 2003 and may continue
to have a similar effect on loan totals in the foreseeable future.

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, 2003,  commercial loans totaled $64,799 or 57.06% of the
Bank's total loan portfolio.  Commercial  loans totaled $66,861 or 55.76% of the
Bank's loan  portfolio at December 31, 2002. The decline in the dollar amount of
commercial loans outstanding  during 2003 was due in part to compliance with the
May 2002 Order. See Note 13 to Heartland's consolidated financial statements for
a discussion of the May 2002 Order.

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, 2003,
real estate  construction and land development loans totaled $10,748 or 9.46% of
the Bank's  total  loan  portfolio  compared  to $12,489 or 10.41% of the bank's
total loan portfolio at December 31, 2002. The Bank was required  during 2002 to
reduce these types of loans by agreement with its regulatory agencies.

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. The
Bank also occasionally  originates and retains fixed rate mortgages. At December
31,  2003 the Bank's  fixed  rate  residential  mortgage  loans  totaled  $1,831
compared  to $493 at  December  31,  2002.  At  December  31,  2003,  the Bank's
residential  mortgage  loans totaled  $24,668 or 21.72% of the Bank's total loan
portfolio  compared  to $23,952 or 19.97% of the Bank's  total loans at December
31, 2002.

The Bank  also  originates  fixed  rate  mortgages  and  sells  them,  servicing
released,  to various investors.  At year-end 2003, the Bank held $2,058 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, 2003
the Bank's consumer loans totaled  approximately $13,341 or 11.75% of the Bank's
total loan portfolio  compared to $16,618 or 13.86% of the Bank's total loans at
December 31, 2002.


NONPERFORMING ASSETS AND ALLOWANCE FOR LOAN LOSSES

Nonperforming assets consist of nonperforming loans, real estate owned (acquired
in  foreclosure),  and other  repossessed  assets.  Nonperforming  loans include
non-accrual loans and accruing loans that are contractually  past due 90 days or
more as to interest or principal  payments.  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  assets  totaled
$4,455 and $6,426 at December 31, 2003 and 2002.  At December  31,  2003,  there
were no outstanding balances of restructured loans.

Note: Dollar amounts in thousands, except per share data.
                                                                              8.

<PAGE>


The  provision  for loan losses is  calculated  as the amount needed in order to
maintain the balance in the allowance for loan losses at the level  estimated by
the calculation of allocated allowance. During the year ended December 31, 2003,
the provision for loan losses was $692 compared to $3,150 in 2002. Provision for
loan  losses  recorded  in 2003 was lower than 2002  primarily  due to lower net
charge-offs and declines in total loans and non-performing  loans.  During 2003,
Heartland  recorded $889 of net  charge-offs  compared to $3,052 in 2002.  Total
loans  declined by $6,364 and  non-performing  loans  declined by $2,610  during
2003.

Provision  expense  was  lower  than  net-charge-offs  in 2003  due to  specific
allocation of allowance at December 31, 2002 for  charge-offs  recorded in 2003,
declines in allowance for loan losses  allocated to groups of loans,  changes in
the amount of allowance  allocated to specific loans and changes in management's
risk grades assigned to loans,  which are derived from the borrowers' ability to
repay,   collateral  values,   economic  conditions  and  other  factors.   Such
allocations  declined  primarily  due to  declines  in total loan  balances  and
non-performing loan balances during 2003.

Changes to the allocation  factors used for groups of loans for which  allowance
is allocated by loan type and risk grade did not cause a material  change in the
actual dollar amount of allowance allocated to those loans.

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 all 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  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.  Specific  allocations
totaled $1,768 at December 31, 2003 compared to $1,895 at December 31, 2002. The
decline  is due to $444 of  charge-offs,  $182  reduction  based on  decline  in
balances and  improvements  in expected  repayments of related loans,  partially
offset by $499  increases  in  allocations  due to  increases  in  balances  and
deteriorations in expected repayment of certain 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,
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. Total allocation to pools of loans was $1,603
at December 31, 2002 and was $1,534 at December 31, 2003.  The decline is due to
$659 in charge-offs,  $62 due to reduction of balances, partially offset by $652
additional  allocation  due to  declines  in internal  evaluation  of  repayment
ability of loans within the pools and general economic considerations.

At December 31, 2003 the balance of the  allowance for loan losses was $3,301 or
2.91% of gross  loans  outstanding,  compared  to $3,498 or 2.92% of gross loans
outstanding at December 31, 2002.


Note: Dollar amounts in thousands, except per share data.
                                                                              9.

<PAGE>



DEPOSIT ACTIVITIES

The Bank offers  several  types of deposit  programs  designed  to attract  both
short-term  and  long-term  savings by providing an  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. Total deposits
were  $137,506 at December  31, 2003  compared to $148,399 at December 31, 2002.
The bank  attempts  to manage  the total  balances  of  certificates  of deposit
outstanding  in conjunction  with the changes in balances of loans  outstanding.
Due to the decline in loan balances  outstanding  during 2003,  the Bank offered
interest  rates on interest  bearing time  deposits  that were  typically  below
market competition, which allowed balances of such deposits to decline. However,
in order to limit the continued  outflow of interest bearing time deposits,  the
Bank  occasionally  offered  interest  rates  at or above  competitive  rates on
maturing  time  deposits in 2003.  While time  deposits  totaling  $54,407  were
outstanding at December 31, 2002 and scheduled to mature in 2003,  time deposits
declined by only $18,694  during 2003.  This  practice  was not  detrimental  to
earnings in 2003 because the renewal rates,  although higher than current market
rates in existence at the time of maturity,  were lower than the original  rates
on the maturing deposits.

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.
Due to the additional potential liquidity risks associated with public knowledge
of the May  2002  Order,  the Bank  utilizes  a  liquidity  plan  that  includes
heightened liquidity ratios to be maintained and procedures for daily monitoring
of liquidity needs, trends and changes in deposits.

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 maturing loans
and  investments  in  its  securities   portfolio  and  by  maintaining  various
short-term  borrowing  sources.  At December 31,  2003,  the Bank had $35,108 or
20.9% of total assets in  securities  available-for-sale,  of which $16,689 were
pledged to secure borrowings and for other purposes. The Bank also had $8,081 or
4.8% of total  assets  in cash and cash  equivalents  and an  additional  $2,000
available  from  unused  federal  funds  purchased  agreements  with  two  large
commercial  banks. The Bank also has the ability to borrow from the Federal Home
Loan Bank of Indianapolis  with various repayment terms ranging from 1 day to 15
years. Such borrowings are secured by investment securities.


Note: Dollar amounts in thousands, except per share data.
                                                                             10.

