UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

                |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934.

                  For the fiscal year ended: December 31, 2001

                                       OR

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

           For the transition period from _____________to_____________

                         Commission File Number 0-22469

                            LAFAYETTE BANCORPORATION
             (Exact name of registrant as specified in its charter)
                               INDIANA 35-1605492
                  (State or other jurisdiction (I.R.S. Employer
              of incorporation or organization) Identification No.)

                 133 North 4th Street, Lafayette, Indiana 47902
               (Address of Principal Executive Offices) (Zip Code)

               Registrant's telephone number, including area code:
                                 (765) 423-7100

          Securities registered pursuant to Section 12 (b) of the Act:

Title of each class                   Name of each exchange on which registered

   NONE                                        Not Applicable

          Securities registered pursuant to Section 12 (g) of the Act:

                           Common Shares, No Par Value
                                (Title of Class)

<PAGE>



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

                  YES [X]           NO [   ]

The  aggregate  market  value of the voting stock held by  nonaffiliates  of the
Registrant  (assuming solely for purposes of this calculation that all directors
and executive  officers of the Registrant are affiliates) valued at the price of
the last trade price of $28.00  reported on the OTC  Bulletin  Board as of March
12, 2002, was approximately $108,161,760.00.

As of March 12, 2002,  there were outstanding  3,961,589  common shares,  no par
value, of the registrant.

DOCUMENTS INCORPORATED BY REFERENCE

No documents are incorporated by reference into Parts II or III.

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


<PAGE>


                                     PART I

ITEM 1. BUSINESS.

                                     General

     Lafayette  Bancorporation  (the  "Corporation")  is a  registered  one-bank
holding company that holds all the outstanding stock of Lafayette Bank and Trust
Company (the "Bank").  The  Corporation  was  incorporated  under Indiana law on
February  16,  1984,  at the  direction of the Board of Directors of the Bank to
facilitate the Bank's adoption of a one-bank holding company structure. The Bank
became a wholly-owned  subsidiary of the Corporation on April 30, 1985, pursuant
to a Plan of  Exchange  in  which  all the  outstanding  stock  of the  Bank was
exchanged for stock of the  Corporation.  Prior to its acquisition of the Bank's
stock, the Corporation  conducted no business or operations.  The  Corporation's
principal  executive  offices are  located at 133 North 4th  Street,  Lafayette,
Indiana 47902 and its telephone number is (765) 423-7100.

     As a bank holding company,  the Corporation  engages in commercial  banking
through  its sole  banking  subsidiary,  the Bank,  and can  engage  in  certain
non-banking  activities and own certain other business corporations that are not
banks, subject to applicable laws and regulations. All references hereinafter to
the activities or operations of the Corporation reflect the Corporation's acting
or operating through the Bank.

     The Bank was  chartered  as an Indiana  state-chartered  bank in 1899.  The
Bank's  principal  executive  offices are also  located at 133 North 4th Street,
Lafayette, Indiana 47902 and its telephone number is (765) 423-7100. At December
31, 2001, the Bank was the largest bank  headquartered in Tippecanoe County with
total assets of $762,318,000 and total deposits of $618,572,000.

     On  October  14,  2001,  the  Corporation  entered  into  an  Agreement  of
Reorganization and Merger, which provides for the merger of the Corporation into
First Merchants  Corporation  ("FMC"),  Muncie,  Indiana. The Agreement provides
that upon the effective date of the merger,  each shareholder of the Corporation
may elect to receive  either 1.11 shares of FMC's common stock or $30.00 in cash
for each share of the  Corporation's  common  stock  owned by such  shareholder.
However,  no more than $50,329,248  aggregate cash may be paid in the merger and
there may be allocations of stock to certain  shareholders  if this threshold is
exceeded.  Subsequent  to the  merger,  the Bank will  continue  to operate as a
separate  banking  subsidiary of First  Merchants  Corporation for at least five
years.  The  transaction  is expected to be consummated in the second quarter of
2002. All required shareholder and regulatory approvals have been received.  The
information  in this paragraph  relating to the continued  operation of the Bank
after the proposed merger is a forward-looking statement which may or may not be
accurate  because of the  uncertainty  whether  the  merger  will or will not be
consummated and, if consummated,  whether First Merchants  decides to modify its
business plans regarding the operation of the Bank.

<PAGE>

Segment Information

     The  Corporation's  operations  include  three primary  segments:  banking,
mortgage banking and trust services. Financial information and other information
about  these  segments  is  provided  in Note 21 to the  Consolidated  Financial
Statements, which is included in Item 8 below, and the information in Note 21 is
incorporated herein by reference.

Competition

     The banking business is highly competitive.  The Corporation's  market area
consists  principally  of Tippecanoe,  White,  Jasper,  and Carroll  Counties in
Indiana,  although the Bank also competes with other  financial  institutions in
surrounding  counties in Indiana in obtaining  deposits and providing many types
of financial services.  The Corporation  competes with larger regional banks for
the business of companies located in the Corporation's market area.

     The Bank also competes with savings and loan  associations,  credit unions,
production  credit   associations  and  federal  land  banks  and  with  finance
companies,  personal loan companies, money market funds and other non-depository
financial  intermediaries.  Many of these financial  institutions have resources
many times greater than those of the Bank. In addition, financial intermediaries
such as  money-market  mutual funds and large  retailers  are not subject to the
same  regulations  and laws that govern the operation of traditional  depository
institutions.

     Recent  changes in federal and state law have  resulted in and are expected
to continue to result in increased competition. The reductions in legal barriers
to the acquisition of banks by  out-of-state  bank holding  companies  resulting
from  implementation  of  interstate  banking  legislation  and other recent and
proposed  changes are expected to continue to further  stimulate  competition in
the markets in which the Bank  operates,  although it is not possible to predict
the extent or timing of such increased competition.

Employees

     The  Corporation  has no compensated  employees.  At December 31, 2001, the
Bank employed 269 full-time  employees and 52 part-time  employees.  The Bank is
not a party to any collective bargaining agreements,  and employee relations are
considered to be good.

                           Regulation and Supervision

     The Bank is chartered under the banking laws of the State of Indiana and is
subject to the supervision  of, and is regularly  examined by, the Department of
Financial Institutions (the "DFI") and the Federal Deposit Insurance Corporation
(the "FDIC").  The  Corporation is a bank holding  company within the meaning of
the Bank Holding Company Act (the "BHC Act") and is registered as such with, and
is subject to the supervision of, the Federal Reserve Board (the "FRB"). Certain
legislation and regulations  affecting the businesses of the Corporation and the
Bank are discussed below.

<PAGE>

General

     As a bank holding  company,  the Corporation is subject to the BHC Act. The
Corporation reports to, registers with, and is examined by the FRB. The FRB also
has the authority to examine the Corporation's subsidiaries,  which includes the
authority to examine the Bank.

     The FRB requires the Corporation to maintain certain levels of capital. See
"Capital  Standards"  herein. The FRB also has the authority to take enforcement
action  against  any bank  holding  company  that  commits any unsafe or unsound
practice,  violates certain laws, regulations,  or conditions imposed in writing
by the FRB.  See "Prompt  Corrective  Action and Other  Enforcement  Mechanisms"
herein.

     Under the BHC Act, a company  generally  must obtain the prior  approval of
the FRB before it exercises a controlling  influence over, or acquires  directly
or  indirectly,  more than 5% of the voting shares or  substantially  all of the
assets of any bank or bank holding company. Thus, the Corporation is required to
obtain the prior approval of the FRB before it acquires,  merges or consolidates
with any bank, or bank holding company. Any company seeking to acquire, merge or
consolidate  with the  Corporation  also would be  required  to obtain the FRB's
approval.

     The  Corporation is generally  prohibited  under the BHC Act from acquiring
ownership or control of more than 5% of the voting shares of any company that is
not a bank or bank holding  company and from engaging  directly or indirectly in
activities  other  than  banking,  managing  banks,  or  providing  services  to
affiliates of the holding  company.  A bank holding company with the approval of
the FRB,  may  engage or acquire  the voting  shares of  companies  engaged,  in
activities  that the FRB has  determined to be so closely  related to banking or
managing or controlling banks as to be a proper incident thereto. A bank holding
company  must  demonstrate  that the  benefits  to the  public  of the  proposed
activity  will  outweigh  the  possible  adverse  effects  associated  with such
activity.  Legislation  enacted  in  December  1999  provides  for bank  holding
companies  that satisfy  certain  conditions  to qualify as  "financial  holding
companies"  and  thereby  be  permitted  to  engage in a much  broader  range of
financial activities. The Corporation is not a financial holding company.

     The FRB generally prohibits a bank holding company from declaring or paying
a cash dividend  which would impose undue  pressure on the capital of subsidiary
banks or would be funded only through borrowing or other arrangements that might
adversely affect a bank holding company's financial  position.  The FRB's policy
is that a bank holding  company  should not  continue its existing  rate of cash
dividends on its common stock unless its net income is  sufficient to fully fund
each dividend and its prospective rate of earnings  retention appears consistent
with its capital needs, asset quality and overall financial condition.

     Transactions between the Corporation,  the Bank and any future subsidiaries
of the Corporation are subject to a number of other  restrictions.  FRB policies
forbid  the  payment  by  bank   subsidiaries   of  management  fees  which  are
unreasonable in amount or exceed the fair market value of the services  rendered
(or, if no market exists, actual costs plus a reasonable profit).  Additionally,
a bank holding  company and its  subsidiaries  are  prohibited  from engaging in
certain tie-in  arrangements in connection with the extension of credit, sale or
lease  of  property,  or  furnishing  of  services.  See  also  "Inter-Corporate
Borrowings" below for a discussion of additional restrictions.
<PAGE>

Capital Standards

     The FRB, FDIC and other federal banking  agencies have  risk-based  capital
adequacy  guidelines  intended  to provide a measure of  capital  adequacy  that
reflects the degree of risk associated with a banking organization's  operations
for both transactions reported on the balance sheet as assets, and transactions,
such as letters of credit  and  recourse  arrangements,  which are  reported  as
off-balance  sheet items.  Under these  guidelines,  nominal  dollar  amounts of
assets and credit  equivalent  amounts of off-balance sheet items are multiplied
by one of several risk  adjustment  percentages,  which range from 0% for assets
with low credit risk, such as certain U.S.  government  securities,  to 100% for
assets with  relatively  higher credit risk, such as business loans. On March 2,
1999,  the four  federal  banking  agencies  published  in the Federal  Register
uniform  final rules that  amended the leverage  capital  standards to make them
more uniform and streamlined and amended the risk-based  standards applicable to
three types of assets. The new standards became effective on April 1, 1999.

     A banking organization's risk-based capital ratios are obtained by dividing
its qualifying capital by its total  risk-adjusted  assets and off-balance sheet
items. The regulators measure  risk-adjusted  assets and off-balance sheet items
against  both total  qualifying  capital  (the sum of Tier 1 capital and limited
amounts of Tier 2 capital) and Tier 1 capital. Tier 1 capital consists of common
stock, retained earnings,  noncumulative  perpetual preferred stock and minority
interests in certain  subsidiaries,  less most other intangible  assets.  Tier 2
capital may  consist of a limited  amount of the  allowance  for loan losses and
certain other instruments with some  characteristics of equity. The inclusion of
elements  of Tier 2 capital  are  subject  to  certain  other  requirements  and
limitations  of the federal  banking  agencies.  Since  December 31,  1992,  the
federal  banking  agencies have  required a minimum  ratio of  qualifying  total
capital to risk-adjusted assets and off-balance sheet items of 8%, and a minimum
ratio of Tier 1 capital to risk-adjusted  assets and off-balance  sheet items of
4%.

     In  addition  to the  risk-based  guidelines,  federal  banking  regulators
require banking  organizations to maintain a minimum amount of Tier 1 capital to
total  assets,  referred to as the leverage  ratio.  For a banking  organization
rated in the highest of the five  categories  used by regulators to rate banking
organizations,  the minimum  leverage ratio of Tier 1 capital to total assets is
3%;  all other  institutions  are  required  to have a minimum  ration of 4%. In
addition to these uniform risk-based capital guidelines and leverage ratios that
apply across the industry,  the regulators have the discretion to set individual
minimum capital  requirements for specific  institutions at rates  significantly
above the minimum guidelines and ratios.

     For a detailed  discussion of the regulatory  capital  requirements and the
Corporation's  and Bank's  compliance  with  those  requirements,  see  "Capital
Adequacy" in  Management's  Discussion  and Analysis of Financial  Condition and
Results of Operations,  which is included in Item 7 below,  and Note 14 to Notes
to Consolidated Financial Statements, which is included in Item 8 below.

     The  Federal  Deposit  Insurance   Corporation   Improvement  Act  of  1991
("FDICIA")  required  the federal  financial  institution  agencies to prescribe
standards  for assessing  interest rate risk,  which is the exposure of a bank's
earnings  and capital  arising from adverse  movements  in interest  rates.  The
banking  agencies  issued a joint policy  statement on interest rate risk in May
1996 that describes prudent methods for monitoring such risk that rely primarily
on the  maintenance  of adequate  internal risk  measurement  systems and active
oversight of risk  management  activities  by the Board of Directors  and senior
management.

<PAGE>

Prompt Corrective Action and Other Enforcement Mechanisms

     FDICIA  requires  each  federal  banking  agency to take prompt  corrective
action to resolve the problems of insured depository institutions, including but
not  limited  to those  that fall  below one or more of the  prescribed  minimum
capital  ratios.  The law requires  each federal  banking  agency to  promulgate
regulations   defining  the  following  five  categories  in  which  an  insured
depository institution will be placed, based on the level of its capital ratios:
well-capitalized,   adequately  capitalized,   undercapitalized,   significantly
undercapitalized and critically undercapitalized.

     The federal banking agencies have issued uniform  regulations  implementing
the  prompt  corrective  action  provisions  of FDICIA.  An  insured  depository
institution  generally will be classified in the following  categories  based on
capital measures indicated below:

         "Well-Capitalized":
          ----------------

                  Total risk-based capital of 10% or more; Tier 1 risk-based
                  ratio capital of 6% or more; and Leverage ratio of 5% or more.

         "Adequately Capitalized":
          ----------------------

                  Total risk-based capital of at least 8%; Tier 1 risk-based
                  capital of at least 4%; and Leverage ratio of at least 4%.

         "Undercapitalized":
          ----------------

                  Total risk-based capital less than 8%; Tier 1 risk-based
                  capital less than 4%; or Leverage ratio less than 4%.

         "Significantly Undercapitalized":
          ------------------------------

                  Total risk-based capital less than 6%; Tier 1 risk-based
                  capital less than 3%; or Leverage ratio less than 3%.

         "Critically Undercapitalized":
          ---------------------------

                  Tangible equity to total assets less than 2%.

     An  institution  that,  based upon its capital  levels,  is  classified  as
well-capitalized,  adequately capitalized, or undercapitalized may be treated as
though it were in the next lower  capital  category if the  appropriate  federal
banking agency,  after notice and  opportunity  for hearing,  determines that an
unsafe or unsound  condition  or an unsafe or  unsound  practice  warrants  such
treatment.  At each successive  lower capital  category,  an insured  depository
institution  is subject to more  restrictions.  The  federal  banking  agencies,
however,  may not treat an institution as "critically  undercapitalized"  unless
its capital ratio actually warrants such treatment.
<PAGE>

     If an  insured  depository  institution  is  undercapitalized,  it  will be
closely  monitored by the appropriate  federal banking agency.  Undercapitalized
institutions  may be required to submit an acceptable  capital  restoration plan
with  a  guarantee  of  performance  issued  by  the  holding  company.  Further
restrictions  and  sanctions  are  required to be imposed on insured  depository
institutions that are critically undercapitalized. The most important additional
measure is that the  appropriate  federal  banking  agency is required to either
appoint a receiver for the institution  within 90 days or obtain the concurrence
of the FDIC in another form of action.

     In  addition  to  measures  taken  under  the  prompt   corrective   action
provisions,  commercial  banking  organizations  may  be  subject  to  potential
enforcement actions by the federal regulators for unsafe or unsound practices in
conducting  their  businesses or for violations of any law, rule,  regulation or
any condition imposed in writing by the agency or any written agreement with the
agency.  Enforcement  actions may include the  imposition  of a  conservator  or
receiver,  the  issuance  of a  cease-and-desist  order  that can be  judicially
enforced,  the termination of insurance of deposits (in the case of a depository
institution),   the  imposition  of  civil  money  penalties,  the  issuance  of
directives to increase capital,  the issuance of formal and informal agreements,
the issuance of removal and  prohibition  orders against  institution-affiliated
parties and the enforcement of such actions  through  injunctions or restraining
orders  based  upon a prima  facie  showing by the  agency  that such  relief is
appropriate. Additionally, a holding company's inability to serve as a source of
strength to its subsidiary  banking  organizations  could serve as an additional
basis for a regulatory action against the holding company.

     As discussed in the "Capital  Adequacy" section of Management's  Discussion
and Analysis of Financial  Condition  and Results of  Operations in Item 7 below
and in Note 14 to Notes to Consolidated  Financial Statements included in Item 8
below, the consolidated and bank-only capital levels were significantly  reduced
as a result of the Bank's  acquisition of three Jasper County  branches on March
12, 1999. In response,  the  Corporation  borrowed  $14,000,000  and contributed
$13,000,000 of capital to the Bank for the Bank to maintain its well-capitalized
status. At year-end 1999, the Bank was categorized as well-capitalized under the
regulatory  framework for prompt  corrective  action,  but the  Corporation  was
categorized as undercapitalized,  as the total capital ratio was 7.99%, slightly
below the 8% minimum. Despite this capital deficiency,  no corrective action was
initiated by the banking  regulatory  authorities.  The Corporation  returned to
adequately  capitalized  status as of March 31, 2000, and maintained that status
through December 31, 2001. See Items 7 and 8 below.

Safety and Soundness Standards

     FDICIA also implemented  certain specific  restrictions on transactions and
required the  regulators  to adopt overall  safety and  soundness  standards for
depository  institutions  related to internal  control,  loan  underwriting  and
documentation,  and asset  growth.  Among  other  things,  for  undercapitalized
institutions  FDICIA  limits the  interest  rates paid on  deposits,  the use of
brokered  deposits  and  the  aggregate  extension  of  credit  by a  depository
institution to an executive officer, director,  principal stockholder or related
interest,  and  reduces  deposit  insurance  coverage  for  deposits  offered by
undercapitalized   institutions  for  deposits  by  certain  employee   benefits
accounts.
<PAGE>

     The FDICIA also  required the agencies to  establish  safety and  soundness
standards for insured  financial  institutions  covering (1) internal  controls,
information  systems and internal audit  systems;  (2) loan  documentation;  (3)
credit  underwriting;   (4)  interest  rate  exposure;  (5)  asset  growth;  (6)
compensation,   fees  and  benefits;  (7)  asset  quality,  earnings  and  stock
valuation;  and (8) excessive compensation for executive officers,  directors or
principal shareholders which could lead to material financial loss. The agencies
have adopted guidelines covering most of these items.

Restrictions on Dividends and Other Distributions

     The power of the board of directors of an insured depository institution to
declare a cash dividend or other distribution with respect to capital is subject
to statutory and regulatory  restrictions  which limit the amount  available for
such  distribution  depending  upon the earnings,  financial  condition and cash
needs  of the  institution,  as  well as  general  business  conditions.  FDICIA
prohibits  insured  depository  institutions  from paying management fees to any
controlling  persons  or,  with  certain  limited  exceptions,   making  capital
distributions,  including dividends, if, after such transaction, the institution
would be undercapitalized.

     An FRB policy  statement  provides that a bank holding  company  should not
declare or pay a cash dividend to its  stockholders  if the dividend would place
undue pressure on the capital of its  subsidiary  banks or if the dividend could
be funded only through  additional  borrowings or other  arrangements that might
adversely   affect  the  financial   position  of  the  bank  holding   company.
Specifically,  a bank holding  company  should not continue its existing rate of
cash  dividends on its common stock unless its net income is sufficient to fully
fund  each  consistent  with its  capital  needs,  asset  quality,  and  overall
financial condition.  Further, the Corporation is expected to act as a source of
financial  strength for the Bank and to commit  resources to support the Bank in
circumstances when it might not do so absent such policy.

     The  Corporation's  ability to pay  dividends  depends in large part on the
ability of the Bank to pay dividends to the Corporation. The ability of the Bank
to pay  dividends is subject to  restrictions  set forth in the Indiana  banking
laws and regulations of the FDIC.

     Under  Indiana  law,  the Bank may declare a dividend  in an amount  deemed
expedient by the Board of Directors of the Bank. Any such dividend, however, may
not (i) impair the capital stock of the Bank,  (ii) be in an amount greater than
the  remainder of undivided  profits then on hand after  deducting  losses,  bad
debts, depreciation, and all other expenses, or (iii) constitute a withdrawal of
any portion of the capital stock of the Bank. In addition,  the Bank must obtain
the prior  approval of the DFI for the  payment of any  dividend if the total of
all  dividends  declared by the Bank during the  calendar  year,  including  the
proposed  dividend  would  exceed the sum of (i) the total of the net profits of
the Bank and (ii) the  retained  net  profits of the Bank for the  previous  two
years.  The amount of "net  profits" is determined  by  subtracting  all current
operating expenses,  actual losses, and all federal,  state and local taxes from
all  earnings  from  current   operations  plus  actual   recoveries  on  loans,
investments and other assets.

     Additionally, under FDICIA, the Bank may not make any capital distribution,
including the payment of dividends,  if after making such  distribution the Bank
would be in any of the  "under-capitalized"  categories  under the FDIC's Prompt
Corrective Action regulations.
<PAGE>

     Also, under the Financial Institution's  Supervisory Act, the FDIC also has
the authority to prohibit the Bank from engaging in business practices which the
FDIC  considers  to be unsafe or unsound.  It is  possible,  depending  upon the
financial  condition of the Bank and other  factors,  that the FDIC could assert
that the payment of dividends or other payments in some  circumstances  might be
such an unsafe or unsound practice and thereby prohibit such payment.

FDIC Insurance Assessments

     The FDIC has  established  several  mechanisms to increase funds to protect
deposits insured by the Bank Insurance Fund ("BIF") and the Savings  Association
Insurance Fund ("SAIF"),  both of which are administered by the FDIC. The Bank's
deposits are insured  through BIF except for those  deposits  the Bank  acquired
from the  Resolution  Trust  Corporation  in December,  1990.  This  acquisition
consisted of two branches of the former Hometown Federal Savings Bank in Delphi,
Indiana, and these deposits remain insured through SAIF.

     As required by FDICIA, the FDIC has adopted a risk-based  assessment system
for deposit insurance premiums.  Under this system,  depository institutions are
charged anywhere from zero to $.27 for every $100 in insured domestic  deposits,
based on such institutions'  capital levels and supervisory subgroup assignment.
The FDIC's rules set forth which  supervisory  subgroup  assignments are made by
the FDIC,  the  assessment  classification  review  procedure,  provide  for the
assignment of new institutions to the  "well-capitalized"  assessment group, set
forth when an institution is to make timely adjustments as appropriate,  and set
forth the basis,  and report data, on which capital group  assignments  are made
for insured  branches of foreign banks,  and expressly  address the treatment of
certain lifeline accounts for which special assessment treatment is given.

     The BIF reached its required  1.25 reserve  ratio in 1995,  and in response
the FDIC reduced deposit insurance  assessment rates on BIF-insured  deposits to
historic low levels.  Legislation enacted in September, 1996 included provisions
for the  recapitalization  of the  SAIF.  The  legislation  imposed  a  one-time
assessment in the amount of 65.7 basis points on all SAIF-insured  deposits held
as of March 31, 1996.  The Bank paid an  assessment  in the amount of $31,000 on
the small  portion of its  deposits  that are  SAIF-insured.  As a result of the
payment of the special  assessment and the adoption of regulations  implementing
the legislation,  rates for deposits insured through SAIF have been brought into
parity  with BIF rates.  The BIF and SAIF  deposit  insurance  assessment  rates
currently in effect range from zero to $.27 per $100 of insured  deposits,  with
the healthiest financial institutions, including the Bank, not being required to
pay any deposit insurance premiums.

Interstate Banking and Branching

     On September 29, 1994,  the  Riegle-Neal  Interstate  Banking and Branching
Efficiency  Act of  1994  (the  "Interstate  Act")  was  signed  into  law.  The
Interstate Act provides that adequately  capitalized and adequately managed bank
holding  companies may acquire banks in any state,  even in those  jurisdictions
that had previously barred acquisitions by out-of-state institutions, subject to
deposit  concentration  limits.  The deposit  concentration  limits provide that
regulatory  approval  by the  Federal  Reserve  Board may not be  granted  for a
proposed  interstate  acquisition  if after the  acquisition,  the acquiror on a
consolidated basis would control more than 10% of the total deposits  nationwide
or would  control  more than 30% of deposits  in the state  where the  acquiring
institution is located. The deposit concentration state limit does not apply for
initial  acquisitions  in a state and, in every case, may be waived by the state
regulatory authority. Interstate acquisitions are subject to compliance with the
Community  Reinvestment  Act  ("CRA").   States  are  permitted  to  impose  age
requirements   not  to  exceed  five  years  on  target  banks  for   interstate
acquisitions.
<PAGE>

     Branching  between states may be  accomplished  either by merging  separate
banks located in different  states into one legal entity,  or by establishing de
novo branches in another state.  Interstate  branching by consolidation of banks
was  permitted  beginning  in  June  1,  1997,  except  in  states  that  passed
legislation  prior to that date  "opting-out"  of  interstate  branching.  Banks
located in states that opted out of interstate  branching may not participate in
interstate   branching.   The  laws  of  the  host  state  regarding   community
reinvestment,  fair lending,  consumer  protection  (including usury limits) and
establishment of branches apply to the interstate branches.

     De novo branching by an out-of-state  bank is not permitted unless the host
state  expressly  permits  de novo  branching  by banks from  out-of-state.  The
establishment  of an  initial  de novo  branch in a state is subject to the same
conditions  as apply to initial  acquisition  of a bank in the host state  other
than the deposit concentration limits.  Effective March 14, 1996, Indiana "opted
in" to the interstate branching provision of the Interstate Act.

