EXHIBIT 13

                               2000 ANNUAL REPORT

                      (Portions incorporated by reference)





<PAGE>
<TABLE>
                                                                              LAFAYETTE BANCORPORATION
                                                                                FINANCIAL HIGHLIGHTS
 (Dollars in thousands, except
<S>                                       <C>                  <C>                  <C>               <C>               <C>
  per share data)                         2000                 1999                 1998              1997              1996
                                   -----------------------------------------------------------------------------------------------

 YEAR ENDED DECEMBER 31
 Net interest income                    $24,981               $22,847              $17,762          $16,386           $14,203
 Noninterest income                       5,825                 5,125                4,916            4,168             3,422
 Noninterest expense                     19,176                17,534               13,610           12,557            11,191
 Net income                               6,916                 6,351                5,377            4,808             4,091


 PER COMMON SHARE (1)
 Net income                               $1.75                 $1.61                $1.36            $1.22             $1.04
 Cash dividends                            0.43                  0.39                 0.34             0.31              0.25
 Book value                               13.37                 11.62                10.82             9.77              8.80


 AT DECEMBER 31
 Assets                                $741,147              $645,149             $483,969         $439,029          $414,391
 Investment securities                   83,341                84,434               81,835           71,845            94,362
 Loans held for sale                      5,949                 3,174               10,086            7,640             5,877
 Loans, total                           537,725               489,070              353,828          312,227           268,940
 Deposits                               578,297               522,247              395,546          355,195           341,550
 Shareholders' equity                    52,801                45,785               42,614           38,469            34,646


 AVERAGE BALANCES
 Assets                                $674,736              $600,451             $455,268         $416,957          $377,623
 Investment securities                   83,868                98,489               76,928           80,606            91,802
 Loans held for sale                      3,392                 5,967                6,095            5,522             4,989
 Loans, total                           517,010               440,615              327,412          289,197           242,286
 Deposits                               547,601               486,489              371,067          345,739           313,621
 Shareholders' equity                    49,017                44,499               40,814           36,530            33,133


 KEY RATIOS
 Return on average assets                  1.02%                 1.06%                1.18%            1.15%             1.08%
 Return on average equity                 14.11%                14.27%               13.17%           13.16%            12.35%
 Efficiency ratio                         60.45%                60.93%               58.46%           59.63%            61.66%

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


</TABLE>



<PAGE>

                     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 seventeen  offices  located in
Tippecanoe,  White,  and  Jasper  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 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, 2000,  1999,  and 1998,  and financial  condition as of
December 31, 2000 and 1999. 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

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 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.


<PAGE>

                              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.

<TABLE>

-------------------------------------------------------------------------------------------------------------------------------
                      Table 1 - FIVE YEAR FINANCIAL SUMMARY
-------------------------------------------------------------------------------------------------------------------------------

                                                                           For the years ended December 31,
<S>                                                     <C>             <C>             <C>             <C>             <C>
                                                        2000            1999            1998            1997            1996
                                                    -------------     ------------    -----------     ----------      ----------
                       SUMMARY OF OPERATIONS
Interest income - tax equivalent(1)                     $53,303         $45,196         $35,329         $32,415         $28,739
Interest expense                                         27,405          21,543          16,963          15,525          14,012
                                                    -------------     ------------    -----------     ----------      ----------
  Net interest income - tax equivalent(1)                25,898          23,653          18,366          16,890          14,727
Tax equivalent adjustment(1)                               (917)           (806)           (604)           (504)           (524)
                                                    -------------     ------------    -----------     ----------      ----------
  Net interest income                                    24,981          22,847          17,762          16,386          14,203
Provision for loan losses                                (1,200)         (1,060)           (980)           (620)           (240)
Noninterest income                                        5,825           5,125           4,916           4,168           3,422
Noninterest expense                                      19,176          17,534          13,610          12,557          11,191
                                                    -------------     ------------    -----------     -----------     ----------

Income before income taxes                               10,430           9,378           8,088           7,377           6,194
Income tax expense                                        3,514           3,027           2,711           2,569           2,103
                                                    -------------     ------------    -----------     -----------     ----------

NET INCOME                                              $ 6,916         $ 6,351         $ 5,377         $ 4,808         $ 4,091
                                                    =============     ============    ===========     ===========     ==========


                                         PER SHARE DATA (2)
Net income                                              $  1.75         $  1.61         $  1.36         $  1.22         $  1.04
Cash dividends                                             0.43            0.39            0.34            0.31            0.25
Shareholders' equity, end of year                         13.37           11.62           10.82            9.77            8.80


                                  SELECTED ACTUAL YEAR-END BALANCES
Total assets                                           $741,147        $645,149        $483,969        $439,029        $414,391
Earning assets                                          676,235         580,858         449,539         406,954         378,345
Investment securities available-for-sale                 78,857          79,722          76,956          66,577          88,206
Investment securities held-to-maturity                    4,484           4,712           4,879           5,268           6,156
Loans held for sale                                       5,949           3,174          10,086           7,640           5,877
Loans                                                   537,725         489,070         353,828         312,227         268,940
Allowance for loan losses                                (5,071)         (4,618)         (4,241)         (3,464)         (3,198)
Total deposits                                          578,297         522,247         395,546         355,195         341,550
Noninterest-bearing demand deposits                      70,866          63,206          48,657          42,752          43,579
Interest-bearing demand deposits                         69,528          67,729          54,294          47,054          47,945
Savings deposits                                        161,456         161,573         116,014          96,974          87,938
Time deposits                                           276,447         229,739         176,581         168,415         162,088
FHLB advances                                            35,737          30,027          23,854          19,886           9,265
Note payable                                             11,550          12,950               -               -               -
Shareholders' equity                                     52,801          45,785          42,614          38,469          34,646

<PAGE>

                                      SELECTED AVERAGE BALANCES
Total assets                                           $674,736        $600,451        $455,268        $416,957        $377,623
Earning assets                                          616,033         554,423         422,772         387,277         348,218
Securities                                               83,868          98,489          76,928          80,606          91,802
Loans held for sale                                       3,392           5,967           6,095           5,522           4,989
Loans                                                   517,010         440,615         327,412         289,197         242,286
Allowance for loan losses                                (5,010)         (4,319)         (3,766)         (3,254)         (3,210)
Total deposits                                          547,601         486,489         371,067         345,739         313,621
Noninterest-bearing demand deposits                      58,723          51,229          39,312          35,728          35,655
Interest-bearing demand deposits                         69,024          62,858          48,777          47,945          45,086
Savings deposits                                        163,182         157,618         108,019          94,360          82,535
Time deposits                                           256,672         214,784         174,959         167,706         150,345
FHLB advances                                            26,142          23,359          22,101          13,940           8,458
Note payable                                             12,423          10,863               -               -               -
Shareholders' equity                                     49,017          44,499          40,814          36,530          33,133


                                  RATIOS BASED ON AVERAGE BALANCES
Loans to deposits (3)                                     94.41%          90.57%          88.24%          83.65%          77.25%
Return on average assets                                   1.02%           1.06%           1.18%           1.15%           1.08%
Return on average equity                                  14.11%          14.27%          13.17%          13.16%          12.35%
Dividend payout ratio                                     24.67%          24.25%          24.94%          24.98%          24.18%
Leverage capital ratio                                     5.79%           5.42%           8.82%           8.76%           8.59%
Efficiency ratio (4)                                      60.45%          60.93%          58.46%          59.63%          61.66%


                                             OTHER DATA
Number of employees (FTE)                                   303             275             220             213             205
Average common shares outstanding (2)                 3,950,297       3,940,024       3,940,123       3,937,399       3,937,531
Cash dividends declared                                  $1,706          $1,540          $1,341          $1,201            $989

</TABLE>

(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.

<PAGE>



The Corporation earned $6,916,000,  $6,351,000, and $5,377,000, or $1.75, $1.61,
and $1.36 per share for the years  ended  December  31,  2000,  1999,  and 1998,
respectively.  The increase in net interest  income  accounted for a significant
portion of the 8.9% and 18.1% earnings  increases recorded by the Corporation in
2000 and  1999,  respectively.  In  addition  to the  increase  recorded  in net
interest  income,  2000 earnings were boosted by NSF and ATM income,  as well as
investment  product  commissions  generated by the Bank's  investment  brokerage
department.  These noninterest income increases,  however, were partially offset
by lower net gain on loan sales in the  secondary  mortgage  market,  along with
increases in the Corporation's provision for loan losses, salaries and benefits,
intangible  amortization,  depreciation,  and other general  operating  expenses
incurred  in  connection  with the opening of the two new  branches  and the new
mortgage  lending  department  during the year.  In general,  1999 earnings were
impacted in a similar fashion  predominately due to the acquisition of the three
branch offices in March 1999.

Return on average  assets  (ROA) was  1.02%,  1.06%,  and 1.18% for the  periods
ending December 31, 2000, 1999, and 1998, respectively,  while return on average
equity (ROE) was 14.11%, 14.27%, and 13.17% 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 1996
through 2000.  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,
                                                2000                            1999                            1998
                                       ------------------------------  ---------------------------  ----------------------------
<S>                                   <C>        <C>       <C>       <C>        <C>      <C>       <C>       <C>        <C>
                                        Average              Average   Average             Average  Average              Average
ASSETS                                  Balance   Interest   Rate      Balance   Interest  Rate     Balance   Interest   Rate
                                       ---------  --------   --------  --------  --------  -------  --------  --------   -------
Interest earning assets
  Securities
    Taxable                             $52,089     $3,318      6.37%  $66,538     $3,831    5.76%  $55,973     $3,217     5.75%
    Tax-exempt (1)                       34,737      2,521      7.26%   33,438      2,317    6.93%   20,978      1,502     7.16%
    Unrealized loss on AFS securities    (2,958)         -              (1,487)         -               (23)         -
                                       ---------  --------   --------  --------  --------  -------  --------  --------   -------
      Total securities                   83,868      5,839      6.96%   98,489      6,148    6.24%   76,928      4,719     6.13%
  Loans (1)(2)
    Commercial                          301,930     27,766      9.20%  251,732     21,951    8.72%  153,030     13,916     9.09%
    Real estate                         166,930     13,753      8.24%  143,711     11,587    8.06%  129,380     11,012     8.51%
    Installment and other consumer       51,379      5,150     10.02%   51,139      5,000    9.78%   51,097      4,975     9.74%
    Other                                   163         11      6.75%        -          -    0.00%        -          -     0.00%
                                       ---------  --------   --------  --------  --------  -------  --------  --------   -------
      Total loans                       520,402     46,680      8.97%  446,582     38,538    8.63%  333,507     29,903     8.97%

  Interest-bearing balances with
    other financial institutions          2,335        144      6.17%      344         18    5.23%      153          8     5.23%
  FHLB stock                              2,123        175      8.24%    1,808        145    8.02%    1,464        117     7.99%
  Federal funds sold                      7,305        465      6.37%    7,200        347    4.82%   10,720        582     5.43%
                                       ---------  --------   --------  --------  --------  -------  --------  --------   -------
  Total earning assets                  616,033    $53,303      8.65%  554,423    $45,196    8.15%  422,772    $35,329     8.36%
                                       =========  ========   ========  ========  ========  =======  ========  ========   =======