<PAGE>


Liquidity  needs  primarily arise from the need to fund loan growth and the need
to meet the withdrawal  needs of depositors.  During the year ended December 31,
2003,  loans declined  throughout  the year and provided cash inflows.  The cash
provided was used to increase  securities  available for sale and cash surrender
value  of life  insurance  and to fund  declines  in  deposits.  Life  insurance
policies held by the Bank are considered investments by the bank as alternatives
to loans or securities available for sale, and were purchased with the intent to
provide tax free income to the Bank.  The Bank is the owner and  beneficiary  of
the policies.  The amount  recorded as an asset is the net cash surrender  value
and income on the  policies is added to the value of the policy.  During 2003 an
additional $1,533 was invested in life insurance policies. Total assets were not
increased and total cash was not decreased by the  purchases.  The funds used to
purchase  the  policies  would  have been used to  purchase  available  for sale
securities.  Therefore,  the capital  position of the Bank is not  significantly
impacted.  The  policies  may be  liquidated  at any time and  therefore  do not
significantly  impact  liquidity.  The policies are managed by the president and
chief  financial   officer  with  oversight  from  the  Bank's  asset  liability
committee.  Management monitors the published ratings and financial  performance
of the policy  issuers  to verify  ability to pay  potential  claims.  The total
income  recorded from life insurance  policies held in 2003 was $105 compared to
$30 in 2002.

Management is not aware of any trends or any know demands, commitments events or
uncertainties   that  may  materially   affect  liquidity  during  2004  or  the
foreseeable future.  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.


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.   Note  13  to  the  consolidated   financial
statements includes a table of Heartland's and the Bank's capital ratios and the
related requirements.

The most restrictive capital adequacy  requirement in place during 2003 and 2002
was from an agreement with the Bank's  regulators.  Effective May 11, 2002, with
the consent of the Bank,  the FDIC and DFI entered a formal order under  federal
and state banking laws,  under which the Bank and its Directors were 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. See note 13 to the consolidated financial statements.



Note: Dollar amounts in thousands, except per share data.
                                                                             11.

<PAGE>



On February 23, 2004, the Bank received written  notification  from the FDIC and
the DFI  indicating  that the Bank  would be  released  from the May 2002  Order
subject to the  stipulation  that the Bank continue to maintain a Tier 1 capital
to assets ratio at 8% or above;  to limit growth in total assets to no more than
three percent per quarter without regulatory approval and to maintain the levels
of acquisition,  development and  construction  loans at or below 125% of Tier 1
capital and commercial  real-estate loans at or below 250% of Tier 1 capital. As
of February 23, 2004,  the Bank's Tier 1 capital  ratio was 9.49%,  total assets
had  declined to  $166,178,  acquisition,  development  and  construction  loans
totaled  61.75% of Tier 1  capital  and  commercial  real-estate  loans  totaled
203.51% of Tier 1 capital.  On February  23, 2004 the Bank's  board of directors
adopted a resolution accepting the stipulations as presented by the FDIC and DFI
and  notified  the FDIC and DFI of the  resolution  and  intent  to abide by the
stipulations.

Heartland  and the Bank  intend  to  maintain  the  required  capital  levels by
accumulating  additional  retained  earnings  and  restricting  growth  in total
assets.  Management  is not aware of any material  trends in capital  resources.
Additionally,  there are no expected  material  changes in the mix and  relative
cost of capital resources of Heartland or the Bank.


PARENT COMPANY LIQUIDITY

Liquidity  management for Heartland,  the parent company of the Bank, centers on
the ability of  Heartland to meet its  obligations  to the holders of the $5,155
subordinated  debentures (also referred to as the "trust preferred securities").
Heartland's  parent-company  liquidity and capital  resources are  restricted by
resolutions  adopted by its Board of  Directors  at the  request of the  Federal
Reserve Bank of Chicago  pursuant to its  supervisory  authority  under the Bank
Holding Company Act. These resolutions  prohibit  Heartland from incurring debt,
paying dividends to Heartland's shareholders, purchasing Heartland's outstanding
common stock,  or paying  interest on the trust  preferred  securities,  without
approval of the Reserve Bank.

Heartland  expects  to rely upon  liquid  assets of the  parent  company  as its
short-term  source of funds to meet its  obligations  with  respect to the trust
preferred  securities,  and to rely upon  dividends from the Bank as the primary
long-term  source of funds to meet  such  obligations.  At  December  31,  2003,
Heartland had sufficient  liquid assets at the  parent-company  level to pay the
interest  payable on the trust preferred  securities  during 2004, and Heartland
may elect to defer the  payment  of  interest  on such  securities  for  certain
periods  of time in any event.  Heartland  therefore  does not  expect  that the
maintenance  requirements  with respect to the Bank's  capital ratio and related
Bank dividend  limitations that are included in the stipulations of the May 2002
Order or Board resolutions will be material to  parent-company  liquidity during
2004.

Heartland had approximately  $1,717 of parent-company  cash that would have been
available  at  December  31,  2003,  for  the  payment  of  interest  and  other
obligations on the subordinated debentures.

In  addition,  at December  31,  2003 the Bank's Tier 1 capital to total  assets
ratio was 8.91% (% using  average  assets) and it could have paid  dividends  of
$1,582  without  violating  the  capital  ratio  maintenance  provisions  of the
regulatory order that is discussed under the "Capital Adequacy" caption above.


Note: Dollar amounts in thousands, except per share data.
                                                                             12.

<PAGE>


CRITICAL ACCOUNTING POLICIES

The financial  condition and results of  operations  for Heartland  presented in
Consolidated  Financial  Statements,  accompanying  notes  to  the  Consolidated
Financial  Statements,  selected financial data appearing  elsewhere within this
report,  and  are to a  large  degree,  dependent  upon  Heartland's  accounting
policies.  The selection of and application of these policies involve estimates,
judgments  and  uncertainties  that are subject to change.  Included  within the
summary of significant  accounting  policies disclosed in Note 1 of the Notes to
Consolidated  Financial Statements are accounting policies that management feels
are critical to the fair presentation of the consolidated  financial statements.
The critical  accounting policies and estimates that Heartland has determined to
be the most  susceptible to change in the near term relate to the  determination
of the allowance for loan losses.  Any  significant  deviation from  Heartland's
existing  accounting  on any or all of  these  areas  could  impact  the  future
financial performance of Heartland.

Allowance for Loan Losses
-------------------------

Heartland  maintains an  allowance  for loan losses to cover  probable  incurred
credit  losses at the balance  sheet date.  Loan losses are charged  against the
allowance when  management  believes the  uncollectibility  of a loan balance is
confirmed.  Subsequent  recoveries,  if  any,  are  credited  to the  allowance.
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.  A  provision  for loan  losses is charged to  operations  based on
management's periodic evaluation of the necessary allowance balance. Evaluations
are  conducted  at least  quarterly  and more  often if  deemed  necessary.  The
ultimate  recovery of all loans is  susceptible  to future market factors beyond
Heartland's control.

Heartland has an established  process to determine the adequacy of the allowance
for loan losses. The determination of the allowance is inherently subjective, as
it requires significant estimates,  including the amounts and timing of expected
future cash flows on impaired loans,  estimated losses on other classified loans
and pools of homogeneous  loans, and consideration of 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,  all of which may be susceptible to significant  change.  The allowance
consists of two  components  of  allocations,  specific and  general.  These two
components  represent the total  allowance  for loan losses  deemed  adequate to
cover losses inherent in the loan portfolio.  Additional detailed explanation of
the  allowance for loan losses is found under the header  "NONPERFORMING  ASSETS
AND ALLOWANCE FOR LOAN LOSSES" above.