Community Reinvestment Act

     A  comprehensive  revision of the  regulations  implementing  the Community
Reinvestment  Act  ("CRA"),  enacted  in 1977 to promote  lending  by  financial
institutions  to individuals  and businesses  located in low and moderate income
areas,  became effective on July 1, 1995. The revised CRA regulations  emphasize
an assessment of actual performance rather than of the procedures  followed by a
bank, to evaluate  compliance with the CRA. Overall CRA compliance  continues to
be  rated  across  a  four-point   scale  from   "outstanding"  to  "substantial
noncompliance," and continues to be a factor in review of applications to merge,
establish  new branches or form bank holding  companies.  In addition,  any bank
rated in  "substantial  noncompliance"  with the revised CRA  regulations may be
subject  to  enforcement  proceedings.  Different  evaluation  methods  are used
depending on the asset size of the bank.

     The  "lending,  investments  and service test method" is  applicable to all
banks with more than $250 million in assets  which are not  wholesale or limited
purpose banks and do not elect to be evaluated by the "strategic plan assessment
method" which is discussed below. Central to this method is the requirement that
such  banks  collect  and report to their  primary  federal  banking  regulators
detailed  information  regarding  home  mortgage,  small  business  and farm and
community  development  loans which is then used to evaluate CRA compliance.  At
the bank's option, data regarding consumer loans and any other loan distribution
it may choose to provide also may be collected and reported.

     Using  such  data,  a bank  will be  evaluated  regarding  its (i)  lending
performance  according  to  the  geographic   distribution  of  its  loans,  the
characteristics  of its  borrowers,  the number and  complexity of its community
development loans, the innovativeness or flexibility of its lending practices to
meet low and moderate income credit needs and, at the bank's  election,  lending
by affiliates  or through  consortia or  third-parties  in which the bank has an
investment  interest;  (ii)  investment  performance  by  measure  of the bank's
"qualified  investments,"  that is, the extent to which the bank's  investments,
deposits,  membership  shares in a credit union, or grants  primarily to benefit
low or moderate  income  individuals  and small  businesses  and farms,  address
affordable  housing or other needs not met by the private market,  or assist any
minority or women-owned depository institution by donating, selling on favorable
terms or  provisioning  on a rent-free basis any branch of the bank located in a
predominately minority neighborhood; and (iii) service performance by evaluating
the  demographic  distribution  of the bank's  branches and ATMs,  its record of
opening and closing  them,  the  availability  of  alternative  retail  delivery
systems  (such as  telephone  banking,  banking  by mail or at work,  and mobile
facilities)  in low and  moderate  income  geographies  and to low and  moderate
income individuals, and (given the characteristics of the bank's service area(s)
and its  capacity  and  constraints)  the  extent  to which  the  bank  provides
"community  development  services"  (services  which  primarily  benefit low and
moderate income  individuals or small farms and businesses or address affordable
housing  needs  not met by the  private  market)  and their  innovativeness  and
responsiveness.
<PAGE>

     Any bank may request to be  evaluated  by the  "strategic  plan  assessment
method" by submitting a strategic plan for review and approval. Such a plan must
involve public  participation in its preparation,  and contain  measurable goals
for meeting low and moderate  income credit needs through  lending,  investments
and provision of services.  Such plans  generally will be evaluated by measuring
strategic plan goals against standards similar to those which will be applied in
evaluating  a bank  according  to the  "lending,  investments  and service  test
method."

     The federal financial  institution  regulatory agencies issued a final rule
effective as of January 1, 1996, to make certain  technical  corrections  to the
revised CRA regulations.  Among other matters, the rule clarifies the transition
from the former CRA  regulations  to the revised CRA  regulations  by confirming
that when an institution  either  voluntarily or mandatorily  becomes subject to
the performance tests and standards of the revised regulations,  the institution
must comply with all of the  requirements  of the revised  regulations and is no
longer subject to the provisions of the former CRA regulations.

     The Bank is evaluated  under the  "lending,  investment  and service"  test
method. The Bank's most recent CRA exam was conducted by the FDIC on November 1,
1999. The Bank was given the CRA rating of "outstanding."

Inter-Corporate Borrowings

     Bank holding  companies  also are restricted as to the extent to which they
and their subsidiaries may borrow or otherwise obtain credit from one another or
engage in certain other transactions. The "covered transactions" that an insured
depository  institution  and its  subsidiaries  are  permitted to engage in with
their nondepository  affiliates are limited to the following amounts: (1) in the
case of any one such affiliate,  the aggregate amount of covered transactions of
the insured depository institution and its subsidiaries cannot exceed 10% of the
capital stock and the surplus of the insured depository institution; and (ii) in
the case of all affiliates,  the aggregate amount of covered transactions of the
insured  depository  institution and its  subsidiaries  cannot exceed 20% of the
capital stock and surplus of the insured  depository  institution.  In addition,
extensions of credit that constitute covered transactions must be collateralized
in prescribed amounts.
<PAGE>

     "Covered  transactions"  are  defined  by  statute  to  include  a loan  or
extension  of credit to the  affiliate,  a purchase of  securities  issued by an
affiliate, a purchase of assets from the affiliate (unless otherwise exempted by
the Federal Reserve Board), the acceptance of securities issued by the affiliate
as collateral for a loan and the issuance of a guarantee,  acceptance, or letter
of credit for the benefit of an affiliate.  Further,  a bank holding company and
its subsidiaries are prohibited from engaging in certain tie-in  arrangements in
connection with any extension of credit, lease or sale of property or furnishing
of services.

Impact of Monetary Policies

     Banking is a business  which  depends on interest  rate  differentials.  In
general,  the difference between the interest paid by a bank on its deposits and
other borrowings, and the interest rate earned by banks on loans, securities and
other  interest-earning  assets  comprises the major source of banks'  earnings.
Thus,  the earnings and growth of banks are subject to the influence of economic
conditions  generally,  both domestic and foreign,  and also to the monetary and
fiscal policies of the United States and its agencies, particularly the FRB. The
FRB implements  national monetary policy,  such as seeking to curb inflation and
combat  recession,  by its  open-market  dealings  in United  States  government
securities,   by  adjusting  the  required   level  of  reserves  for  financial
institutions  subject to reserve  requirements  and through  adjustments  to the
discount  rate  applicable  to borrowings by banks which are members of the FRB.
The  actions  of the FRB in these  areas  influence  the  growth of bank  loans,
investments and deposits and also affect  interest rates.  The nature and timing
of any  future  changes in such  policies  and their  impact on the  Corporation
cannot be  predicted.  In addition,  adverse  economic  conditions  could make a
higher  provision  for loan losses a prudent  course and could cause higher loan
loss charge-offs, thus adversely affecting the Bank's net earnings.

Recent Legislative and Regulatory Changes

     The Gramm-Leach-Bliley  Act, which was signed into law on December 12, 1999
and became effective March 11, 2000,  permits bank holding  companies to qualify
as "financial  holding  companies" that may engage in a broad range of financial
activities that are "financial in nature,"  including  underwriting,  dealing in
and making a market in securities, insurance underwriting and agency activities,
and merchant banking. The Gramm-Leach-Bliley Act also authorizes banks to engage
through  financial  subsidiaries  in nearly all of the activities  permitted for
financial holding companies.

     The  Gramm-Leach-Bliley  Act also imposes significant new financial privacy
obligations  and reporting  requirements  on banks as well as on other financial
institutions.  Among other things,  financial  institutions  are required to (a)
establish  privacy  policies and disclose them to customers  both at the time of
establishing  the customer  relationship  and on an annual basis, and (b) permit
customers  to opt out of the  financial  institution's  disclosure  of  customer
nonpublic personal information to third parties that are not affiliated with the
financial   institution.   In  May  2000,  the  banking  agencies  issued  final
regulations  implementing the  Gramm-Leach-Bliley  Act provisions  governing the
privacy  of  consumer  financial  information.  Full  compliance  with  the  new
regulations was required by July 1, 2001.
<PAGE>

     The Corporation and the Bank do not believe that the Gramm-Leach-Bliley Act
will have a material adverse effect on the Bank's operations. To the extent that
the  Gramm-Leach-Bliley  Act  permits  banks,  securities  firms  and  insurance
companies to affiliate,  however,  the financial  services industry is likely to
experience  further  consolidation,  resulting in increased  competition for the
Bank from larger and  diverse  companies,  many of which may have  substantially
greater financial resources than the Corporation and the Bank.

FORWARD-LOOKING STATEMENTS

     This  Form  10-K  and  future  filings  made by the  Corporation  with  the
Securities and Exchange Commission,  as well as other filings, reports and press
releases made or issued by the  Corporation  and the Bank,  and oral  statements
made  by  executive   officers  of  the   Corporation   and  Bank,  may  include
forward-looking   statements   relating  to  such  matters  as  (a)  assumptions
concerning  future  economic  and  business  conditions  and their effect on the
economy in general and on the markets in which the  Corporation  and the Bank do
business,  and (b)  expectations  for  increased  revenues  and earnings for the
Corporation and Bank through growth resulting from  acquisitions,  attraction of
new  deposit  and  loan  customers  and the  introduction  of new  products  and
services.  Such forward-looking  statements are based on assumptions rather than
historical or current facts and, therefore, are inherently uncertain and subject
to risk.

     The  Corporation  notes that a variety of  factors  could  cause the actual
results or experience to differ materially from the anticipated results or other
expectations described or implied by such forward-looking  statements. The risks
and uncertainties that may affect the operations,  performance,  development and
results of the Corporation's and Bank's business include the following:  (a) the
risk of adverse changes in business conditions in the banking industry generally
and in the  specific  markets  in which the Bank  operates;  (b)  changes in the
legislative and regulatory  environment  that negatively  impact the Corporation
and Bank through increased  operating expenses;  (c) increased  competition from
other financial and non-financial institutions;  (d) the impact of technological
advances;  and (e) other risks  detailed from time to time in the  Corporation's
filings with the Securities and Exchange Commission. The Corporation and Bank do
not undertake any obligation to update or revise any forward-looking  statements
subsequent to the date on which they are made.

ITEM 2. PROPERTIES.

     The Corporation,  through the Bank, currently operates from its main office
in downtown  Lafayette and from 19 additional  locations in  Tippecanoe,  White,
Jasper, and Carroll Counties in Indiana.  Information about the Bank's locations
is set forth in the table below:







                      [This space intentionally left blank]

<PAGE>


<TABLE>

======================================== =================================== =======================================

                                                     LOCATION/                         ADDITIONAL BANKING
<S>                                     <C>                                 <C>
            NAME OF OFFICE                         TELEPHONE NO.                       FUNCTIONS OFFERED
            --------------                         -------------                       -----------------
---------------------------------------- ----------------------------------- ---------------------------------------
Downtown Main Office                     133 North 4th Street                oTrust Department
                                         Lafayette, Indiana                  oMortgage Loan Department
                                         (765) 423-7100                      oCommercial Loan Department
---------------------------------------- ----------------------------------- ---------------------------------------
Downtown Motor Bank                      401 North 4th Street                o24-Hour MAC Automatic
                                         Lafayette, Indiana                   Teller Machine
                                         (765) 423-7165
---------------------------------------- ----------------------------------- ---------------------------------------
Elston Branch                            2862 U.S. 231 South                 o24-Hour MAC Automatic
                                         Lafayette, Indiana                   Teller Machine
                                         (765) 423-7166
---------------------------------------- ----------------------------------- ---------------------------------------
Lafayette Square Branch                  2504 Teal Road                      o24-Hour MAC Automatic
                                         Lafayette, Indiana                   Teller Machine
                                         (765) 423-7164
---------------------------------------- ----------------------------------- ---------------------------------------
Market Square Branch                     2200 Elmwood Avenue                 oInstallment Loan Department
                                         Lafayette, Indiana                  o24-Hour MAC Automatic
                                         (765) 423-7163                       Teller Machine
---------------------------------------- ----------------------------------- ---------------------------------------
Tippecanoe Court Branch                  Pay Less Super Market               o24-Hour MAC Automatic
                                         2513 Maple Point Drive               Teller Machine
                                         Lafayette, Indiana
                                         (765) 423-3821
---------------------------------------- ----------------------------------- ---------------------------------------
West Lafayette Branch                    2329 North Salisbury Street         o24-Hour MAC  Automatic
                                         West Lafayette, Indiana              Teller Machine
                                         (765) 423-7162
---------------------------------------- ----------------------------------- ---------------------------------------
26 East Branch                           3901 S.R. 26 East                   oInvestment Center
                                         Lafayette, Indiana                  oInsurance Department
                                         (765) 423-7167                      o24-Hour MAC Automatic
                                                                              Teller Machine
---------------------------------------- ----------------------------------- ---------------------------------------
Elmwood Avenue Branch                    Pay Less Super Market               o24-Hour MAC Automatic
                                         1904 Elmwood Avenue                  Teller Machine
                                         Lafayette, Indiana
                                         (765) 423-3831
---------------------------------------- ----------------------------------- ---------------------------------------
Valley Lakes Branch                      1803 East 350 South                 o24-Hour MAC Automatic
                                         Lafayette, Indiana                   Teller Machine
                                         (765) 423-3841

---------------------------------------- ----------------------------------- ---------------------------------------
Super Wal-Mart Branch                    4205 Commerce Drive                 o24-Hour MAC Automatic
                                         Lafayette, Indiana                   Teller Machine
                                         (765) 423-2027
---------------------------------------- ----------------------------------- ---------------------------------------
Brookston Branch                         S.R. 18 West and HWY 43             o24-Hour MAC Automatic
                                         Brookston, Indiana                   Teller Machine
                                         (765) 563-6400
---------------------------------------- ----------------------------------- ---------------------------------------
Monticello Branch                        116 East Washington St.             o24-Hour MAC Automatic
                                         Monticello, Indiana                  Teller Machine
                                         (219) 583-4666
---------------------------------------- ----------------------------------- ---------------------------------------
</TABLE>
<PAGE>

<TABLE>

======================================== =================================== =======================================

                                                     LOCATION/                         ADDITIONAL BANKING
<S>                                     <C>                                 <C>
            NAME OF OFFICE                         TELEPHONE NO.                       FUNCTIONS OFFERED
            --------------                         -------------                       -----------------
---------------------------------------- ----------------------------------- ---------------------------------------

Super Wal-Mart Branch                    1088 West Broadway Street           o24-Hour MAC Automatic
                                         Monticello, Indiana                  Teller Machine
                                         (219) 583-3078
---------------------------------------- ----------------------------------- ---------------------------------------
Reynolds Branch                          U.S. 24 West                        o24-Hour MAC Automatic
                                         Reynolds, Indiana                    Teller Machine
                                         (219) 984-5471
---------------------------------------- ----------------------------------- ---------------------------------------
DeMotte Branch                           437 North Halleck                   o24-Hour MAC Automatic
                                         DeMotte, Indiana 46310               Teller Machine
                                         (219) 987-5812
---------------------------------------- ----------------------------------- ---------------------------------------
Remington Branch                         101 East Division Street            o24-Hour MAC Automatic
                                         Remington, Indiana 47977             Teller Machine
                                         (219) 866-2161
---------------------------------------- ----------------------------------- ---------------------------------------
Rensselaer Branch                        200 West Washington Street          o24-Hour MAC Automatic
                                         Rensselaer, Indiana 47978            Teller Machine
                                         (219) 866-7121
---------------------------------------- ----------------------------------- ---------------------------------------
Rensselaer Motor Bank                    200 North Van Rensselaer
                                         Rensselaer, Indiana 47978
                                         (219) 866-1455
---------------------------------------- ----------------------------------- ---------------------------------------
---------------------------------------- ----------------------------------- ---------------------------------------
Flora Branch                             805 E. Columbia Street              o24-Hour MAC Automatic
                                         Flora, Indiana 46929                 Teller Machine
                                         (574) 967-4318
======================================== =================================== =======================================
</TABLE>

     The Bank owns its main office and all its branch offices, except the Market
Square,  Tippecanoe Court Pay Less,  Elmwood Pay Less,  Valley Lakes,  Lafayette
Super Wal-Mart, and Monticello Super Wal-Mart branches, all of which are leased.
The West Lafayette and 26 East branch facilities are owned by the Bank; however,
both are  subject  to land  leases.  The  main  office  facility,  which is used
predominantly  by the Corporation and the Bank,  contains  approximately  63,000
square  feet.  The  remaining  space is leased  to  various  unrelated  business
operations. The other branches range in size from nearly 12,225 square feet down
to approximately 450 square feet. The Bank's Data Center is located at 320 North
Street in Lafayette,  Indiana, and houses the Bank's data processing  operations
in addition to the proof and checking departments.

ITEM 3. LEGAL PROCEEDINGS.

     There  are no  material  pending  legal  proceedings,  other  than  routine
litigation incidental to their business, to which the Corporation or the Bank is
a party or of which any of its property is subject.

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

     There was no matter  submitted  during the fourth quarter of 2001 to a vote
of security holders, by solicitation of proxies or otherwise.
<PAGE>

Special Item. Executive Officers of the Registrant.

Name                   Age               Offices Held
----                   ---               ------------
Joseph A. Bonner       70       Chairman of the Board of the Corporation
                                and the Bank

Robert J. Weeder       64       Chief Executive Officer and President of the
                                Corporation and the Bank

Robert J. Ralston      60       Executive Vice President/Senior Operations
                                Officer and Secretary/Treasurer of the Bank

Tony S. Albrecht       38       Senior Vice President and Manager,
                                Commercial Loan Department

Lawrence A. Anthrop    57       Senior Vice President and Senior Trust
                                Officer of the Bank

E. James Brisco        49       Senior Vice President and Manager, Mortgage
                                Loan Department of the Bank

Daniel J. Gick         44       Senior Vice President and Manager,
                                Retail Banking

Hal D. Job             58       Regional President, Jasper County Market

Michelle D. Turnpaugh  36       Secretary/Treasurer of the Corporation and
                                Assistant Secretary of the Bank

Marvin S. Veatch       37       Vice President and Controller of the Bank

Charles E. Wise        55       Senior Vice President and Branch Manager of the
                                Reynolds and Monticello offices of the Bank

     Officers  are elected  annually by the Board of  Directors  and serve for a
one-year  period and until  their  successors  are  elected.  No  officers  have
employment  contracts.  There are no  family  relationships  between  any of the
officers of the Corporation.

     Except  as  indicated  below,  each of the  officers  has  held the same or
similar position with the Corporation or the bank or the past five years.

     Mr.  Bonner  retired  as  President  and  Chief  Executive  Officer  of the
Corporation and the Bank effective January 31, 1997.

     Mr. Albrecht  became Senior Vice President and Manager of Commercial  Loans
of the Bank in April 1999,  prior to which time he had served as Vice  President
of the Bank. Prior to his employment by the Bank in August 1998, he was employed
by Bank One, Indiana as Vice President of Commercial Lending.
<PAGE>

     Mr. Job became Regional President of the Jasper County Market in March 1999
resulting from the Jasper County branch  acquisition in March 1999. Prior to his
employment  by the Bank in March 1999,  he was employed by Bank One,  Indiana as
Market President, Rensselaer.

     Mr. Gick  became  Senior Vice  President  and Manager of Retail  Banking in
November  1999,  prior to which  time he had  served  as  Regional  Senior  Vice
President  resulting  from the Jasper County branch  acquisition  in March 1999.
Prior to his  employment by the Bank in March 1999, he was employed by Bank One,
Indiana as Senior Vice President, Rensselaer Market.


                                     PART II

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

Stock Information

     The common stock of Lafayette Bancorporation, Lafayette, Indiana, is traded
on the  OTC  Bulletin  Board  under  the  trading  symbol  of  LAYB  (Cusip  No.
505893-10-7).  At the  close of  business  on  December  31,  2001,  there  were
3,961,589 shares outstanding held by approximately 475 shareholders.

     Management  does not have knowledge of the prices paid in all  transactions
and has not  verified  the  accuracy of those  prices  that have been  reported.
Because  of the lack of an  established  market  for the  common  shares  of the
Corporation,  these  prices  would not  necessarily  reflect the prices that the
shares would trade in an active market.

                          Price Per Share
                          ---------------                     Dividend
                          High        Low                     Declared

----------------------------------------------------------------------------
2001
----------------------------------------------------------------------------

First Quarter             $16 1/2    $12 3/4                  $ .10
Second Quarter            15 1/2     13 3/4                     .10
Third Quarter             18         14 1/2                     .11
Fourth Quarter            27 1/2     16                         .16

----------------------------------------------------------------------------
2000
----------------------------------------------------------------------------

First Quarter             $24 5/16   $13 3/8                  $ .09
Second Quarter            16 3/8     10                         .09
Third Quarter             14 9/16    12 1/16                    .10
Fourth Quarter            15 3/4     12 1/4                     .15

               Data adjusted for all stock splits and dividends.
<PAGE>

     The following  firms have transacted  business in Lafayette  Bancorporation
common stock during the past year:

        o        City Securities Corporation
        o        First Tennessee Securities Corp.
        o        Herzog, Herne, Geduld, Inc.
        o        Hill Thompson Magid, L.P.
        o        Howe Barnes Investments, Inc.
        o        JJB Hilliard, WL Lyons, Inc.
        o        McDonald & Company Securities, Inc.
        o        Merrill Lynch
        o        Monroe Securities, Inc.
        o        Raymond James Financial Services, Inc.
                 located at Lafayette Bank and Trust Company
        o        Solomon Smith Barney, Inc.

Transfer Agent

Lafayette Bancorporation
133 North Fourth Street
P.O. Box 1130
Lafayette, Indiana 47902-1130

ITEM 6. SELECTED FINANCIAL DATA.

     See Table 1 under "Results of Operations"  in  Management's  Discussion and
Analysis of Financial Condition and Results of Operations in Item 7 below, which
is incorporated herein by reference.

ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.

Introduction and Overview

     Lafayette  Bancorporation  (Corporation)  is  a  one-bank  holding  company
located  in  Lafayette,  Indiana.  The  Corporation's  wholly-owned  subsidiary,
Lafayette Bank and Trust Company (Bank),  conducts  business in eighteen offices
located in Tippecanoe, White, Jasper, and Carroll Counties, Indiana. The Bank is
engaged in a variety of financial services, including accepting deposits; making
commercial and consumer loans;  originating  mortgage loans;  providing personal
and  corporate  trust  services;  providing  investment  advisory and  brokerage
services; and providing auto, homeowners, and other insurance products.

     On March 14, 2001, the Corporation  established a loan production office in
Flora,  Indiana.  In order  to meet all the  banking  needs  of  Carroll  County
residents, the Corporation opened a full-service branch in Flora on December 31,
2001. This branch,  which is currently staffed by eight individuals,  provides a
full range of loan and deposit  products,  as well as other banking  services in
this new market area.
<PAGE>

     On March 15, 2000, the Corporation opened a full-service  branch located in
the Super  Wal-Mart in  Monticello,  Indiana.  Also, on July 19, 2000, a similar
full-service  branch was opened in the Super Wal-Mart in Lafayette,  Indiana. In
addition to these two new branches,  the Corporation  established a new mortgage
line of business during the second quarter of 2000, which assists  customers who
do not meet the  qualifications  of  conventional  or traditional  mortgage loan
programs to secure financing.  The Mortgage  Alternative  Department only offers
mortgage  products,  such as first or second  mortgages and lines of credit that
are secured by real estate. Loans originated in this department are pre-approved
for  sale  and are  sold in the  secondary  mortgage  market  with no  servicing
retained.

     The information in this  Management's  Discussion and Analysis is presented
as an analysis of the major components of the  Corporation's  operations for the
three years ended December 31, 2001, 2000, and 1999, and financial  condition as
of December 31, 2001 and 2000.  This  information  should be read in conjunction
with the accompanying  consolidated financial statements and footnotes contained
elsewhere in this report.  The tables contained in the  Management's  Discussion
and Analysis include dollar amounts expressed in thousands.

Mergers and Acquisitions

     On October 14, 2001, Lafayette Bancorporation signed a definitive agreement
with First Merchants Corporation,  located in Muncie, Indiana, to merge with and
into First Merchants  Corporation  ("FMC"). The Agreement provides that upon the
effective date of the merger,  each  shareholder of the Corporation may elect to
receive  either  1.11  shares of FMC's  common  stock or $30.00 in cash for each
share of the Corporation's  common stock owned by such shareholder.  However, no
more than $50,329,248  aggregate cash may be paid in the merger and there may be
allocations  of stock to certain  shareholders  if this  threshold  is exceeded.
Under  the  terms  of the  agreement,  upon  the  closing  of this  transaction,
Lafayette  Bank and Trust  Company will be a  wholly-owned  subsidiary  of First
Merchants  Corporation for at least five (5) years.  The transaction is expected
to be effective in the second  quarter of 2002.  All  required  shareholder  and
regulatory approvals of the merger have been received.

     In March 1999, the Bank purchased three branches in Jasper County, Indiana,
located in the towns of DeMotte,  Remington,  and Rensselaer.  The fair value of
assets acquired was $71,749,000,  which consisted primarily of commercial loans,
the physical facilities,  goodwill, and core deposit intangibles. The fair value
of liabilities  assumed was $117,015,000,  which consisted primarily of customer
deposits.   Since  the  Bank  acquired  more  liabilities  than  assets  in  the
transaction,  the Bank received  $45,266,000 of cash as of the settlement  date.
See Note 18 to the consolidated  financial statements for additional information
regarding this  acquisition.  This  transaction had a significant  effect on the
Corporation's  results of operations  for the years ended  December 31, 2000 and
1999,  as the  Corporation  had use of the earning  assets and  interest-bearing
liabilities acquired for the entire twelve months of 2000, and for approximately
nine and one-half months of 1999.

Results of Operations

     The major components of the  Corporation's  operating  results for the past
five years are summarized in Table 1 - Five Year Financial Summary.