Noninterest earning assets
  Allowance for loan losses              (5,010)                        (4,319)                      (3,766)
  Premises and equipment                 11,112                          9,087                        6,417
  Cash and due from banks                22,126                         21,830                       16,309
  Accrued interest and other assets      30,475                         19,430                       13,536
                                       ---------                       --------                     --------
  Total assets                         $674,736                       $600,451                     $455,268
                                       =========                       ========                     ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities
  Deposits
    Interest-bearing demand deposits     $69,024      $741      1.07%  $62,858       $714    1.14%  $48,777       $610     1.25%
    Savings deposits                     163,182     7,254      4.45%  157,618      5,994    3.80%  108,019      4,339     4.02%
    Time deposits                        256,672    15,021      5.85%  214,784     11,316    5.27%  174,959      9,957     5.69%
                                       ---------- --------   --------  --------  --------  -------  --------  --------   -------
      Total interest-bearing deposits    488,878    23,016      4.71%  435,260     18,024    4.14%  331,755     14,906     4.49%
  Borrowed funds
    Short-term borrowings                 32,482     1,773      5.46%   30,168      1,358    4.50%   15,581        712     4.57%
    FHLB advances                         26,142     1,609      6.15%   23,359      1,412    6.04%   22,101      1,345     6.09%
    Note payable                          12,423     1,007      8.11%   10,863        749    6.89%        -          -     0.00%
                                       ---------- --------   --------  --------  --------  -------  --------  --------   -------
      Total borrowed funds                71,047     4,389      6.18%   64,390      3,519    5.47%   37,682      2,057     5.46%
                                       ---------- --------   --------  --------  --------  -------  --------  --------   -------
  Total interest-bearing liabilities     559,925   $27,405      4.89%  499,650    $21,543    4.31%  369,437    $16,963     4.59%
                                                  ========   ========            ========  =======            ========   =======


Noninterest-bearing liabilities
  Noninterest-bearing demand deposits     58,723                        51,229                       39,312
  Accrued interest and other liabilities   7,071                         5,073                        5,705
  Shareholders' equity                    49,017                        44,499                       40,814
                                       ----------                      --------                     --------
  Total liabilities and
    shareholders' equity                $674,736                      $600,451                     $455,268
                                       ==========                      ========                     ========


Interest margin recap
  Net interest income and
    interest rate spread                           $25,898      3.76%             $23,653    3.84%             $18,366     3.76%
                                                  ========   ========            ========  =======            ========   =======
  Net interest income margin                                    4.20%                        4.27%                         4.34%
                                                             ========                      =======                       =======

</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 $1,309 for 2000,  $1,192 for
     1999 and $1,090 for 1988.
<PAGE>

Table 3 - Net Interest Earning Assets  illustrates net  interest-earning  assets
and liabilities for 2000, 1999, and 1998.

<TABLE>

---------------------------------------------------------------------------------------------------------------------------------
                                             Table 3 - Net Interest-Earning Assets
---------------------------------------------------------------------------------------------------------------------------------

<S>                                                                <C>                     <C>                     <C>
                                                                   2000                    1999                    1998
                                                          ----------------------- ----------------------- -----------------------
Average interest-earning assets.......                         $616,033                $554,423                $422,772
Average interest-bearing liabilities..                          559,925                 499,650                 369,437
                                                          ----------------------- ----------------------- -----------------------

               Net interest-earning assets                      $56,108                 $54,773                 $53,335
                                                          ======================= ======================= =======================
</TABLE>
<PAGE>


Table 4 - Volume and Rate Analysis  depicts the dollar effect of volume and rate
changes  from  1998  through  2000.   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>

-------------------------------------------------------------------------------------------------------------------------------
                                                             Table 4 - Volume/Rate Analysis
-------------------------------------------------------------------------------------------------------------------------------


                                                    2000-1999                                           1999-1998
                                   -----------------------------------------------------------------------------------------------

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

Loans                                 $8,142           $6,573         $1,569            $8,635           $9,796         ($1,161)
Securities
  Taxable                               (513)          (1,024)           511               614              534              80
  Tax-exempt                             204               92            112               815              865             (50)
Interest-bearing balances with
 other financial institutions            126              122              4                10               10               -
FHLB stock                                30               26              4                28               28               -
Federal funds sold and
  overnight balances                     118                5            113              (235)            (175)            (60)
                                   -----------------------------------------------------------------------------------------------

Total interest income                 $8,107           $5,794         $2,313            $9,867          $11,058         ($1,191)
                                   ===============================================================================================



INTEREST EXPENSE

Interest-bearing DDA                     $27              $68          ($41)              $104             $164            ($60)
Savings deposits                       1,260              218         1,042              1,655            1,897            (242)
Time deposits                          3,705            2,363         1,342              1,359            2,140            (781)
Short-term borrowings                    415              110           305                646              657             (11)
FHLB advances                            197              171            26                 67               76              (9)
Note payable                             258              116           142                749              749               -
                                   -----------------------------------------------------------------------------------------------

Total interest expense                $5,862           $3,046        $2,816             $4,580           $5,683          ($1,103)
                                   ===============================================================================================

Net Interest income                   $2,245           $2,748         ($503)            $5,287           $5,375             ($88)
                                   ===============================================================================================


</TABLE>



<PAGE>



Net interest income on a tax equivalent basis for 2000 was 9.5% higher than that
for 1999,  while the net interest  margin for 2000 was 4.20%,  or 7 basis points
lower than the prior year. Tax  equivalent net interest  income was 28.8% higher
in 1999 compared to 1998, while the net interest margin decreased 7 basis points
to 4.27% from that of 1998.

The  Corporation  continued its loan growth in 2000, as average loans  increased
$73,820,000,  or 16.5%, which led to higher net interest income during the year.
At the same time the Corporation  was adding to its loan portfolio,  the Federal
Reserve's Open Market  Committee  (FOMC) was raising  interest  rates.  The FOMC
increased  interest  rates three times during 2000  totaling  100 basis  points.
Although the increased interest rates led to higher rates charged on loans being
booked,  the  interest  rate  increase  had a  more  significant  impact  on the
Corporation's  cost of funds,  as  interest-bearing  liabilities  repriced  at a
faster pace than the  interest-earning  assets. While the interest rate increase
impacted the interest-bearing  liabilities more than it did the interest-earning
assets,  the increase in net earning asset volume more than offset the effect of
higher interest rates, leading to increased net interest income.

     The growth experienced by the Corporation, predominately through the branch
acquisition in mid-March  1999,  led to higher net interest  income in 1999. The
key element in the branch  acquisition  was the  successful  deployment of funds
obtained in that transaction.  Virtually all of the $45,266,000 cash received in
the branch acquisition was shifted into the loan portfolio, primarily commercial
loans, as of June 30, 1999. Even though the interest rate  environment  remained
relatively low during the first six months of 1999, the yields  associated  with
loans were at a higher rate than any other investment alternative.  The interest
rate environment increased slightly during the latter half of the year, with the
most  significant  increase of 1999 occurring in November,  when the FOMC raised
interest rates 50 basis points. However, the lower and more stable interest rate
environment that existed during the first ten and one-half months led to a lower
net interest margin for the year. Overall,  the increase in net interest-earning
asset  volume  during the year more than  adequately  compensated  for the lower
yields.



                   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  and  forecasted
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.

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.

<PAGE>

<TABLE>

---------------------------------------------------------------------------------------------------------------------------------
                                                            Table 5 - Analysis of Allowance for Loan Losses
---------------------------------------------------------------------------------------------------------------------------------

<S>                                         <C>                 <C>                <C>               <C>               <C>
                                            2000                1999               1998              1997              1996
                                      ------------------ ----------------- ------------------- ------------------ ---------------

Balance at beginning of year               $4,618              $4,241             $3,464            $3,198             $3,200

Loans charged-off
  Commercial and agricultural                (503)               (363)               (37)             (126)              (202)
  Real estate                                   0                (114)                 0                 0                  0
  Installment                                (374)               (352)              (374)             (424)              (343)
                                      ------------------ ----------------- ------------------- ------------------ ---------------
                Total charge-offs            (877)               (829)              (411)             (550)              (545)
                                      ------------------ ----------------- ------------------- ------------------ ---------------

Charge-offs recovered
  Commercial and agricultural                  61                  49                124               126                250
  Real estate                                   0                  35                  0                 0                  0
  Installment                                  69                  62                 84                70                 53
                                      ------------------ ----------------- ------------------- ------------------ ---------------
                 Total recoveries             130                 146                208               196                303
                                      ------------------ ----------------- ------------------- ------------------ ---------------

Net loans charged-off                        (747)               (683)              (203)             (354)              (242)
Current year provision                      1,200               1,060                980               620                240
                                      ------------------ ----------------- ------------------- ------------------ ---------------

Balance at end of year                     $5,071              $4,618             $4,241            $3,464             $3,198
                                      ================== ================= =================== ================== ===============

Loans at year end, excluding
  loans held for sale                    $537,725            $489,070           $353,828          $312,227           $268,940

Ratio of allowance to loans
  at year end                                0.94%               0.94%              1.20%             1.11%              1.19%

Average loans                            $517,010            $440,615           $327,412          $289,197           $242,286

Ratio of net loans charged-off
  to average loans                           0.14%               0.16%              0.06%             0.12%              0.10%


                                                                  Allocation of allowance for loan losses at December 31,
                                            2000                1999               1998              1997              1996
                                      ------------------ ----------------- ------------------- ------------------ ---------------

Commercial and agricultural                $3,829              $2,430             $2,499            $1,200             $1,245
Real estate                                   305                 293                486               340                 50
Installment                                   514                 601                570               560                550
Unallocated                                   423               1,294                686             1,364              1,353
                                      ------------------ ----------------- ------------------- ------------------ ---------------
    Total                                  $5,071              $4,618             $4,241            $3,464             $3,198
                                      ================== ================= =================== ================== ===============

</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>

---------------------------------------------------------------------------------------------------------------------------------
                                                        Table 6 - Nonperforming Assets
---------------------------------------------------------------------------------------------------------------------------------

                                                                      As of December 31,
                                         -----------------------------------------------------------------------------------------
<S>                                             <C>                 <C>                   <C>               <C>           <C>
                                                2000                1999                  1998              1997          1996
                                         ----------------- ---------------------  ------------------- ---------------- -----------
Principal balance
  Nonaccrual                                    $2,718              $622                 $1,468             $127          $178
  Restructured                                      55               114                    197              350           482
  90 days or more past due                       1,052               584                    775              505           735
                                         ----------------- ---------------------  ------------------- ---------------- -----------

            Total nonperforming loans           $3,825            $1,320                 $2,440             $982        $1,395
                                         ================= =====================  =================== ================ ===========

Nonperforming loans as a percent
   of loans                                       0.71%             0.27%                  0.69%            0.31%         0.52%

Other real estate owned                            $72              $487                    $22             $230          $116

OREO as a percent of loans                        0.01%             0.10%                  0.01%            0.07%         0.04%

Allowance as a percent of
  nonperforming loans                           132.58%           349.85%                173.81%          352.75%       229.25%


For nonaccrual and restructured loans for the years ended December 31:
   Interest income under
      original terms                              $362               $53                   $146              $55           $74
   Interest income which
      was recorded                                 150                20                     17               27            56
</TABLE>


<PAGE>

The  consolidated  provision  for loan losses was  $1,200,000,  $1,060,000,  and
$980,000  for 2000,  1999,  and 1998,  respectively.  Although  the  Corporation
experienced  an  upward  trend  in  loan  delinquency  ratios,  charge-offs  and
nonperforming  loans,  management  continues to believe overall asset quality is
satisfactory.  Historically,  the  Corporation  has  experienced  relatively low
levels of  nonperforming  loans,  and management  believes the current levels of
nonperforming  loans are  manageable  in the normal  course of  business.  While
nonperforming  loans as a  percent  of loans and as a  percent  of total  assets
increased from 1999, these ratios were comparable to 1998.  Additionally,  while
charge-offs  increased slightly in 2000, the ratio of net charge-offs to average
loans was slightly lower in 2000 compared to 1999.