Due to the  imprecise  nature  of  estimating  the  allowance  for loan  losses,
Heartland's  allowance for loan losses includes a minor  unallocated  component.
The  unallocated  component  of  the  allowance  for  loan  losses  incorporates
Heartland's  judgmental  determination  of inherent losses that may not be fully
reflected   in  other   allocations,   including   factors   such  as   economic
uncertainties,   lending  staff  quality,  industry  trends  impacting  specific
portfolio segments, and broad portfolio quality trends.  Therefore, the ratio of
allocated to  unallocated  components  within the total  allowance may fluctuate
from period to period.


OFF BALANCE SHEET ARRANGEMENTS

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.  For more detail on
these  arrangements,  see  Note  14  of  the  Notes  to  Consolidated  Financial
Statements.




Note: Dollar amounts in thousands, except per share data.
                                                                             13.

<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  1,200  shareholders  (including  beneficial owners who held their
shares in street name) on March 22, 2004. The number of  shareholders  of record
was 302 on March 22, 2004 and 307 at December 31, 2003 and January 1, 2004.

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.

                            High               Low
                            ----               ---
            ......
First Quarter 2002          $8.65             $7.80
Second Quarter 2002          9.65              8.45
Third Quarter 2002           9.50              7.50
Fourth Quarter 2002          8.30              7.51
First Quarter 2003           8.94              7.91
Second Quarter 2003          9.58              8.00
Third Quarter 2003          10.00              8.95
Fourth Quarter 2003         10.94              9.80

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.





                                                                             14.

<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, 2003 and 2002.

o  Consolidated    Statements   of   Operations   for   the   years   ended
   December 31, 2003 and 2002.

o  Consolidated  Statements  of  Changes in  Shareholders'  Equity for the years
   ended December 31, 2003 and 2002.

o  Consolidated  Statements of Cash Flows for the years ended  December 31, 2003
   and 2002.

o  Notes to consolidated financial statements.



                                                                             15.
<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, 2003 and 2002 and the related  consolidated
statements of operations, changes in shareholders' equity and cash flows for the
years then ended. These consolidated financial statements are the responsibility
of the Corporation's management.  Our responsibility is to express an opinion on
these consolidated 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,  2003 and 2002,  and the  results of its
operations  and its cash  flows  for the years  then  ended in  conformity  with
accounting principles generally accepted in the United States of America.





                                          Crowe Chizek and Company LLC

Indianapolis, Indiana
March 3, 2004



                                                                             16.

<PAGE>




                           HEARTLAND BANCSHARES, INC.
                           CONSOLIDATED BALANCE SHEETS
                           December 31, 2003 and 2002
                          (Dollar amounts in thousands)

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

                                                             2003        2002
                                                             ----        ----
ASSETS
Cash and due from banks                                    $  8,081   $ 10,198
Federal funds sold                                            2,636     15,034
                                                           --------   --------
      Total cash and cash equivalents                        10,717     25,232

Time deposits with other financial institutions                 500        500
Securities available-for-sale                                35,108     19,566
Loans held for sale                                           2,058      7,156
Loans, net of allowance of $3,301 and $3,498                110,255    116,422
Premises and equipment, net                                   2,509      2,673
Federal Home Loan Bank stock                                    638        608
Cash surrender value of life insurance                        2,384        960
Accrued interest receivable and other assets                  3,760      3,695
                                                           --------   --------

                                                           $167,929   $176,812
                                                           ========   ========


LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
   Noninterest-bearing deposits                            $ 19,343   $ 18,542
   Interest-bearing demand and savings deposits              67,408     60,408
   Interest-bearing time deposits                            50,755     69,449
                                                           --------   --------
      Total deposits                                        137,506    148,399
   Repurchase agreements                                      7,812      6,251
   Federal Home Loan Bank advances                            4,000      4,000
   Subordinated debentures                                    5,155      5,155
   Accrued interest payable and other liabilities               904        807
                                                           --------   --------
      Total liabilities                                     155,377    164,612

Shareholders' equity
   Common stock, no par value:  10,000,000 shares
     authorized; 1,394,172 shares issued and outstanding      1,394      1,394
   Additional paid-in capital                                11,360     11,360
   Accumulated deficit                                         (441)      (855)
   Accumulated other comprehensive income                       239        301
                                                           --------   --------
                                                             12,552     12,200
                                                           --------   --------
                                                           $167,929   $176,812
                                                           ========   ========


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

                           See accompanying notes.
                                                                             17.

<PAGE>


                           HEARTLAND BANCSHARES, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
            Years ended December 31, 2003 and 2002 (Dollar amounts in
                        thousands, except per share data)

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

                                                             2003        2002
                                                             ----        ----
Interest income
   Loans, including related fees                           $  8,091    $ 9,654
   Securities:
      Taxable                                                   868        965
      Non-taxable                                               124        123
   Short-term investments                                       147        230
                                                           --------    -------
                                                              9,230     10,972

Interest expense
   Deposits                                                   2,351      3,671
   Short-term borrowings                                         26         74
   Other borrowings                                             381        462
                                                           --------    -------
                                                              2,758      4,207
                                                           --------    -------
Net interest income                                           6,472      6,765

Provision for loan losses                                       692      3,150
                                                           --------    -------

Net interest income after provision for loan losses           5,780      3,615

Noninterest income
   Deposit service charges and fees                             634        600
   Commissions on investment sales                              367        389
   Gain on sale of securities                                     1         57
   Gain on sale of loans, net                                 1,009        712
   Other                                                        211        186
                                                           --------    -------
                                                              2,222      1,944

Noninterest expense
   Salaries and employee benefits                             4,306      3,948
   Occupancy and equipment, net                                 695        680
   Data processing                                              708        817
   FDIC insurance                                               124        227
   Professional fees                                            425        374
   Loss on sale and write-down of other real estate              11        525
   Loan collection, repossession and other real
    estate expense                                              314        213
   Other                                                        829        825
                                                           --------    -------
                                                              7,412      7,609
                                                           --------    -------
Income/(loss) before income taxes                               590     (2,050)

Income taxes                                                    176       (837)
                                                           --------    -------

Net income/(loss)                                          $    414    $(1,213)
                                                           ========    =======

Basic and diluted earnings/(loss) per share                $    .30    $  (.87)
                                                           ========    =======


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

                           See accompanying notes.
                                                                             18.

<PAGE>


                           HEARTLAND BANCSHARES, INC.
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
            Years ended December 31, 2003 and 2002 (Dollar amounts in
                        thousands, except per share data)

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


                                            Retained    Accumulated
                                Additional  Earnings/      Other       Total
                         Common Paid-in (Accumulated Comprehensive Shareholders'
                          Stock   Capital   Deficit)      Income      Equity
                          -----   -------   --------      ------      ------

Balance January 1, 2002   $1,394    $ 11,360    $  358      $  151     $13,263

Comprehensive income/(loss)
   Net loss for 2002                            (1,213)                 (1,213)
   Change in unrealized
     gain/(loss) on securities
     available for sale, net                                   150         150
                                                                        ------
Total comprehensive
  income/(loss)                                                         (1,063)
                           -----      ------      ----         ---      ------
Balance December 31, 2002  1,394      11,360      (855)        301      12,200

Comprehensive income/(loss)
   Net income for 2003                             414                     414
   Change in unrealized
     gain/(loss) on securities
     available for sale, net                                   (62)        (62)
                                                                        ------
Total comprehensive
  income/(loss)                                                            352
                           -----    --------    ------      ------      ------
Balance December 31, 2003 $1,394    $ 11,360    $ (441)     $  239     $12,552
                          ======    ========    ======      ======     =======


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

                           See accompanying notes.
                                                                             19.