<PAGE>


                                        Table 1 - FIVE YEAR FINANCIAL SUMMARY
<TABLE>

                                                                For the years ended December 31,
<S>                                           <C>             <C>             <C>            <C>             <C>
          SUMMARY OF OPERATIONS               2001            2000            1999           1998            1997
                                          -------------- ---------------  -------------- -------------- ---------------

Interest income - tax equivalent (1)            $54,633         $53,303         $45,196        $35,329         $32,415
Interest expense                                 26,903          27,405          21,543         16,963          15,525
                                          -------------- ---------------  -------------- -------------- ---------------
  Net interest income - tax equivalent (1)       27,730          25,898          23,653         18,366          16,890
Tax equivalent adjustment (1)                     (969)           (917)           (806)          (604)           (504)
                                          -------------- ---------------  -------------- -------------- ---------------
  Net interest income                            26,761          24,981          22,847         17,762          16,386
Provision for loan losses                       (1,225)         (1,200)         (1,060)          (980)           (620)
Noninterest income                                7,454           5,825           5,125          4,916           4,168
Noninterest expense                              22,174          19,176          17,534         13,610          12,557
                                          -------------- ---------------  -------------- -------------- ---------------

Income before income taxes                       10,816          10,430           9,378          8,088           7,377
Income tax expense                                3,401           3,514           3,027          2,711           2,569
                                          -------------- ---------------  -------------- -------------- ---------------

NET INCOME                                       $7,415          $6,916          $6,351         $5,377          $4,808
                                          ============== ===============  ============== ============== ===============

            PER SHARE DATA (2)
Net income                                        $1.87           $1.75           $1.61          $1.36           $1.22
Cash dividends                                     0.47            0.43            0.39           0.34            0.31
Shareholders' equity, end of year                 14.93           13.37           11.62          10.82            9.77

    SELECTED ACTUAL YEAR-END BALANCES
Total assets                                   $762,318        $741,147        $645,149       $483,969        $439,029
Earning assets                                  692,989         676,235         580,858        449,539         406,954
Investment securities available-for-sale         94,164          78,857          79,722         76,956          66,577
Investment securities held-to-maturity            3,918           4,484           4,712          4,879           5,268
Loans held for sale                              17,262           5,949           3,174         10,086           7,640
Loans                                           555,864         537,725         489,070        353,828         312,227
Allowance for loan losses                       (5,413)         (5,071)         (4,618)        (4,241)         (3,464)
Total deposits                                  618,572         578,297         522,247        395,546         355,195
Noninterest-bearing demand deposits              80,012          70,866          63,206         48,657          42,752
Interest-bearing demand deposits                 73,781          69,528          67,729         54,294          47,054
Savings deposits                                194,917         161,456         161,573        116,014          96,974
Time deposits                                   269,862         276,447         229,739        176,581         168,415
FHLB advances                                    34,982          35,737          30,027         23,854          19,886
Note payable                                     10,150          11,550          12,950              -               -
Shareholders' equity                             59,120          52,801          45,785         42,614          38,469

        SELECTED AVERAGE BALANCES
Total assets                                   $746,295        $674,736        $600,451       $455,268        $416,957
Earning assets                                  685,805         616,033         554,423        422,772          38,727
Securities                                       92,275          83,868          98,489         76,928          80,606
Loans held for sale                               8,554           3,392           5,967          6,095           5,522
Loans                                           543,103         517,010         440,615        327,412         289,197
Allowance for loan losses                       (5,337)         (5,010)         (4,319)        (3,766)         (3,254)
Total deposits                                  594,239         547,601         486,489        371,067         345,739
Noninterest-bearing demand deposits              61,993          58,723          51,229         39,312          35,728
Interest-bearing demand deposits                 70,181          69,024          62,858         48,777          47,945
Savings deposits                                181,932         163,182         157,618        108,019          94,360
Time deposits                                   280,133         256,672         214,784        174,959         167,706
FHLB advances                                    35,252          26,142          23,359         22,101          13,940
Note payable                                     11,023          12,423          10,863              -               -
Shareholders' equity                             56,506          49,017          44,499         40,814          36,530

           RATIOS BASED ON AVERAGE BALANCES
Loans to deposits (3)                            91.39%          94.41%          90.57%         88.24%          83.65%
Return on average assets                          0.99%           1.02%           1.06%          1.18%           1.15%
Return on average equity                         13.12%          14.11%          14.27%         13.17%          13.16%
Dividend payout ratio                            25.11%          24.67%          24.25%         24.94%          24.98%
Leverage capital ratio                            6.24%           5.79%           5.53%          8.82%           8.76%
Efficiency ratio (4)                             63.02%          60.45%          60.93%         58.46%          59.63%

                OTHER DATA
Number of employees (FTE)                           306             303             275            220             213
Average common shares outstanding (2)         3,959,582       3,950,297       3,940,024      3,940,123       3,937,399
Cash dividends declared                          $1,862          $1,706          $1,540         $1,341          $1,201
</TABLE>
<PAGE>

(1)  Net interest income has been presented on both a tax equivalent and non-tax
     equivalent  basis.  The tax equivalent basis was calculated using a 34% tax
     rate for all periods presented.  The tax equivalent adjustment reverses the
     tax equivalent  basis in order to present net interest income in accordance
     with generally accepted  accounting  principles (GAAP), as reflected in the
     consolidated financial statements.

(2)  Per share data has been  retroactively  adjusted to reflect stock dividends
     and splits.  Amounts do not consider the dilutive  effect of stock  options
     outstanding.

(3)  The loan to deposit ratio calculation excludes loans held for sale.

(4)  The efficiency ratio is calculated by dividing  noninterest  expense by the
     sum  of  net  interest  income,  on  a  fully  tax  equivalent  basis,  and
     noninterest income.

     The Corporation earned $7,415,000,  $6,916,000,  and $6,351,000,  or $1.87,
$1.75, and $1.61, and per share for the years ended December 31, 2001, 2000, and
1999,  respectively.  The  increase  in  net  interest  income  accounted  for a
significant  portion of the 7.2% and 8.9%  earnings  increases  recorded  by the
Corporation in 2001 and 2000, respectively. In addition to the increase recorded
in net interest income,  2001 earnings were enhanced by fiduciary  income,  NSF,
service charge and ATM income.  Also aiding earnings was higher net gain on loan
sales in the secondary mortgage market and increased earnings on additional life
insurance  policies  purchased.  However,  the increases realized in noninterest
income  were  more than  offset  by the  increases  experienced  in  noninterest
expenses.   The  Corporation   realized  increases  in  salaries  and  benefits,
depreciation,  and other general operating  expenses incurred as a result of the
Carroll County facility opened in 2001,  along with the full-year  effect of the
two Wal-Mart branches and the Mortgage Alternative Department opened in 2000. In
general,  2000 earnings  were  impacted  similarly due to the opening of the two
Wal-Mart branches and the Mortgage Alternative Department.

     Return on average assets (ROA) was .99%,  1.02%,  and 1.06% for the periods
ending December 31, 2001, 2000, and 1999, respectively,  while return on average
equity (ROE) was 13.12%, 14.11%, and 14.27% for those same time periods.

Net Interest Income

     Net interest income is the most significant  component of the Corporation's
earnings.  Net  interest  income is the  difference  between  interest  and fees
realized on earning assets, primarily loans and securities, and interest paid on
deposits and other borrowed  funds.  The net interest  margin is this difference
expressed as a percentage  of average  earning  assets.  Net interest  income is
determined  by several  factors,  including  the  volume of  earning  assets and
liabilities, the mix of earning assets and liabilities, and the overall level of
interest  rates.  Although some of these factors can be influenced by management
policies and actions,  these factors are also  influenced by elements beyond the
control of  management,  such as the  general  level of credit  demand,  Federal
Reserve Board monetary policy,  and changes in tax laws.  Tables 1 through 4 are
an integral  part in analyzing  the  components  of net interest  income and the
changes which have  occurred  between the time periods  presented.  Table 1-Five
Year Financial  Summary shows the  Corporation's  net interest  income from 1997
through 2001.  Table 2 - Average Balance Sheets and Interest Rates represent the
major components of interest-earning  assets and  interest-bearing  liabilities.
For  analytical  purposes,  interest  income  presented  in the  table  has been
adjusted to a tax equivalent  basis  assuming a 34% tax rate for all years.  The
tax  equivalent  adjustment  recognizes  the income tax savings  when  comparing
taxable and tax-exempt assets.
<PAGE>
<TABLE>

                                       Table 2 - AVERAGE BALANCE SHEETS AND INTEREST RATES

                                                                    Years ended December 31,
                                            2001                              2000                             1999
                               -------------------------------- ------------------------------------------------------------------
<S>                             <C>       <C>        <C>        <C>        <C>        <C>       <C>        <C>        <C>
            ASSETS              Average               Average    Average               Average    Average               Average
Interest earning assets         Balance    Interest    Rate      Balance    Interest     Rate     Balance    Interest     Rate
                               -------------------------------- ------------------------------------------------------------------
Securities
  Taxable                         $55,714     $3,299     5.92%     $52,089     $3,318      6.37%    $66,538     $3,831      5.76%

  Tax-exempt (1)                   35,842      2,623     7.32%      34,737      2,521      7.26%     33,438      2,317      6.93%
  Unrealized loss on AFS
    securities                        719          -               (2,958)          -               (1,487)          -
                               -------------------------------- ------------------------------------------------------------------
Total Securities                   92,275      5,922     6.42%      83,868      5,839      6.96%     98,489      6,148      6.24%

Loans (1)(2)

  Commercial                      330,838     27,627     8.35%     301,930     27,766      9.20%    251,732     21,951      8.72%

  Real estate                     170,808     14,452     8.46%     166,930     13,753      8.24%    143,711     11,587      8.06%
  Installment and other
    consumer                       47,649      4,759     9.99%      51,379      5,150     10.02%     51,139      5,000      9.78%

  Other                             2,362         92     3.90%         163         11      6.75%          -          -      0.00%
                               -------------------------------- ------------------------------------------------------------------
Total Loans                       551,657     46,930     8.51%     520,402     46,680      8.97%    446,582     38,538      8.63%


Interest-bearing balances with
  other financial institutions     15,785        668     4.23%       2,335        144      6.17%        344         18      5.23%

FHLB stock                          2,307        172     7.46%       2,123        175      8.24%      1,808        145      8.02%

Federal funds sold                 23,781        941     3.96%       7,305        465      6.37%      7,200        347      4.82%
                               -------------------------------- ------------------------------------------------------------------
Total Earning Assets              685,805    $54,633     7.97%     616,033    $53,303      8.65%    554,423    $45,196      8.15%
                                            =========  ========              =========    =======             ==========   =======

Noninterest Earning Assets

Allowance for loan losses         (5,337)                          (5,010)                          (4,319)

Premises and equipment             10,917                           11,112                            9,087

Cash and due from banks            22,639                           22,126                           21,830
Accrued interest and other
  Assets                           32,271                           30,475                           19,430
                               -----------                      -----------                      -----------
Total Assets                     $746,295                         $674,736                         $600,451
                               ===========                      ===========                      ===========
</TABLE>
<PAGE>
<TABLE>

LIABILITIES AND
 SHAREHOLDERS'
  EQUITY
Interest-Bearing Liabilities
Deposits
  Interest-bearing demand
<S>                               <C>           <C>      <C>       <C>           <C>       <C>      <C>           <C>       <C>
    deposits                      $70,181       $524     0.75%     $69,024       $741      1.07%    $62,858       $714      1.14%

  Savings deposits                181,932      5,607     3.08%     163,182      7,254      4.45%    157,618      5,994      3.80%

  Time deposits                   280,133     16,519     5.90%     256,672     15,021      5.85%    214,784     11,316      5.27%
                               -------------------------------- ------------------------------------------------------------------
Total interest-bearing deposits   532,246     22,650     4.26%     488,878     23,016      4.71%    435,260     18,024      4.14%


Borrowed Funds

  Short-term borrowings            40,940      1,506     3.68%      32,482      1,773      5.46%     30,168      1,358      4.50%

  FHLB advances                    35,252      2,113     5.99%      26,142      1,609      6.15%     23,359      1,412      6.04%

  Note payable                     11,023        634     5.75%      12,423      1,007      8.11%     10,863        749      6.89%
                               -------------------------------- ------------------------------------------------------------------

Total Borrowed Funds               87,215      4,253     4.88%      71,047      4,389      6.18%     64,390      3,519      5.47%
                               -------------------------------- ------------------------------------------------------------------
                                  619,461    $26,903     4.34%     559,925    $27,405      4.89%    499,650    $21,543      4.31%
Total interest-bearing
   liabilities                              ==========  =======              =========    =======             =========   ========

Noninterest-bearing
  liabilities
Noninterest-bearing demand
  deposits                         61,993                           58,723                           51,229
Accrued interest and other
  liabilities                       8,335                            7,071                            5,073

Shareholders' equity               56,506                           49,017                           44,499
                               -----------                      -----------                      -----------
Total liabilities and
  shareholders' equity           $746,295                         $674,736                         $600,451
                               ===========                      ===========                      ===========

Interest margin recap
  Net interest income and
    interest rate spread                     $27,730     3.62%                $25,898      3.76%               $23,653      3.84%
                                          =========== =========            ===========   =========           ==========   ========
  Net interest income margin                             4.04%                             4.20%                            4.27%
                                                      =========                          =========                        ========
</TABLE>
(1)  Interest  income on tax-exempt  securities and loans has been adjusted to a
     tax  equivalent  basis using a marginal  federal income tax rate of 34% for
     all years.

(2)  Nonaccrual  loans are included in average  loan  balances and loan fees are
     included in  interest  income.  Loan fees were $1,831 for 2001,  $1,309 for
     2000, and $1,192 for 1999.
<PAGE>

Table3 - Net Interest  Earning Assets  illustrates net  interest-earning  assets
         and liabilities for 2001, 2000, and 1999.
<TABLE>

                                          Table 3 - NET INTEREST-EARNING ASSETS

<S>                                                                  <C>               <C>               <C>
                                                                     2001              2000              1999
                                                               ------------------------------------------------------
 Average interest-earning assets                                        $685,805          $616,033          $554,423
 Average interest-bearing liabilities                                    619,461           559,925           499,650
                                                               ------------------------------------------------------

                  Net interest-earning assets                            $66,344           $56,108           $54,773
                                                               ======================================================
</TABLE>

Table4 - Volume and Rate  Analysis  depicts the dollar effect of volume and rate
     changes  from 1999  through  2001.  Variances  which were not  specifically
     attributable to volume or rate were allocated  proportionately between rate
     and volume using the absolute values of each as a basis for the allocation.
     Nonaccrual  loans  were  included  in the  average  loan  balances  used in
     determining the yields.

                                            Table 4 - VOLUME/RATE ANALYSIS
<TABLE>

                                                       2001-2000                                2000-1999
                                        -----------------------------------------  ------------------------------------
                                                       Change        Change                       Change     Change
                                           Total       Due To        Due To           Total       Due To     Due To
<S>                                     <C>          <C>            <C>            <C>          <C>         <C>
INTEREST INCOME                           Change       Volume         Rate            Change      Volume      Rate
---------------
                                        -----------------------------------------  ------------------------------------

Loans                                          $250        $2,726       ($2,476)         $8,142      $6,573     $1,569
Securities
  Taxable                                      (19)           458          (477)          (513)     (1,024)        511
  Tax-exempt                                    102            81             21            204          92        112
Interest-bearing balances with
  other financial institutions                  524           583           (59)            126         122          4
FHLB stock                                      (3)            14           (17)             30          26          4
Federal funds sold and
  overnight balances                            476           709          (233)            118           5        113
                                        -----------------------------------------  ------------------------------------
                                        -----------------------------------------  ------------------------------------
Total interest income                        $1,330        $4,571       ($3,241)         $8,107      $5,794     $2,313
                                        =========================================  ====================================


INTEREST EXPENSE

Interest-bearing DDA                         ($217)           $12         ($229)            $27         $68      ($41)
Savings deposits                            (1,647)           764        (2,411)          1,260         218      1,042
Time deposits                                 1,498         1,383            115          3,705       2,363      1,342
Short-term borrowings                         (267)           395          (662)            415         110        305
FHLB advances                                   504           547           (43)            197         171         26
Note payable                                  (373)         (104)          (269)            258         116        142
                                        -----------------------------------------  ------------------------------------
                                        -----------------------------------------  ------------------------------------
Total interest expense                       ($502)        $2,997       ($3,499)         $5,862      $3,046     $2,816
                                        =========================================  ====================================

Net Interest income                          $1,832        $1,574           $258         $2,245      $2,748     ($503)
                                        =========================================  ====================================
</TABLE>
<PAGE>

     Net interest income on a tax equivalent basis for 2001 was 7.1% higher than
that for 2000,  while the net  interest  margin for 2001 was 4.04%,  or 16 basis
points lower than the prior year. Tax  equivalent  net interest  income was 9.5%
higher in 2000 compared to 1999, while the net interest margin decreased 7 basis
points to 4.20% from that of 1999.

     The primary  responsibility  of the Federal Open Market Committee (FOMC) is
to set the monetary policy for the United States.  In a year that  experienced a
slow-down  in the  economy,  which led to the highest  unemployment  rate in six
years and waning consumer confidence,  the FOMC met eleven times during 2001 and
reduced  interest  rates at each meeting  resulting in a total  reduction of 475
basis points.  The federal funds rate and the discount rate was 1.75% and 1.25%,
respectively, at December 31, 2001. These were the lowest interest rates seen in
40 years.

     With the lower  interest rate  environment  that existed  during 2001,  the
Corporation  continued  to grow  its loan  portfolio.  Average  loans  increased
$31,255,000,  or 6.0% during 2001,  which is modest growth  compared to the last
five years,  but such growth more than  compensated for the lower interest rates
charged and resulted in higher total interest income.  The Corporation's cost of
funds  declined  during  the  year as a  result  of the  falling  interest  rate
environment,  which  reduced  total  interest  expense,  even as  total  average
interest-bearing  liabilities grew $59,536,000,  or 10.6%.  Lower interest rates
impacted interest-bearing  liabilities to a greater degree than interest-earning
assets, and net earning asset volume increased, resulting in higher net interest
income for the Corporation for 2001.

     During 2000, the Corporation  grew its average loan portfolio  $73,820,000,
or 16.5%.  This loan growth,  in addition to higher interest rates caused by the
FOMC raising  interest  rates three times  totaling 100 basis points  during the
year, led to higher total interest income.  The higher interest rate environment
also significantly impacted the Corporation's cost of funds, as interest-bearing
liabilities repriced at a faster pace than interest-earning assets. Overall, the
increase in net earning  asset volume more than offset the higher cost of funds,
which resulted in increased net interest income.

Provision for Loan Losses and Asset Quality

     The  provision  for loan  losses  represents  charges  made to  earnings to
maintain an adequate  allowance for loan losses.  The allowance is maintained at
an amount  believed to be sufficient to absorb  probable  losses incurred in the
credit portfolio.  Factors  considered in establishing an appropriate  allowance
include:  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.

     The Corporation  maintains a comprehensive  loan review program to evaluate
loan administration,  credit quality, and loan documentation.  This program also
includes  a  regular  review  of  problem  loan  reports,   delinquencies,   and
charge-offs.  The  adequacy of the  allowance  for loan losses is evaluated on a
quarterly basis.  This evaluation  focuses on specific loan reviews,  changes in
the type and volume of the loan portfolio given the current economic conditions,
and  historical  loss  experience.  Any  one of  the  following  conditions  may
necessitate a review of a specific  loan: a question has been raised whether the
customer's cash flow or net worth are sufficient to repay the loan; the loan has
been  criticized in a regulatory  examination;  the accrual of interest has been
suspended; or other reasons where either the ultimate collectibility of the loan
is in question,  or the loan has other special or unusual  characteristics which
require special monitoring.
<PAGE>

     Activity  in the  allowance  for  loan  losses  is  reflected  in Table 5 -
Analysis of Allowance for Loan Losses.  The recorded  values of loans and leases
actually  removed  from the  consolidated  balance  sheets  are  referred  to as
charge-offs and, after netting out recoveries on previously  charged-off assets,
become net charge-offs. The Corporation's policy is to charge-off loans when, in
management's  opinion,  the loan is  deemed  uncollectible,  although  concerted
efforts  continue  to be made  to  maximize  recovery.

Table 5 - ANALYSIS OF ALLOWANCE FOR LOAN LOSSES

<TABLE>
<S>                                                   <C>            <C>          <C>        <C>          <C>
                                                      2001           2000         1999       1998         1997
                                                  --------------  -----------  ----------- ---------- --------------
 Balance at beginning of year                            $5,071       $4,618       $4,241     $3,464         $3,198

 Loans charged-off
   Commercial and agricultural                            (431)        (503)        (363)       (37)          (126)
   Real estate                                             (14)            0        (114)          0              0
   Installment                                            (537)        (374)        (352)      (374)          (424)
                                                  --------------  -----------  ----------- ---------- --------------
                 Total charge-offs                        (982)        (877)        (829)      (411)          (550)
                                                  --------------  -----------  ----------- ---------- --------------

 Charge-offs recovered
   Commercial and agricultural                               13           61           49        124            126
   Real estate                                                0            0           35          0              0
   Installment                                               86           69           62         84             70
                                                  --------------  -----------  ----------- ---------- --------------
                 Total recoveries                            99          130          146        208            196
                                                  --------------  -----------  ----------- ---------- --------------

 Net loans charged-off                                    (883)        (747)        (683)      (203)          (354)
 Current year provision                                   1,225        1,200        1,060        980            620
                                                  --------------  -----------  ----------- ---------- --------------

 Balance at end of year                                  $5,413       $5,071       $4,618     $4,241         $3,464
                                                  ==============  ===========  =========== ========== ==============

 Loans at year end, excluding
   loans held for sale                                 $555,864     $537,725     $489,070   $353,828       $312,227

 Ratio of allowance to loans
   at year end                                            0.97%        0.94%        0.94%      1.20%          1.11%

 Average loans                                         $543,103     $517,010     $440,615   $327,412       $289,197

 Ratio of net loans charged-off
   to average loans                                       0.16%        0.14%        0.16%      0.06%          0.12%

                                                       Allocation of allowance for loan losses at December 31,
                                                      2001           2000         1999       1998         1997
                                                  --------------  -----------  ----------- ---------- --------------

 Commercial and agricultural                             $4,410       $3,829       $2,430     $2,499         $1,200
 Real estate                                                279          305          293        486            340
 Installment                                                440          514          601        570            560
 Unallocated                                                284          423        1,294        686          1,364
                                                  --------------  -----------  ----------- ---------- --------------
     Total                                               $5,413       $5,071       $4,618     $4,241         $3,464
                                                  ==============  ===========  =========== ========== ==============
</TABLE>
<PAGE>

     Nonperforming  assets and their  relative  percentages to loan balances are
presented in Table 6 - Nonperforming  Assets.  The level of nonperforming  loans
and leases is an important  element in assessing  asset quality and the relevant
risk in the credit  portfolio.  Nonperforming  loans include  nonaccrual  loans,
restructured loans and loans delinquent 90 days or more. Loans are evaluated for
nonaccrual when payments are past due over 90 days.  Another element  associated
with  asset  quality  is  other  real  estate  owned  (OREO),  which  represents
properties acquired by the Corporation through loan defaults by customers.

Table 6 - NONPERFORMING ASSETS

<TABLE>
                                                                                        As of December 31,
                                                                          -----------------------------------------------
<S>                                                                         <C>      <C>       <C>      <C>      <C>
                                                                            2001     2000      1999     1998     1997
                                                                          -----------------------------------------------
 Principal balance
   Nonaccrual                                                                $3,440   $2,718      $622   $1,468     $127
   Restructured                                                                  25       55       114      197      350
   90 days or more past due                                                     768    1,052       584      775      505
                                                                          -----------------------------------------------

                         Total nonperforming loans                           $4,233   $3,825    $1,320   $2,440     $982
                                                                          ===============================================

 Nonperforming loans as a percent of loans                                    0.76%    0.71%     0.27%    0.69%    0.31%

 Other real estate owned                                                         $8      $72      $487      $22     $230

 OREO as a percent of loans                                                   0.00%    0.01%     0.10%    0.01%    0.07%

 Allowance as a percent of nonperforming loans                              127.88%  132.58%   349.85%  173.81%  352.75%

 For nonaccrual and restructured loans for the years ended December 31:

 Interest income under original terms                                          $370     $362       $53     $146      $55
 Interest income which was recorded                                             126      150        20       17       27
</TABLE>

     The consolidated provision for loan losses was $1,225,000,  $1,200,000, and
$1,060,000  for 2001,  2000,  and 1999,  respectively.  Management  believes the
Corporation's  overall asset quality  remained  satisfactory,  despite an upward
trend in delinquency ratios,  charge-offs,  and nonperforming loans. The current
levels of nonperforming loans are considered to be manageable by the Corporation
in the normal  course of business.  Although  nonperforming  loan totals and net
charge-offs  were at their highest  point in five years,  the ratio of net loans
charged-off  to average loans and  nonperforming  loans as a percentage of loans
only increased slightly when compared to the prior year.

     Management  increased the provision for loan losses to $1,225,000  for 2001
as a result of continued loan growth and increased  charge-offs  and delinquency
trends.  The increase in the provision for loan loss kept pace with the increase
in loan growth  during the year as the ratio of  allowance  to loans at year-end
was .97%, up slightly from the .94% in 2000.


     The $140,000  increase in the 2000  provision for loan losses was primarily
due to the Corporation's 16.5% growth in average loans.
<PAGE>

     Total  nonperforming loans increased $408,000 to $4,233,000 at December 31,
2001 as compared to December 31, 2000. The most  significant  change occurred in
the nonaccrual and 90 days or more past due categories, where balances increased
$722,000  and  decreased  $284,000,  respectively.   Approximately  72%  of  the
nonaccrual increase related to activity in the commercial loan portfolio,  where
nineteen  credits  totaling  approximately  $2,267,000 were added to the list in
2001. This commercial loan increase was offset by five credits totaling $185,000
being charged-off during the year, along with eight credits totaling  $1,512,000
being removed from the list and principal paydowns accounting for $51,000 of the
change. One mortgage loan borrower with two loans totaling $237,000 was added to
the nonaccrual  list,  while three  installment  credits  totaling  $34,000 were
removed  from the list during the year.  Loans 90 days or more past due declined
$284,000  during  2001  primarily  due to the  activity  in  the  mortgage  loan
portfolio.