Management  increased the provision for loan losses to $1,200,000  for 2000 as a
result of continued loan growth and increased  charge-offs.  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  remained at .94%,  the same
level as in 1999.


The $80,000 increase in the 1999 provision for loan losses was mainly due to the
Corporation's  increased  loan  growth,  offset  to a  certain  degree  by lower
nonperforming loan totals and declining delinquency ratios.


Total  nonperforming  loans  increased  $2,505,000 to $3,825,000 at December 31,
2000 as compared to December 31, 1999. The most significant  changes occurred in
the nonaccrual and 90 days or more past due categories, where balances increased
$2,096,000 and $468,000,  respectively.  The majority of the nonaccrual increase
resulted  from  ten  commercial  loan   relationships   totaling   approximately
$2,449,000  being  added to the  nonaccrual  list,  but nearly  one-half of this
increase  related to one borrower.  Three loans totaling  approximately  $61,000
were  removed  from the list during the same period.  Other  nonperforming  loan
activity   during  the  year  included   charge-offs   and  paydowns,   totaling
approximately  $145,000  and  $147,000,  respectively.  Of  the  total  $468,000
increase in loans past due 90 days or more,  approximately $276,000, or 59%, was
attributed to the mortgage loan portfolio, while approximately $157,000, or 34%,
represented an increase in the installment loan area.

As  of  December  31,  2000,  the  Corporation   had  twenty  credits   totaling
approximately  $5,175,000  which  management  believed  met the  criteria for an
impaired loan. Impaired loan balances increased  $4,529,000 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.


The  $415,000  change in OREO  during 2000 was related to the sale of three 1999
foreclosed  properties,  offset by the  addition of one property  foreclosed  in
August 2000.  As of December 31,  2000,  there were a total of three  parcels of
other real estate held by the  Corporation  with a remaining total book value of
$72,000.

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.

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, 2000, the  Corporation  had loans totaling  $4,514,000 on its
watch list which were not included in impaired or nonperforming loans.


<PAGE>

                         NONINTEREST INCOME AND EXPENSE

A  listing  of  noninterest  income  and  expense  from  1998  through  2000 and
percentage changes between years is included in Table 7 - Noninterest Income and
Expense.

<TABLE>

--------------------------------------------------------------------------------------------------------------------------------
                                        Table 7 - NONINTEREST INCOME & EXPENSE
--------------------------------------------------------------------------------------------------------------------------------

<S>                                          <C>              <C>               <C>             <C>                     <C>
                                                                % change                            % change
                                                2000            from '99            1999            from '98            1998
                                            ------------    ----------------    ------------    ----------------    ------------
Noninterest Income
Income from fiduciary activities               $1,187              4.67%            $1,134            17.63%          $  964
Service charges on deposit accounts             1,880             18.91%             1,581            20.78%           1,309
Investment product commissions                    758            138.36%               318           -10.92%             357
Other operating income                          1,353              4.56%             1,294            26.24%           1,025

                                            ------------    ----------------    ------------    ----------------    ------------
                                                5,178             19.67%             4,327            18.39%           3,655

Net gain on loan sales                            659            -30.04%               942           -24.94%           1,255
Net realized gain/(loss) on securities            (12)           -91.67%              (144)        -2500.00%               6
                                            ------------    ----------------    ------------    ----------------    ------------

                  Total noninterest income     $5,825             13.66%            $5,125             4.25%          $4,916
                                            ============    ================    ============    ================    ============



                                                               % change                            % change
                                                2000            from '99            1999            from '98            1998
                                            ------------    ----------------    ------------    ----------------    ------------
Salaries and employee benefits                $10,681              8.59%            $9,836            19.86%          $8,206
Occupancy expenses, net                         1,247             16.22%             1,073            20.43%             891
Equipment expenses                              1,731             31.74%             1,314            24.67%           1,054
Other operating expenses                        5,517              3.88%             5,311            53.54%           3,459
                                            ------------    ----------------    ------------    ----------------    ------------

                 Total noninterest expense    $19,176              9.36%           $17,534            28.83%         $13,610
                                            ============    ================    ============    ================    ============

</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 13.7% to $5,825,000 in 2000 compared to $5,125,000
in 1999. Primary sources of noninterest  income were from fiduciary  activities,
service charges, and net gain on secondary market mortgage loan sales. Excluding
the net  loss on  securities  in 2000,  noninterest  income  increased  10.8% to
$5,837,000.

Income from fiduciary  activities  increased 4.7% during 2000 primarily due to a
departmental  fee  schedule  adjustment.  Service  charges on  deposit  accounts
increased 18.9% during the current year as a result of an increase in the number
of accounts  being  charged and an increase in the service  charge fee  schedule
that went into effect mid-June.  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.  Investment product  commissions  increased 138.4% to $758,000 during
2000 which was attributed to increased  brokerage  activity and the reallocation
of accumulated  money market  investments  into the stock market  throughout the
year.  The  Corporation   continued  to  record  an  increasing  number  of  ATM
transactions  during  2000,  and as a result,  higher ATM fees  accounted  for a
significant portion of the 4.6% increase in other operating income.

Net gain on loan sales  originated in the  secondary  mortgage  market  declined
30.0% in 2000, as annual sales volume declined 28.2% from the previous year. New
home growth in addition to home  refinancing  activities were slowed as the FOMC
tightened  monetary  policy and increased  the  borrowing  rates of consumers on
three separate occasions during 2000. Activity from the origination and sales of
mortgage loans is extremely dependent upon the current interest rate environment
as well as customer  demand.  The Corporation has been developing  relationships
with builders and real estate agents,  and, given a stable or declining interest
rate  environment,  management  expects  this area of activity to be a continued
source of significant  income.  The statement in this paragraph  relating to the
secondary  market  mortgage  department and its operations is a  forward-looking
statement  which  may  or may  not be  accurate  due  to  the  impossibility  of
predicting  future economic and business events and the level of future interest
rates.

Noninterest  income  recorded  in 1999  increased  4.3%  compared  to 1998.  New
accounts secured, along with an adjustment in the fee schedule and higher market
values of trust assets due to the strong  performance of the stock market,  were
all factors in the 17.6% increase in income from fiduciary  activities.  Service
charges on deposit  accounts  increased  20.8% during 1999. The majority of this
increase  related  to  higher  volume as a result of the  Jasper  County  branch
acquisitions.  Investment product commissions  declined 10.9% primarily due to a
lower number of transactions  executed during the year. Increased ATM fees and a
secondary   mortgage  market  department   volume  incentive   received  by  the
Corporation  from its loan  investors  accounted  for the  majority of the 26.2%
increase in other operating income.

Total noninterest expense rose 9.4% to $19,176,000 in 2000 compared to the 28.8%
increase recorded in 1999.  Salaries and employee benefits increased 8.6% during
2000. A large portion of this increase was  attributable  to the staffing of the
two new branches and the new Mortgage  Alternative  Department opened during the
year.  Increased  commission  expense,  primarily due to the successful  results
posted by the Investment  Center,  in addition to increased costs experienced in
health insurance coverage were also contributing  factors in the higher expenses
incurred.  However,  partially  offsetting  these  higher  costs was a  $376,000
reduction  in the value of the  officer's  stock  appreciation  rights  due to a
decline in the Corporation's stock price during the year.

Net occupancy and equipment  expenses  increased 16.2% and 31.7%,  respectively,
during 2000. While a certain amount of these increases related to the opening of
the two new branches and the Mortgage  Alternative  Department,  the majority of
the total  increase was related to higher  depreciation  expense.  The increased
depreciation expense was not only the result of the 1999 branch acquisitions and
the new branch and lending department openings during the current year, but also
the investment the Corporation has made in new technology.  A new  communication
system,  along with a wide-area network,  teller system and proof imaging system
have been installed to enable the Corporation to remain  competitive  within the
market area while also improving overall operational efficiencies.

Other operating  expenses  increased 3.9% in 2000, with approximately 69% of the
increase  attributable  to the full-year  effect of the intangible  amortization
expense related to the 1999 Jasper County branch acquisitions.  The remainder of
the  increase  related to ongoing  operational  expenses of the new branches and
mortgage  department  for items such as  telephone,  advertising,  and  employee
education,  in addition to  increased  expenses  associated  with the higher ATM
transaction volumes.


Total noninterest expense increased 28.8% in 1999 compared to 1998 predominately
due to operational  costs  associated in the Jasper County branch  acquisitions.
Salaries and employee  benefits,  net occupancy  expenses,  and other  operating
expenses were all significantly impacted as a result of the increase in staffing
levels,   improvements  made  at  the  branch  facilities,   and  other  ongoing
operational and transitional costs, including intangible amortization,  incurred
with the  operation  of the  Jasper  County  branches.  While a  portion  of the
increase  in the  equipment  category  related to the branch  acquisitions,  the
majority of the increase was  attributed to the  infrastructure  foundation  and
Y2K-related technology upgrades implemented during the year.


<PAGE>


                                  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  had regular tax and alternative  minimum tax net operating loss
carryforwards which were fully utilized during 1998.

The Corporation's  effective tax rate was 33.7%, 32.3%, and 33.5% in 2000, 1999,
and 1998, respectively. Further tax information regarding the Corporation can be
found in Note 1 and Note 12 to the consolidated financial statements.



                               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.

Table 8 - Securities and Securities  Maturity  Schedule  summarizes the carrying
values of  securities  from 1998 through 2000 and the maturity  distribution  at
December 31, 2000, 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.