<PAGE>


                           HEARTLAND BANCSHARES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     Years ended December 31, 2003 and 2002
                          (Dollar amounts in thousands)

------------------------------------------------------------------------------
                                                             2003        2002
                                                             ----        ----
Cash flows from operating activities
   Net income/(loss)                                       $    414   $ (1,213)
   Adjustments to reconcile net income/(loss) to net
     cash from operating activities
      Depreciation and amortization                             572        316
      Gain on sale of securities, net                            (1)       (57)
      Loss on sale and write-down of other real estate           11        525
      Provision for loan losses                                 692      3,150
      FHLB stock dividends                                      (30)         -
      Gain on sales of loans, net                            (1,009)      (712)
      Loans originated for sale                             (64,716)   (50,404)
      Proceeds from loans sold                               70,823     48,557
      Increase in cash surrender value of life insurance       (105)       (30)
      Change in assets and liabilities:
         Accrued interest receivable and other assets           581       (435)
         Accrued interest payable and other liabilities         130         98
                                                            -------    -------
            Net cash from operating activities                7,362       (205)

Cash flows from investing activities
   Purchase of securities available-for-sale                (41,756)   (17,164)
   Proceeds from sales, calls and maturities of securities
     available-for-sale                                      25,835     15,514
   Loans made to customers, net of payments collected         2,798     21,585
   Purchase of FHLB stock                                         -        (96)
   Proceeds from sale of other real estate                    1,987      1,106
   Purchases of bank owned life insurance                    (1,533)         -
   Redemption of bank owned life insurance                      214          -
   Net purchases of property and equipment                      (90)      (120)
                                                           --------   --------
      Net cash from investing activities                    (12,545)    20,825

Cash flows from financing activities
   Net change in deposit accounts                           (10,893)   (12,592)
   Net change in repurchase agreements                        1,561        697
   Draws on FHLB advances                                     3,000          -
   Repayments on FHLB advances                               (3,000)         -
                                                           --------   --------
      Net cash from financing activities                     (9,332)   (11,895)
                                                           --------   --------

Net change in cash and cash equivalents                     (14,515)     8,725

Cash and cash equivalents at beginning of period             25,232     16,507
                                                           --------   --------

Cash and cash equivalents at end of period                 $ 10,717   $ 25,232
                                                           ========   ========

Supplemental  disclosures of cash flow  information  Cash paid during the period
   for:
      Interest                                             $  2,817   $  4,290
      Income taxes                                             (393)        92
Supplemental disclosure of non-cash activities:
   Transfer from loans to other real estate                $  2,677   $  2,079


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

                           See accompanying notes.
                                                                             20.

<PAGE>


                           HEARTLAND BANCSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002
              (Dollar amounts in thousands, except per share data)

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

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
subsidiary,  Heartland  Community Bank (Bank),  after elimination of significant
intercompany  transactions and accounts. As further discussed in Note 8, a trust
that had  previously  been  consolidated  with the  Corporation  is now reported
separately.

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.

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  and  disclosed  in  the  financial
statements,  and future results could differ from these estimates. 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 in other comprehensive income,
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 Held For Sale:  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.

Loans:  Loans  that  management  has the  intent  and  ability  to hold  for the
foreseeable  future or until  maturity or payoff 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.


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

                                 (Continued)
                                                                             21.
<PAGE>

                           HEARTLAND BANCSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002
              (Dollar amounts in thousands, except per share data)

------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Interest income is not reported when full loan repayment is in doubt,  typically
when payments are significantly  past due. All interest accrued but not received
for loans placed on nonaccrual is reversed  against  interest  income.  Interest
received  on such loans is  accounted  for on the  cash-basis  or  cost-recovery
method,  until  qualifying for return to accrual.  Loans are returned to accrual
status when all the principal and interest amounts contractually due are brought
current and future payments are reasonably assured.

Allowance  for Loan  Losses:  The  allowance  for  loan  losses  is a  valuation
allowance for probable  incurred credit losses.  Loan losses are charged against
the allowance when management believes the uncollectibility of a loan balance is
confirmed.  Subsequent  recoveries,  if  any,  are  credited  to the  allowance.
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.

The  allowance  consists  of  specific  and  general  components.  The  specific
component relates to loans that are individually classified as impaired or loans
otherwise  classified as substandard or doubtful.  The general  component covers
non-classified  loans and is based on historical  loss  experience  adjusted for
current factors.

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.  Estimated
useful  lives  range from 3 years to 40 years.  These  assets are  reviewed  for
impairment when events indicate the carrying amount may not be recoverable.

Foreclosed  Assets:  Assets acquired  through or instead of loan foreclosure are
initially  recorded at fair value when acquired,  establishing a new cost basis.
If fair value  declines  subsequent  to  foreclosure,  a valuation  allowance is
recorded through expense. Costs after acquisition are expensed.



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

                                 (Continued)
                                                                             22.
<PAGE>

                           HEARTLAND BANCSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002
              (Dollar amounts in thousands, except per share data)

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

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Company Owned Life  Insurance:  The  Corporation  has purchased  life  insurance
policies on certain key executives.  Company owned life insurance is recorded at
its cash surrender value, or the amount that can be realized, and was carried at
$2,384 and $960 at December 31, 2003 and 2002 and shown in other assets.

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:  Employee  compensation  expense  under  stock  options  is
reported using the intrinsic value method.  No stock-based  compensation cost is
reflected in net income,  as all options  granted had an exercise price equal to
or  greater  than the market  price of the  underlying  common  stock at date of
grant. The following table illustrates the effect on net income and earnings per
share if expense was measured  using the fair value  recognition  provisions  of
FASB Statement No. 123, Accounting for Stock-Based Compensation.

                                                       2003         2002
                                                       ----         ----

Net income/(loss) as reported                        $      414   $  (1,213)
Deduct:  Stock-based compensation expense
  determined under fair value based method                   65          17
                                                     ----------   ---------
Pro forma net income/(loss)                          $      349   $  (1,230)
                                                     ==========   =========

Basic and diluted earnings/(loss) per share
  as reported                                        $      .30   $   (.87)
Pro forma basic and diluted earnings/(loss)
  per share                                                 .25       (.88)

The pro forma  effects are computed  using an option  pricing  model,  using the
following weighted-average assumptions as of grant date.

                                                       2003            2002
                                                       ----            ----

   Risk-free interest rate                               3.12%          3.55%
   Expected option life                                   6.0 years    5.0 years
   Expected stock price volatility                      12.58%         13.37%
   Dividend yield                                        0.00%          0.00%


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

                                 (Continued)
                                                                             23.
<PAGE>

                           HEARTLAND BANCSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002
              (Dollar amounts in thousands, except per share data)

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

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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. Such financial
instruments  are  recorded  when they are funded.  Instruments,  such as standby
letters of credit, that are considered  financial  guarantees in accordance with
FASB Interpretation Number 45, are not significant.