     As of December 31, 2001, the Corporation had thirty-five  credits  totaling
approximately  $8,228,000  which  management  believed  met the  criteria for an
impaired loan. Impaired loan balances increased  $3,052,000 from the prior year,
primarily  as a result of the  increased  nonaccrual  activity  during the year.
Specific reserve allocations have been made in the allowance for loan losses for
the excess of the loan balance over the estimated  discounted  future cash flows
in accordance with Statements of Financial Accounting Standards No. 114 and 118.


     Management  believes  loans  classified  for  regulatory  purposes as loss,
doubtful, substandard, or special mention that are not included in nonperforming
or impaired loans do not represent or result from trends or uncertainties  which
will have a material impact on future operating results,  liquidity,  or capital
resources.

     In addition to loans  classified for regulatory  purposes,  management also
designates certain loans for internal  monitoring  purposes in a watch category.
Loans may be placed on management's watch list as a result of delinquent status,
concern about the borrower's financial condition,  a decline in the value of the
collateral  securing  the loan,  substandard  classification  during  regulatory
examinations,  or simply  as a result of  management's  desire to  monitor  more
closely a borrower's  financial condition and performance.  Watch category loans
may include loans with loss  potential  that are still  performing  and accruing
interest  and may be current  under the terms of the loan  agreements;  however,
management may have a significant degree of concern about the borrowers' ability
to continue to perform  according  to the terms of the loans.  Loss  exposure on
these  loans  is  typically   evaluated   based  primarily  upon  the  estimated
liquidation  value of the collateral  securing the loans.  Also,  watch category
loans may include  credits which,  although  adequately  secured and performing,
reflect past delinquency  problems or unfavorable  financial trends exhibited by
the borrowers.
<PAGE>

     All watch list loans are subject to additional scrutiny and monitoring. The
Corporation's  philosophy  encourages  loan officers to identify  borrowers that
should be  monitored  in this  fashion,  and  management  believes  this process
ultimately  results  in the  identification  of problem  loans in a more  timely
fashion.

     As of December 31, 2001, the Corporation  had loans totaling  $9,222,000 on
its watch list which were not included in impaired or nonperforming loans.

Noninterest Income and Expense

     A listing of  noninterest  income and expense  from 1999  through  2001 and
percentage changes between years is included in Table 7 - Noninterest Income and
Expense.

Table 7 - NONINTEREST INCOME & EXPENSE

<TABLE>
                                                                % change                      % change
<S>                                                <C>                <C>        <C>                <C>        <C>
                                                   2001         from '00         2000         from '99         1999
                                               -------------  -------------  -------------  -------------  -------------
 Noninterest Income
 Income from fiduciary activities                    $1,264          6.49%         $1,187          4.67%         $1,134
 Service charges on deposit accounts                  2,352         25.11%          1,880         18.91%          1,581
 Investment product commissions                         398        -47.49%            758        138.36%            318
 Other operating income                               1,582         16.93%          1,353          4.56%          1,294
                                               -------------  -------------  -------------  -------------  -------------
                                               -------------  -------------  -------------  -------------  -------------
                                                      5,596          8.07%          5,178         19.67%          4,327

 Net gain on loan sales                               1,858        181.94%            659        -30.04%            942
 Net realized gain/(loss) on securities                   0       -100.00%           (12)        -91.67%          (144)
                                               -------------  -------------  -------------  -------------  -------------
            Total noninterest income                 $7,454         27.97%         $5,825         13.66%         $5,125
                                               =============  =============  =============  =============  =============

                                                                % change                      % change
                                                   2001         from '00         2000         from '99         1999
                                               -------------  -------------  -------------  -------------  -------------
 Noninterest Expense
 Salaries and employee benefits                     $12,908         20.85%        $10,681          8.59%         $9,836
 Occupancy expenses, net                              1,293          3.69%          1,247         16.22%          1,073
 Equipment expenses                                   1,914         10.57%          1,731         31.74%          1,314
 Other operating expenses                             6,059          9.82%          5,517          3.88%          5,311
                                               -------------  -------------  -------------  -------------  -------------
           Total noninterest expense                $22,174         15.63%        $19,176          9.36%        $17,534
                                               =============  =============  =============  =============  =============
</TABLE>
<PAGE>

     Nearly all noninterest  income and expense  categories  were  significantly
impacted  by the 1999  Jasper  County  branch  acquisition,  as the  Corporation
operated these  locations for the entire twelve months in 2000 and only nine and
one-half months during 1999.

     Noninterest  income  increased  28.0% to  $7,454,000  in 2001  compared  to
$5,825,000 in 2000.  Primary  sources of noninterest  income were from fiduciary
activities,  service  charges,  and net gain on secondary  market  mortgage loan
sales.

     Income from fiduciary  activities  increased 6.5% during 2001 predominately
due to higher fees recorded as a result of more  business  volume in the trusts,
estates, and farm management sectors of the department.

     Service charges on deposit accounts increased 25.1% during the current year
not only due to a rise in the number of accounts  being  charged,  but also as a
result of the  implementation  of the  Overdraft  Honor program on October 18th.
This program is designed to allow  certain  customers  to overdraw  their demand
deposit account up to $500 for a stated charge to be assessed on a per-item paid
basis.

     Investment  product  commissions  are gross  fees  generated  by the Bank's
Investment  Center,  a full  service  brokerage  operation  offered  exclusively
through Raymond James Financial  Services,  Inc., member  NASD/SIPC.  Management
believes the down-turn in the economy,  along with the September  11th terrorist
attacks,  significantly  affected the  investing  community and led to the 47.5%
decrease in investment product commissions recorded in 2001.

     Other operating  income increased 16.9% during 2001, of which 94.3% of that
increase  was  attributed  to  increased  earnings on an  additional  $2,995,000
purchase  in  November  2000 of life  insurance  policies  on the  current  bank
directors.

     Net gain on loan sales  originated  in the secondary  mortgage  market rose
181.9% in 2001, as annual sales volume increased approximately  $73,844,000,  or
174.1% from the previous year.  New home growth,  particularly  first-time  home
buyers,  along with home refinancing  activities  dramatically  increased as the
FOMC  eased  monetary  policy  eleven  times  during  2001,  resulting  in lower
borrowing rates for consumers.

     Noninterest  income  recorded in 2000  increased  13.7% compared to 1999. A
departmental fee adjustment led to a 4.7% increase in fiduciary income, while an
increase in the number of accounts,  along with a higher service charge fee that
went into effect in mid-June accounted for the 18.9% increase in service charges
on deposit accounts.  Investment product commissions rose 138.4%, primarily as a
result of increased brokerage activity and the reallocation of accumulated money
market  funds  into the  stock  market  throughout  the year.  Higher  ATM fees,
resulting  from  increases  posted in the  number of  foreign  ATM  transactions
accounted for the majority of the 4.6% increase in other operating income.

     Total  noninterest  expense increased 15.6% to $22,174,000 in 2001 compared
to the 9.4% increase recorded in 2000.  Salaries and employee benefits increased
20.9% during 2001.  Approximately 41% of the increase posted during the year was
attributable to the change in the valuation of the officers' stock  appreciation
rights. An expense of $539,000 was recorded in 2001,  whereas $376,000 in income
was posted in 2000, resulting in a change of $915,000 between years.  Accounting
for the remainder of the increase was higher commission  expense,  primarily due
to the record year posted by the Corporation's  mortgage banking activities,  in
addition to the staffing of the Flora facility and the rising costs  experienced
in health insurance coverage.
<PAGE>

     Net   occupancy   and  equipment   expenses   increased   3.7%  and  10.6%,
respectively,  during  the  current  year.  The  majority  of the  increase  was
attributable  to higher  depreciation  expense  recorded  not only for the Flora
facility opened in 2001, but also as a result of the full-year expense effect on
the new technology placed in service during the prior year. Branch rent, as well
as maintenance and repair costs also contributed to the higher expenses incurred
during the year.

     Other operating  expenses increased 9.8% in 2001, with approximately 40% of
the  increase  attributable  to costs  incurred in  connection  with the pending
merger with First Merchants  Corporation.  The remainder of the increase related
to ongoing operational items for the Flora facility and other branches,  as well
as increased marketing and advertising costs, legal fees, postage,  ATM expenses
associated  with  increased  transaction  volumes,  and life  insurance  expense
related to the additional life insurance policies purchased in November 2000 for
bank directors.

     Total noninterest  expense increased 9.4% in 2000 compared to 1999 not only
due to the operational  costs associated with the two new Wal-Mart  branches and
the  Mortgage  Alternative  Department,  but also as a result  of the  full-year
expense  effect of the Jasper County branch  acquisitions.  In addition,  higher
commission expense recorded due to the success of the Investment  Center,  along
with rising health insurance costs  contributed to higher expenses for the year.
Net occupancy and equipment expenses were attributable to increased depreciation
expense incurred, not only in the Jasper County branch acquisitions, but also as
a result of the investment made by the Corporation in new technology.

Income Taxes

     The  Corporation  records a provision for income taxes  currently  payable,
along with a provision  for those taxes  payable in the  future.  Such  deferred
taxes arise from  differences  in the timing of certain items between  financial
statement  reporting and income tax reporting.  The major difference between the
effective tax rate applied to the Corporation's  financial  statement income and
the  federal  statutory  rate of 34% is the  result of  interest  on  tax-exempt
securities and loans, offset by state tax expense.

     The Corporation's  effective tax rate was 31.4%,  33.7%, and 32.3% in 2001,
2000,  and 1999,  respectively.  The  effective tax rate declined in 2001 due to
increases in tax exempt interest  income and income on life insurance  policies,
as well as  reduced  state  taxes  resulting  from the  effect  of state  income
apportionment. Further tax information regarding the Corporation can be found in
Note 1 and Note 12 to the consolidated financial statements.
<PAGE>


                               FINANCIAL CONDITION

Securities

     Securities  held-to-maturity  are those which the  Corporation has both the
positive  intent and ability to hold to maturity,  and are reported at amortized
cost. Securities  available-for-sale  are those which the Corporation may decide
to sell if needed for liquidity,  asset/liability  management, or other reasons.
Securities  available-for-sale are reported at fair value, with unrealized gains
and  losses  included  as a  separate  component  of  equity,  net of  tax.  The
Corporation does not maintain any securities for trading purposes.

     Table8  -  Securities  and  Securities  Maturity  Schedule  summarizes  the
carrying   values  of  securities  from  1999  through  2001  and  the  maturity
distribution  at December 31, 2001,  by  classification.  Interest on tax-exempt
securities has been adjusted to a tax equivalent  basis using a marginal federal
tax rate of 34% for all years.

                                                   Table 8 - SECURITIES
<TABLE>

                                                                                  At December 31,
                                                         ------------------------------------------------------------------
<S>                                                                       <C>                   <C>                   <C>
                                                                          2001                  2000                  1999
                                                         ------------------------------------------------------------------
 Securities available-for-sale
 U.S. Government & agencies                                             $2,023                $4,193                $5,005
 States and political subdivisions                                      36,315                31,012                27,268
 Corporate obligations                                                  10,426                 4,001                 1,973
 Mortgage-backed and asset-backed                                       42,856                37,105                42,888
 Other securities                                                        2,544                 2,546                 2,588
                                                         ------------------------------------------------------------------

           Total securities available-for-sale                         $94,164               $78,857               $79,722

 Securities held-to-maturity
 States and political subdivisions                                      $3,918                $4,484                $4,712

                                                         ------------------------------------------------------------------
            Total securities held-to-maturity                           $3,918                $4,484                $4,712

                                                         ------------------------------------------------------------------
                     Total securities                                  $98,082               $83,341               $84,434
                                                         ==================================================================
</TABLE>
<PAGE>

<TABLE>
                                                SECURITIES MATURITY SCHEDULE

                                         1 Year and Less       1 to 5 Years           5 to 10 Years         Over 10 Years
                                      ------------------------------------------  ---------------------- --------------------
<S>                                           <C>        <C>       <C>      <C>          <C>        <C>        <C>        <C>
Available-for-sale                     Balance       Rate    Balance    Rate       Balance      Rate     Balance     Rate
------------------
                                      -----------  -----------------------------  ---------------------- --------- ----------
                                              $-          -        $-         -           $-          -        $-          -
U.S. Treasury

Federal agencies                               -          -     2,023     5.00%            -          -         -          -

State and municipal (1)                    1,074      5.19%     5,221     5.31%        6,433      6.83%    23,587      7.50%

Corporate obligations                          -          -    10,426     6.76%            -          -         -          -

Mortgage-backed and  asset-backed              -          -         -         -        3,734      5.38%    39,122      5.85%

Other securities                               -          -         -         -          998      5.79%     1,546      5.97%

                                      -----------           ----------            -----------            ---------
       Total available-for-sale           $1,074              $17,670                $11,165              $64,255
                                      ===========           ==========            ===========            =========

Held-to-maturity
State and municipal (1)                       $0          -    $1,924     5.04%         $927      8.32%    $1,067      8.91%

                                      -----------           ----------            -----------            ---------
        Total held-to-maturity                $0               $1,924                   $927               $1,067
                                      ===========           ==========            ===========            =========
</TABLE>

(1)  Average rates were calculated on a tax equivalent  basis using a marginal
     federal income tax rate of 34%.

     The majority of the  securities  portfolio  is comprised of federal  agency
securities, state municipal securities (tax-exempt),  corporate obligations, and
mortgage-backed and asset-backed securities.

     The securities  portfolio  carries varying degrees of risk.  Investments in
U.S. Treasury  securities and federal agency securities have little or no credit
risk.  Mortgage-backed and asset-backed  securities are substantially  issues of
federal agencies. Obligations of states and political subdivisions and corporate
securities are the areas of highest  potential credit exposure in the portfolio.
This risk is minimized  through the purchase of high  quality  investments.  The
Corporation's   investment  policy  requires  that  obligations  of  states  and
political  subdivisions  and  corporate  bonds must have a rating of A or better
when purchased. The vast majority of these investments were rated A or better at
December  31,  2001.  The risk of  non-rated  municipal  bonds is  minimized  by
limiting  the amounts  invested and by  investing  in local  issues.  Management
believes the  non-rated  securities in the  Corporation's  portfolio are of high
quality.  No securities of an individual issuer,  excluding U.S.  Government and
its  agencies,  exceeded  10% of the  Corporation's  shareholders'  equity as of
December 31, 2001. The  Corporation  does not use off-balance  sheet  derivative
financial  instruments as defined in SFAS No. 119,  "Disclosure about Derivative
Financial Instruments and Fair Value of Financial Instruments."
<PAGE>

     Total  securities were  $98,082,000 and $83,341,000 as of December 31, 2001
and 2000,  respectively.  While the average total securities  balance  increased
10.0% during 2001,  the ending  balance  increased  $14,741,000,  or 17.7%.  The
slow-down  in the economy and the weaker  stock  market led to a decline in loan
demand and an increase in deposits,  as customers  were exiting the stock market
and  searching  for  investments  that  carried a higher  degree of safety.  The
combination  of  these  events  resulted  in  higher  liquidity  levels  for the
Corporation,  and in an effort to  maximize  earnings,  a portion  of the excess
liquidity  was  invested  in  shorter-term  states and  political  subdivisions,
corporate  obligations,   and  mortgage  and  asset-backed   securities.   These
investments  carried  a higher  yield  than  any  other  short-term  investment,
including overnight federal funds sold. Proceeds of matured or called securities
during the year were also reinvested into these same investment instruments.

     Management's  security strategy includes utilizing  short-term  securities,
adjustable rate  instruments,  and easily  marketable  securities.  Tax-free and
intermediate taxable bonds are used to further enhance earnings.  As of December
31, 2001,  approximately  96% of the total  investment  security  portfolio  was
classified in the available-for-sale  category,  which allows flexibility in the
asset/liability  management  function.  Although none occurred during 2001, sell
strategies  are  executed,  on  occasion,  when the  interest  rate  environment
provides the opportunity to boost the overall portfolio performance.

     As of December 31, 2001 and 2000, the security  portfolio  held  structured
notes  totaling  $0 and  $3,998,000,  respectively.  The  investment  policy has
specific guidelines  describing total holdings,  maturity,  and price volatility
parameters regarding these types of security  instruments.  All structured notes
were U.S. Government agency issues.

     The change which occurred in the unrealized gain/loss on securities between
2001 and 2000 was a result  of the  declining  interest  rate  environment  that
existed in 2001, in conjunction with the change in the portfolio mix. The change
in equity due to market value fluctuations in the  available-for-sale  portfolio
is not used in the regulatory capital calculation.

Loans

     The loan portfolio  constitutes  the major earning asset of the Corporation
and offers the best alternative for maximizing interest spread above the cost of
funds.  The  Corporation's  loan  personnel  have the authority to extend credit
under guidelines established and approved by the Board of Directors.  Any credit
which  exceeds the authority of the loan officer is forwarded to the Bank's loan
committee for approval.  The loan committee is comprised of various  experienced
loan  officers  and three  bank  directors  -- the  President,  and two  outside
directors,  one of whom is the Chairman.  Each outside director  participates on
this committee on a monthly  rotating  basis.  All credits which exceed the loan
committee's  lending  authority are presented to the full Board of Directors for
ultimate  approval or denial.  The loan  committee  not only acts as an approval
body to ensure consistent application of the Corporation's loan policy, but also
provides  valuable  insight  through  communication  and  pooling of  knowledge,
judgment, and experience of its members.

     The  Corporation's  primary  lending area  generally  includes  Tippecanoe,
White,  Jasper,  Carroll,  and  contiguous  counties in Northwest  Indiana.  The
Corporation  extends  out-of-area credit only to borrowers who are considered to
be low risk, and only on a very limited basis.

Table 9 - Loans Outstanding  reflects  outstanding balances by loan type for the
past five years.  Additional  loan  information  is  presented  in Note 3 to the
consolidated financial statements.
<PAGE>

                                             Table 9 - LOANS OUTSTANDING
<TABLE>

                                                                                 At December 31,
                                                            ----------------------------------------------------------
<S>                                                            <C>        <C>         <C>        <C>         <C>
                                                               2001       2000        1999       1998        1997
                                                            ----------------------------------------------------------

Commercial and agricultural                                    $232,997   $215,087    $192,760   $115,198    $112,586
Real estate - construction                                       62,305     54,768      47,375     28,043      17,117
Real estate - mortgage                                          211,014    212,190     197,181    160,655     127,574
Installment                                                      44,559     50,696      51,754     49,932      54,950
Other                                                             4,989      4,984           0          0           0
                                                            ----------------------------------------------------------
Total loans                                                    $555,864   $537,725    $489,070   $353,828    $312,227
                                                            ==========================================================

                                                              Composition of loan portfolio by type at December 31,
                                                            ----------------------------------------------------------
                                                               2001       2000        1999       1998        1997
                                                            ----------------------------------------------------------
Commercial and agricultural                                      41.91%     40.00%      39.41%     32.56%      36.06%
Real estate - construction                                       11.21%     10.18%       9.69%      7.93%       5.48%
Real estate - mortgage                                           37.96%     39.46%      40.32%     45.40%      40.86%
Installment                                                       8.02%      9.43%      10.58%     14.11%      17.60%
Other                                                             0.90%      0.93%       0.00%      0.00%       0.00%
                                                            ----------------------------------------------------------
Total loans                                                      100.0%     100.0%      100.0%     100.0%      100.0%
                                                            ==========================================================
</TABLE>

     Although the Corporation  continued growing the loan portfolio during 2001,
the  pace of  growth  was  slower  than any of the four  preceding  years.  Loan
balances increased  $18,139,000,  or 3.4% during the year,  compared to the 9.9%
posted  in the  prior  year.  The  combination  of the  Corporation  being  more
selective in the credit risk it was willing to accept,  along with the slow-down
in the economy resulted in weaker loan demand than in past years.

     The  commercial  and  agricultural   sector  of  the  loan  portfolio  grew
$17,910,000,  or 8.3%, in 2001, and was the largest sector within the portfolio.
Late in the first quarter of 2001, the Corporation established a loan production
office in Carroll County to serve that community and market until a full-service
branch  could be  constructed.  As a  result,  the  efforts  in this new  market
accounted for  approximately  83.8% of the total  increase in the commercial and
agricultural loan sector.

     Real estate  construction and mortgage loans grew 13.8%,  while real estate
mortgages slightly declined .6% during 2001. Construction projects in and around
the Greater  Lafayette  area  continue  to  advance,  despite the effects of the
sluggish economy. Even though home equity loan balances increased  approximately
$8,739,000,  or 61.6% in 2001,  total real estate  mortgage  balances  decreased
$1,176,000,  or .6%,  as  customers  took  advantage  of the low  interest  rate
environment  and  opted  to  refinance  their  adjustable-rate   mortgages  into
fixed-rate  mortgages  through  the  Corporation's   secondary  market  mortgage
department.  Management  believes  the  degree  of risk  assumed  on any loan is
commensurate  with the interest rate assessed,  and is thereby able to receive a
higher  rate of  return  on  commercial  and real  estate-construction  loans as
compared to  residential  real estate loans.  Although  these loan types usually
possess  increased  elements  of  risk,  the  Corporation's  lending  practices,
policies,  and  procedures  that are in place are  intended to mitigate  certain
risks associated with such loans. Conversely, because of the nature of the loan,
real estate mortgage and home equity loans carry a lower degree of risk.

     Total  installment  loan  balances  declined  12.1% in 2001.  The  indirect
automobile  line of  business  accounted  for nearly all of the  decrease in the
installment  loan  category.  This  particular  line of  business  is  extremely
competitive by nature,  however,  the dealer incentives that followed the events
of September 11th which promoted a zero percent annual  percentage  yield on all
new auto purchases made it even more  challenging to remain  competitive in this
loan area.

     In  general,  as loan  totals  have  grown  over the past  years,  the loan
portfolio has remained diversified by loan type, borrower,  and industry.  As of
December 31, 2001, there were no concentrations of credits in excess of 10.0%.
<PAGE>

Table 10 - Loan Liquidity and  Sensitivity to Changes in Interest Rates reflects
the maturity  schedule of commercial and agricultural  loans. Also indicated are
fixed  and  variable  rate  loans  maturing  after  one year  for the same  loan
categories.

                                              Table 10 - LOAN LIQUIDITY
<TABLE>

                                                              Loan Maturities at December 31, 2001
                                           ----------------------------------------------------------------------------
<S>                                             <C>                  <C>                          <C>              <C>
                                                1 Year               1 - 5               Over 5
                                               and Less              Years               Years              Total
                                           ------------------  ------------------  -------------------  ---------------
Commercial and agricultural                         $112,842            $115,932               $4,223         $232,997
Real estate - construction                            37,389              17,648                7,268           62,305
                                           ------------------  ------------------  -------------------  ---------------
           Total selected loans                     $150,231            $133,580              $11,491         $295,302
                                           ==================  ==================  ===================  ===============

Sensitivity to Changes in Interest Rates

Fixed rates                                                              $19,568               $4,627
Variable rates                                                           114,012                6,864
                                                               ------------------
                                                               ------------------  -------------------
           Total selected loans                                         $133,580              $11,491
                                                               ==================  ===================
</TABLE>

Deposits

     The Corporation offers a wide variety of deposit services to individual and
commercial customers,  such as noninterest-bearing and interest-bearing checking
accounts,  savings accounts, money market accounts, and certificates of deposit.
The deposit base provides the major  funding  source for earning  assets.  Total
average deposits grew  $46,638,000,  or 8.5%, in 2001. As previously  mentioned,
many customers apparently were leaving the stock market, at least on a temporary
basis,  and  electing a safer  investment  until the  economy  shows  signs of a
turn-around.  As a  result,  approximately  90.5% of the total  average  deposit
increase occurred in the savings and time deposit categories.
<PAGE>

     A three year schedule of average  deposits by type,  and maturities of time
deposits greater than $100,000 is presented in Table 11 - Deposit Information.

                                            Table 11 - DEPOSIT INFORMATION
<TABLE>

                                      2001                             2000                           1999
                         ----------------------------------------------------------------- ----------------------------
<S>                     <C>              <C>              <C>              <C>            <C>              <C>
                            Average          Average        Average           Average        Average         Average
                            Balance            Rate         Balance             Rate         Balance          Rate
                         --------------   ------------------------------   --------------- ------------    ------------

Noninterest-bearing            $61,993                 -        $58,723                 -      $51,229               -
Interest-bearing demand         70,181             0.75%         69,024             1.07%       62,858           1.14%
Savings deposits               181,932             3.08%        163,182             4.45%      157,618           3.80%
Time deposits                  280,133             5.90%        256,672             5.85%      214,784           5.27%
                         --------------   ------------------------------   --------------- ------------    ------------
                         --------------   ------------------------------   --------------- ------------    ------------
     Total deposits           $594,239             3.81%       $547,601             4.20%     $486,489           3.70%
                         ==============   ==============================   =============== ============    ============
</TABLE>

                                       Maturity Ranges of Time Deposits
                              with Balances of $100,000 or More at December 31,
<TABLE>

<S>                          <C>                              <C>                             <C>
                             2001                             2000                            1999
                         --------------                  ---------------                   ------------
3 months or less               $15,334                          $12,730                        $12,638
3 through 6 months              14,095                            7,462                          4,422
6 through 12 months             12,083                           13,108                          6,372
Over 12 months                  12,215                           20,214                         15,233
                         --------------                  ---------------                   ------------
          Total                $53,727                          $53,514                        $38,665
                         ==============                  ===============                   ============
</TABLE>

     To provide  temporary  liquidity and as an alternative to borrowing federal
funds,  the  Corporation  will  acquire,   from  time  to  time,  large  balance
certificates  of deposit,  generally from public  entities,  for short-term time
periods.  The  Corporation  had such funds  totaling  $95,000,  $4,303,000,  and
$5,514,000, as of December 31, 2001, 2000, and 1999, respectively.