<PAGE>

<TABLE>

-----------------------------------------------------------------------------------------------------------------------------
                              Table 8 - SECURITIES
-----------------------------------------------------------------------------------------------------------------------------

                                                                         At December 31,
                                                      --------------------------------------------------------------------------
<S>                                                            <C>                      <C>                     <C>
                                                               2000                     1999                    1998
                                                      ------------------------- --------------------- --------------------------
Securities available-for-sale
  U.S. Government & agencies                                   4,193                  $ 5,005                  $14,110
  States and political subdivisions                           31,012                   27,268                   23,637
  Corporate obligations                                        4,001                    1,973                    2,513
  Mortgage-backed and asset-backed                            37,105                   42,888                   36,696
  Other securities                                             2,546                    2,588                        -
                                                      ------------------------- --------------------- --------------------------

                Total securities available-for-sale          $78,857                  $79,722                  $76,956


Securities held-to-maturity
  States and political subdivisions                          $ 4,484                  $ 4,712                  $ 4,879

                                                      ------------------------- --------------------- --------------------------
                 Total securities held-to-maturity           $ 4,484                  $ 4,712                  $ 4,879


                                                      ------------------------- --------------------- --------------------------
                         Total securities                    $83,341                  $84,434                  $81,835
                                                      ========================= ===================== ==========================

</TABLE>


<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                          $  0          -        $  -           -        $    0          -       $     0       -
  Federal agencies  -                       -          -         1,201       6.50%       2,992       6.01%            -       -
  State and municipal (1)                   -          -         1,624       6.31%       6,762       7.15%       22,626    7.70%
  Corporate obligations                     -          -         4,001       6.60%           -          -             -       -
  Mortgage-backed and asset-backed          -          -           240       6.24%       1,137       7.61%       35,728    6.87%
  Other securities                          -          -             -          -        1,515       5.79%        1,031    5.97%

                                       ----------------------  ---------------------  ---------------------  -------------------
           Total available-for-sale      $  0                   $7,066                 $12,406                  $59,385
                                       =========               =========              ===========            ===========


Held-to-maturity
  State and municipal (1)                $415        7.02%      $1,353       7.97%     $ 1,632       8.17%      $ 1,084    8.91%

                                       ---------               ---------              -----------            -----------
           Total held-to-maturity        $415                   $1,353                 $ 1,632                  $ 1,084
                                       =========               =========              ===========            ===========

</TABLE>

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



<PAGE>

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,  2000.  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, 2000. 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."

Total  securities  were  $83,341,000 and $84,434,000 as of December 31, 2000 and
1999,  respectively.  Although the total securities  balance decreased only 1.3%
during 2000, the average balance actually decreased $14,621,000,  or 14.8%. This
decrease in the average balance was  predominately  attributed to the short-term
investments made in 1999 with the proceeds  received in the Jasper County branch
acquisition.   Those   proceeds   were   ultimately   utilized  in  funding  the
Corporation's  ongoing loan growth  which is discussed in greater  detail in the
"Loans" section.  Proceeds of matured or called  securities during the year were
reinvested  into states and political  subdivisions  and  corporate  obligations
sector of the  portfolio in order to take  advantage of the higher  yields given
the higher interest rate environment.


Management's   security  strategy  includes  utilizing  short-term   securities,
adjustable rate instruments,  and easily marketable securities primarily to fund
the continuing growth of the loan portfolio.  Tax-free and intermediate  taxable
bonds  are  used  to  further  enhance  earnings.   As  of  December  31,  2000,
approximately 94% of the total investment  security  portfolio was classified in
the available-for-sale category, which allows flexibility in the asset/liability
management  function.  Sell  strategies  are  executed,  on  occasion,  when the
interest  rate  environment  provides  the  opportunity  to  boost  the  overall
portfolio performance.  As a result of the higher interest rate environment that
existed, management completed a bond swap in July 2000. Although the transaction
resulted in a minimal net loss, the higher yields and  additional  earnings more
than offset the Corporation's loss by year-end.

As of December 31, 2000 and 1999, the security  portfolio held structured  notes
totaling  $3,998,000 and  $3,997,000,  respectively.  The investment  policy has
specific guidelines  describing total holdings,  maturity,  and price volatility
parameters regarding these types of security  instruments.  All structured notes
are U.S. Government agency issues.

The change which occurred in the unrealized gain/loss on securities between 2000
and 1999 was a result of the decrease in the interest rate  environment  in late
2000,  in  conjunction  with the  change  in the  portfolio  mix.  Although  the
Corporation recorded small net losses in its investment activity during 2000 and
1999, it is not likely the Corporation will realize significant future losses in
the security  portfolio to satisfy loan growth or liquidity needs. The change in
equity due to market value fluctuations in the available-for-sale  portfolio are
not  used  in  the  regulatory  capital  calculation.  This  paragraph  includes
forward-looking  statements that are based on management's assumptions regarding
future economic and business conditions.  Such economic and business assumptions
are  inherently  uncertain  and  subject  to risk and may  prove to be  invalid,
causing management to respond to the present circumstances and conditions.



<PAGE>

                                      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 which 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, 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.

<TABLE>

---------------------------------------------------------------------------------------------------------------------------------
                                                                Table 9 - Loans Outstanding
---------------------------------------------------------------------------------------------------------------------------------

                                                                        At December 31,
                                      -------------------------------------------------------------------------------------------

<S>                                         <C>                <C>                <C>                <C>                <C>
                                            2000               1999               1998               1997               1996
                                      -------------------------------------------------------------------------------------------

Commercial and agricultural               $215,087           $192,760           $115,198           $112,586            $96,276
Real estate - construction                  54,768             47,375             28,043             17,117             12,194
Real estate - mortgage                     212,190            197,181            160,655            127,574            104,547
Installment                                 50,696             51,754             49,932             54,950             54,924
Other                                        4,984                  0                  0                  0                999
                                      -------------------------------------------------------------------------------------------

  Total loans                             $537,725           $489,070           $353,828           $312,227           $268,940
                                      ===========================================================================================


</TABLE>


<TABLE>
                                                          Composition of loan portfolio by type at December 31,

<S>                                         <C>                <C>                <C>                <C>                <C>
                                            2000               1999               1998               1997               1996
                                      -------------------------------------------------------------------------------------------
Commercial and agricultural                 40.00%             39.41%             32.56%             36.06%             35.80%
Real estate - construction                  10.18%              9.69%              7.93%              5.48%              4.54%
Real estate - mortgage                      39.46%             40.32%             45.40%             40.86%             38.87%
Installment                                  9.43%             10.58%             14.11%             17.60%             20.42%
Other                                        0.93%              0.00%              0.00%              0.00%              0.37%

                                      -------------------------------------------------------------------------------------------
  Total loans                              100.0%             100.0%             100.0%             100.0%             100.0%
                                      ===========================================================================================
</TABLE>

<PAGE>


Much like the past four years, the Corporation  continued its growth of the loan
portfolio.  Although actual balances rose $48,655,000, or 9.9%, during 2000, the
average  balances  increased  16.5% from the prior  year.  The  average  balance
increase was due, in large part, to the Jasper County  branch  acquisitions,  as
the excess deposits  acquired in that  transaction were used to fund loan growth
opportunities.  These loans were on the  Corporation's  books since the last six
months of 1999.

The commercial and agricultural  sector of the loan portfolio grew  $22,327,000,
or 11.6%, in 2000, and was the largest sector within the portfolio. Supported by
the  ongoing low  unemployment  rates,  particularly  in the  Tippecanoe  County
market,  the continuing  growth and economic  prosperity has led the increase in
this category.

Real estate  construction and mortgage loans grew 15.6% and 7.6%,  respectively,
during  2000.  Many of the same  reasons  for the growth in the  commercial  and
agricultural  sector also apply to these two sectors of the loan portfolio.  The
growth and expansion in and around the Greater Lafayette area has resulted in an
increasing  number  of  construction  projects,  as well as new  home  ownership
opportunities.

The Corporation also experienced home equity loan balance increases in excess of
50% during 2000.

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 2.0% in 2000.  The monitoring of the
indirect  automobile  line of business  remained a priority of  management,  and
although net charge-offs  increased for this loan type, overall installment loan
charge-offs increased only $15,000, or 5.2% from last year.

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, 2000, there were no concentrations of credits in excess of 10.0%.


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.
<PAGE>

<TABLE>

--------------------------------------------------------------------------------------------------------------------------------
                                                     Table 10 - Loan Liquidity
--------------------------------------------------------------------------------------------------------------------------------

                                                        Loan Maturities at December 31, 2000
                                        ----------------------------------------------------------------------------------------
<S>                                          <C>                <C>               <C>                  <C>
                                             1 Year             1 - 5               Over 5
                                             and Less           Years               Years              Total
                                        -----------------  -----------------    ---------------   ---------------
Commercial and agricultural                 $ 92,514           $115,118             $7,455           $215,087
Real estate - construction                    32,109             21,487              1,172             54,768
                                        -----------------  -----------------    ---------------   ---------------


          Total selected loans              $124,623           $136,605             $8,627           $269,855
                                        =================  =================    ===============   ===============

</TABLE>


<TABLE>


Sensitivity to Changes in Interest Rates

<S>                                                            <C>                  <C>
  Fixed rates                                                  $ 24,239             $7,864
  Variable rates                                                112,366                763
                                                           -----------------    ---------------

                           Total selected loans                $136,605             $8,627
                                                           =================    ===============

</TABLE>

<PAGE>


                                    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 $61,112,000, or 12.6%, in 2000. Influenced somewhat by the
rising  interest rate  environment,  approximately  68.5% of the total  increase
occurred in the time deposit category.


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>

--------------------------------------------------------------------------------------------------------------------------------
                                                            Table 11 - Deposit Information
--------------------------------------------------------------------------------------------------------------------------------

                                               2000                             1999                        1998
                                    --------------------------        --------------------------   --------------------------
<S>                                  <C>        <C>                     <C>         <C>             <C>         <C>
                                     Average        Average             Average      Average        Average        Average
                                     Balance        Rate                Balance      Rate           Balance        Rate
                                    ------------  ------------        ------------  ------------   ------------  ------------
Noninterest-bearing                  $58,723            -               $51,229           -          $39,312           -
Interest-bearing demand               69,024         1.07%               62,858        1.14%          48,777        1.25%
Savings deposits                     163,182         4.45%              157,618        3.80%         108,019        4.02%
Time deposits                        256,672         5.85%              214,784        5.27%         174,959        5.69%
                                    ------------  ------------        ------------  ------------   ------------  ------------

              Total deposits        $547,601         4.20%             $486,489        3.70%        $371,067        4.02%
                                    ============  ============        ============  ============   ============  ============


</TABLE>

<TABLE>

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

<S>                                               <C>                   <C>                             <C>
                                                  2000                          1999                       1998
                                          ----------------------       --------------------         ----------------------
3 months or less                                        $12,730              $12,638                      $9,273
3 through 6 months                                        7,462                4,422                       4,287
6 through 12 months                                      13,108                6,372                       4,230
Over 12 months                                           20,214               15,233                      10,438
                                          ----------------------       --------------------          ----------------------
                  Total                                 $53,514              $38,665                     $28,228
                                          ======================       ====================          ======================
</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 $4,303,000,  $5,514,000,  and $500,000 as of
December 31, 2000, 1999, and 1998, respectively.

<PAGE>



                                   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.



<TABLE>

-------------------------------------------------------------------------------------------------------------------
                                         Table 12 - Short-term Borrowings
-------------------------------------------------------------------------------------------------------------------


                                                                                As of December 31,
                                                                 --------------------------------------------------

<S>                                                                  <C>               <C>               <C>
                                                                     2000              1999              1998
                                                                 --------------   ---------------   ---------------

Repurchase agreements outstanding                                      $54,275           $24,645           $15,788
Treasury tax and loan open-end note                                      1,297             2,628               614
                                                                 --------------   ---------------   ---------------

                Total short-term borrowings                            $55,572           $27,273           $16,402
                                                                 ==============   ===============   ===============


Average balance of repurchase agreements
  during year                                                          $30,521           $28,428           $14,671

Maximum month-end balance of repurchase
  agreements during year                                                54,275            33,192            17,223

Weighted-average interest rate of
  repurchase agreements during year                                      5.39%             4.36%             4.47%

Weighted-average interest rate of
  repurchase agreements at end of year                                   5.76%             4.87%             4.20%

</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, 2000,
1999, and 1998. 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 U.S.  Government and U.S.  Government agency  securities,  along with
one-to-four family residential loans. FHLBI advances as of December 31, 2000 and
1999 were $35,737,000 and $30,027,000,  respectively.  The Corporation increased
its net FHLBI  advance  borrowings  during 2000  primarily to fund the continued
loan growth. The attractive  interest rates along with the fixed rate feature of
the  advances  made this a more  desirable  source of funds,  as  opposed to the
short-term nature of certain repurchase agreement contracts.