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.  Earnings and dividends per share are restated for
all  stock  splits  and  dividends  through  the date of issue of the  financial
statements.

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  and is  recognized  as a  separate
component 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.  See footnote 13.

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.

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

                                 (Continued)
                                                                             24.
<PAGE>

                           HEARTLAND BANCSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002
              (Dollar amounts in thousands, except per share data)

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

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Segment Reporting:  Internal  financial  information is primarily reported and
aggregated in one line of business, 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.

Adoption of New  Accounting  Standards:  During 2003,  the Company  adopted FASB
Statement 143, Accounting for Asset Retirement Obligations,  FASB Statement 145,
Rescission  of FAS  Statement 4, 44 and 64,  Amendment of FAS  Statement 13, and
Technical Corrections,  FASB Statement 146, Accounting for Costs Associated with
Exit or Disposal  Activities,  FASB Statement 149, Amendment of Statement 133 on
Derivative  Instruments and Hedging  Activities,  FASB Statement 150, Accounting
for Certain Financial  Instruments with  Characteristics of both Liabilities and
Equity, FASB Statement 132 (revised 2003), Employers' Disclosures about Pensions
and  Other  Postretirement  Benefits  and FASB  Interpretation  45,  Guarantor's
Accounting  and  Disclosure  Requirements  for  Guarantees.  Adoption of the new
standards did not materially affect the Company's operating results or financial
condition.

The Corporation also adopted FASB  Interpretation 46,  Consolidation of Variable
Interest  Entities.  Interpretation 46, as revised in December 2003, changes the
accounting  model for  consolidation  from one based on consideration of control
through  voting  interests.  Whether  to  consolidate  an  entity  will now also
consider  whether  that  entity  has  sufficient  equity at risk to enable it to
operate without additional financial support,  whether the equity owners in that
entity lack the  obligation  to absorb  expected  losses or the right to receive
residual  returns of the entity,  or whether voting rights in the entity are not
proportional  to  the  equity  interest  and   substantially  all  the  entity's
activities are conducted for an investor with few voting rights.  See Note 8 for
details on the impact of this Interpretation.

Newly  Issued But Not Yet  Effective  Accounting  Standards:  No new  accounting
standards have been issued that are not yet effective that would have a material
impact on the Corporation's financial condition or results of operations.





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

                                 (Continued)
                                                                             25.
<PAGE>

                           HEARTLAND BANCSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002
              (Dollar amounts in thousands, except per share data)

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


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
                                                 -----     -----     ------
2003
   U.S. Government and government
     sponsored entities                        $17,417   $     93   $   (47)
   Obligations of states and political
     subdivisions                                4,499        143         -
   Mortgage backed securities                   12,076        148       (29)
   Corporate obligations                         1,116         84         -
                                               -------   --------   -------
                                               $35,108   $    468   $   (76)
                                               =======   ========   =======


2002
   U.S. Government and government
     sponsored entities                        $ 7,937   $    104   $     -
   Obligations of states and political
     subdivisions                                2,709        119         -
   Mortgage backed securities                    7,826        212        (2)
   Corporate obligations                         1,094         54         -
                                               -------   --------   -------
                                               $19,566   $    489   $    (2)
                                               =======   ========   =======

During 2003 and 2002,  gross  proceeds from sales of securities  were $2,002 and
$3,035. Recognized gains were $1 and $57. There were no recognized losses.

The fair value of securities at December 31, 2003, by contractual  maturity,  is
shown below.

   Due in one year or less                                         $  2,022
   Due after one year through five years                             17,904
   Due after five years through ten years                             1,905
   Due after ten years                                                1,201
   Mortgage backed securities                                        12,076
                                                                   --------

                                                                   $ 35,108

Securities with a carrying value of $16,689 and $15,900 at December 31, 2003 and
2002 were pledged to secure borrowings and for other purposes.


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

                                 (Continued)
                                                                             26.
<PAGE>

                           HEARTLAND BANCSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002
              (Dollar amounts in thousands, except per share data)

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

NOTE 2 - SECURITIES (Continued)

Securities  with  unrealized  losses at year end 2003 not  recognized  in income
presented by length of time in an unrealized loss position are as follows:

                           Less than 12 Months   12 Months or More       Total
                           -------------------   -----------------       -----
                             Fair   Unrealized  Fair Unrealized  Fair Unrealized
Description of Securities    Value    Loss       Value  Loss        Value   Loss
-------------------------    -----    ----       -----  ----        -----   ----

US Government and
  government sponsored
   entities                $2,977  $ (47)       $   -    $   -    $2,977  $ (47)
Mortgage backed securities  2,890    (29)           -        -     2,890    (29)
                           ------  -----      -------    -----    ------   -----
Total temporarily impaired $5,867 $  (76)     $     -    $   -    $5,867  $ (76)


Unrealized losses on securities have not been recognized into income because the
securities are of high credit quality,  management has the intent and ability to
hold for the foreseeable future, and the decline in fair value is largely due to
changes in market interest  rates.  The fair value is expected to recover as the
securities approach their maturity date and/or market rates change.


NOTE 3 - LOANS

Loans at year end are comprised of the following:

                                                          2003        2002
                                                          ----        ----

   Commercial loans and leases                          $ 64,799   $ 66,861
   Real estate construction and land development          10,748     12,489
   Residential real estate                                24,668     23,952
   Consumer                                               13,341     16,618
                                                        --------   --------
      Subtotal                                           113,556    119,920
   Less:  Allowance for loan losses                       (3,301)    (3,498)
                                                        --------   --------

                                                        $110,255   $116,422
                                                        ========   ========

Certain of the  Corporation's  officers and directors were loan customers of the
Bank. The balance of loans  outstanding to these individuals was $973 and $1,880
at December  31, 2003 and 2002.  New loans  originated  and advances on existing
loans during 2003 were $1,184 and repayments were $2,091.


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

                                 (Continued)
                                                                             27.
<PAGE>

                           HEARTLAND BANCSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002
              (Dollar amounts in thousands, except per share data)

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

NOTE 4 - ALLOWANCE FOR LOAN LOSSES

The activity in the allowance for loan losses is as follows:
                                                          2003        2002
                                                          ----        ----

   Beginning balance                                    $  3,498   $  3,400
   Provision charged to operations                           692      3,150
   Loans charged-off                                      (1,103)    (3,702)
   Recoveries on loans previously charged-off                214        650
                                                        --------   --------

   Ending balance                                       $  3,301   $  3,498
                                                        ========   ========

Information about impaired loans is as follows:
                                                          2003        2002
                                                          ----        ----
   Year-end loans with no allowance
     for loan losses allocated                          $      -   $      -
   Year-end loans with allowance for
     loan losses allocated                                 1,945      4,689
   Amount of the allowance allocated                         437        812
   Average of impaired loans during the year               3,765      4,239
   Interest income recognized during impairment                -          -
   Cash-basis interest income received during impairment       -          -
   Non-performing loans:
      Loans on non accrual status at year end              3,023      4,857
      Loans delinquent greater than 90 days
        and still accruing at year end                         -        776

Nonperforming  loans includes both smaller  balance  homogeneous  loans that are
collectively  evaluated for  impairment  and  individually  classified  impaired
loans.