Borrowings

     Aside from the core deposit  base and large  denomination  certificates  of
deposit  mentioned above, the  Corporation's  remaining  funding sources include
short-term and long-term  borrowings.  Short-term  borrowings consist of federal
funds purchased from other financial  institutions on an overnight basis, retail
repurchase  agreements  which  generally  mature  within  thirty days,  and U.S.
Treasury demand notes.
<PAGE>


Table 12 - SHORT-TERM BORROWINGS

<TABLE>
                                                                                  As of December 31,
                                                                               --------------------------
<S>                                                                              <C>      <C>     <C>
                                                                                 2001     2000    1999
                                                                               --------------------------

       Repurchase agreements outstanding                                        $31,505  $54,275 $24,645
       Treasury tax and loan open-end note                                          568    1,297   2,628
                                                                               --------------------------

                             Total short-term borrowings                        $32,073  $55,572 $27,273
                                                                               ==========================

       Average balance of repurchase agreements during year                     $39,538  $30,521 $28,428

       Maximum month-end balance of repurchase agreements during year            41,906   54,275  33,192

       Weighted-average interest rate of repurchase agreements during year        3.67%    5.39%   4.36%

       Weighted-average interest rate of repurchase agreements at end of year     1.88%    5.76%   4.87%
</TABLE>

     As  presented  in Table 12 -  Short-term  Borrowings,  the  balance  of the
Corporation's   short-term   borrowings  were  comprised  of  retail  repurchase
agreements  and a treasury tax and loan  open-end  note as of December 31, 2001,
2000, and 1999. While the Corporation  experienced  growth in retail  repurchase
agreements  in  2000,  one  customer  accounted  for a  significant  part of the
increase over the prior year. This customer's account serves as a clearing-house
twice  annually  for state  funds  received.  After  being  deposited  into this
customer's account,  these funds were distributed to other local municipalities.
In the past,  these funds were on deposit with the Corporation  only for a short
time,  usually one week or less, with the funds fully  distributed by the end of
the year. However, as of December 31, 2000,  approximately  $18,000,000 remained
on deposit with the  Corporation  and was  subsequently  disbursed on January 2,
2001.  For the years  presented,  retail  repurchase  agreements  accounted  for
substantially the entire balance of short-term borrowings.

     The Bank is a member of the Federal Home Loan Bank of Indianapolis  (FHLBI)
and has the authority of the Board of Directors to borrow up to $40 million. All
current and any future borrowings are secured by a blanket  collateral pledge of
the Bank's one-to-four  family residential loans and the outstanding  balance of
the  guaranteed  portion of Small  Business  Administration  (SBA) loans.  FHLBI
advances as of  December  31, 2001 and 2000 were  $34,982,000  and  $35,737,000,
respectively. The $755,000 decrease was attributed to scheduled annual principal
pay-downs as required by the advances.

     The  Corporation  executed an unsecured  long-term  borrowing  agreement on
March 15, 1999 with The Northern  Trust Company,  located in Chicago,  Illinois.
The purpose of the note was for the Corporation to contribute additional capital
to the Bank in order for the Bank to acquire  the  Jasper  county  branches  and
maintain its well-capitalized capital status. The Corporation made a $13,000,000
capital  contribution  to the Bank on March  15,  1999.  Under  the terms of the
agreement,  the Corporation is required to make quarterly  principal payments of
$350,000,  with a final balloon payment due March 31, 2006.  Interest is payable
monthly at an interest rate currently  indexed to the federal funds rate plus an
applicable margin determined by the Corporation's  existing capital ratios.  The
note is also subject to various covenants, including a defined minimum return on
average assets,  tangible net worth,  capital ratios,  indebtedness  ratio, loan
loss  allowance to loans  ratio,  and  nonperforming  asset  ratios.  Management
believes  the  Corporation  was in  compliance  with all  covenants  of the loan
agreement as of December 31, 2001. The outstanding principal balance of the note
payable at December 31, 2001 was $10,150,000.  Additional  information regarding
short-term borrowings, FHLBI advances, and the note payable can be found in Note
7 and Note 8 of the consolidated financial statements.
<PAGE>

Quantitative and Qualitative Disclosures about Market Risk

     Market risk of the Corporation  encompasses exposure to both liquidity risk
and  interest  rate  risk  and is  reviewed  at  least  quarterly  by the  Funds
Management Committee (FMC) and the Board of Directors.

     The  liquidity  of the  parent  company  is  dependent  on the  receipt  of
dividends from the banking subsidiary.  Certain restrictions exist regarding the
transfer  of  funds  from  the  subsidiary  as  explained  in  Note  14  to  the
consolidated financial statements. Management expects that in the aggregate, the
banking  subsidiary will continue to have the ability to dividend adequate funds
to the parent  company.  The statement in this paragraph  relating to the parent
company   continuing  to  receive  dividends  from  the  subsidiary  bank  is  a
forward-looking  statement  which  may  or  may  not  be  accurate  due  to  the
impossibility  of  predicting  future  economic  and  business  events,  and  in
particular, the future profitability of the Corporation's banking subsidiary.

     The banking  subsidiary's  source of funding is predominantly core deposits
consisting of both commercial and individual deposits, maturities of securities,
repayments of loan principal and interest,  federal funds purchased,  securities
sold under  agreements to repurchase,  and FHLBI  advances.  The deposit base is
diversified  between  individual  and  commercial  accounts  which  helps  avoid
dependence on large  concentrations  of funds.  The Corporation does not solicit
certificates  of  deposit  from  brokers.  Table 13 - Funding  Uses and  Sources
details the main components of cash flows for 2001 and 2000.

Table 13 - FUNDING USES AND SOURCES

<TABLE>
                                                    2001                                     2000
                                   ---------------------------------------- ----------------------------------------
                                                   Increase/(decrease)                       Increase/(decrease)
                                     Average       -------------------         Average       -------------------
<S>                                         <C>           <C>          <C>             <C>         <C>          <C>
                                     Balance       Amount       Percent        Balance       Amount      Percent
                                   ---------------------------------------- ----------------------------------------
FUNDING USES
Loans, total                           $551,657      $31,255         6.01%        $520,402     $73,820       16.53%
Taxable securities                       55,714        3,625         6.96%          52,089    (14,449)      -21.72%
Tax-exempt securities                    35,842        1,105         3.18%          34,737       1,299        3.88%
Interest-bearing balances with
  other financial institutions           15,785       13,450       576.02%           2,335       1,991      578.78%
FHLB stock                                2,307          184         8.67%           2,123         315       17.42%
Federal funds sold and overnight
  balances                               23,781       16,476       225.54%           7,305         105        1.46%
                                   -------------                            ----------------------------------------
                                   ---------------------------------------- ----------------------------------------
            Total uses                 $685,086      $66,095        10.68%        $618,991     $63,081       11.35%
                                   ======================================== ========================================

FUNDING SOURCES
Noninterest-bearing deposits            $61,993       $3,270         5.57%         $58,723      $7,494       14.63%
Interest-bearing demand                  70,181        1,157         1.68%          69,024       6,166        9.81%
Savings deposits                        181,932       18,750        11.49%         163,182       5,564        3.53%
Time deposits                           280,133       23,461         9.14%         256,672      41,888       19.50%
Short-term borrowings                    40,940        8,458        26.04%          32,482       2,314        7.67%
FHLB advances                            35,252        9,110        34.85%          26,142       2,783       11.91%
Note payable                             11,023      (1,400)       -11.27%          12,423       1,560       14.36%
                                                                                                       -------------
                                   ---------------------------------------- ----------------------------------------
           Total sources               $681,454      $62,806        10.15%        $618,648     $67,769       12.30%
                                   ======================================== ========================================
</TABLE>
<PAGE>

     The  Corporation's  interest  rate risk is measured by computing  estimated
changes in net  interest  income and the net  portfolio  value (NPV) of its cash
flows from assets and liabilities in the event of adverse  movements in interest
rates.   Interest  rate  risk  exposure  is  measured  using  an  interest  rate
sensitivity analysis to determine the change in NPV in the event of hypothetical
changes in  interest  rates.  Another  method  also used to enhance  the overall
process is interest rate  sensitivity  gap analysis.  This method is utilized to
determine  the  repricing   characteristics  of  the  Corporation's  assets  and
liabilities.

     NPV  represents  the market value of  portfolio  equity and is equal to the
market value of assets minus the market value of  liabilities.  This  particular
analysis  assesses the risk of loss in market risk sensitive  instruments in the
event of a sudden and sustained 1% - 2% increase and decrease in interest rates.
The Corporation's  Board of Directors adopted an interest rate risk policy which
established  a 45% minimum and maximum  increase  and decrease in the NPV in the
event of a sudden and sustained 1% - 2% increase or decrease in interest rates.

     The following table  represents the  Corporation's  projected change in NPV
for the various rate shock levels as of December 31, 2001.

    -----------------------  Net Portfolio Value --------------------

Change          Dollar           Dollar                  Percentage
in Rates        Amount           Change                    Change

+ 200           $ 61,920         $ (7,627)                   (10.97) %
+ 100             63,551           (5,996)                    (8.62)
Base              69,547                -                        -
- 100             70,503              956                      1.37
- 200             74,933            5,386                      7.74

     The above table  indicates that as of December 31, 2001, the  Corporation's
estimated NPV would be expected to decrease in the event of sudden and sustained
increases in prevailing interest rates.  Conversely,  in the event of sudden and
sustained  decreases in prevailing  interest rates, the Corporation's  estimated
NPV would be expected to increase.  As of December 31, 2001,  the  Corporation's
estimated changes in NPV were within the approved guidelines  established by the
Board of Directors.

     Computations of prospective  effects of hypothetical  interest rate changes
are  based on a number  of  assumptions,  including  relative  levels  of market
interest  rates,  loan  prepayments  and deposit decay rates,  and should not be
relied  upon  as  indicative  of  actual  results.  These  computations  do  not
contemplate  any  actions  management  may  undertake  in response to changes in
interest  rates.  The NPV  calculation  is  based  on the net  present  value of
discounted  cash  flows  utilizing  certain  prepayment  assumptions  and market
interest rates.

     Certain  shortcomings are inherent in the method of computing the estimated
NPV.  Actual  results may differ from that  information  presented  in the table
above should market  conditions vary from the assumptions used in preparation of
the table  information.  If  interest  rates  remain or decrease  below  current
levels,  the  proportion of adjustable  rate loans in the loan  portfolio  could
decrease in future periods due to refinancing activity. Also, in the event of an
interest rate change,  prepayment  and early  withdrawal  levels would likely be
different from those assumed in the table. Lastly, the ability of many borrowers
to repay their  adjustable  rate debt may decline during a rising  interest rate
environment.
<PAGE>

Capital Adequacy

     The  Corporation  and  Bank  are  subject  to  various  regulatory  capital
guidelines as required by federal and state banking  agencies.  These guidelines
define the various components of core capital and assign risk weights to various
categories of assets.

     Tier 1 capital  consists of  shareholders'  equity less  goodwill  and core
deposit  intangibles,  as defined by bank  regulators.  The definition of Tier 2
capital  includes the amount of allowance  for loan losses which does not exceed
1.25% of gross risk weighted assets. Total capital is the sum of Tier 1 and Tier
2 capital.

     The minimum  requirements under the capital guidelines are a 4.00% leverage
ratio  (Tier 1 capital  divided by average  assets  less  intangible  assets and
unrealized  gains/losses),  a 4.00%  Tier 1  risk-based  capital  ratio  (Tier 1
capital divided by risk-weighted  assets), and a 8.00% total capital ratio (Tier
1 capital plus Tier 2 capital divided by risk-weighted assets).

     The Federal Deposit Insurance Corporation  Improvement Act of 1991 (FDICIA)
required federal  regulatory  agencies to define capital tiers. These tiers are:
well-capitalized,   adequately  capitalized,   undercapitalized,   significantly
undercapitalized,  and critically  undercapitalized.  Under these regulations, a
"well-capitalized" institution must achieve a Tier 1 risk-based capital ratio of
at least 6.00%, and a total risk-based  capital ratio of at least 10.00%,  and a
leverage  ratio of at least  5.00% and not be under a capital  directive  order.
Failure to meet capital  requirements can initiate of regulatory  action.  If an
institution is only adequately  capitalized,  regulatory approval is required to
accept brokered deposits.  If  undercapitalized,  capital  distributions,  asset
growth and  expansion  may be limited,  and the  institution  may be required to
submit a capital restoration plan.

     Consolidated capital amounts and ratios are presented in Table 14 - Capital
Ratios.  Bank capital  ratios  appear in Note 14 of the  consolidated  financial
statements. In connection with the Bank's acquisition of the three Jasper County
branches on March 15, 1999, the consolidated  and bank-only  capital levels were
significantly  reduced. In response,  the Corporation  borrowed  $14,000,000 and
contributed $13,000,000 of capital to the Bank in order for the Bank to maintain
its  well-capitalized  status.  However,  the  Corporation  was  categorized  as
undercapitalized  as of December 31, 1999, as the total capital ratio was 7.99%,
slightly  below  the 8.00%  minimum.  Although  the  Corporation's  capital  was
slightly below the minimum at December 31, 1999, no corrective regulatory action
was initiated by the banking regulatory authorities. The Corporation returned to
adequately  capitalized  status as of March  31,  2000 and has  maintained  that
status through  December 31, 2001, and management  anticipates  maintaining  its
adequately  capitalized status for the foreseeable future. The statement in this
paragraph  relating to the Corporation  maintaining  its adequately  capitalized
status is a  forward-looking  statement  which may or may not be accurate due to
the impossibility of predicting  future economic and business events,  including
the ability of the Corporation to raise additional  capital,  if needed, as well
as other factors that are beyond the control of the Corporation.

     Exclusive  of the  effect  of the  unrealized  gains/losses  on  securities
component,  which is driven by the interest rate environment,  the Corporation's
shareholders'  equity  increased  $5,656,000,  or 10.7% in 2001  compared to the
$5,323,000,  or 11.1%  increase  posted in 2000. The amount of dividends paid by
the  Corporation  was  increased  9.1%  to  $1,862,000  in  2001,  and  reflects
management's  effort to  increase  the value  and  return of each  shareholder's
investment  in the  Corporation  by the increased  dollar  dividend  payout,  in
addition to the stock splits and dividends declared in past years.

     At  December   31,   2001,   management   was  not  aware  of  any  current
recommendations  by banking  regulatory  authorities  which,  if they were to be
implemented,  would have, or are reasonably likely to have, a material effect on
the Corporation's consolidated liquidity, capital resources or operations.
<PAGE>

Table 14 - CAPITAL RATIOS
<TABLE>

                                                                                      At December 31,
<S>                                                                                <C>              <C>
                                                                                   2001             2000
                                                                             -----------------------------------
Tier 1 capital
  Shareholders' equity                                                                 $59,120          $52,801
  Less:  Intangibles                                                                  (12,291)         (13,007)
         Net unrealized losses on
          available-for-sale equity securities                                             (9)             (14)
  Add:  Unrealized (gain)/loss on securities                                             (400)              263
                                                                             -----------------------------------
  Total Tier 1 capital                                                                 $46,420          $40,043
                                                                             ===================================

Total risk-based capital
  Tier 1 capital                                                                       $46,420          $40,043
  Allowance for loan losses                                                              5,413            5,071
                                                                             -----------------------------------
  Total risk-based capital                                                             $51,833          $45,114
                                                                             ===================================

Risk weighted assets                                                                  $558,529         $541,362
                                                                             ===================================
Average assets, fourth quarter                                                        $743,577         $692,178
                                                                             ===================================

Risk-based ratios
  Tier 1                                                                                 8.31%            7.40%
                                                                             ===================================
  Total risk-based capital                                                               9.28%            8.33%
                                                                             ===================================
Leverage Ratios                                                                          6.24%            5.79%
                                                                             ===================================
</TABLE>

Inflation

     For a financial  institution,  effects of price changes and inflation  vary
considerably from an industrial organization. Changes in the prices of goods and
services are the primary determinant of an industrial company's profit,  whereas
changes in  interest  rates  have a major  impact on a  financial  institution's
profitability. Inflation affects the growth of total assets, but it is difficult
to assess its impact because neither the timing nor the magnitude of the changes
in the consumer  price index directly  coincide with changes in interest  rates.
During periods of high inflation there are normally  corresponding  increases in
the money supply.  During such times,  financial  institutions  often experience
above average growth in loans and deposits. Also, general increases in the price
of goods and services will result in increased operating expenses. Over the last
few years the  inflation  rate has been  relatively  low,  and its impact on the
balance sheets and levels of income and expense has been nominal.
<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

     See  "Quantitative  and  Qualitative  Disclosures  about  Market  Risk"  in
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations in Item 7 above, which is incorporated herein by reference.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.









                      [This space intentionally left blank]



<PAGE>























                            LAFAYETTE BANCORPORATION

                        CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2001, 2000, and 1999





<PAGE>



                                    CONTENTS






REPORT OF INDEPENDENT AUDITORS..........................................46

CONSOLIDATED FINANCIAL STATEMENTS

     CONSOLIDATED BALANCE SHEETS........................................47

     CONSOLIDATED STATEMENTS OF INCOME..................................48

     CONSOLIDATED STATEMENTS OF CHANGES IN
       SHAREHOLDERS' EQUITY.............................................49

     CONSOLIDATED STATEMENTS OF CASH FLOWS..............................50

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.........................52



<PAGE>











                         REPORT OF INDEPENDENT AUDITORS



Board of Directors and Shareholders
Lafayette Bancorporation
Lafayette, Indiana


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


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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in  all  material   respects,   the  financial  position  of  Lafayette
Bancorporation  as of  December  31,  2001  and  2000,  and the  results  of its
operations  and its cash flows for each of the three  years in the period  ended
December 31, 2001 in conformity with accounting principles generally accepted in
the United States of America.





                                          /s/ Crowe, Chizek and Company LLP
                                          Crowe, Chizek and Company LLP

Indianapolis, Indiana
January 24, 2002



<PAGE>


                           CONSOLIDATED BALANCE SHEETS
                           December 31, 2001 and 2000
                          (Dollar amounts in thousands)

---------------------------------------------------------------------------
<TABLE>

<S>                                                                                        <C>             <C>
                                                                                           2001            2000
                                                                                           ----            ----
ASSETS

Cash and due from banks                                                               $     32,028     $     26,452
Interest-bearing deposits in other financial institutions                                   10,237           21,820
Federal funds sold                                                                           9,200           25,200
                                                                                      ------------     ------------

     Total cash and cash equivalents                                                        51,465           73,472

Securities available-for-sale                                                               94,164           78,857
Securities held-to-maturity (fair value
  $4,047 and $4,580)                                                                         3,918            4,484
Loans held for sale                                                                         17,262            5,949
Loans                                                                                      555,864          537,725
Less:  Allowance for loan losses                                                            (5,413)          (5,071)
                                                                                      ------------     ------------
     Net loans                                                                             550,451          532,654

FHLB stock, at cost                                                                          2,344            2,200
Premises, furniture and equipment, net                                                      11,007           11,353
Intangible assets                                                                           12,291           13,007
Accrued interest receivable and other assets                                                19,416           19,171
                                                                                      ------------     ------------

         Total assets                                                                 $    762,318     $    741,147
                                                                                      ============     ============

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
     Noninterest-bearing deposits                                                     $     80,012     $     70,866
     Interest-bearing demand and savings deposits                                          268,698          230,984
     Interest-bearing time deposits                                                        269,862          276,447
                                                                                      ------------     ------------
         Total deposits                                                                    618,572          578,297

     Short-term borrowings                                                                  32,073           55,572
     FHLB advances                                                                          34,982           35,737
     Note payable                                                                           10,150           11,550
     Accrued interest payable and other liabilities                                          7,421            7,190
                                                                                      ------------     ------------
         Total liabilities                                                                 703,198          688,346

Shareholders' equity
     Common stock, no par value:  20,000,000 shares

       authorized; 3,961,589 and 3,953,616 shares issued and outstanding                     3,962            3,954
     Additional paid-in capital                                                             38,119           38,024
     Retained earnings                                                                      16,639           11,086
     Accumulated other comprehensive income (loss)                                             400             (263)
                                                                                      ------------     ------------

         Total shareholders' equity                                                         59,120           52,801
                                                                                      ------------     ------------

              Total liabilities and shareholders' equity                              $    762,318     $    741,147
                                                                                      ============     ============
</TABLE>


                             See accompanying notes.



<PAGE>


                        CONSOLIDATED STATEMENTS OF INCOME
                  Years ended December 31, 2001, 2000 and 1999
              (Dollar amounts in thousands, except per share data)

---------------------------------------------------------------------------
<TABLE>

<S>                                                                       <C>              <C>             <C>
                                                                          2001             2000            1999
                                                                          ----             ----            ----
Interest income
     Loans, including related fees                                    $     46,853    $     46,620     $     38,520
     Taxable securities                                                      3,299           3,318            3,831
     Tax exempt securities                                                   1,731           1,664            1,529
     Other                                                                   1,781             784              510
                                                                      ------------    ------------     ------------
         Total interest income                                              53,664          52,386           44,390

Interest expense
     Deposits                                                               22,650          23,016           18,024
     Short-term borrowings                                                   1,506           1,773            1,358
     Other borrowings                                                        2,747           2,616            2,161
                                                                      ------------    ------------     ------------
         Total interest expense                                             26,903          27,405           21,543
                                                                      ------------    ------------     ------------

Net interest income                                                         26,761          24,981           22,847

Provision for loan losses                                                    1,225           1,200            1,060
                                                                      ------------    ------------     ------------

Net interest income after provision for loan losses                         25,536          23,781           21,787

Noninterest income
     Fiduciary activities                                                    1,264           1,187            1,134
     Service charges on deposit accounts                                     2,352           1,880            1,581
     Net realized gain/(loss) on securities                                      -             (12)            (144)
     Net gain on loan sales                                                  1,858             659              942
     Other service charges and fees                                          1,080           1,042              923
     Investment product commissions                                            398             758              318
     Other                                                                     502             311              371
                                                                      ------------    ------------     ------------
         Total noninterest income                                            7,454           5,825            5,125

Noninterest expense
     Salaries and employee benefits                                         12,908          10,681            9,836
     Occupancy, net                                                          1,293           1,247            1,073
     Equipment                                                               1,914           1,731            1,314
     Intangible amortization                                                   716             740              597
     Other                                                                   5,343           4,777            4,714
                                                                      ------------    ------------     ------------
         Total noninterest expenses                                         22,174          19,176           17,534
                                                                      ------------    ------------     ------------

Income before income taxes                                                  10,816          10,430            9,378

Income taxes                                                                 3,401           3,514            3,027
                                                                      ------------    ------------     ------------

Net income                                                                 $ 7,415        $  6,916        $   6,351
                                                                      ============    ============     ============

Basic earnings per share                                              $      1.87     $       1.75     $      1.61
                                                                      ===========     ============     ============

Diluted earnings per share                                            $      1.84     $       1.74     $      1.57
                                                                      ===========     ============     ============

</TABLE>

                             See accompanying notes.




<PAGE>


           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                  Years ended December 31, 2001, 2000, and 1999
              (Dollar amounts in thousands, except per share data)

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

<TABLE>
                                                                             Accumulated
                                               Additional                       Other                     Total
                                   Common        Paid-in      Retained      Comprehensive  Treasury    Shareholders'
<S>                             <C>           <C>          <C>            <C>            <C>           <C>
                                    Stock        Capital      Earnings      Income (Loss)    Stock       Equity

Balance, January 1, 1999        $    2,394     $  32,620     $    7,747     $      (42)  $     (105)    $   42,614

    Comprehensive income
      Net income                                                  6,351                                      6,351
      Change in net unrealized
        gain/ (loss) on securities
        available-for-sale                                                      (1,914)                     (1,914)
                                                                                                        ----------
          Total comprehensive
            income                                                                                           4,437

    Issue 11,884 shares under
     stock option plan                  12           266                                                       278
    3-2 stock split,
      1,200,738 shares               1,201                       (1,201)                                         -
    Cash dividends
      ($.39 per share)                                           (1,540)                                    (1,540)
    Purchase 105 treasury shares                                                                 (4)            (4)
    Retire 20,517 treasury shares      (21)                         (88)                        109              -
                                   --------      --------       --------       --------     --------       --------

Balance, December 31, 1999           3,586        32,886         11,269         (1,956)           -         45,785
    Comprehensive income
      Net income                                                  6,916                                      6,916
      Change in net unrealized
        gain/ (loss) on securities
        available-for-sale                                                       1,693                       1,693
                                                                                                        ----------
          Total comprehensive
                       income                                                                                8,609

    Issue 8,448 shares under
     stock option plan                   9           108                                                       117
    10% Stock dividend
     359,043 shares                    359         5,030         (5,393)                                        (4)
    Cash dividends
     ($.43 per share)                                            (1,706)                                    (1,706)
                                ----------     ---------     ----------     ----------   ----------     ----------

Balance, December 31, 2000           3,954        38,024         11,086           (263)                    -52,801

    Comprehensive income
      Net income                                                  7,415                                      7,415
      Change in net unrealized
        gain/ (loss) on securities
        available-for-sale                                                         663                         663
                                                                                                        ----------
          Total comprehensive
            income                                                                                           8,078

    Issue 7,973 shares under
     stock option plan                   8            95                                                       103
    Cash dividends
      ($.47 per share)                                           (1,862)                                    (1,862)



Balance, December 31, 2001      $    3,962     $  38,119     $   16,639     $      400   $        -      $  59,120
                                ==========     =========     ==========     ==========   ===========    ===========
</TABLE>


                             See accompanying notes.