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, 2000.  The  outstanding  principal  balance of the note payable at
December 31, 2000 was $11,550,000.  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  quarterly by the  asset/liability  committee
(ALCO) 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 2000 and 1999.

<TABLE>

-------------------------------------------------------------------------------------------------------------------------------
                                                             Table 13 - Funding Uses and Sources
-------------------------------------------------------------------------------------------------------------------------------

                                                                    2000                                1999
                                               ---------------------------------------    -------------------------------------
<S>                                             <C>             <C>         <C>         <C>             <C>        <C>
                                                   Average        Increase/(decrease)       Average       Increase/(decrease)
                                                   Balance       Amount      Percent        Balance      Amount     Percent
                                               --------------- ----------- -----------    ------------- ---------- ------------
FUNDING USES
  Loans, total                                  $520,402         $73,820      16.53%         $446,582     $113,075     33.90%
  Taxable securities                              52,089         (14,449)    -21.72%           66,538       10,565     18.88%
  Tax-exempt securities                           34,737           1,299       3.88%           33,438       12,460     59.40%
  Interest-bearing balances with
    other financial institutions                   2,335           1,991     578.78%              344          191    124.84%
  FHLB stock                                       2,123             315      17.42%            1,808          344     23.50%
  Federal funds sold and overnight balances        7,305             105       1.46%            7,200       (3,520)   -32.84%
                                                --------------- ----------- -----------    ------------- ---------- ------------
                          Total uses            $618,991         $63,081      11.35%         $555,910     $133,115     31.48%
                                                =============== =========== ===========    ============= ========== ============

FUNDING SOURCES
  Noninterest-bearing deposits                   $58,723          $7,494      14.63%          $51,229      $11,917     30.31%
  Interest-bearing demand                         69,024           6,166       9.81%           62,858       14,081     28.87%
  Savings deposits                               163,182           5,564       3.53%          157,618       49,599     45.92%
  Time deposits                                  256,672          41,888      19.50%          214,784       39,825     22.76%
  Short-term borrowings                           32,482           2,314       7.67%           30,168       14,587     93.62%
  FHLB advances                                   26,142           2,783      11.91%           23,359        1,258      5.69%
  Note payable                                    12,423           1,560      14.36%           10,863       10,863         -

                                                --------------- ----------- -----------    ------------- ---------- ------------
                          Total sources         $618,648         $67,769      12.30%         $550,879     $142,130     34.77%
                                                =============== =========== ===========    ============= ========== ============
</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, 2000.

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

         Change        Dollar          Dollar           Percentage
        in Rates       Amount          Change           Change

          + 200        $ 51,812        $ (11,183)       (17.75) %
          + 100          57,345           (5,650)        (8.97)
          Base           62,995                -             -
          - 100          68,085            5,090          8.08
          - 200          72,626            9,631         15.29

The above  table  indicates  that as of December  31,  2000,  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, 2000,  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,  although these terms are not
used to  represent  overall  financial  condition.  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 result in the initiation of regulatory
action  by  the  appropriate  regulatory  agency.  If  an  institution  is  only
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  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. As of December 31, 1999, the Bank was categorized
as well-capitalized under the regulatory framework for prompt corrective action.
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,
2000, 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  $5,323,000,  or 11.1% in 2000  compared to the
$5,085,000,  or 11.9%  increase  posted in 1999. The amount of dividends paid by
the  Corporation  was increased to $1,706,000  in 2000.  Management's  effort to
increase  the  value  and  return  of  each  shareholder's   investment  in  the
Corporation is reflected by the increased dollar dividend payout, in addition to
the stock splits and dividends declared in the past few years.

At December 31, 2000, 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>

--------------------------------------------------------------------------------------------------------------------------
                                  Table 14 - Capital Ratios
--------------------------------------------------------------------------------------------------------------------------

                                              At December 31,
<S>                                         <C>           <C>
                                            2000          1999
                                      --------------- -------------
Tier 1 capital
  Shareholders' equity                      $52,801       $45,785
  Less:  Intangibles                        (13,007)      (13,737)
         Net unrealized losses on
         available-for-sale equity securities   (14)            -
  Add:  Unrealized loss on securities           263         1,956
                                       -------------- -------------
  Total Tier 1 capital                      $40,043       $34,004
                                       ============== =============

Total risk-based capital
  Tier 1 capital                            $40,043       $34,004
  Allowance for loan losses                   5,071         4,618
                                       -------------- -------------
  Total risk-based capital                  $45,114       $38,622
                                       ============== =============

Risk weighted assets                       $541,362      $483,307
                                       ============== =============
Average assets, fourth quarter             $692,178      $627,045
                                       ============== =============

Risk-based ratios
  Tier 1                                       7.40%         7.04%
                                       ============== =============
  Total risk-based capital                     8.33%         7.99%
                                       ============== =============

Leverage Ratios                                5.79%         5.42%
                                       ============== =============

</TABLE>



<PAGE>

                                    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>







                            LAFAYETTE BANCORPORATION
                               Lafayette, Indiana

                        CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2000, 1999 and 1998






                                    CONTENTS

REPORT OF INDEPENDENT AUDITORS

CONSOLIDATED FINANCIAL STATEMENTS

     CONSOLIDATED BALANCE SHEETS

     CONSOLIDATED STATEMENTS OF INCOME

     CONSOLIDATED STATEMENTS OF CHANGES IN
       SHAREHOLDERS' EQUITY

     CONSOLIDATED STATEMENTS OF CASH FLOWS

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



<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,  2000 and 1999 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,  2000.  These  financial
statements  are  the  responsibility  of  the  Corporation's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in  all  material   respects,   the  financial  position  of  Lafayette
Bancorporation  as of  December  31,  2000  and  1999,  and the  results  of its
operations  and its cash flows for each of the three  years in the period  ended
December 31, 2000 in conformity with generally accepted accounting principles.




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

Indianapolis, Indiana
January 25, 2001



<PAGE>



                            LAFAYETTE BANCORPORATION

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

                           CONSOLIDATED BALANCE SHEETS
                           December 31, 2000 and 1999
                          (Dollar amounts in thousands)
<TABLE>

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



<S>                                                                                        <C>             <C>
                                                                                           2000            1999
                                                                                           ----            ----
                                     ASSETS

Cash and due from banks                                                               $     26,452     $     28,287
Interest-bearing deposits in other financial institutions                                   21,820               83
Federal funds sold                                                                          25,200            2,200
                                                                                      ------------     ------------

     Total cash and cash equivalents                                                        73,472           30,570

Securities available-for-sale                                                               78,857           79,722
Securities held-to-maturity (fair value
  $4,580 and $4,709)                                                                         4,484            4,712
Loans held for sale                                                                          5,949            3,174
Loans                                                                                      537,725          489,070
Less:  Allowance for loan losses                                                            (5,071)          (4,618)
                                                                                      ------------     ------------
     Net loans                                                                             532,654          484,452

FHLB stock, at cost                                                                          2,200            1,897
Premises, furniture and equipment, net                                                      11,353           10,583
Intangible assets                                                                           13,007           13,747
Accrued interest receivable and other assets                                                19,171           16,292
                                                                                      ------------     ------------

         Total assets                                                                 $    741,147     $    645,149
                                                                                      ============     ============

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
     Noninterest-bearing deposits                                                     $     70,866     $     63,206
     Interest-bearing demand and savings deposits                                          230,984          229,302
     Interest-bearing time deposits                                                        276,447          229,739
                                                                                      ------------     ------------
         Total deposits                                                                    578,297          522,247

     Short-term borrowings                                                                  55,572           27,273
     FHLB advances                                                                          35,737           30,027
     Note payable                                                                           11,550           12,950
     Accrued interest payable and other liabilities                                          7,190            6,867
                                                                                      ------------     ------------
         Total liabilities                                                                 688,346          599,364

Shareholders' equity
     Common stock, no par value:  5,000,000 shares
       authorized; 3,953,616 and 3,586,140 shares issued and outstanding                     3,954            3,586
     Additional paid-in capital                                                             38,024           32,886
     Retained earnings                                                                      11,086           11,269
     Accumulated other comprehensive income                                                   (263)          (1,956)
                                                                                      ------------     ------------
         Total shareholders' equity                                                         52,801           45,785
                                                                                      ------------     ------------

              Total liabilities and shareholders' equity                              $    741,147     $    645,149
                                                                                      ============     ============
</TABLE>
See accompanying notes to consolidated financial statements

<PAGE>


                        CONSOLIDATED STATEMENTS OF INCOME

                  Years ended December 31, 2000, 1999 and 1998

              (Dollar amounts in thousands, except per share data)
<TABLE>

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


<S>                                                                       <C>              <C>             <C>
                                                                          2000             1999            1998
                                                                          ----             ----            ----
Interest income
     Loans, including related fees                                    $     46,620    $     38,520     $     29,810
     Taxable securities                                                      3,318           3,831            3,217
     Tax exempt securities                                                   1,664           1,529              991
     Other                                                                     784             510              707
                                                                      ------------    ------------     ------------
         Total interest income                                              52,386          44,390           34,725

Interest expense
     Deposits                                                               23,016          18,024           14,906
     Short-term borrowings                                                   1,773           1,358              712
     Other borrowings                                                        2,616           2,161            1,345
                                                                      ------------    ------------     ------------
         Total interest expense                                             27,405          21,543           16,963
                                                                      ------------    ------------     ------------

Net interest income                                                         24,981          22,847           17,762

Provision for loan losses                                                    1,200           1,060              980
                                                                      ------------    ------------     ------------

Net interest income after provision for loan losses                         23,781          21,787           16,782

Noninterest income
     Fiduciary activities                                                    1,187           1,134              964
     Service charges on deposit accounts                                     1,880           1,581            1,309
     Net realized gain/(loss) on securities                                    (12)           (144)               6
     Net gain on loan sales                                                    659             942            1,255
     Other service charges and fees                                          1,042             923              727
     Investment product commissions                                            758             318              357
     Other                                                                     311             371              298
                                                                      ------------    ------------     ------------
         Total noninterest income                                            5,825           5,125            4,916

Noninterest expense
     Salaries and employee benefits                                         10,681           9,836            8,206
     Occupancy, net                                                          1,247           1,073              891
     Equipment                                                               1,731           1,314            1,054
     Intangible amortization                                                   740             597               81
     Other                                                                   4,777           4,714            3,378
                                                                      ------------    ------------     ------------
         Total noninterest expenses                                         19,176          17,534           13,610
                                                                      ------------    ------------     ------------

Income before income taxes                                                  10,430           9,378            8,088

Income taxes                                                                 3,514           3,027            2,711
                                                                      ------------    ------------     ------------

Net income                                                            $      6,916    $      6,351     $      5,377
                                                                      ============    ============     ============