NOTE 5 - PREMISES AND EQUIPMENT

Year-end premises and equipment were as follows:
                                                          2003        2002
                                                          ----        ----

   Land                                                 $    205   $    205
   Buildings and improvements                              1,793      1,793
   Leasehold improvements                                    312        312
   Furniture and equipment                                 1,358      1,332
                                                        --------   --------
      Total                                                3,668      3,642
   Accumulated depreciation                               (1,159)      (969)
                                                        --------   --------

      Premises and equipment, net                       $  2,509   $  2,673
                                                        ========   ========

Depreciation expense was $254 and $300 for 2003 and 2002.


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

                                 (Continued)
                                                                             28.
<PAGE>

                           HEARTLAND BANCSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002
              (Dollar amounts in thousands, except per share data)

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

NOTE 6 - DEPOSITS

Interest-bearing  time  deposits  issued  in  denominations  of $100 or  greater
totaled $14,157 and $26,418 at December 31, 2003 and 2002.

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

               2004                                     $ 27,815
               2005                                       17,297
               2006                                        2,840
               2007                                        2,112
               2008                                          691
               Thereafter                                      -
                                                        --------
                                                        $ 50,755
                                                        ========

Time  deposits  from  governmental  and  other  public  entities  such as school
corporations  and hospitals in the Bank's market area totaled $2,536 at December
31, 2003 and $2,418 at December 31, 2002.

Certain of the  Corporation's  officers and directors were deposit  customers of
the Bank. The balance of deposits with these  individuals was $2,110 and $11,481
at December 31, 2003 and 2002.


NOTE 7 - REPURCHASE AGREEMENTS AND FHLB ADVANCES

Securities sold under agreements to repurchase are secured by pledged securities
with a  carrying  amount  of  $8,787  and  $9,212  at  year-end  2003 and  2002.
Securities sold under agreements to repurchase are financing  arrangements  that
have daily maturities and variable interest rates.

Information  concerning  securities  sold  under  agreements  to  repurchase  is
summarized as follows:
                                                           2003       2002
                                                           ----       ----

   Average daily balance during the year                 $  4,194   $ 4,855
   Average interest rate during the year                     0.62%     1.52%
   Maximum month-end balance during the year             $  7,812   $ 7,364
   Weighted average interest rate at year end                0.60%      .75%

Federal Home Loan Bank (FHLB) advances are payable at maturity, generally with a
prepayment  penalty.  They  are  collateralized  by  pledged  securities  with a
carrying  amount of $5,136 and interest  bearing  deposits of $1,505 at December
31, 2003. Interest is payable monthly.


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

                                 (Continued)
                                                                             29.
<PAGE>

                           HEARTLAND BANCSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002
              (Dollar amounts in thousands, except per share data)

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



NOTE 7 - REPURCHASE AGREEMENTS AND FHLB ADVANCES (Continued)

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

              Maturity date   Interest Rate       2003       2002
              -------------   -------------       ----       ----

               July 14, 2004      1.49%         $  2,000   $     -
               December 29, 2005  2.36             1,000         -
               November 1, 2004   3.68             1,000     1,000
               July 14, 2003      4.66                 -     2,000
               October 30, 2003   3.08                 -     1,000
                                                --------   -------
                                                $  4,000   $ 4,000
                                                ========   =======


NOTE 8 - SUBORDINATED DEBENTURES AND TRUST PREFERRED SECURITIES

On  December  18,  2001,  a trust  formed by the  Corporation  issued  $5,000 of
floating rate trust  preferred  securities as part of a pooled  offering of such
securities.  The  Corporation  issued  subordinated  debentures  to the trust in
exchange for the proceeds of the offering,  which debentures  represent 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.  Distributions  on the
securities  are  payable  quarterly  in arrears at the annual rate of LIBOR plus
3.60%. The rate cannot exceed 12.50%.

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.  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.


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

                                 (Continued)
                                                                             30.
<PAGE>

                           HEARTLAND BANCSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002
              (Dollar amounts in thousands, except per share data)

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

NOTE 8 - SUBORDINATED DEBENTURES AND TRUST PREFERRED SECURITIES (Continued)

Prior to  2003,  the  trust  was  consolidated  in the  Corporation's  financial
statements,  with the trust preferred securities issued by the trust reported in
liabilities as "guaranteed  preferred beneficial interests" and the subordinated
debentures  eliminated in  consolidation.  Under new accounting  guidance,  FASB
Interpretation  No.  46, as  revised in  December  2003,  the trust is no longer
consolidated with the Corporation.  Accordingly, the Corporation does not report
the  securities  issued by the trust as  liabilities,  and  instead  reports  as
liabilities the  subordinated  debentures  issued by the Corporation and held by
the trust, as these are no longer eliminated in consolidation.  Accordingly, the
amounts previously reported as "guaranteed  preferred  beneficial  interests" in
liabilities have been recaptioned  "subordinated  debentures" and continue to be
presented in  liabilities  on the balance sheet for all periods  presented.  The
effect  of no  longer  consolidating  the trust  does not  significantly  affect
financial  statement  classifications,  and does not  change  the  Corporation's
equity or net income.


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 $79 and $65 for 2003 and
2002.


NOTE 10 - STOCK OPTION PLANS

At December 31, 2003, the  Corporation  maintained  three stock option plans: an
employee plan (under which options may be granted  through 2007), a non-employee
director  plan (under which options may be granted  through  January 2008) and a
non-employee  director  plan (under  which no new  options may be granted  after
September,  2003).  Under the terms of these  plans,  options  for up to 305,780
shares  of the  Corporation's  common  stock may be  granted  to  employees  and
directors  of the  Corporation  and its  subsidiaries  with 28,804  shares still
available for grant at December 31, 2003. The exercise price of options  granted
to employees  under the employee  plan is  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.



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

                                 (Continued)
                                                                             31.
<PAGE>

                           HEARTLAND BANCSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002
              (Dollar amounts in thousands, except per share data)

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

NOTE 10 - STOCK OPTION PLANS (Continued)

Employee  options are immediately  exercisable with respect to 20 percent of the
shares  covered by the option and vest with respect to an  additional 20 percent
of the shares on each of the following four  anniversaries of the date of grant,
assuming continued employment of the optionee. The options will expire ten years
after date of grant.

Non-employee  director  options issued under the expired  non-employee  director
plan  provided for a vesting  schedule,  and the holders of all options  granted
under that plan that were  outstanding at December 31, 2003, have satisfied that
vesting schedule and all of such options are now exercisable in full.

Non-employee  director  options issued under the currently  active  non-employee
director plan are immediately exercisable.

The option  plans  provide  usual and  customary  provisions  providing  for the
adjustment of the exercise price and number and type of shares subject to grants
under the plans in the event of certain corporate  events,  and the acceleration
of the rights of an  optionee  to  exercise  unvested  stock  options in certain
events.