<PAGE>


                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  Years ended December 31, 2001, 2000, and 1999
                          (Dollar amounts in thousands)

----------------------------------------------------------------------------
<TABLE>

<S>                                                                        <C>               <C>          <C>
                                                                           2001              2000         1999
                                                                           ----              ----         ----

Cash flows from operating activities
     Net income                                                        $     7,415      $     6,916      $    6,351
     Adjustments to reconcile net income to net
       cash from operating activities
         Depreciation                                                        1,475            1,339             948
         Net amortization                                                      773              722             726
         Provision for loan losses                                           1,225            1,200           1,060
         Net realized (gain)/loss on securities                                  -               12             144
         Net realized (gain) loss on sale of
              other real estate                                                  9               (5)              -
         Change in assets and liabilities
              Loans originated for sale                                   (138,582)         (56,201)        (67,547)
              Loans sold                                                   127,269           53,426          74,459
              Accrued interest receivable
                and other assets                                              (750)          (4,410)         (1,947)
              Accrued interest payable
                and other liabilities                                          231              323           1,314
                                                                      ------------     ------------    ------------
                  Net cash from operating activities                          (935)           3,322          15,508

Cash flows from investing activities
     Change in interest-bearing balances with
         other financial institutions                                            -                -             671
     Purchase of securities available-for-sale                             (84,767)         (86,815)       (172,049)
     Proceeds from sales of securities available-for-sale                   56,077           82,375          56,027
     Proceeds from maturities of securities
       available-for-sale                                                   14,432            8,119         109,826
     Purchase of securities held-to-maturity                                     -                -          (2,000)
     Proceeds from maturities of securities
       held-to-maturity                                                        564              229           2,160
     Loans made to customers, net of payments collected                    (19,297)         (49,452)        (78,085)
     Purchase of Federal Home Loan Bank stock                                 (144)            (303)           (358)
     Property and equipment expenditures                                    (1,129)          (2,109)         (3,578)
     Proceeds from sales of other real estate                                  330              470               -
                                                                      ------------     ------------    ------------

         Net cash from investing activities                                (33,934)         (47,486)        (87,386)
</TABLE>


                                  (Continued)


<PAGE>




                CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                  Years ended December 31, 2001, 2000, and 1999
                          (Dollar amounts in thousands)


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

<TABLE>

<S>                                                                        <C>              <C>            <C>
                                                                           2001             2000           1999
                                                                           ----             ----           ----

Cash flows from financing activities
     Net change in deposit accounts                                   $     40,275    $     56,050     $      9,686
     Cash received in branch acquisition for
       liabilities assumed, net of assets acquired                               -               -           45,266
     Net change in short-term borrowings                                   (23,499)         28,299           10,871
     Proceeds from other borrowings                                              -          22,000           30,000
     Payments on other borrowings                                           (2,155)        (17,690)         (10,877)
     Common stock issued                                                       103             117              278
     Dividends paid                                                         (1,862)         (1,706)          (1,540)
     Purchase of fractional shares from stock dividend                           -              (4)               -
     Purchase of treasury stock                                                  -               -               (4)
                                                                      ------------    ------------     ------------
         Net cash from financing activities                                 12,862          87,066           83,680
                                                                      ------------    ------------     ------------

Net change in cash and cash equivalents                                    (22,007)         42,902           11,802

Cash and cash equivalents at beginning of year                              73,472          30,570           18,768
                                                                      ------------    ------------     ------------

Cash and cash equivalents at end of year                              $     51,465    $     73,472     $     30,570
                                                                      ============    ============     ============

Supplemental disclosures of cash flow information
     Cash paid during the period for
         Interest                                                     $     27,495    $     26,882     $     20,765
         Income taxes                                                        4,054           3,405            3,168

Non-cash investing and financing activities
     Loans transferred to other real estate                           $        298    $         50     $        465
     See also Note 18 regarding 1999 branch acquisition.

</TABLE>




                             See accompanying notes.



<PAGE>




                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2001, 2000, and 1999
              (Dollar amounts in thousands, except per share data)


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations and Principles of Consolidation: The consolidated financial
statements  include the accounts of Lafayette  Bancorporation  (Corporation) and
its wholly owned  subsidiary,  Lafayette  Bank and Trust Company  (Bank),  after
elimination of significant intercompany transactions and accounts.

The  Corporation  provides  financial  services  to  its  customers,   primarily
commercial  and retail banking and trust  services,  with  operations  conducted
through its main office and 17 branches  located in Tippecanoe,  White,  Jasper,
and Carroll Counties in Indiana.  The majority of the  Corporation's  revenue is
derived from commercial and retail business lending  activities and investments.
Although the overall loan  portfolio is  diversified,  the economy of Tippecanoe
County is heavily  dependent  on Purdue  University,  one of the area's  largest
employers,  and the economy of White and Jasper  County is heavily  dependent on
the  agricultural  industry.  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:  Management  must make estimates and  assumptions in preparing
financial  statements  that affect the amounts  reported  and  disclosed.  These
estimates  and  assumptions  may change in the future and future  results  could
differ from these  estimates.  Estimates that are more  susceptible to change in
the near  term  include  the  allowance  for  loan  losses,  the  fair  value of
securities and other financial  instruments,  and the determination and carrying
value of impaired loans.


Securities:  Securities  are  classified  as  held-to-maturity  and  carried  at
amortized cost when  management has the positive intent and ability to hold them
to maturity.  Securities are classified as available-for-sale when they might be
sold before maturity.  Securities available-for-sale are reported at fair value,
with unrealized gains or losses included in other comprehensive income.

Realized  gains or losses  are  determined  based on the  amortized  cost of the
specific security sold.  Interest and dividend income,  adjusted by amortization
of purchase premium or discount, is included in earnings.

Loans Held for Sale: The Bank sells certain  fixed-rate  first mortgage loans in
the secondary market on a servicing-released basis. Mortgage loans held for sale
are carried at the lower of cost or  estimated  market  value  determined  on an
aggregate basis.




                                   (Continued)



<PAGE>


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Loans: Interest on real estate, commercial and most installment loans is accrued
over the term of the loans based on the principal  outstanding.  The recognition
of interest income is discontinued when, in management's  judgment, the interest
will not be  collectible  in the normal course of business.  Loans are evaluated
for non-accrual when the loan is impaired or payments are past due over 90 days.
Interest  received is recognized on the cash basis or cost recovery method until
qualifying  for  return  to  accrual   status.   Accrual  is  resumed  when  all
contractually   due  payments  are  brought  current  and  future  payments  are
reasonably  assured.  The Bank  defers  loan fees,  net of certain  direct  loan
origination  costs.  The net amount deferred is reported in the balance sheet as
part of loans and is recognized  into interest  income over the term of the loan
using a method which approximates a level-yield.


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


Loan  impairment is recognized if a loan's full  principal or interest  payments
are not expected to be received.  Loans considered to be impaired are reduced to
the present value of expected  future cash flows using the loans'  existing rate
or to the fair value of  collateral  if  repayment  is expected  solely from the
collateral,  by  allocating a portion of the  allowance  for loan losses to such
loans.  Smaller-balance homogeneous loans are evaluated for impairment in total.
Such loans include  residential  real estate loans secured by one to four family
residences and installment loans to individuals for household,  family and other
personal   expenditures.   Commercial  and  agricultural   loans  are  evaluated
individually for impairment.

Premises, Furniture and Equipment:  Premises, furniture 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.

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,  a valuation  allowance  is recorded  through  expense.
Holding costs after acquisition are expensed.

Long-term Assets:  These assets are reviewed for impairment when events indicate
their carrying  amounts may not be  recoverable  from future  undiscounted  cash
flows. If impaired, the assets are recorded at discounted amounts.



                                   (Continued)



<PAGE>


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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. The Bank
retains possession of and control over pledged securities.

Intangibles: Intangibles include goodwill and core deposit intangibles. Goodwill
is amortized on the  straight-line  method over 15 to 25 years, and core deposit
is amortized on an accelerated  method over 10 years.  Intangibles  are assessed
for impairment based on estimated  undiscounted  cash flows, and written down if
necessary.

Stock Compensation:  Expense for employee  compensation under stock option plans
is based on Opinion 25, with expense  reported only if options are granted below
market price at grant date. Pro forma disclosures of net income and earnings per
share are provided as if the fair value method of Financial  Accounting Standard
No. 123 were used for stock-based compensation.

Income Taxes: Deferred tax liabilities and assets are determined at each balance
sheet date.  They are  measured by applying  enacted tax laws to future  taxable
income or expense resulting from differences in the financial  statement and tax
basis of assets and  liabilities.  Valuation  allowances  are  established  when
necessary to reduce  deferred tax assets to the amount  expected to be realized.
Income tax expense is the tax payable or refundable for the period plus or minus
the change during the period in deferred tax assets and liabilities.

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

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.

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





                                   (Continued)



<PAGE>


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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.

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 are now such matters that will have
a material effect on 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, which are also 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.

Industry  Segments:  Internal  financial  information is primarily  reported and
aggregated  in three  lines of  business,  banking,  mortgage  banking and trust
services.


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







                                   (Continued)



<PAGE>



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

A new  accounting  standard  requires all business  combinations  to be recorded
using the purchase method of accounting for any transaction initiated after June
30, 2001.  Under the purchase method,  all identifiable  tangible and intangible
assets and liabilities of the acquired company must be recorded at fair value at
date of acquisition,  and the excess cost over fair value of net assets acquired
is recorded as goodwill.  Identifiable  intangible assets must be separated from
goodwill.  Identifiable intangible assets with finite useful lives will continue
to amortize under the new standard,  whereas goodwill will cease being amortized
starting in 2002. Annual  impairment  testing will be required for goodwill with
impairment being recorded if the carrying amount of goodwill exceeds its implied
fair value. Amounts previously recorded as goodwill from depository  institution
branch  acquisitions  are not presently  considered to be goodwill under the new
standard  and  these  amounts  will  continue  to be  amortized.  Management  is
currently evaluating the impact of this new standard,  but management expects to
continue amortizing all of the Corporation's intangible assets.


Reclassifications:   Some  items  in  the  prior   financial   statements   were
reclassified to conform to the current presentation.



NOTE 2 - SECURITIES


The fair value of securities available for sale and the related gains and losses
recognized in accumulated other comprehensive income (loss) were as follows:
<TABLE>

                                                                                      Gross            Gross
<S>                                                             <C>               <C>             <C>
                                                                       Fair        Unrealized       Unrealized
                                                                      Value           Gains           Losses
Securities Available-for-Sale

2001
     U.S. Government and its agencies                            $      2,023     $         23    $          -
     Obligations of states and political subdivisions                  36,315              433            (350)
     Corporate obligations                                             10,426              331              (5)
     Mortgage-backed and other asset-backed
       securities                                                      42,856              391            (152)
     Other securities                                                   2,544                -              (9)
                                                                 ------------     ------------    -------------

                                                                 $     94,164     $      1,178    $       (516)
                                                                 ============     ============    ============

</TABLE>






                                   (Continued)



<PAGE>



NOTE 2 - SECURITIES (Continued)
<TABLE>

                                                                                      Gross            Gross
<S>                                                             <C>              <C>              <C>
                                                                       Fair        Unrealized       Unrealized
                                                                      Value           Gains           Losses

2000
     U.S. Government and its agencies                            $      4,193     $         10    $        (18)
     Obligations of states and political subdivisions                  31,012              418            (286)
     Corporate obligations                                              4,001               48               -
     Mortgage-backed and other asset-backed
       securities                                                      37,105               58            (652)
     Other securities                                                   2,546              515            (529)
                                                                 ------------     ------------    ------------

                                                                 $     78,857     $      1,049    $     (1,485)
                                                                 ============     ============    ============
</TABLE>

The carrying amount,  unrecognized gains and losses and fair value of securities
held to maturity were as follows:
<TABLE>

                                                                      Gross            Gross
<S>                                             <C>             <C>               <C>             <C>
                                                   Carrying       Unrecognized     Unrecognized        Fair
                                                    Amount            Gains           Losses           Value

Securities Held to Maturity

2001

     Obligations of states and political
       subdivisions                              $      3,918    $        129      $          -   $      4,047
                                                 ============    ============      ============   ============

2000

     Obligations of states and political
       subdivisions                              $      4,484    $         98      $         (2)  $      4,580
                                                 ============    ============      ============   ============
</TABLE>


Gross  gains of $0,  $2,  and $35 and  gross  losses of $0,  $14,  and $179 were
realized on sales of securities available-for-sale in 2001, 2000, and 1999.








                                   (Continued)



<PAGE>


NOTE 2 - SECURITIES (Continued)


The fair value of securities and carrying amount, if different,  at December 31,
2001 by  contractual  maturity are shown below.  Securities  not due at a single
maturity date are shown separately.
<TABLE>

                                                                                                     Available
                                                                        Held-to-Maturity             For Sale
<S>                                                             <C>             <C>             <C>
                                                                    Carrying          Fair             Fair
                                                                     Amount           Value            Value

     Due in 1 year or less                                       $          -     $          -    $      1,074
     Due after 1 year through 5 years                                   1,924            2,015          17,670
     Due after five years through 10 years                                927              964           7,431
     Due after 10 years                                                 1,067            1,068          25,133
                                                                 ------------     ------------    ------------
         Subtotal                                                       3,918            4,047          51,308
     Mortgage-backed and other asset-
       backed securities                                                    -                -          42,856
                                                                 ------------     ------------    ------------

         Total                                                   $      3,918     $      4,047    $     94,164
                                                                 ============     ============    ============
</TABLE>


Securities with a carrying value of $34,702 and $57,405 at December 31, 2001 and
2000 were pledged to secure public deposits and repurchase agreements.  See Note
8 regarding additional securities pledges.

At December 31, 2001 and 2000, mortgage-backed securities include collateralized
mortgage  obligations  (CMO's)  and real  estate  mortgage  investment  conduits
(REMIC's)  with an  amortized  cost of  $27,997  and  $17,295  and fair value of
$28,123 and $16,753,  all of which are issued by U.S.  Government  agencies.  At
December 31, 2001 and 2000,  approximately  $7,538 and $8,481 are variable rate,
with the remainder fixed rate.









                                   (Continued)



<PAGE>


NOTE 3 - LOANS

Loans are comprised of the following as of December 31:
<TABLE>

<S>                                                                                   <C>              <C>
                                                                                      2001             2000
                                                                                      ----             ----

     Commercial and agricultural loans                                            $    232,997    $    215,087
     Real estate construction                                                           62,305          54,768
     Residential real estate loans                                                     211,014         212,190
     Installment loans to individuals                                                   44,559          50,696
     Commercial paper                                                                    4,989           4,984
                                                                                  ------------    ------------

         Total                                                                    $    555,864    $    537,725
                                                                                  ============    ============

Non-performing loans consist of the following at December 31:

                                                                                      2001             2000
                                                                                      ----             ----

     Loans past due 90 days or more                                               $        768    $      1,052
     Non-accrual loans                                                                   3,440           2,718
     Restructured loans                                                                     25              55
                                                                                  ------------    ------------

         Total                                                                    $      4,233    $      3,825
                                                                                  ============    ============

Information regarding impaired loans is as follows:
                                                                                      2001             2000
                                                                                      ----             ----
     Year-end impaired loans

         With no allowance for loan losses allocated                              $        693    $         25
         With allowance for loan losses allocated                                        7,535           5,151

     Amount of the allowance allocated                                                   2,077           1,658
</TABLE>

<TABLE>

<S>                                                                   <C>             <C>              <C>
                                                                      2001            2000             1999
                                                                      ----            ----             ----

     Average balance of impaired loans                           $      5,608     $      2,885    $        697
     Interest income recognized during impairment                         312               55               3
     Cash-basis interest income recognized                                220               41               3
</TABLE>


The Bank had $237 and $34 of loans on  non-accrual  at December 31, 2001 or 2000
that management did not deem to be impaired.






                                   (Continued)



<PAGE>


NOTE 3 - LOANS (Continued)

Certain directors and officers of the Corporation and Bank were customers of the
Bank in the  ordinary  course of  business.  Loan  activity  with these  related
parties is as follows:

     Balance as of January 1, 2001                        $        910
     Change in persons included                                      -
     New loans                                                     791
     Loan payments                                                (474)
                                                           ------------

     Balance as of December 31, 2001                      $      1,227
                                                           ============


NOTE 4 - ALLOWANCE FOR LOAN LOSSES

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

<TABLE>
<S>                                                                   <C>             <C>              <C>
                                                                      2001            2000             1999
                                                                      ----            ----             ----

     Balance, January 1                                          $      5,071     $      4,618    $      4,241
     Provision charged to operations                                    1,225            1,200           1,060
     Loans charged-off                                                   (982)            (877)           (829)
     Recoveries on loans previously charged-off                            99              130             146
                                                                 ------------     ------------    ------------

     Balance, December 31                                        $      5,413     $      5,071    $      4,618
                                                                 ============     ============    ============
</TABLE>


NOTE 5 - PREMISES, FURNITURE AND EQUIPMENT

A summary of premises, furniture and equipment by major category follows:
<TABLE>

<S>                                                                                   <C>              <C>
                                                                                      2001             2000
                                                                                      ----             ----

     Land                                                                         $        905    $        870
     Buildings and improvements                                                          9,037           8,782
     Leasehold improvements                                                              1,749           1,786
     Furniture and equipment                                                             8,438           9,781
                                                                                  ------------    ------------
         Total                                                                          20,129          21,219
     Accumulated depreciation                                                           (9,122)         (9,866)
                                                                                  ------------    ------------

     Premises, furniture and equipment, net                                       $     11,007    $     11,353
                                                                                  ============    ============
</TABLE>




                                   (Continued)



<PAGE>


NOTE 6 - INTEREST-BEARING TIME DEPOSITS

Time  deposits of $100 or greater  totaled  $53,727 and $53,514 at December  31,
2001 and 2000.

At December 31, 2001, the scheduled maturities of time deposits are as follows:

                  2002                         $    193,826
                  2003                               57,608
                  2004                               11,294
                  2005                                2,813
                  2006                                4,052
                  Thereafter                            269
                                               ------------

                  Total                        $    269,862
                                               ============


NOTE 7 - SHORT-TERM BORROWINGS

Short-term borrowings are comprised of the following at year-end:
<TABLE>

<S>                                                                                   <C>              <C>
                                                                                      2001             2000
                                                                                      ----             ----

     Balance of repurchase agreements outstanding                                 $     31,505    $     54,275
     Balance of treasury tax and loan open-end note                                        568           1,297
                                                                                  ------------    ------------

         Total short-term borrowings                                              $     32,073    $     55,572
                                                                                  ============    ============
</TABLE>

At December 31, 2001 and 2000,  the  Corporation  had $667 and $1,054 in related
party repurchase agreements.






                                   (Continued)



<PAGE>


NOTE 8 - FHLB ADVANCES AND NOTE PAYABLE

FHLB  advances  and note  payable  outstanding  at  December  31  consist of the
following:
<TABLE>

<S>                                                                                   <C>              <C>
                                                                                      2001             2000
                                                                                      ----             ----
     Federal Home Loan Bank advances; annual principal payments; various
     maturities with final maturity May 15, 2008; interest payable monthly at
     various fixed interest rates from 5.45% - 6.82%; secured by a blanket
     pledge of the Bank's obligations of the U.S. Government and U.S. Government
     agencies and one-to-four family residential mortgage loans.                       $ 7,982         $ 8,737

     Federal Home Loan Bank advances; principal callable one year from date of
     advance and quarterly thereafter, otherwise, principal payments due at
     maturity, with final maturities in 2002 and 2010; interest payable monthly
     at various fixed interest rates from 4.98%-6.20%; secured by a blanket
     pledge of the Bank's obligations of the U.S. Government and U.S. Government
     agencies and one-to-four family residential mortgage loans.                        27,000          27,000


         Total FHLB advances                                                            34,982          35,737


     Note payable to Northern Trust Company; quarterly principal payments of
     $350 required; matures March 31, 2006; interest payable monthly at a
     variable rate, which is currently 3.60% based on the Federal Funds rate
     plus an applicable margin based on the Corporation's existing capital
     ratios; obligation is unsecured but subject to various covenants,
     including defined minimum return on average assets, tangible net worth,
     capital ratios, loan loss allowance to non-performing loans ratio, and
     maximum non-performing assets.  At year-end, the Corporation was in
     compliance with all covenants.                                                     10,150          11,550
                                                                                  ------------    ------------

         Total                                                                    $     45,132      $   47,287
                                                                                  ============    ============

Annual principal payments required are as follows:

                     2002                                                         $      7,399
                     2003                                                                4,426
                     2004                                                                1,479
                     2005                                                                1,485
                     2006                                                                2,800
                     Thereafter                                                         27,543
                                                                                  ------------

                         Total FHLB advances and note payable                     $     45,132
                                                                                  ============
</TABLE>




                                   (Continued)



<PAGE>


NOTE 9 - EMPLOYEE BENEFIT PLANS

The following  sets forth the defined  benefit  pension plan's funded status and
amount  recognized in the balance  sheet at December 31 (amounts  computed as of
September 30, 2001 and 2000):

<TABLE>

<S>                                                                               <C>                <C>
                                                                                  2001               2000
                                                                                  ----               ----
     Change in benefit obligation:
         Beginning benefit obligation                                        $        13,314    $       12,626
         Service cost                                                                    813               783
         Interest cost                                                                   979               928
         Actuarial (gain) loss                                                         1,128              (503)
         Benefits paid                                                                  (588)             (520)
                                                                             ---------------    --------------
         Ending benefit obligation                                                    15,646            13,314

     Change in plan assets, at fair value:
         Beginning plan assets                                                        16,341            16,603
         Actual return                                                                  (246)              258
         Employer contribution                                                             -                 -
         Benefits paid                                                                  (588)             (520)
                                                                             ---------------    --------------

         Ending plan assets                                                           15,507            16,341
                                                                             ---------------    --------------

     Funded status                                                                      (139)            3,027
     Unrecognized net actuarial (gain) loss                                            2,480              (382)
     Unrecognized prior service cost                                                      17                19
     Unrecognized transition asset                                                      (480)             (631)
                                                                             ---------------    --------------

     Prepaid benefit cost                                                    $         1,878    $        2,033
                                                                             ===============    ==============
</TABLE>


The components of pension expense and related actuarial assumptions were as
follows:
<TABLE>


<S>                                                            <C>                <C>                <C>
                                                               2001               2000               1999
                                                               ----               ----               ----

     Service cost                                          $          813    $           783    $          647
     Interest cost                                                    979                928               812
     Expected return on plan assets                                (1,488)            (1,513)           (1,386)
     Amortization of prior service cost                                 2                  2                 2
     Amortization of transition asset                                (151)              (151)             (151)
                                                           --------------    ---------------    --------------

                                                           $          155    $            49    $          (76)
                                                           ==============    ===============    ==============



     Discount rate on benefit obligation                              7.00%             7.50%             7.50%
     Long-term expected rate of return
       on plan assets                                                 9.25              9.25              9.25
     Rate of compensation increase                                    4.00              4.00              4.00
</TABLE>

At  December  31,  2001  and  2000,   the  plan's   assets   include   Lafayette
Bancorporation  common  stock of $1,216 and $582.  At December 31, 2001 and 2000
the plan's assets also included Lafayette Bank and Trust Company certificates of
deposit of $538 and $436.



                                   (Continued)


<PAGE>


NOTE 9 - EMPLOYEE BENEFIT PLANS (Continued)

The  Bank  maintains  a  retirement  savings  plan  covering  substantially  all
employees. The plan requires employees to complete one year of service and be 21
years of age before entering the plan. The plan allows for Bank contributions at
an annually  determined  matching  percentage of the first 4% of employee salary
contributions,  as well as an annual  discretionary  contribution.  Total 401(k)
contributions  charged to expense were $176,  $161, and $140 for 2001,  2000 and
1999.


The Bank  maintains  a  deferred  compensation  plan for the  benefit of certain
directors.  Under  the  plan,  the Bank  agrees,  in  return  for the  directors
deferring  the  receipt of a portion  of their  current  compensation,  to pay a
retirement  benefit  computed as the amount of the  compensation  deferred  plus
accrued interest at a variable rate. Accrued benefits payable totaled $1,596 and
$1,289 at December 31, 2001 and 2000. Deferred compensation expense was $131 for
2001,  and $106 for 2000. In  conjunction  with the plan, the Bank has purchased
life insurance on the directors.  The cash surrender  value of that insurance is
carried  as  an  other  asset  on  the  consolidated   balance  sheet,  and  was
approximately $7,171 and $6,834 at December 31, 2001 and 2000.



NOTE 10 - POSTRETIREMENT BENEFITS

The Bank sponsors a  postretirement  benefit plan which provides defined medical
benefits.  Retirees  contribute an amount equal to their  individual  applicable
premium to provide the  coverage,  less 30%,  which is paid monthly by the Bank.
Retirees must pay 100% of medical premiums for all dependent coverage.  The plan
is not funded and has no assets.








                                   (Continued)



<PAGE>


NOTE 10 - POSTRETIREMENT BENEFITS (Continued)

The following sets forth the plan's benefit obligation and amounts recognized in
the balance sheet at December 31:
<TABLE>

<S>                                                                                   <C>              <C>
                                                                                      2001             2000
                                                                                      ----             ----
     Change in postretirement benefit obligation:
         Beginning benefit obligation                                             $        454    $        550
         Unrecognized net actuarial (gain) loss                                              -            (159)
         Service cost                                                                       31              35
         Interest cost                                                                      36              38
         Benefits paid, net                                                                (23)            (10)
                                                                                  ------------    ------------

         Ending benefit obligation                                                         498             454

     Unrecognized net gain                                                                 277             302
                                                                                  ------------    ------------

     Accrued benefit obligation                                                   $        775    $        756
                                                                                  ============    ============
</TABLE>


Components of net periodic postretirement benefit cost as of December 31:

<TABLE>

<S>                                                                   <C>             <C>              <C>
                                                                      2001            2000             1999
                                                                      ----            ----             ----


     Service cost                                                $         31     $         35    $         31
     Interest cost                                                         36               38              34
     Amortization of unrecognized gain                                    (25)             (10)            (11)
                                                                 ------------     ------------    ------------

         Benefit cost                                            $         42     $         63    $         54
                                                                 ============     ============    ============
</TABLE>


For measurement purposes,  the annual rate of increase in the per capita cost of
covered  health care benefits  assumed was 7 % for 2001, 8% for 2000,  and 11.5%
for 1999, with the rate assumed to decrease to 6% over the next two years in the
2001  and  2000  calculation,  and to  5.5%  over  the  next  year  in the  1999
calculation.  The health care cost trend is a significant  assumption.  However,
either an increase or decrease in the assumed health care cost trend rates by 1%
in each year would affect the accumulated  postretirement  benefit obligation as
of December 31, 2001 and the aggregate  service and interest cost  components of
net periodic  postretirement benefit cost for the year then ended by amounts not
considered to be material.