Basic earnings per share                                              $       1.75    $       1.61     $       1.36
                                                                      ============    ============     ============

Diluted earnings per share                                            $       1.74    $       1.57     $       1.34
                                                                      ============     ===========     ============

</TABLE>
See accompanying notes to consolidated financial statements

<PAGE>




           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

                  Years ended December 31, 2000, 1999 and 1998

              (Dollar amounts in thousands, except per share data)
<TABLE>

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

                                                                             Accumulated
<S>                             <C>             <C>          <C>          <C>           <C>             <C>
                                               Additional                       Other                     Total
                                   Common        Paid-in      Retained      Comprehensive  Treasury    Shareholders'
                                    Stock        Capital      Earnings         Income        Stock       Equity
                                -----------    -----------   -----------   -----------   -----------    -----------
Balance, January 1, 1998        $   2,174      $  24,555     $  11,927      $     (90)     $   (97)     $  38,469
    Comprehensive income
      Net income                                                 5,377                                      5,377
      Change in net unrealized
        gain/ (loss) on securities
        available-for-sale                                                          48                         48
                                                                                                        ---------
          Total comprehensive
            income                                                                                          5,425

    Issue 2,825 shares under
     stock option plan                   2            67                                                       69
    10% Stock dividend,
      217,640 shares                   218         7,998        (8,216)                                         -
    Cash dividends
      ($.34 per share)                                          (1,341)                                    (1,341)
    Purchase 188 treasury shares                                                                (8)            (8)
                                -----------    -----------   -----------   -----------   -----------    -----------
Balance, December 31, 1998           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
                                ===========    ===========   ===========   ===========   ===========    ===========
</TABLE>

See accompanying notes to consolidated financial statements

<PAGE>









                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                  Years ended December 31, 2000, 1999 and 1998

                          (Dollar amounts in thousands)
<TABLE>

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


<S>                                                                        <C>               <C>                <C>
                                                                           2000              1999               1998
                                                                           ----              ----               ----
                      CASH FLOWS FROM OPERATING ACTIVITIES
     Net income                                                       $   6,916          $  6,351          $   5,377
     Adjustments to reconcile net income to net
       cash from operating activities
         Depreciation                                                     1,339               948                646
         Net amortization                                                   722               726                311
         Provision for loan losses                                        1,200             1,060                980
         Net realized (gain)/loss on securities                              12               144                 (6)
         Net realized (gain) loss on sale of
              other real estate                                              (5)                -                (43)
         Change in assets and liabilities
              Loans originated for sale                                 (56,201)          (67,547)           (86,291)
              Loans sold                                                 53,426            74,459             83,845
              Accrued interest receivable
                and other assets                                         (4,410)           (1,947)            (1,402)
              Accrued interest payable
                and other liabilities                                       323             1,314                446
                                                                      ------------     ------------       ------------
                  Net cash from operating activities                      3,322            15,508               3,863

Cash flows from investing activities
     Change in interest-bearing balances with
         other financial institutions                                         -                671               (671)
     Purchase of securities available-for-sale                          (86,815)          (172,049)           (54,270)
     Proceeds from sales of securities available-for-sale                82,375             56,027              3,592
     Proceeds from maturities of securities
       available-for-sale                                                 8,119            109,826             40,176
     Purchase of securities held-to-maturity                                  -             (2,000)            (2,532)
     Proceeds from maturities of securities
       held-to-maturity                                                     229              2,160              2,906
     Loans made to customers, net of payments collected                 (49,452)           (78,085)           (41,804)
     Purchase of Federal Home Loan Bank stock                              (303)              (358)              (297)
     Property and equipment expenditures                                 (2,109)            (3,578)            (2,416)
     Proceeds from sales of other real estate                               470                  -                251
                                                                      ------------     ------------       ------------
         Net cash from investing activities                             (47,486)           (87,386)           (55,065)



</TABLE>

See accompanying notes to consolidated financial statements
<PAGE>


                            LAFAYETTE BANCORPORATION
                CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                  Years ended December 31, 2000, 1999 and 1998
                          (Dollar amounts in thousands)
<TABLE>

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

<S>                                                                        <C>              <C>            <C>
                                                                           2000             1999           1998
                                                                           ----             ----           ----
Cash flows from financing activities
     Net change in deposit accounts                                   $  56,050         $  9,686       $  40,351
     Cash received in branch acquisition for
       liabilities assumed, net of assets acquired                            -           45,266               -
     Net change in short-term borrowings                                 28,299           10,871          (3,970)
     Proceeds from other borrowings                                      22,000           30,000           4,800
     Payments on other borrowings                                       (17,690)         (10,877)           (832)
     Common stock issued                                                    117              278              69
     Dividends paid                                                      (1,706)          (1,540)         (1,341)
     Purchase of fractional shares from stock dividend                       (4)               -               -
     Purchase of treasury stock                                               -               (4)             (8)
                                                                      ------------    ------------     ------------
         Net cash from financing activities                              87,066           83,680          39,069
                                                                      ------------    ------------     ------------

Net change in cash and cash equivalents                                  42,902           11,802         (12,133)

Cash and cash equivalents at beginning of year                           30,570           18,768          30,901
                                                                      ------------    ------------     ------------

Cash and cash equivalents at end of year                              $  73,472       $   30,570       $  18,768
                                                                      ============    ============     ============

Supplemental disclosures of cash flow information
     Cash paid during the period for
         Interest                                                     $  26,882       $   20,765       $  16,824
         Income taxes                                                     3,405            3,168           2,939

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

</TABLE>

See accompanying notes to consolidated financial statements

<PAGE>


                            LAFAYETTE BANCORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2000, 1999 and 1998
              (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 16 branches located in Tippecanoe, White, and Jasper
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  therein  and  the
disclosures  provided.  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.



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

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.



<PAGE>


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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.

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.



<PAGE>


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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.

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  will  require 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.

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



<PAGE>


NOTE 2 - SECURITIES

The amortized  cost and fair values of securities are as follows at December 31,
2000:

<TABLE>
<S>                                             <C>             <C>             <C>             <C>
                                                                       Gross          Gross
                                                    Amortized       Unrealized     Unrealized          Fair
                                                      Cost             Gains         Losses            Value
SECURITIES AVAILABLE-FOR-SALE

     U.S. Government and its agencies            $      4,201    $         10     $        (18)   $      4,193
     Obligations of states and political
       subdivisions                                    30,880             418             (286)         31,012
     Corporate obligations                              3,953              48                -           4,001
     Mortgage-backed and other
       asset-backed securities                         37,699              58             (652)         37,105
     Other securities                                   2,560             515             (529)          2,546
                                                 ------------    ------------     ------------    ------------

                                                 $     79,293    $      1,049     $     (1,485)   $     78,857
                                                 ============    ============     ============    ============

Securities Held-to-Maturity

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

The amortized  cost and fair values of securities are as follows at December 31,
1999:
<TABLE>

<S>                                             <C>             <C>             <C>             <C>
                                                                       Gross          Gross
                                                    Amortized       Unrealized     Unrealized          Fair
                                                      Cost             Gains         Losses            Value
SECURITIES AVAILABLE-FOR-SALE

     U.S. Government and its agencies            $      5,207    $          -     $       (202)   $      5,005
     Obligations of states and political
       subdivisions                                    28,785              10           (1,527)         27,268
     Corporate obligations                              2,000               -              (27)          1,973
     Mortgage-backed and other
       asset-backed securities                         44,402              35           (1,549)         42,888
     Other securities                                   2,567              21                -           2,588
                                                 ------------    ------------     ------------    ------------

                                                 $     82,961    $         66     $     (3,305)   $     79,722
                                                 ============    ============     ============    ============

Securities Held-to-Maturity

     Obligations of states and political
       subdivisions                              $      4,712    $         40     $        (43)   $      4,709
                                                 ============    ============     ============    ============
</TABLE>

Gross gains of $2, $35 and $6 and gross losses of $14, $179 and $0 were realized
on sales of securities available-for-sale in 2000, 1999 and 1998.


<PAGE>


NOTE 2 - SECURITIES (Continued)

The  amortized  cost and  estimated  market value of  securities at December 31,
2000, by contractual maturity,  are shown below.  Securities not due at a single
maturity date are shown separately.
<TABLE>

                                                      Available-for-Sale                Held-to-Maturity

<S>                                             <C>             <C>             <C>             <C>
                                                   Amortized          Fair          Amortized          Fair
                                                     Cost             Value           Cost             Value

     Due in 1 year or less                       $          -    $          -     $        415    $        415
     Due after 1 year through
       5 years                                          6,805           6,826            1,353           1,394
     Due after five years through
       10 years                                        10,730          10,754            1,632           1,686
     Due after 10 years                                24,059          24,172            1,084           1,085
                                                 ------------    ------------     ------------    ------------
         Subtotal                                      41,594          41,752            4,484           4,580
     Mortgage-backed and other asset-
       backed securities                               37,699          37,105                -               -
                                                 ------------    ------------     ------------    ------------

         Total                                   $     79,293    $     78,857     $      4,484    $      4,580
                                                 ============    ============     ============    ============
</TABLE>

Securities with a carrying value of $57,405 and $28,206 at December 31, 2000 and
1999 were pledged to secure public deposits and repurchase agreements.  See Note
8 regarding additional securities pledges.

At December 31, 2000 and 1999, mortgage-backed securities include collateralized
mortgage  obligations  (CMO's)  and real  estate  mortgage  investment  conduits
(REMIC's)  with an  amortized  cost of  $17,295  and  $20,256  and fair value of
$16,753 and $19,144,  all of which are issued by U.S.  Government  agencies.  At
December 31, 2000 and 1999,  approximately  $8,481 and $8,432 are variable rate,
with the remainder fixed rate.


<PAGE>


NOTE 3 - LOANS

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

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

     Commercial and agricultural loans                                            $    215,087    $    192,760
     Real estate construction                                                           54,768          47,375
     Residential real estate loans                                                     212,190         197,181
     Installment loans to individuals                                                   50,696          51,754
     Commercial paper                                                                    4,984               -
                                                                                  ------------    ------------

         Total                                                                    $    537,725    $    489,070
                                                                                  ============    ============

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

                                                                                      2000             1999
                                                                                      ----             ----

     Loans past due 90 days or more                                               $      1,052    $        584
     Non-accrual loans                                                                   2,718             622
     Restructured loans                                                                     55             114
                                                                                  ------------    ------------

         Total                                                                    $      3,825    $      1,320
                                                                                  ============    ============

Information regarding impaired loans is as follows:
                                                                                      2000             1999
                                                                                      ----             ----
     Year-end impaired loans
         With no allowance for loan losses allocated                              $         25    $         70
         With allowance for loan losses allocated                                        5,151             576
     Amount of the allowance allocated                                                   1,658             151

     Average balance of impaired loans during the year                                   2,885             697
     Interest income recognized during impairment                                           55               3
     Cash-basis interest income recognized                                                  41               3
</TABLE>

The Bank had $34 and $14 of loans on  non-accrual  at December  31, 2000 or 1999
that management did not deem to be impaired.