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

                                       2 0 0 3                 2 0 0 2
                                       -------                 -------
                                             Weighted-                Weighted-
                                              Average                  Average
                                             Exercise                 Exercise
                                  Options      Price       Options      Price
                                  -------      -----       -------      -----
   Outstanding - beginning
     of period                     135,044    $  9.07      147,735    $    9.07
   Granted                          83,500       9.07        5,500         9.07
   Exercised                             -         -             -           -
   Forfeited                             -         -       (18,191)        9.07
                                 ---------    ------      --------       ------

   Outstanding-end of period       218,544   $  9.07       135,044    $    9.07
                                 =========   =======     =========    =========

   Exercisable at end of period    182,044    $ 9.07       125,021    $    9.07
                                 =========    ======     =========    =========

   Weighted average remaining life
     of outstanding options           6.19 years              5.41 years

   Weighted average fair value of
     options granted during the year  $   1.53                $  1.11
                                      ========                =======



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

                                 (Continued)
                                                                             32.
<PAGE>

                           HEARTLAND BANCSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002
              (Dollar amounts in thousands, except per share data)

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

NOTE 11 - INCOME TAXES

Income tax expense/(benefit) was as follows:
                                                           2003       2002
                                                           ----       ----

   Current                                               $    170   $  (653)
   Deferred                                                     6      (184)
                                                         --------   -------
      Total                                              $    176   $  (837)
                                                         ========   =======

Effective  tax rates  differ from  federal  statutory  rates  applied to pre-tax
income due to the following:
                                                           2003       2002
                                                           ----       ----
   Federal statutory rate times
     financial statement income/(loss)                   $    201   $  (697)
   Effect of:
      Tax-exempt income                                       (38)      (38)
      State taxes, net of federal tax effect                   34      (111)
      Other, net                                              (21)        9
                                                         --------   -------
         Total                                           $    176   $  (837)
                                                         ========   =======


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

                                                          2003       2002
                                                          ----       ----
   Deferred tax assets:
      Allowance for loan losses                          $    896   $   950
      Deferred compensation                                   105        69
      State net operating loss carryforward                    40        83
      Other                                                    55        44
                                                         --------   -------
                                                            1,096     1,146
   Deferred tax liabilities:
      Depreciation                                            (93)      (87)
      Cash to accrual adjustment                             (107)     (213)
      Net unrealized gains on securities                     (153)     (186)
      Other                                                   (57)       (1)
                                                         --------   -------
                                                             (410)     (487)
                                                         --------   -------
      Total                                              $    686   $   659
                                                         ========   =======

The  Corporation  has a net  operating  loss  carryforward  for state income tax
purposes of $719 expiring in 2017.



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

                                 (Continued)
                                                                             33.
<PAGE>

                           HEARTLAND BANCSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002
              (Dollar amounts in thousands, except per share data)

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

NOTE 12 - EARNINGS PER SHARE

The following  illustrates  the  computation  of basic and diluted  earnings per
share.

                                                        2003         2002
                                                        ----         ----
Basic earnings per share
   Net income/ (loss)                                $      414   $  (1,213)
                                                     ==========   =========

   Weighted average shares outstanding                1,394,172   1,394,172
                                                     ==========   =========

      Basic earnings per share                       $      .30   $     (.87)
                                                     ==========   ==========

                                                        2003         2002
                                                        ----         ----
Dilutive earnings per share
   Net income/ (loss)                                $      414   $  (1,213)
                                                     ==========   =========

   Weighted average shares outstanding                1,394,172   1,394,172
   Dilutive effect of assumed exercise of stock
     options                                              2,277           -
                                                      ---------   ---------
      Diluted average shares outstanding              1,396,449   1,394,172
                                                     ==========   =========

      Diluted earnings per share                     $      .30   $     (.87)
                                                     ==========   ==========

Outstanding stock options for 135,044 shares of common stock were not considered
dilutive for computing  diluted earnings per share in 2002, but were included in
dilutive effect of assumed exercise of stock options in 2003.


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.





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

                                 (Continued)
                                                                             34.
<PAGE>

                           HEARTLAND BANCSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002
              (Dollar amounts in thousands, except per share data)

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

NOTE 13 - CAPITAL REQUIREMENTS AND REGULATORY MATTERS (Continued)

At year-end 2003 and 2002, the most recent regulatory notifications  categorized
the  Bank  as  well  capitalized  under  the  regulatory  framework  for  prompt
corrective  action.  There are no conditions  or events since that  notification
that management believes have changed the institution's category. 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
                           ------    -----   ------   -----    ------    -----

2003 - Bank
Total capital (to risk
  weighted assets)        $17,056  14.11%   $9,669     8.00%  $12,087    10.00%
Tier 1 capital (to risk
  weighted assets)         15,523  12.84     4,835     4.00     7,252     6.00
Tier 1 capital
  (to average assets)      15,523   8.91     6,970     4.00     8,713     5.00

2003 - Corporation
Total capital (to risk
  weighted assets)        $18,846  15.55%   $9,693     8.00%      N/A
Tier 1 capital (to risk
  weighted assets)         16,497  13.62     4,847     4.00       N/A
Tier 1 capital (to
  average assets)          16,497   9.46     6,675     4.00       N/A


2002 - Bank
Total capital (to risk
  weighted assets)        $16,509  12.96%   $10,188    8.00%  $12,735    10.00%
Tier 1 capital (to risk
  weighted assets)         14,935  11.73      5,094    4.00     7,641     6.00
Tier 1 capital (to
  average assets)          14,935   8.35      7,150    4.00     8,938     5.00

2002 - Corporation
Total capital (to risk
  weighted assets)        $18,473 14.48%    $10,205   8.00%       N/A
Tier 1 capital (to risk
  weighted assets)         15,865 12.44       5,103   4.00        N/A
Tier 1 capital (to
  average assets)          15,865  8.86       7,159   4.00        N/A




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

                                 (Continued)
                                                                             35.
<PAGE>

                           HEARTLAND BANCSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002
              (Dollar amounts in thousands, except per share data)

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


NOTE 13 - CAPITAL REQUIREMENTS AND REGULATORY MATTERS (Continued)

On May 11,  2002,  with the  consent  of the  Bank,  the  FDIC  and the  Indiana
Department of Financial  Institutions (DFI) entered a formal order under federal
and state banking  laws,  under which the Bank and its Directors are 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.

On February 23, 2004,  Heartland received written notification from the FDIC and
the DFI  indicating  that the Bank  would be  released  from the May 2002  Order
subject to the  stipulation  that the Bank continue to maintain a Tier 1 capital
to assets ratio at 8% or above;  to limit growth in total assets to no more than
three percent per quarter without regulatory approval and to maintain the levels
of acquisition,  development and  construction  loans at or below 125% of Tier 1
capital and commercial  real-estate loans at or below 250% of Tier 1 capital. On
February 23, 2004 the Bank's board of directors  adopted a resolution  accepting
the  stipulations as presented by the FDIC and DFI and notified the FDIC and DFI
of the resolution and intent to abide by the stipulations.

Heartland's  parent-company  liquidity and capital  resources are  restricted by
resolutions  adopted by its Board of  Directors  at the  request of the  Federal
Reserve Bank of Chicago  pursuant to its  supervisory  authority  under the Bank
Holding Company Act. These resolutions  prohibit  Heartland from incurring debt,
paying dividends to Heartland's shareholders, purchasing Heartland's outstanding
common stock,  or paying  interest on the trust  preferred  securities,  without
approval of the Reserve Bank.