The  weighted   average  discount  rate  used  in  determining  the  accumulated
postretirement benefit obligation was 8% for 2001 and 2000, and 7% for 1999.





                                   (Continued)



<PAGE>


NOTE 11 - STOCK APPRECIATION RIGHTS AND STOCK OPTION PLAN


The  Corporation  maintains  an  Officers'  Stock  Appreciation  Rights Plan for
granting rights to certain officers,  under which all available rights have been
granted.  Upon exercise of a stock  appreciation  right,  the holder may receive
cash equal to the excess of the fair market value of common stock at the date of
exercise over the option price. Stock appreciation  rights are vested at 20% per
year and must be exercised  within 10 years of grant. The plan expires May 2002.
Granted  rights  outstanding  were fully  vested and  consisted  of 38,105 at an
option price of $3.66 for 2001 and 2000. In 2001, no rights were  exercised.  In
2000,  16,500  rights were  exercised  when the fair market value was $23.18 per
share.  The  aforementioned  amounts of rights and prices are adjusted for stock
dividends and splits.  Compensation  expense  (benefit) charged to operations in
2001,  2000 and  1999  was  $539,  ($376),  and $14 and is based on an  increase
(decrease)  in market value.  The liability at December 31, 2001,  2000 and 1999
was $895, $356 and $1,053.

The Corporation has established two  nonqualified  stock option plans to provide
stock options to directors and key members of  management.  One plan was adopted
in 1995 ("1995 Plan") and the other in 1998 ("1998  Plan").  There are no shares
of common stock  remaining  available  for grant under the 1995 Plan.  The total
number of shares of common stock  remaining  available for grant to directors is
17 and  management is 19,928 under the 1998 Plan. All shares for both plans were
available  for grant at a price  equal to the  market  price of the stock at the
date of grant.

Under the 1995 Plan,  options  granted to  directors at the  effective  date are
exercisable  any time after the date of grant,  and options granted to directors
elected after the effective date are exercisable after two years. Under the 1998
Plan,  options  granted to directors are  exercisable  after two years.  Options
granted to management under both plans become 20% exercisable after one year and
20% each  subsequent  year.  Both plans are effective for five years and options
must be exercised within ten years from the date of grant.











                                   (Continued)



<PAGE>


NOTE 11 - STOCK APPRECIATION RIGHTS AND STOCK OPTION PLAN (Continued)

A summary of the Corporation's  stock option activity,  and related  information
for the years ended  December 31,  follows  (adjusted  for stock  dividends  and
splits):
<TABLE>

                                                                  Weighted           Weighted
                                                                   Average            Average

<S>                                             <C>             <C>                <C>
                                                                  Exercise             Fair
                                                    Options         Price              Value

Outstanding, beginning of 1999                       227,427    $   12.89
Granted                                               14,834        24.70           $   4.76
Exercised                                            (17,166)       11.26
Forfeited                                             (9,758)       14.72
                                                 -----------    ---------
Outstanding, end of 1999                             215,337        13.75
Granted                                               20,075        15.23               2.19
Exercised                                             (9,144)       11.37
Forfeited                                             (8,441)       15.69
                                                 -----------    ---------
Outstanding, end of 2000                             217,827        13.91
Granted                                               24,650        15.00               3.98
Exercised                                             (7,973)       11.53
Forfeited                                             (2,352)       15.52
                                                 -----------    ---------
Outstanding, end of 2001                             232,152     $  14.09
                                                 ===========    =========

</TABLE>

Options  outstanding at December 31, 2001 include  184,529 with exercise  prices
ranging from $10.39 to $15.23 (weighted  average exercise price of $12.20) and a
weighted  average  remaining life of 5.87 years; and 47,623 with exercise prices
ranging from $17.63 to $24.70 (weighted  average exercise price of $21.41) and a
weighted average remaining life of 7.27 years.  Options  exercisable at December
31, 2001 include  136,677  with  exercise  prices  ranging from $10.39 to $15.23
(weighted  average  exercise price of $11.28);  and 37,406 with exercise  prices
ranging from $17.63 to $24.70 (weighted average exercise price of $20.86).


Pro forma  information  regarding  net  income and  earnings  per share has been
determined as if the  Corporation  had accounted for its stock options under the
fair value method. The fair value for these options was estimated at the date of
grant using a  Black-Scholes  option  pricing model with the following  weighted
average assumptions for the years 2001, 2000, and 1999: risk-free interest rates
of 4.9%,  6.7%, and 5.4% dividend  yields of 2% for 2001, 3% for 2000 and 2% for
1999;  volatility  factors of the  expected  market  price of the  Corporation's
common stock of .37, .24, and .13; and a weighted  average  expected life of the
options  of five  years for  management  options  and two  years for  directors'
options.



                                   (Continued)




<PAGE>


NOTE 11 - STOCK APPRECIATION RIGHTS AND STOCK OPTION PLAN (Continued)

For purposes of pro forma  disclosures,  the estimated fair value of the options
is amortized to expense over the options' vesting period.  The Corporation's pro
forma   information   follows  (in  thousands  except  for  earnings  per  share
information):
<TABLE>

<S>                                                                   <C>             <C>              <C>
                                                                      2001            2000             1999
                                                                      ----            ----             ----

     Pro forma net income                                        $      7,329     $      6,859    $      6,270
     Pro forma earnings per share
         Basic                                                   $       1.85     $      1.74     $       1.59
         Diluted                                                 $       1.82     $      1.72     $       1.55
</TABLE>

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


NOTE 12 - INCOME TAXES

Income taxes consist of the following:
<TABLE>

<S>                                                                   <C>             <C>              <C>
                                                                      2001            2000             1999
                                                                      ----            ----             ----


     Currently payable                                           $      4,172     $      3,498    $      3,004
     Deferred income taxes (benefit)                                     (782)               3             (50)
     Non-qualified stock option benefit
        allocated to additional paid-in capital                            11               13              73
                                                                 ------------     ------------    ------------


         Total                                                   $      3,401     $      3,514    $      3,027
                                                                 ============     ============    ============
</TABLE>


The  following is a  reconciliation  of statutory  federal  income taxes and the
amount  computed by applying the  statutory  rate of 34% to income before income
taxes:

<TABLE>

<S>                                                                   <C>             <C>              <C>
                                                                      2001            2000             1999
                                                                      ----            ----             ----

     Statutory rate applied to income before

       income taxes                                              $      3,677     $      3,546    $      3,188
     Add/(deduct)
         Tax exempt interest income                                      (533)            (486)           (430)
         State tax expense (net of federal benefit)                       395              474             417
         Other                                                           (138)             (20)           (148)
                                                                 ------------     ------------    ------------

              Total                                              $      3,401     $      3,514    $      3,027
                                                                 ============     ============    ============
</TABLE>



                                   (Continued)



<PAGE>


NOTE 12 - INCOME TAXES (Continued)

The net  deferred  tax asset  reflected  in the  consolidated  balance  sheet is
comprised of the following components as of December 31:
<TABLE>

<S>                                                                                   <C>              <C>
                                                                                      2001             2000
                                                                                      ----             ----
     Deferred tax assets

         Allowance for loan losses                                                $      1,718    $      1,380
         Accrued stock appreciation rights                                                 350             139
         Accrued post-retirement benefit obligation                                        462             426
         Deferred compensation                                                             589             470
         Deferred loan fees                                                                 99              57
         Net unrealized loss on securities available-for-sale                                -             173
                                                                                  ------------    ------------
              Total tax assets                                                           3,218           2,645


     Deferred tax liabilities

         Depreciation                                                                     (339)           (341)
         Net pension benefit                                                              (734)           (795)
         Intangible asset amortization                                                    (282)           (186)
         Net unrealized gain on securities available-for-sale                             (262)              -
         Other                                                                            (179)           (248)
                                                                                  ------------    ------------
              Total deferred tax liabilities                                            (1,796)         (1,570)

     Valuation allowance                                                                     -               -
                                                                                  ------------    ------------

         Net deferred tax asset                                                   $      1,422    $      1,075
                                                                                  ============    ============
</TABLE>


NOTE 13 - PER SHARE DATA

The following table  illustrates  the computation of basic and diluted  earnings
per share.  Weighted  average  shares  outstanding  have been  restated  for all
periods for stock splits and dividends.
<TABLE>

<S>                                                             <C>                <C>                <C>
                                                                2001               2000               1999
                                                                ----               ----               ----
Basic earnings per share
     Net income                                            $        7,415    $         6,916    $        6,351
     Weighted average shares outstanding                        3,959,582          3,950,297         3,940,024
                                                           --------------    ---------------    --------------

         Basic earnings per share                          $         1.87    $         1.75     $         1.61
                                                           ==============    ==============     ==============
Diluted earnings per share

     Net income                                            $        7,415    $         6,916    $        6,351
     Weighted average shares outstanding                        3,959,582          3,950,297         3,940,024
     Dilutive effect of stock options                              61,213             35,224            94,364
                                                           --------------    ---------------    --------------

         Diluted average shares outstanding                     4,020,795          3,985,521         4,034,388
                                                           --------------    ---------------    --------------

Diluted earnings per share                                 $         1.84    $         1.74     $         1.57
                                                           ==============    ==============     ==============
</TABLE>





                                   (Continued)



<PAGE>


NOTE 14 - CAPITAL REQUIREMENTS

The Corporation and Bank are subject to various regulatory capital  requirements
administered by federal and state banking agencies.  Capital adequacy guidelines
and prompt  corrective  action  regulations  involve  quantitative  measures  of
assets,  liabilities,  and  certain  off-balance-sheet  items  calculated  under
regulatory  accounting  practices.  Capital amounts and classifications are also
subject  to  qualitative  judgments  by  regulators.  Failure  to  meet  capital
requirements can initiate regulatory action.

Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require the  Corporation  and Bank to maintain  minimum  amounts and ratios (set
forth in the  following  table) of total and Tier 1 capital  (as  defined in the
regulations)  to  risk-weighted  assets (as  defined),  and of Tier 1 capital to
average assets (as defined).

Prompt  corrective  action  regulations  provide  five   classifications:   well
capitalized,    adequately    capitalized,    undercapitalized,    significantly
undercapitalized, and critically undercapitalized,  although these terms are not
used to  represent  overall  financial  condition.  If  adequately  capitalized,
regulatory   approval   is   required   to   accept   brokered   deposits.    If
undercapitalized,   the   institution   may  be   required   to  limit   capital
distributions, limit asset growth and expansion, and prepare capital restoration
plans.

On March 12, 1999 the Corporation's  wholly-owned subsidiary bank acquired three
branches in Jasper County, Indiana. As a result of this transaction consolidated
and bank-only capital levels were reduced.  The Corporation borrowed $14,000 and
contributed  $13,000  to the  Bank  in  order  for  the  bank  to  maintain  its
well-capitalized  status.  As of December 31, 2001, the Bank was  categorized as
well-capitalized under the regulatory framework for prompt corrective action. To
be  categorized  as  well-capitalized,  the Bank  must  maintain  minimum  total
risk-based,  Tier 1 risk-based,  and Tier 1 leverage  ratios as set forth in the
table.  The Corporation was categorized as  undercapitalized  as of December 31,
1999, as the total capital ratio was slightly  below the minimum  required level
for  capital  adequacy   purposes.   The  Corporation   returned  to  adequately
capitalized  status as of March 31, 2000 and has maintained  that status through
December 31, 2001.  Although the  Corporation's  capital was slightly  below the
minimum at December 31, 1999, no corrective  regulatory  action was initiated by
the banking regulatory  authorities and management  anticipates  maintaining its
adequately capitalized status in the foreseeable future.







                                   (Continued)



<PAGE>


NOTE 14 - CAPITAL REQUIREMENTS (Continued)

The actual capital  amounts and ratios are presented in the following  table (in
millions) for the Corporation and the Bank. Minimum Required To Minimum Required
Be Well-Capitalized For Capital Under Prompt Corrective Actual Adequacy Purposes
Action Regulations Amount Ratio Amount Ratio Amount Ratio 2001
<TABLE>
<S>                                      <C>          <C>           <C>         <C>         <C>         <C>

Total capital to risk weighted assets
         Consolidated                     $    51.8      9.28%       $   44.7      8.00%     $   55.9     10.00%
         Lafayette Bank and Trust              61.3     10.98            44.7      8.00          55.8     10.00

Tier 1 capital to risk weighted assets
         Consolidated                          46.4      8.31            22.3      4.00          33.5      6.00
         Lafayette Bank and Trust              55.9     10.01            22.3      4.00          33.5      6.00

Tier 1 capital to average assets
         Consolidated                          46.4      6.24            29.7      4.00          37.2      5.00
         Lafayette Bank and Trust              55.9      7.51            29.8      4.00          37.2      5.00

2000

Total capital to risk weighted assets
         Consolidated                     $    45.1      8.33%       $   43.3      8.00%     $   54.1     10.00%
         Lafayette Bank and Trust              55.5     10.19            43.6      8.00          54.5     10.00

Tier 1 capital to risk weighted assets
         Consolidated                          40.0      7.40            21.7      4.00          32.5     6.00
         Lafayette Bank and Trust              50.5      9.26            21.8      4.00          32.7     6.00

Tier 1 capital to average assets
         Consolidated                          40.0      5.79            27.7      4.00          34.6     5.00
         Lafayette Bank and Trust              50.5      7.29            27.7      4.00          34.6     5.00

</TABLE>

The  Bank is also  subject  to  state  regulations  restricting  the  amount  of
dividends payable to the Corporation.  At December 31, 2001, the Bank had $8,882
of retained earnings available for dividends under these regulations.




                                   (Continued)



<PAGE>


NOTE 15 - COMMITMENTS AND CONTINGENT LIABILITIES

The Bank leases branch  facilities  under  operating  leases expiring in various
years through 2007.  Expense for leased  premises was $306,  $281,  and $244 for
2001, 2000 and 1999.

Future minimum lease payments are as follows:

                     2002                 $        290
                     2003                          267
                     2004                          222
                     2005                          162
                     2006                           75
                     Thereafter                     19
                                          ------------

                         Total            $      1,035
                                          ============

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.

At December 31, off-balance sheet financial instruments whose contract amount
represents credit risk are summarized as follows:

                                                2001             2000
                                                ----             ----

     Unused lines of credit             $     84,611    $     64,987
     Commitments to make loans                 6,180           7,229
     Standby letters of credit                 3,536           1,585
     Commercial letters of credit                  -               -

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 $10,738  and $9,639 at  December  31, 2001 and 2000.  These
reserves do not earn interest.




                                   (Continued)



<PAGE>


NOTE 16 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying  value and  estimated  fair values of the  Corporation's  financial
instruments as of December 31 are as follows:
<TABLE>

<S>                                                        <C> <C>                            <C> <C>
                                                -----------2 0 0 1---------        -----------2 0 0 0---------
                                                 Carrying            Fair           Carrying            Fair
                                                   Value             Value            Value             Value

Financial assets

   Cash and cash equivalents                   $      51,465    $      51,465     $      73,472    $      73,472
   Securities available-for-sale                      94,164           94,164            78,857           78,857
   Securities held-to-maturity                         3,918            4,047             4,484            4,580
   Loans held for sale                                17,262           17,435             5,949            6,058
   Loans, net                                        550,451          551,053           532,654          524,222
   FHLB stock                                          2,344            2,344             2,200            2,200
   Accrued interest receivable                         6,803            6,803             7,830            7,830


Financial liabilities

   Deposits                                    $    (618,572)   $    (623,883)    $    (578,297)   $    (580,115)
   Short-term borrowings                             (32,073)         (32,073)          (55,572)         (55,572)
   FHLB advances                                     (34,982)         (35,358)          (35,737)         (35,903)
   Note payable                                      (10,150)         (10,150)          (11,550)         (11,550)
   Accrued interest payable                           (2,180)          (2,180)           (2,772)          (2,772)
</TABLE>


The following  methods and  assumptions  were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value.  The carrying  amount is  considered  to estimate fair value for cash and
short-term  instruments,   demand  deposits,   short-term  borrowings,   accrued
interest,  and variable  rate loans,  deposits  and note  payable that  re-price
frequently and fully.  Securities  fair values are based on quoted market prices
or, if no quotes  are  available,  on the rate and term of the  security  and on
information  about the issuer.  For loans held for sale, the fair value of loans
held for sale is based on quoted market  prices.  For  commercial,  real estate,
consumer,  and other loans,  fair value is estimated by discounting  future cash
flows using the current  rates at which similar loans would be made to borrowers
with similar credit ratings and for the same remaining maturities. FHLB stock is
restricted  in nature and is not actively  traded on a secondary  market and the
carrying  amount is a  reasonable  estimate  of fair  value.  The fair  value of
fixed-maturity  certificates  of deposit is estimated  using the rates currently
offered for deposits of similar remaining  maturities.  For FHLB advances,  fair
value is estimated using rates  currently  available to the Corporation for debt
with  similar  terms and  remaining  maturities.  The  estimated  fair value for
off-balance  sheet  loan  commitments  approximates  carrying  value and are not
considered significant to this presentation.






                                   (Continued)


<PAGE>


NOTE 17 - PARENT COMPANY STATEMENTS

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

                            CONDENSED BALANCE SHEETS
                                   December 31
<TABLE>

<S>                                                                                        <C>             <C>
                                                                                           2001            2000
                                                                                           ----            ----
ASSETS
Cash on deposit with subsidiary                                                       $      1,855     $      1,901
Investment in bank                                                                          68,589           63,221
Other assets                                                                                   387              265
                                                                                      ------------     ------------
                                                                                      $     70,831     $     65,387
                                                                                      ============     ============

LIABILITIES AND SHAREHOLDERS' EQUITY
Note payable                                                                          $     10,150     $     11,550
Other liabilities                                                                            1,561            1,036
Shareholders' equity                                                                        59,120           52,801
                                                                                      ------------     ------------
                                                                                      $     70,831     $     65,387
                                                                                      ============     ============
</TABLE>


             CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                             Years ended December 31
<TABLE>

<S>                                                                       <C>              <C>             <C>
                                                                          2001             2000            1999
                                                                          ----             ----            ----

Operating income
     Dividends received from subsidiary bank                          $      3,525    $      3,200     $      2,960
     Interest income                                                            40              74               75
                                                                      ------------    ------------     ------------
                                                                             3,565           3,274            3,035
Operating expenses
     Interest expense                                                          634           1,007              749
     Compensation expense (benefit)                                            539            (376)              14
     Other operating expenses                                                  232             119              111
                                                                      ------------    ------------     ------------
                                                                             1,405             750              874
Income before income taxes and equity in
  undistributed earnings of bank                                             2,160           2,524            2,161

Income tax benefit                                                             550             215              389
                                                                      ------------    ------------     ------------
Income before equity in undistributed earnings of bank                       2,710           2,739            2,550

Equity in undistributed earnings of bank                                     4,705           4,177            3,801
                                                                      ------------    ------------     ------------

Net income                                                                   7,415           6,916            6,351

Other comprehensive income, net of tax                                         663           1,693           (1,914)
                                                                      ------------    ------------     ------------

Comprehensive income                                                  $      8,078    $      8,609     $      4,437
                                                                      ============    ============     ============

</TABLE>


                                   (Continued)




<PAGE>


NOTE 17 - PARENT COMPANY STATEMENTS (Continued)

                       CONDENSED STATEMENTS OF CASH FLOWS
                             Years ended December 31
<TABLE>

<S>                                                                       <C>              <C>             <C>
                                                                          2001             2000            1999
                                                                          ----             ----            ----

Cash flows from operating activities
     Net income                                                       $      7,415    $      6,916     $      6,351
     Adjustments to reconcile net income to net cash
       from operating activities
         Amortization of deferred costs                                          6               6                6
         Equity in undistributed earnings of bank                           (4,705)         (4,177)          (3,801)
         Other assets and other liabilities                                    397            (419)            (160)
                                                                      ------------    ------------     ------------
              Net cash from operating activities                             3,113           2,326            2,396

Cash flows from financing activities
     Proceeds from note payable                                                  -               -           14,000
     Principal payments on note payable                                     (1,400)         (1,400)          (1,050)
     Capital contribution to subsidiary bank                                     -               -          (13,000)
     Common stock issued                                                       103             117              278
     Dividends paid                                                         (1,862)         (1,706)          (1,540)
     Purchase of fractional shares                                               -              (4)               -
     Purchase of treasury shares                                                 -               -               (4)
                                                                      ------------    ------------     ------------
         Net cash from financing activities                                 (3,159)         (2,993)          (1,316)
                                                                      ------------    ------------     ------------

Net change in cash and cash equivalents                                        (46)           (667)           1,080

Cash and cash equivalents at beginning of year                               1,901           2,568            1,488
                                                                      ------------    ------------     ------------

Cash and cash equivalents at end of year                              $      1,855    $      1,901     $      2,568
                                                                      ============    ============     ============
</TABLE>







                                   (Continued)



<PAGE>


NOTE 18 - BRANCH ACQUISITION

In March 1999, the Bank purchased three branches located in DeMotte,  Remington,
and Rensselaer, Indiana.

The fair value of assets acquired was $71,749 (consisting  primarily of goodwill
and core deposit  intangibles of $13,510,  and commercial  loans,  net of a $563
purchase  adjustment for credit quality),  the fair value of liabilities assumed
was $117,015 (consisting primarily of customer deposits),  and the Bank received
$45,266 of cash at settlement.


NOTE 19 - OTHER COMPREHENSIVE INCOME

Other comprehensive income components and related taxes were as follows:
<TABLE>

<S>                                                            <C>                <C>                <C>
                                                               2001               2000               1999
                                                               ----               ----               ----

Unrealized holding gains (losses) on
     securities available-for-sale                         $        1,098    $         2,791    $       (3,314)
Less:  reclassification adjustments for gains
      and losses later recognized in income                             -                 12               144
                                                           --------------    ---------------    --------------
Net unrealized gains (losses)                                       1,098              2,803            (3,170)
Tax effect                                                           (435)            (1,110)            1,256
                                                           --------------    ---------------    --------------

Other comprehensive income                                 $          663    $         1,693    $       (1,914)
                                                           ==============    ===============    ==============
</TABLE>


NOTE 20 - QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>


                                                                                        Earnings per Share
                                Interest       Net Interest           Net               ------------------
<S>                                   <C>               <C>             <C>                <C>                  <C>
                                  Income           Income            Income            Basic         Fully Diluted

2001
    First quarter             $   13,786        $    6,187       $    1,678        $    .42         $     .42
    Second quarter                13,745             6,601            1,906             .48               .48
    Third quarter                 13,373             6,835            2,019             .51               .50
    Fourth quarter                12,760             7,138            1,812             .46               .44

2000

    First quarter             $   12,123        $    6,084       $    1,798        $    .46         $     .45
    Second quarter                12,878             6,297            1,807             .46               .46
    Third quarter                 13,427             6,226            1,634             .41               .41
    Fourth quarter                13,958             6,374            1,677             .42               .42
</TABLE>


Earnings per share amounts have been restated for subsequent stock dividends and
splits.


                                   (Continued)



<PAGE>


NOTE 21 - SEGMENT INFORMATION


The Corporation's operations include three primary segments:  banking,  mortgage
banking,  and trust  services.  Through its banking  subsidiary's  locations  in
Tippecanoe,  Jasper,  White  and  Carroll  Counties,  the  Corporation  provides
traditional  community banking services,  such as accepting  deposits and making
commercial,  residential and consumer loans. Mortgage banking activities include
the origination of residential  mortgage loans for sale on a servicing  released
basis to various  investors.  The Corporation's  trust department  provides both
personal and corporate trust services.


The Corporation's  three reportable  segments are determined by the products and
services offered. Loans,  investments and deposits comprise the primary revenues
and expenses of the banking  operation,  net gains on loans sold account for the
revenues in the mortgage banking segment,  and trust administration fees provide
the primary revenues in the trust department.

The following segment  financial  information has been derived from the internal
profitability  reporting system utilized by management to monitor and manage the
financial  performance of the Corporation.  The accounting policies of the three
segments  are  the  same  as  those  described  in the  summary  of  significant
accounting  policies.  The Corporation  evaluates  segment  performance based on
profit or loss before  income  taxes.  The  evaluation  process for the mortgage
banking and trust segments include only direct expenses,  while certain indirect
expenses,  including  goodwill,  are  absorbed  by the  banking  operation.  The
difference  between segment totals and  consolidated  totals are holding company
amounts and income tax expense.









                                   (Continued)




<PAGE>


NOTE 21 - SEGMENT INFORMATION (Continued)
<TABLE>

<S>                                          <C>                <C>                <C>              <C>
                                                                   Mortgage                              Total
2001                                            Banking            Banking            Trust            Segments
----                                            -------            -------            -----            --------


     Net interest income                    $        27,058    $          297     $            -    $        27,355
     Net gain on loan sales                               -             1,858                  -              1,858
     Other revenue                                    4,330                 2              1,264              5,596
     Noncash items:
         Depreciation                                 1,369                58                 48              1,475
         Provision for loan loss                      1,225                 -                  -              1,225

     Segment profit, before taxes                    10,858               998                326             12,185
     Segment assets                                 744,396            17,402                133            761,931


2000

     Net interest income                    $        25,769    $          146     $            -    $        25,915
     Net gain on loan sales                               -               659                  -                659
     Other revenue                                    3,973                 6              1,187              5,166
     Non-cash items:
         Depreciation                                 1,243                48                 48              1,339
         Provision for loan loss                      1,200                 -                  -              1,200
     Segment profit, before taxes                    10,655                67                385             11,107
     Segment assets                                 734,581             6,122                179            740,822

1999

     Net interest income                    $        23,310    $          211     $            -    $        23,521
     Net gain on loan sales                               -               942                  -                942
     Other revenue                                    2,959                90              1,134              4,183
     Noncash items:
         Depreciation                                   868                42                 38                948
         Provision for loan loss                      1,060                 -                  -              1,060
     Segment profit, before taxes                     9,328               459                390             10,177
     Segment assets                                 641,132             3,325                202            644,659
</TABLE>


NOTE 22 - PENDING MERGER

On October 15, 2001, Lafayette Bancorporation signed a definitive agreement with
First Merchants Corporation,  located in Muncie, Indiana, to merge with and into
First Merchants Corporation.  Under the terms of the agreement, upon the closing
of this  transaction,  Lafayette  Bank and Trust Company will be a  wholly-owned
subsidiary  of First  Merchants  Corporation.  The  transaction  is  subject  to
shareholder  and  regulatory  approval  and is expected to be  effective  in the
second quarter of 2002.