<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, 2000                  $        989
     Change in persons included                                -
     New loans                                               231
     Loan payments                                          (310)
                                                     ------------
     Balance as of December 31, 2000                $        910
                                                     ============


NOTE 4 - ALLOWANCE FOR LOAN LOSSES

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

<TABLE>
<S>                                                                   <C>             <C>              <C>
                                                                      2000            1999             1998
                                                                      ----            ----             ----

     Balance, January 1                                          $      4,618     $      4,241    $      3,464
     Provision charged to operations                                    1,200            1,060             980
     Loans charged-off                                                   (877)            (829)           (411)
     Recoveries on loans previously charged-off                           130              146             208
                                                                 ------------     ------------    ------------

     Balance, December 31                                        $      5,071     $      4,618    $      4,241
                                                                 ============     ============    ============

</TABLE>

NOTE 5 - PREMISES, FURNITURE AND EQUIPMENT

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

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

     Land                                                                         $        870    $        870
     Buildings and improvements                                                          8,782           8,468
     Leasehold improvements                                                              1,786           1,296
     Furniture and equipment                                                             9,781           9,922
                                                                                  ------------    ------------
         Total                                                                          21,219          20,556
     Accumulated depreciation                                                           (9,866)         (9,973)
                                                                                  ------------    ------------

     Premises, furniture and equipment, net                                       $     11,353    $     10,583
                                                                                  ============    ============
</TABLE>


<PAGE>


NOTE 6 - INTEREST-BEARING TIME DEPOSITS

Time  deposits of $100 or greater  totaled  $53,514 and $38,665 at December  31,
2000 and 1999.

At December 31, 2000, the scheduled maturities of time deposits are as follows:

                  2001                     $    147,135
                  2002                           89,613
                  2003                           34,173
                  2004                            2,633
                  2005                            2,401
                  Thereafter                        492
                                            ------------
           Total                           $    276,447
                                            ============


NOTE 7 - SHORT-TERM BORROWINGS

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

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

     Balance of repurchase agreements outstanding                                 $     54,275    $     24,645
     Balance of treasury tax and loan open-end note                                      1,297           2,628
                                                                                  ------------    ------------

         Total short-term borrowings                                              $     55,572    $     27,273
                                                                                  ============    ============
</TABLE>

At December 31, 2000 and 1999,  the  Corporation  had $1,054 and $240 in related
party repurchase agreements.


<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>
                                                                                      2000             1999
                                                                                      ----             ----
     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. $ 8,737 $ 9,527

     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 20,500

         Total FHLB advances                                                            35,737          30,027

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  8.28%  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. 11,550 12,950
                                                                                  ------------    ------------

         Total                                                                    $     47,287      $   42,977
                                                                                  ------------    ------------
</TABLE>

Annual principal payments required are as follows:

                     2001                  $      2,155
                     2002                         7,399
                     2003                         4,426
                     2004                         1,479
                     2005                         1,485
                     Thereafter                  30,343
                                            ------------
  Total FHLB advances and note payable     $     47,287
                                            ============


<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, 2000 and 1999):
<TABLE>

<S>                                                                               <C>                <C>
                                                                                  2000               1999
                                                                                  ----               ----
     Change in benefit obligation:
         Beginning benefit obligation                                        $        12,626    $       12,240
         Service cost                                                                    783               647
         Interest cost                                                                   928               812
         Actuarial (gain) loss                                                          (503)             (648)
         Benefits paid                                                                  (520)             (425)
                                                                             ---------------    --------------
         Ending benefit obligation                                                    13,314            12,626

     Change in plan assets, at fair value:
         Beginning plan assets                                                        16,603            15,199
         Actual return                                                                   258             1,829
         Employer contribution                                                             -                 -
         Benefits paid                                                                  (520)             (425)
                                                                             ---------------    --------------

         Ending plan assets                                                           16,341            16,603
                                                                             ---------------    --------------

     Funded status                                                                     3,027             3,977
     Unrecognized net actuarial (gain) loss                                             (382)           (1,134)
     Unrecognized prior service cost                                                      19                20
     Unrecognized transition asset                                                      (631)             (782)
                                                                             ---------------    --------------

     Prepaid benefit cost                                                    $         2,033    $        2,081
                                                                             ===============    ==============
</TABLE>

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

<S>                                                            <C>                <C>                <C>
                                                               2000               1999               1998
                                                               ----               ----               ----

     Service cost                                          $          783    $           647    $          612
     Interest cost                                                    928                812               803
     Expected return on plan assets                                (1,513)            (1,386)           (1,341)
     Amortization of prior service cost                                 2                  2                 2
     Amortization of transition asset                                (151)              (151)             (151)
                                                           --------------    ---------------    --------------

                                                           $           49    $           (76)   $          (75)
                                                           ==============    ===============    ==============

     Discount rate on benefit obligation                              7.50%             7.50%             6.75%
     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,  2000  and  1999,   the  plan's   assets   include   Lafayette
Bancorporation  common  stock of $582 and $1,028.  At December 31, 2000 and 1999
the plan's assets also included Lafayette Bank and Trust Company certificates of
deposit of $436 and $421.


<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 $161,  $140 and $116 for 2000,  1999 and
1998.

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 $1,289 and
$1,049 at December 31, 2000 and 1999. Deferred compensation expense was $106 for
2000, and $90 for 1999 and 1998. In  conjunction  with the plan  formation,  the
Bank  purchased  life  insurance  on the  directors.  In November  2000 the Bank
purchased $2,995 in additional life insurance coverage. The cash surrender value
of that  insurance  is carried  as an other  asset on the  consolidated  balance
sheet, and was approximately $6,834 and $3,678 at December 31, 2000 and 1999.


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.



<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>
                                                                                      2000             1999
                                                                                      ----             ----
     Change in postretirement benefit obligation:
         Beginning benefit obligation                                             $        550    $        494
         Unrecognized net actuarial (gain) loss                                           (159)              -
         Service cost                                                                       35              31
         Interest cost                                                                      38              34
         Benefits paid, net                                                                (10)             (9)
                                                                                  ------------    ------------

         Ending benefit obligation                                                         454             550

     Unrecognized net gain                                                                 302             153
                                                                                  ------------    ------------

     Accrued benefit obligation                                                   $        756    $        703
                                                                                  ============    ============
</TABLE>


Components of net periodic postretirement benefit cost as of December 31:
<TABLE>


<S>                                                                   <C>             <C>              <C>
                                                                      2000            1999             1998
                                                                      ----            ----             ----

     Service cost                                                $         35     $         31    $         28
     Interest cost                                                         38               34              31
     Amortization of unrecognized gain                                    (10)             (11)            (14)
                                                                 ------------     ------------    ------------

         Benefit cost                                            $         63     $         54    $         45
                                                                 ============     ============    ============
</TABLE>



For measurement purposes,  the annual rate of increase in the per capita cost of
covered  health care  benefits  assumed was 8% for 2000,  and 11.5% for 1999 and
1998,  with the rate  assumed to  decrease  to 6% over the next two years in the
2000  calculation,  and to 5.5%  over the  next  two  years in the 1999 and 1998
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, 2000 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 2000, and 7% for 1999 and 1998.



<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 2000, and 54,605 at an option price of $3.66 for 1999.
In 2000,  16,500 rights were exercised when the fair market value was $23.18 per
share.  In 1999,  18,150  rights were  exercised  when the fair market value was
$24.62 per share. The  aforementioned  amounts of rights and prices are adjusted
for stock  dividends  and  splits.  Compensation  expense  (benefit)  charged to
operations  in 2000,  1999 and 1998 was ($376),  $14 and $450 and is based on an
increase (decrease) in market value. The liability at December 31, 2000 and 1999
was $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 and
management under the 1998 Plan is 4,967 and 37,675, respectively. 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 at the effective date and directors  elected
after the effective date 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.



<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>

                                                 ----------2 0 0 0---------         -----------1 9 9 9------------
<S>                                             <C>             <C>               <C>              <C>
                                                                  Weighted                              Weighted
                                                                   Average                               Average
                                                                  Exercise                              Exercise
                                                    Options         Price              Options            Price

Outstanding beginning of year                        215,337    $      13.75            227,427    $        12.89
Granted                                               20,075           15.23             14,834             24.70
Exercised                                             (9,144)          11.37            (17,166)            11.26
Forfeited                                             (8,441)          15.69             (9,758)            14.72
                                                 -----------    ------------        -----------    --------------

Outstanding end of year                              217,827    $      13.91            215,337    $        13.75
                                                 ===========    ============        ===========    ==============

Exercisable at end of year                           159,867    $      12.94            134,309    $        12.00
                                                 ===========    ============        ===========    ==============

Weighted average fair value per
  option granted during the year                 $     2.19                         $      3.98
</TABLE>


Options  outstanding at December 31, 2000 include  169,479 with exercise  prices
ranging from $10.39 to $15.23 (weighted  average exercise price of $11.77) and a
weighted  average  remaining life of 6.23 years; and 48,348 with exercise prices
ranging from $17.63 to $24.70 (weighted  average exercise price of $21.40) and a
weighted average remaining life of 8.27 years.  Options  exercisable at December
31, 2000 include  127,791  with  exercise  prices  ranging from $10.39 to $13.34
(weighted  average  exercise price of $11.07);  and 32,076 with exercise  prices
ranging from $17.63 to $24.70 (weighted average exercise price of $20.39).


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 2000, 1999 and 1998,  respectively:  risk-free
interest rates of 6.7%, 5.4% and 5.6%; dividend yields of 3% for 2000 and 2% for
1999 and 1998, respectively;  volatility factors of the expected market price of
the  Corporation's  common  stock of .24,  .13 and .16;  and a weighted  average
expected life of the options of five years for management  options and two years
for directors' options.



<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>
                                                                      2000            1999             1998
                                                                      ----            ----             ----

     Pro forma net income                                        $      6,859     $     6,270     $      5,242
     Pro forma earnings per share
         Basic                                                   $       1.74     $      1.59     $       1.33
         Diluted                                                 $       1.72     $      1.55     $       1.30
</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>
                                                                      2000            1999             1998
                                                                      ----            ----             ----

     Currently payable                                           $      3,498     $      3,004    $      3,085
     Deferred income taxes (benefit)                                        3              (50)           (385)
     Non-qualified stock option benefit
        allocated to additional paid-in capital                            13               73              11
                                                                 ------------     ------------    ------------


         Total                                                   $      3,514     $      3,027    $      2,711
                                                                 ============     ============    ============
</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>
                                                                      2000            1999             1998
                                                                      ----            ----             ----

     Statutory rate applied to income before
       income taxes                                              $      3,546     $      3,188    $      2,750
     Add/(deduct)
         Tax exempt interest income                                      (486)            (430)           (337)
         State tax expense (net of federal benefit)                       474              417             358
         Other                                                            (20)            (148)            (60)
                                                                 ------------     ------------    ------------

              Total                                              $      3,514     $      3,027    $      2,711
                                                                 ============     ============    ============
</TABLE>


<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>
                                                                                      2000             1999
                                                                                      ----             ----
     Deferred tax assets
         Allowance for loan losses                                                $      1,380    $      1,053
         Accrued stock appreciation rights                                                 139             417
         Accrued post-retirement benefit obligation                                        426             372
         Deferred compensation                                                             470             381
         Deferred loan fees                                                                 57              42
         Net unrealized loss on securities available-for-sale                              173           1,283
                                                                                  ------------    ------------
              Total tax assets                                                           2,645           3,548

     Deferred tax liabilities
         Depreciation                                                                     (341)           (280)
         Net pension benefit                                                              (795)           (825)
         Intangible asset amortization                                                    (186)            (93)
         Other                                                                            (248)           (162)
                                                                                  ------------    ------------
              Total deferred tax liabilities                                            (1,570)         (1,360)

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

         Net deferred tax asset                                                   $      1,075    $      2,188
                                                                                  ============    ============
</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>
                                                                2000               1999               1998
                                                                ----               ----               ----
Basic earnings per share
     Net income                                            $        6,916    $         6,351    $        5,377
     Weighted average shares outstanding                        3,950,297          3,940,024         3,940,123
                                                           --------------    ---------------    --------------

         Basic earnings per share                          $         1.75    $         1.61     $         1.36
                                                           ==============    ==============     ==============
Diluted earnings per share
     Net income                                            $        6,916    $         6,351    $        5,377
     Weighted average shares outstanding                        3,950,297          3,940,024         3,940,123
     Diluted effect of assumed exercise

       of stock options                                            35,224             94,364            87,137
                                                           --------------    ---------------    --------------
         Diluted average shares outstanding                     3,985,521          4,034,388         4,027,260
                                                           --------------    ---------------    --------------


Diluted earnings per share                                 $         1.74    $         1.57     $         1.34
                                                           ==============    ==============     ==============
</TABLE>


<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  judgements  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 (as
defined) 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, 2000, 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, 2000.  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.