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

                                 (Continued)
                                                                             36.
<PAGE>

                           HEARTLAND BANCSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002
              (Dollar amounts in thousands, except per share data)

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


NOTE 14 - COMMITMENTS AND CONTINGENT LIABILITIES

The Bank leases certain  facilities  and land under  operating  leases  expiring
through  2016.  The related  lease  expense was $311 and $310 for 2003 and 2002.
Future minimum lease payments are as follows:

                  2004                              $    313
                  2005                                   288
                  2006                                   289
                  2007                                   313
                  2008                                   290
                  Thereafter                           2,015
                                                    --------

                     Total minimum lease payments   $  3,508
                                                    ========

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.


Off-balance sheet financial  instruments whose contract amount represents credit
risk are summarized as follows:
                                       2 0 0 3                  2 0 0 2
                                       -------                  -------
                                  Fixed     Variable       Fixed      Variable
                                  Rate        Rate         Rate         Rate
                                  ----        ----         ----         ----
   Commitments to make loans    $  2,310   $    8,440   $        -   $   3,538
   Unused lines of credit              -       24,580            -      21,953
   Letters of credit                   -        1,267            -       1,347


Interest  rates on fixed  rate loan  commitments  ranged  from 5.00% to 6.50% at
December 31, 2003.

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 $1,540 and $950 at  December  31,  2003 and 2002.  These
reserves do not earn interest.


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

                                 (Continued)
                                                                             37.
<PAGE>

                           HEARTLAND BANCSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002
              (Dollar amounts in thousands, except per share data)

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

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 3                 2 0 0 2
                                       -------                 -------
                                 Carrying     Fair       Carrying     Fair
                                   Value      Value        Value      Value
                                   -----      -----        -----      -----
   Financial assets:
      Cash and cash equivalents  $ 10,717   $ 10,717     $ 25,232     $ 25,232
      Time deposits with other
        financial institutions        500       500           500          500
      Securities
        available-for-sale         35,108    35,108        19,566       19,566
      Loans held for sale           2,058     2,096         7,156        7,263
      Loans, net                  110,255   111,625       116,422      118,352
      FHLB stock                      638       638           608          608
      Accrued interest receivable     711         711         718          718



   Financial liabilities:
      Deposits                $(137,506)  $(137,928)  $(148,399)  $(149,134)
      Repurchase agreements      (7,812)     (7,812)     (6,251)     (6,251)
      FHLB advances              (4,000)     (4,018)     (4,000)     (4,048)
      Trust preferred
       securities                (5,155)     (5,155)     (5,155)     (5,155)
      Accrued interest
        payable                    (92)        (92)        (151)       (151)

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 of loans held for
sale is based on  market  quotes.  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.




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

                                 (Continued)
                                                                             38.
<PAGE>

                           HEARTLAND BANCSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002
              (Dollar amounts in thousands, except per share data)

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


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

                                                             2003        2002
                                                             ----        ----
ASSETS
Cash                                                       $  1,717   $  1,752
Investment in bank                                           15,760     15,236
Investment in unconsolidated subsidiary                         155        155
Other assets                                                    128        221
                                                           --------   --------

                                                           $ 17,760   $ 17,364
                                                           ========   ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Subordinated debentures                                    $  5,155   $  5,155
Other liabilities                                                53          9
                                                           --------   --------
   Total liabilities                                          5,208      5,164
Shareholders' equity                                         12,552     12,200
                                                           --------   --------

                                                           $ 17,760   $ 17,364
                                                           ========   ========


                         CONDENSED STATEMENTS OF INCOME

                                                             2003        2002
                                                             ----        ----

Interest and dividend income                               $     41  $      29

Interest expense                                               (252)      (297)

Other expense                                                   (74)       (63)

Tax benefit                                                     113        132
                                                           --------   --------

Income/(loss) before equity in undistributed
 earnings of bank                                              (172)      (199)

Equity in undistributed earnings/(loss) of bank                 586     (1,014)
                                                           --------   --------


Net income/(loss)                                          $    414   $ (1,213)
                                                           ========   ========



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

                                 (Continued)
                                                                             39.
<PAGE>

                           HEARTLAND BANCSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002
              (Dollar amounts in thousands, except per share data)

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

NOTE 16 - PARENT COMPANY STATEMENTS (Continued)

                       CONDENSED STATEMENTS OF CASH FLOWS

                                                             2003        2002
                                                             ----        ----

Cash flows from operating activities
   Net income/(loss)                                        $    414   $(1,213)
   Adjustments to reconcile net income/(loss) to net cash
     from operating activities
      Equity in undistributed (earnings)/ loss of bank          (586)    1,014
      Other assets and other liabilities, net                    137       (71)
                                                            --------   -------
         Net cash from operating activities                      (35)     (270)

Net change in cash and cash equivalents                          (35)     (270)

Beginning cash and cash equivalents                            1,752     2,022
                                                            --------   -------

Cash and cash equivalents at end of period                  $  1,717   $ 1,752
                                                            ========   =======


NOTE 17 - OTHER COMPREHENSIVE INCOME (LOSS)

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

                                                           2003       2002
                                                           ----       ----
   Unrealized holding gains and losses on
     securities available-for-sale                       $    (94)  $   296
   Reclassification adjustment for gains
     and losses later recognized in income                     (1)      (57)
                                                         --------   -------
   Net unrealized gains and losses                            (95)      239
   Tax effect                                                  33       (89)
                                                         --------   -------
      Other comprehensive income (loss)                  $    (62)  $   150
                                                         ========   =======




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

                                                                             37.
<PAGE>


DIRECTORS AND OFFICERS OF HEARTLAND COMMUNITY BANK

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  and  Branch
                                        Manager

Jeffrey L. Goben,                       Jeff Tillman,
Executive Vice President,               Assistant Vice President,
Chief Operating Officer and Secretary

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

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

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

R. Trent McWilliams,                    Connie Hann,
Vice President, Business Development    Mortgage Loan Officer

Tony Anderson,                          Melissa Duke,
Vice President, Mortgage Loans          Commercial Loan Officer

Pam Fender,                             Ken Yedlick,
Vice President, Deposit Operations      Commercial Loan Officer

Robert Maher,                           Kathee Pruitt,
Vice President, CD Brokerage Program    Branch Manager

Alexa McKnight,                         Trudy Holtsclaw,
Assistant Vice President                Branch Manager

Terri Webb,                             Tonia Bussinger,
Assistant Vice President                Collections Officer

Lisa Shirar,                            Michael Yovanoff,
Compliance Officer                      Portfolio Manager




                                                                             41.
<PAGE>


Banking Facilities

Franklin:                              Greenwood:
420 North Morton Street (US 31)        489 South State Road 135
Franklin, Indiana  46131               Greenwood, Indiana  46142
Phone (317) 738-3915                   Phone (317) 881-3915
FAX (317) 738-7315                     FAX (317) 859-3849

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

Operations and Commercial Loan Center
460 North Morton Street (US 31)
Franklin, Indiana 46131
Phone (317) 738-3915
FAX (317) 736-5022

World Wide Web:
www.HeartlandCommunityBank.com

Investor Relations/Analyst Contact

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











                                                                             42.