<PAGE>



ITEM 9.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
         FINANCIAL DISCLOSURE.

         Not applicable.


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     The  information  required by this item  relating to Executive  Officers is
found under the heading "Special Item.  Executive Officers of the Registrant" in
Part I of this Report.  The following table presents  certain  information as of
December 31, 2001,  regarding the current  Directors of the  Corporation and the
most  highly  compensated  executive  officers  who  are  not  Directors  of the
Corporation.  Unless otherwise indicated in a footnote, the principal occupation
of each Director has been the same for the last five years.

Name,
Present Principal                                           Director
Occupation and Age                                           Since(1)
------------------                                           -----

Directors:

Richard A. Boehning(2)                                         1992
  Of Counsel, Bennett Boehning & Clary
  (law firm), Age 64

Joseph A. Bonner(3)                                            1985
 Chairman of the Board of the Bank and
 the Corporation, Age 70

Wilbur L. Hancock(4)                                           1989
  Retired General Manager, Customer Operations
  PSI Energy, A CINERGY Company, Age 63

Roy D. Meeks(5)                                                1981
  President and Owner of Nelmeeks, Inc.
  d/b/a Radisson Inn, Age 69

Robert J. Weeder(6)                                            1989
  Chief Executive Officer and President
  of the Corporation and the Bank, Age 64
--------------------

1    Includes  service  on the  Board  of the Bank  prior  to the  Corporation's
     becoming a holding company for the Bank in 1985.
2    Mr.  Boehning  has  served as a  Director  of the Bank  since 1992 and as a
     Director of the  Corporation  since 1994. Mr. Boehning was a partner in the
     law firm of Bennett Boehning & Clary prior to January 1, 2001.
3    Mr.  Bonner  has  served  as a  Director  of the Bank  since  1985 and as a
     Director of the  Corporation  since 1987.  On January 31, 1997,  Mr. Bonner
     retired as President and Chief Executive Officer of the Corporation and the
     Bank.
4    Mr.  Hancock  has  served as a  Director  of the Bank since 1989 and of the
     Corporation  since 1992.  From  October 1996  through  March 1997,  when he
     retired,  Mr.  Hancock  served as  Northwest  Region  Manager and  District
     Manager -- Lafayette for PSI Energy.
5    Mr. Meeks has served as a Director of the Bank since 1981 and as a Director
     of the Corporation since 1985.
6    Mr.  Weeder  has  served  as a  Director  of the Bank  since  1989 and as a
     Director of the  Corporation  since 1990. He assumed the positions of Chief
     Executive  Officer  of the  Corporation  and the  Bank  upon  Mr.  Bonner's
     retirement  in  January  1997.  Mr.  Weeder had  served as  Executive  Vice
     President since 1992.
<PAGE>

ITEM 11. EXECUTIVE COMPENSATION.

     The following table sets forth information regarding  compensation paid for
the fiscal years indicated to the Corporation's  Chief Executive Officer and the
other  most  highly  compensated  executive  officer,  based on salary and bonus
earned during fiscal 2001.

                           Summary Compensation Table
------------------------------------------- ----------------------------------
<TABLE>

                                                                                      Long-Term
                                                                                     Compensation
                                                                                        Awards
                                                     Annual Compensation

                                                                                      Securities
<S>                                        <C>        <C>             <C>           <C>                <C>
                                                                                      Underlying
                 Name and                                                              Options/           All Other
            Principal Position                Year        Salary        Bonus            SARs(1)          Compensation

Robert J. Weeder,                             2001      $207,500        $75,000           3,050             $20,216(2)
  President and Chief Executive               2000      $187,500        $65,000           1,925             $18,021
  Officer                                     1999      $170,000        $60,000           1,337             $13,978


Robert J. Ralston,                            2001      $120,500        $20,000           1,000             $2,469(3)
  Executive Vice President, Senior            2000      $115,500        $15,000           1,320             $2,432
  Operations Officer and Secretary/           1999      $105,000        $30,000             990             $2,538
  Treasurer of the Bank

Hal D. Job,                                   2001      $99,000          $5,000             500             $2,080(3)
  Regional President, Jasper County           2000      $99,000          $5,000             770             $2,080
  Market, of the Bank                         1999      $77,538(4)         $5,000             825             $1,651


Tony S. Albrecht,                             2001      $91,000         $20,000           1,500             $2,220(3)
  Senior Vice President and Manager,          2000      $85,000         $15,000           1,320             $2,000
  Commercial Loan Department of the           1999      $78,654         $15,000             825             N/A
  Bank


E. James Brisco, Jr.,                         2001      $85,750         $35,000           1,000             $2,415(3)
  Senior Vice President and Manager,          2000      $81,750         $17,000           1,100             $1,975
Mortgage Loan Department of the Bank          1999      $77,750         $20,000             825             $1,955

------------------------------------------- ---------- ------------- ------------- ------------------ ------------------
</TABLE>

1    Numbers of options  granted  have been  adjusted to reflect the stock split
     and stock dividends subsequent to the date of grant.
2    Represents  matching  contributions  of $3,344 under the Lafayette Bank and
     Trust Company  Employees'  Salary  Savings Plan (the "401(k)  Plan"),  Bank
     Director fees in the amount of $7,200, Corporation Director fees of $6,000,
     and above-market  interest credited on deferred Director fees in the amount
     of $3,672.
3    Represents matching contributions under the 401(k) Plan.
4    Mr. Job joined the Bank in March 1999.
<PAGE>

                      Option/SAR Grants In Last Fiscal Year

     The following  table  presents  information on the stock option grants that
were made during 2001 pursuant to the Lafayette Bancorporation 1998 Nonqualified
Stock Option Plan (the "1998 Plan"). No SARs were granted during 2001.

<TABLE>

                                                                                              Potential Realizable
                                                                                            Value at Assumed Annual
                                                                                              Rates of Stock Price
                                                                                                Appreciation for
                                                                                                  Option Term(1)
                                                   Individual Grants
                                                                                            -------------------------
---------------------------- ------------------ --------------- ------------- ------------- ------------ ------------

<S>                          <C>               <C>             <C>           <C>           <C>          <C>
                                                  % of Total
                                 Number of        Options(2)/
                                Securities       SARs Granted   Exercise or
                                Underlying       to Employees    Base Price
                               Options/SARs       in Fiscal        ($/Sh)      Expiration
           Name                  Granted(2)            Year                         Date          5%           10%
---------------------------- ------------------ --------------- ------------- ------------- ------------ ------------

Robert J. Weeder                    3,050           12.4%          $15.00       2/12/11     $28,762      $72,926
---------------------------- ------------------ --------------- ------------- ------------- ------------ ------------

Robert J. Ralston                   1,000            4.1%          $15.00       2/12/11     $  9,430     $23,910
---------------------------- ------------------ --------------- ------------- ------------- ------------ ------------
---------------------------- ------------------ --------------- ------------- ------------- ------------ ------------

Hal D. Job                            500            2.0%          $15.00       2/12/11     $  4,715     $11,955
---------------------------- ------------------ --------------- ------------- ------------- ------------ ------------
---------------------------- ------------------ --------------- ------------- ------------- ------------ ------------

Tony S. Albrecht                    1,500            6.1%          $15.00       2/12/11     $14,145      $35,865
---------------------------- ------------------ --------------- ------------- ------------- ------------ ------------
---------------------------- ------------------ --------------- ------------- ------------- ------------ ------------

E. James Brisco, Jr.                1,000            4.1%          $15.00       2/12/11     $  9,430     $23,910
---------------------------- ------------------ --------------- ------------- ------------- ------------ ------------
</TABLE>

1    The  amounts in the table are not  intended  to  forecast  possible  future
     appreciation,  if any, of the Corporation's Common Shares. Actual gains, if
     any, are dependent upon the future market price of the Corporation's Common
     Shares and there can be no  assurance  that the amounts  reflected  in this
     table will be achieved.
2    The 1998  Plan  provides  for the grant of  options  to  Directors  and key
     employees.  Except for vesting  provisions,  the terms of Director  and key
     employee  options  are  identical.  All  options  granted  during 2001 were
     granted on February 12, 2001,  with an exercise price for each option being
     the  estimated  fair market value of one Common Share on that date.  During
     2001,  Mr.  Weeder  received  option grants both as a Director and as a key
     employee. Director options become fully exercisable on the date that is two
     years from the date of grant or upon the earlier occurrence of a Director's
     70th  birthday.  The options  granted during 2001 to key employees have the
     same terms. The key employee  options become  exercisable in twenty percent
     increments,  with twenty  percent  becoming  exercisable  one year from the
     grant date and an additional  twenty  percent  becoming  exercisable on the
     four subsequent  anniversaries of the grant date; provided,  however,  that
     all options become  immediately  exercisable upon the earlier occurrence of
     the optionee's 65th birthday or (b) an "Applicable Event," which is defined
     in the 1998 Plan as (i) the  expiration of a tender offer or exchange offer
     (other  than an offer  by the  Corporation)  pursuant  to which at least 50
     percent  of  the  Corporation's  issued  and  outstanding  stock  has  been
     purchased,  or (ii) the approval by the  shareholders of the Corporation of
     an agreement to merge or consolidate the  Corporation  with or into another
     entity where the Corporation is not the surviving  entity,  or an agreement
     to  sell  or  otherwise   dispose  of  all  or  substantially  all  of  the
     Corporation's assets (including a plan of liquidation).  The options expire
     ten years from the date of grant unless terminated  earlier upon the death,
     retirement or  termination  of employment of the optionee.  The options are
     nontransferable  and may be  exercised  only  by the  optionee  during  his
     lifetime.


<PAGE>


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

     No options or SARs were  exercised  during 2001 by the  executive  officers
named in the Summary  Compensation  Table above.  The following table sets forth
information  for 2001 with respect to the value of unexercised  options and SARs
as of December 31, 2001.

<TABLE>

<S>                      <C>                                    <C>
------------------------- -------------------------------------- ------------------------------------------------------

                           Number of Unexercised Options/SARs                    Value of Unexercised
                                 at Fiscal Year-End (#)(1)           In-the-Money Options/SARs at Fiscal Year-End ($)(2)
------------------------- -------------------------------------- ------------------------------------------------------

          Name                        Exercisable/                                   Exercisable/
                           Unexercisable Unexercisable
------------------------- -------------------------------------- ------------------------------------------------------

Robert J. Weeder                      37,706/6,812                                 $701,806/$72,387
------------------------- -------------------------------------- ------------------------------------------------------
------------------------- -------------------------------------- ------------------------------------------------------

Robert J. Ralston                     30,097/3,912                                 $613,308/$39,256
------------------------- -------------------------------------- ------------------------------------------------------
------------------------- -------------------------------------- ------------------------------------------------------

Hal D. Job                              484/1,611                                   $2,411/$13,694
------------------------- -------------------------------------- ------------------------------------------------------
------------------------- -------------------------------------- ------------------------------------------------------

Tony S. Albrecht                        594/3,051                                   $3,555/$30,420
------------------------- -------------------------------------- ------------------------------------------------------
------------------------- -------------------------------------- ------------------------------------------------------

E. James Brisco, Jr.                   5,968/3,417                                  $78,437/$34,146
------------------------- -------------------------------------- ------------------------------------------------------
</TABLE>

1    The 1998  Option Plan  provides  for the grant of  nonqualified  options to
     Directors  and key  employees.  For a discussion  of the material  terms of
     options granted under the 1998 Plan, see Note 2 to the Option/SAR Grants In
     Last Fiscal Year table above.  Mr. Weeder has received option grants in his
     capacities   as  both  a  Director   and  key   employee.   The   Lafayette
     Bancorporation  Officers' Stock  Appreciation  Rights Plan, as amended (the
     "SAR Plan"),  provides for the grant of SARs from time to time to executive
     and senior management officers of the Corporation in the sole discretion of
     the Stock  Option  Committee.  Each SAR is granted at a base value equal to
     the fair  market  value of one Common  Share on the date of grant and has a
     subsequent value equal to 100 percent (or such other  percentage  specified
     by the Stock  Option  Committee)  of the  excess of the  then-current  fair
     market  value of one Common  Share over the base price of the SAR. The SARs
     granted  to Messrs.  Weeder and  Ralston  vested in annual  twenty  percent
     increments and are now fully vested.  SARs become fully exercisable without
     regard to vesting restrictions upon the occurrence of (i) the expiration of
     a tender offer or exchange  offer (other than an offer by the  Corporation)
     pursuant  to which at  least 5  percent  of the  Corporation's  issued  and
     outstanding  stock  has  been  purchased,  or  (ii)  the  approval  by  the
     shareholders of the Corporation of an agreement to merge or consolidate the
     Corporation with or into another  corporation  where the Corporation is not
     the surviving corporation,  or an agreement to sell or otherwise dispose of
     all or substantially all of the  Corporation's  assets (including a plan of
     liquidation). SARs also become fully vested when an officer reaches age 62.
     Under  the  merger  agreement  with  First  Merchants  Corporation,  at the
     effective  date  of the  merger,  the  SARs  will  be  cashed  out  for the
     difference  between the base price of the SARs and the $30.00  provided for
     in the merger  agreement,  or  $530,013.00 in the aggregate for Mr. Ralston
     and $473,673 in the aggregate for Mr. Weeder.
2    Represents  the  difference  between  the last per share  sales  price of a
     Common Share on December 31, 2001  ($27.15),  which is the last sales price
     in 2001 known to the  Corporation's  management,  and the exercise price of
     options/SARs   having  an  exercise  price  less  than  that  sales  price,
     multiplied by the number of options/SARs.

                                  Pension Plan

     The Bank  maintains a  noncontributory  defined  benefit  pension plan, the
Lafayette Bank and Trust Company  Employees'  Pension Plan (the "Pension Plan").
All  employees  who have  attained the age of 21 and have  completed one year of
service are eligible to  participate  in the Pension Plan.  The following  table
indicates  the  estimated  annual  benefits  payable under the Pension Plan to a
participant  at  the  normal   retirement  age  of  65  who  has  the  specified
remuneration and years of service.


<PAGE>


------------------------------------------------------------------------------
                              Pension Plan Table (1)

                                Years of Service
______________________________________________________________________________
<TABLE>
<S>                                     <C>             <C>              <C>              <C>            <C>
Pay                                     15              20               25               30             35
---                                     --              --               --               --             --

 25,000                               7,550            9,920            12,400           14,880        17,360
 50,000                              15,690           20,920            26,150           31,380        36,610
 75,000                              23,940           31,920            39,900           47,880        55,860
100,000                              32,190           42,920            53,650           64,380        75,110
125,000                              40,440           53,920            67,400           80,880        94,360
150,000                              48,690           64,920            81,150           97,380       113,610
160,000                              51,990           69,320            86,650          103,980       121,310
170,000                              55,290           73,720            92,150          110,580       129,010
200,000                              55,290           73,720            92,150          110,580       129,010
------------------------------------------------------------------------------
</TABLE>

1    Pay  limited  to  statutory  IRC ss.  401(a)(17)  limit in  calculation  of
     benefits.  Federal law limits  annual  compensation  taken into account for
     benefit  purposes to $160,000 for plan years beginning  January 1, 1997 and
     thereafter,   until   indexed   to  the  next   $10,000   increment.   (IRC
     ss.401(a)(17)).

     The  retirement  benefit  formula used for the Pension Plan is based upon a
participant's  average monthly  compensation for the five  consecutive  calendar
years that produce the highest  average and the  participant's  years of service
with the Bank. The retirement  benefit formula is composed of two parts, a "base
benefit" and an "excess  benefit." The base benefit is equal to 1.6 percent of a
participant's  average  monthly  compensation  during the  applicable  five-year
period  multiplied by the participant's  number of years of service.  The excess
benefit is equal to 0.6 percent of the amount by which the participant's average
monthly  compensation  exceeds $750.00 multiplied by the participant's number of
years of service (not to exceed 35 years). A participant's compensation is based
on total  taxable  wages or salary  (including  any  overtime  and  bonuses  but
excluding  proceeds  received  through  the  exercise  of SARs)  plus any salary
reduction contributions made by the participant under the Bank's 401(k) plan and
any contribution made to a section 125 plan maintained by the Bank.  Federal law
limits the amount of annual  compensation  that can be counted  for some  highly
compensated  employees.  The years of  credited  service  for  years of  service
through the end of 2001 applicable for  determining the retirement  benefits for
the executive  officers named in the Summary  Compensation Table are as follows:
Mr. Weeder: 16 years; Mr. Ralston: 23 years; Mr. Job: 2 years; and Mr. Albrecht:
3 years.

Compensation of Directors

     During  2001,   Directors  of  the  Corporation  received  $500  per  month
regardless of committee  participation  or attendance at meetings.  Non-employee
Directors of the Bank  received  $1,600 per month and employee  Directors of the
Bank  received $600 per month.  Outside  Directors of the Bank received a $2,000
performance award and the Chairman received a performance award in the amount of
$10,000  for the year  2001.  The grant of  performance  awards  was based  upon
recommendations  of the  Salary  Committee  based  upon  the  criteria  for  the
employees' performance award program.
<PAGE>

     In  October  1994,  the  Bank  adopted  a  deferred  compensation  plan for
Directors through Bank Compensation Strategies Group, Inc. (the "1994 Plan"). To
fund the 1994 Plan, the Bank purchased  single-premium  universal life insurance
policies for each of the participants.  The interest rate payable under the 1994
Plan is tied to the Wall  Street  Prime  Rate  plus  150  basis  points,  and is
adjusted on September 30 of each calendar year. The adjusted interest rate as of
September 30, 2001, was 7.50 percent (Wall Street Prime Rate (6.00 percent) plus
150 basis points).  All of the Directors of the Corporation and the Bank, except
for Mr. Kessler, deferred 2001 Director fees pursuant to the 1994 Plan.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

Beneficial Ownership of Directors and Executive Officers

     The following  table provides  information as of December 31, 2001, for the
beneficial  ownership of the  Corporation's  Common Stock by all Directors,  all
executive officers named in the Summary  Compensation Table in Item 11 above and
all directors and executive officers as a group. Unless otherwise indicated in a
footnote,  the  individual  possesses  sole  voting and  investment  powers with
respect to shares  indicated  as  beneficially  owned by the  individual  and is
deemed to share voting and investment  powers over shares indicated as held by a
spouse, children or other family members residing with the individual.
<TABLE>

                                                                                 Number of Shares
<S>                                                                             <C>                     <C>
                                   Name                                         Beneficially Owned       Percentage

Directors:
---------
Richard A. Boehning                                                                   16,983(1)              *

Joseph A. Bonner                                                                      37,706(2)              *

Wilbur L. Hancock                                                                     14,457(3)              *

Roy D. Meeks                                                                          50,061(4)             1.3%

Robert J. Weeder                                                                      31,532(5)              *

Named Executive Officers Who Are Not Directors:
----------------------------------------------
Robert J. Ralston                                                                     14,965(6)              *

Hal D. Job                                                                             1,419(7)              *

Tony S. Albrecht                                                                       2,679(8)              *

E. James Brisco, Jr.                                                                   5,968(9)              *

All Directors & Executive Officers as a Group (14 Persons)                           201,137(10)            5.0%
</TABLE>

*Less than 1 percent

(1)  Includes  4,565 shares held by the  Albrecht  Family  Trust,  for which Mr.
     Boehning  serves as trustee,  and 9,517  shares that Mr.  Boehning  has the
     right to acquire upon the exercise of options.
(2)  Includes  14,247  shares held jointly by Mr.  Bonner and his spouse,  9,666
     shares held by Mr.  Bonner's  spouse and 10,944  shares that Mr. Bonner has
     the right to acquire upon the exercise of stock options.
(3)  Includes 3,596 shares held jointly by Mr. Hancock and his spouse and 10,128
     shares that Mr. Hancock has the right to acquire upon the exercise of stock
     options.
(4)  Includes  26,420  shares held  jointly by Mr.  Meeks and his spouse,  2,395
     shares held by Mr.  Meeks'  spouse and 11,761 shares that Mr. Meeks has the
     right to acquire upon the exercise of stock options.
(5)  Includes  2,867  shares held  jointly by Mr.  Weeder and his spouse,  4,851
     shares held by Mr.  Weeder's  spouse and 19,724  shares that Mr. Weeder has
     the right to acquire upon exercise of stock options.
(6)  Includes  1,896 shares held jointly by Mr. Ralston and his spouse and 9,975
     shares that Mr. Ralston has the right to acquire upon the exercise of stock
     options.
(7)  Includes  550 shares held  jointly by Mr. Job and his spouse and 484 shares
     that Mr. Job has the right to acquire upon the exercise of stock options.
(8)  Includes  594 shares that Mr.  Albrecht  has the right to acquire  upon the
     exercise of stock options.
(9)  Represents  shares  that  Mr.  Brisco  has the  right to  acquire  upon the
     exercise of stock options.
(10) Includes 102,468 shares that members of the group have the right to acquire
     upon the exercise of stock options and 71,546 shares as to which voting and
     investment powers are shared.
<PAGE>

Principal Owners Of Common Shares

     As of March 1, 2002, the Corporation had no knowledge of any shareholder or
group of  shareholders  who  beneficially  owned  more than five  percent of the
Corporation's Common Shares. (The Bank's Trust Department,  however,  holds more
than five percent of the Corporation's Common Shares in its fiduciary capacity).

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

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


                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

          (a)1. Financial Statements. See Item 8 above.

          (a)2. Schedules.

     All schedules have been omitted because the required  information is either
inapplicable or has been included in the  Corporation's  consolidated  financial
statements or notes thereto.

          (a)3. Exhibits.

     The exhibits  filed as part of this Report on Form 10-K are  identified  in
the Exhibit Index,  which Exhibit Index  specifically  identifies those exhibits
that describe or evidence all  management  contracts and  compensatory  plans or
arrangements required to be filed as exhibits to this Report. Such Exhibit Index
is incorporated herein by reference.

          (b)  Reports on Form 8-K.

     On October 15, 2001, the  Corporation  filed a Report on Form 8-K to report
the signing of the definitive  agreement  pursuant to which the Corporation will
be merged into First Merchants Corporation, Muncie, Indiana.












                      [This space left intentionally blank]


<PAGE>


                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf, by the undersigned,
thereunto duly authorized.

Dated: March 19 , 2002            LAFAYETTE BANCORPORATION

                                  By:/s/ Robert J. Weeder
                                     Robert J. Weeder, President


     In  accordance  with the  Exchange  Act,  this  report  was  signed  by the
following  persons on behalf of the  Registrant and in the capacities and on the
dates indicated.


Dated: March 19 , 2002            /s/ Robert J. Weeder
                                  Robert J. Weeder, President (Principal
                                  Executive Officer) and Director


Dated: March 19 , 2002            /s/ Marvin S. Veatch
                                  Marvin S. Veatch, Controller (Principal
                                  Accounting Officer and Principal Financial
                                  Officer)


Dated: March 19 , 2002            /s/ Richard A. Boehning
                                  Richard A. Boehning, Director


Dated: March 19 , 2002            /s/ Joseph A. Bonner
                                  Joseph A. Bonner, Director


Dated: March 19 , 2002            ____________________________________
                                  Wilbur L. Hancock, Director


Dated: March 19 , 2002            /s/ Roy D. Meeks
                                  Roy D. Meeks, Director



<PAGE>


                                  EXHIBIT INDEX

Exhibit
Number           Description

2.1               Agreement of Reorganization and Merger between First
                  Merchants Corporation and the Corporation is incorporated
                  by reference to Exhibit 2 of the Form 8-K filed on
                  October 15, 2001.

3.1               Restated Articles of Incorporation of the Corporation, as
                  amended May 5, 2000.

3.2               Bylaws of the Corporation, as amended, are incorporated
                  by reference to Exhibit 3.2 to the Registrant's Form 10,
                  which became effective June 30, 1997.

10.1*             Lafayette Bancorporation Non-Qualified Stock Option Plan,
                  including schedule identifying material terms of options
                  granted to Directors and named executive officers, is
                  incorporated by reference to Exhibit 10.1 in the Registrant's
                  Form 10, which became effective on June 30, 1997.

10.2*             Lafayette Bancorporation Officers' Stock Appreciation
                  Rights Plan, including schedule identifying material terms of
                  stock appreciation rights granted to named executive officers,
                  is incorporated by reference to Exhibit 10.2 in the
                  Registrant's Form 10, which became effective on June 30, 1997.

10.3*             Lafayette Bank and Trust Company Directors Deferred
                  Compensation Plan and Form of Agreement (1987) are
                  incorporated by reference to Exhibit 10.3 of Registrant's
                  Form 10, which became effective on June 30, 1997.

10.4*             Lafayette Bank and Trust Company Directors Deferred
                  Compensation Form of Agreement (1994) is incorporated
                  by reference to Exhibit 10.4 of Registrant's Form 10, which
                  became effective on June 30, 1997.

10.5*             Lafayette Bancorporation 1998 Nonqualified Stock Option
                  Plan is incorporated by reference to Exhibit 10.5 of the
                  Registrant's Form 10-K for the year ended December 31,
                  1998.

10.6*             Lafayette Bancorporation Director Emeritus Supplemental
                  Retirement Benefits Plan is incorporated by reference to
                  Exhibit 10.6 of the Registrant's Form 10-K filed for the year
                  ended December 31, 1998.

21                Subsidiaries of Registrant.

23                Consent of Independent Auditors

*    Indicates  Exhibits  that  describe or  evidence  management  contracts  or
     compensatory plans or arrangements required to be filed as Exhibits to this
     Form 10-K.