<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.
<TABLE>
                                                                                           Minimum Required To
                                                                  Minimum Required         Be Well-Capitalized
                                                                     For Capital         Under Prompt Corrective
                                                Actual            Adequacy Purposes        Action Regulations
                                            Amount   Ratio         Amount     Ratio          Amount     Ratio
2000

Total capital to risk weighted assets
<S>                                       <C>            <C>         <C>           <C>       <C>          <C>
         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

1999

Total capital to risk weighted assets
         Consolidated                     $    38.6      7.99%       $   38.7      8.00%     $   48.3     10.00%
         Lafayette Bank and Trust              50.2     10.33            38.9      8.00          48.6     10.00

Tier 1 capital to risk weighted assets
         Consolidated                          34.0      7.04            19.3      4.00          29.0      6.00
         Lafayette Bank and Trust              45.6      9.38            19.4      4.00          29.1      6.00

Tier 1 capital to average assets
         Consolidated                          34.0      5.42            25.1      4.00          31.4      5.00
         Lafayette Bank and Trust              45.6      7.22            25.2      4.00          31.5      5.00

</TABLE>

The  Bank is also  subject  to  state  regulations  restricting  the  amount  of
dividends payable to the Corporation.  At December 31, 2000, the Bank had $7,979
of retained earnings available for dividends under these regulations.



<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 $281,  $244 and $219 for
2000, 1999 and 1998. Future minimum lease payments are as follows:

                     2001                 $        282
                     2002                          282
                     2003                          261
                     2004                          222
                     2005                          161
                     Thereafter                     90
                                          ------------
                         Total            $      1,298
                                          ============

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:
<TABLE>

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

     Unused lines of credit                                                       $     64,987    $     59,753
     Commitments to make loans                                                           7,229          10,987
     Standby letters of credit                                                           1,585           4,235
     Commercial letters of credit                                                            -              21
</TABLE>

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 $9,639 and $9,434 at  December  31,  2000 and 1999.  These
reserves do not earn interest.



<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>

                                                -----------2 0 0 0---------        -----------1 9 9 9---------
                                                 Carrying            Fair           Carrying            Fair
                                                   Value             Value            Value             Value

Financial assets
<S>                                            <C>              <C>               <C>              <C>
   Cash and cash equivalents                   $      73,472    $      73,472     $      30,570    $      30,570
   Securities available-for-sale                      78,857           78,857            79,722           79,722
   Securities held-to-maturity                         4,484            4,580             4,712            4,709
   Loans held for sale                                 5,949            6,058             3,174            3,204
   Loans, net                                        532,654          524,222           484,452          479,127
   FHLB stock                                          2,200            2,200             1,897            1,897
   Accrued interest receivable                         7,830            7,830             6,833            6,833

Financial liabilities
   Deposits                                    $    (578,297)   $    (580,115)    $    (522,247)   $    (522,033)
   Short-term borrowings                             (55,572)         (55,572)          (27,273)         (27,273)
   FHLB advances                                     (35,737)         (35,903)          (30,027)         (29,602)
   Note payable                                      (11,550)         (11,550)          (12,950)         (12,950)
   Accrued interest payable                           (2,772)          (2,772)           (2,249)          (2,249)
</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.


<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>
                                                                                           2000            1999
                                                                                           ----            ----
ASSETS
Cash on deposit with subsidiary                                                       $      1,901     $      2,568
Investment in bank                                                                          63,221           57,350
Other assets                                                                                   265              490
                                                                                      ------------     ------------
                                                                                      $     65,387     $     60,408
                                                                                      ============     ============

LIABILITIES AND SHAREHOLDERS' EQUITY
Note payable                                                                          $     11,550     $     12,950
Other liabilities                                                                            1,036            1,673
Shareholders' equity                                                                        52,801           45,785
                                                                                      ------------     ------------
                                                                                      $     65,387     $     60,408
                                                                                      ============     ============
</TABLE>

                         CONDENSED STATEMENTS OF INCOME
                             Years ended December 31
<TABLE>
<S>                                                                       <C>              <C>             <C>
                                                                          2000             1999            1998
                                                                          ----             ----            ----

Operating income
     Dividends received from subsidiary bank                          $      3,200    $      2,960     $      1,850
     Interest income                                                            74              75               26
                                                                      ------------    ------------     ------------
                                                                             3,274           3,035            1,876
Operating expenses
     Interest expense                                                        1,007             749                -
     Compensation expense (benefit)                                           (376)             14              450
     Other operating expenses                                                  119             111               93
                                                                      ------------    ------------     ------------
                                                                               750             874              543
Income before income taxes and equity in
  undistributed earnings of bank                                             2,524           2,161            1,333

Income tax benefit                                                             215             389              205
                                                                      ------------    ------------     ------------
Income before equity in undistributed earnings of bank                       2,739           2,550            1,538

Equity in undistributed earnings of bank                                     4,177           3,801            3,839
                                                                      ------------    ------------     ------------

Net income                                                                   6,916           6,351            5,377

Other comprehensive income, net of tax                                       1,693          (1,914)              48
                                                                      ------------    ------------     ------------

Comprehensive income                                                  $      8,609    $      4,437     $      5,425
                                                                      ============    ============     ============

</TABLE>

<PAGE>



NOTE 17 - PARENT COMPANY STATEMENTS (Continued)

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

<S>                                                                       <C>              <C>             <C>
                                                                          2000             1999            1998
                                                                          ----             ----            ----

Cash flows from operating activities
     Net income                                                       $      6,916    $      6,351     $      5,377
     Adjustments to reconcile net income to net cash
       from operating activities
         Amortization of deferred costs                                          6               6                6
         Equity in undistributed earnings of bank                           (4,177)         (3,801)          (3,839)
         Other assets and other liabilities                                   (419)           (160)             466
                                                                      ------------    ------------     ------------
              Net cash from operating activities                             2,326           2,396            2,010

Cash flows from financing activities
     Proceeds from note payable                                                  -          14,000                -
     Principal payments on note payable                                     (1,400)         (1,050)               -
     Capital contribution to subsidiary bank                                     -         (13,000)               -
     Common stock issued                                                       117             278               69
     Dividends paid                                                         (1,706)         (1,540)          (1,341)
     Purchase of fractional shares                                              (4)              -                -
     Purchase of treasury shares                                                 -              (4)              (8)
                                                                      ------------    ------------     ------------
         Net cash from financing activities                                 (2,993)         (1,316)          (1,280)
                                                                      ------------    ------------     ------------

Net change in cash and cash equivalents                                       (667)          1,080              730

Cash and cash equivalents at beginning of year                               2,568           1,488              758
                                                                      ------------    ------------     ------------

Cash and cash equivalents at end of year                              $      1,901    $      2,568     $      1,488
                                                                      ============    ============     ============

</TABLE>

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.




<PAGE>



NOTE 19 - OTHER COMPREHENSIVE INCOME

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

<S>                                                            <C>                <C>                <C>
                                                               2000               1999               1998
                                                               ----               ----               ----

Unrealized holding gains (losses) on
     securities available-for-sale                         $        2,791    $        (3,314)   $           85
Less:  reclassification adjustments for gains
      and losses later recognized in income                            12                144                (6)
                                                           --------------    ---------------    --------------
Net unrealized gains (losses)                                       2,803             (3,170)               79
Tax effect                                                         (1,110)             1,256               (31)
                                                           --------------    ---------------    --------------

Other comprehensive income                                 $        1,693    $        (1,914)   $           48
                                                           ==============    ===============    ==============

</TABLE>

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

                                 Interest       Net Interest           Net                 Earnings per Share
                                                                                           ------------------
                                  Income           Income            Income            Basic         Fully Diluted
2000

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


1999

    First quarter             $    9,483        $    4,911       $    1,519        $    .38         $     .37
    Second quarter                11,267             5,815            1,650             .42               .41
    Third quarter                 11,693             6,022            1,750             .44               .43
    Fourth quarter                11,947             6,099            1,432             .37               .36

</TABLE>

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


<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 and White  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.




<PAGE>



NOTE 21 - SEGMENT INFORMATION (Continued)
<TABLE>


2000                                                              Mortgage                               Total
----
                                                Banking            Banking            Trust            Segments

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

     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



1998                                                              Mortgage                               Total
----
                                                Banking            Banking            Trust            Segments

     Net interest income                    $        17,239    $          497     $            -    $        17,736
     Net gain on loan sales                               -             1,255                  -              1,255
     Other revenue                                    2,685                12                964              3,661
     Noncash items:
         Depreciation                                   594                27                 25                646
         Provision for loan loss                        980                 -                  -                980
     Segment profit, before taxes                     7,636               760                209              8,605
     Segment assets                                 473,019            10,224                167            483,410



</TABLE>
<PAGE>
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,  2000,  there were  3,953,616  shares
outstanding held by approximately 500 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 which the shares would
trade in an active market.
<TABLE>

Stock Information
                                                                    Price Per Share  Dividend
<S>                                <C>                  <C>                                     <C>
                                      High                      Low                             Declared
  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

1999
First Quarter                $        24 13/16          $       23 3/16                          $  .08
Second Quarter                        24 13/16                  23 5/8                              .08
Third Quarter                         25                        23 5/16                             .09
Fourth Quarter                        24 11/16                  22 11/16                            .14
</TABLE>

* Data  adjusted  for all stock  splits  and  dividends,  including  a 10% stock
dividend to shareholders of record on October 2, 2000, paid on November 1, 2000.

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

o        City Securities Corporation

o        Herzog, Herne, Geduld, Inc.

o        Hill Thompson Magid, L.P.

o        Howe Barnes Investments, Inc.

o        JJP Hilliard, WL Lyons, Inc.

o        McDonald & Company Securities, Inc.

o        Merrill Lynch

o        Monroe Securities, Inc.

o        MPI Financial

o        Raymond James Financial Services, Inc. located at Lafayette
         Bank and Trust Company

o        Salomon Smith Barney, Inc.

Transfer Agent

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

<PAGE>