##### 



Exhibit 13.2

INDEX TO FINANCIAL STATEMENTS

|                                                                                                             |  |      |   | 
|------------------------------------------------------------------------------------------------------------ |  | ---- | - | 
|                                                                                                             |  | Page |  
|                                                                                                             |  |      |  
|Report of Independent Auditors                                                                               |  |      | 2 | 
|Consolidated Balance Sheets, December 31, 2001 and December 31, 2000                                         |  |      | 3 | 
|Consolidated Statements of Operations for the three-year period ended December 31, 2001                      |  |      | 4 | 
|Consolidated Statements of Changes in Shareholders Equity for the three-year period
ended December 31, 2001 |  |      | 5 | 
|Consolidated Statements of Cash Flows for the three year period ended December 31, 2001                      |  |      | 6 | 
|Notes to Consolidated Financial Statements                                                                   |  |      | 7 | 

1



---



##### 



REPORT OF INDEPENDENT AUDITORS

Board of Directors and Shareholders
First Shares Bancorp, Inc.
Greenwood, Indiana

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

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

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



| | Crowe, Chizek and Company LLP
| | -----------------------------

Indianapolis, Indiana
January 9, 2002, except for Note 17
    with respect to the proposed public
    offering, as to which the date is
    March 27, 2002.

2



---



##### 



FIRST SHARES BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

December 31, 2001 and 2000
(Dollar amounts in thousands, except per share data)

|                                     |             |                                                                                     |                           |                |         |       |         |   |        |       |        | 
|------------------------------------ | ----------- | ----------------------------------------------------------------------------------- | ------------------------- | -------------- | ------- | ----- | ------- | - | ------ | ----- | ------ | 
|ASSETS                              
|                                     |             |                                                                                     |                           |                |         |       |         |  
|                                     |             |                                                                                     |                           |                |         | 2001  |         |   | 2000   |      
|                                     |             |                                                                                     |                           |                |         |       |         |   |        |      
|                                     |             | Cash and due from banks                                                             |                           | $              | 5,227   |       |         | $ | 3,394  |      
|                                     |             | Federal funds sold and other                                                        |                           |                | 1,081   |       |         |   |       |      
|                                     |             |                                                                                     |                           |                |         |      
|                                     |             |                                                                                     | Cash and cash equivalents |                |         | 6,308 |         |   |        | 3,394 |       
|                                     |             | Securities available for sale                                                       |                           |                | 22,881  |       |         |   | 15,772 |      
|                                     |             | Securities held to maturity (fair value of
$277 in 2001 and 2000)                   |                           |                | 275     |       |         |   | 276    |      
|                                     |             | FHLB stock, at cost                                                                 |                           |                | 670     |       |         |   | 670    |      
|                                     |             | Loans held for sale                                                                 |                           |                | 2,759   |       |         |   | 494    |      
|                                     |             | Loans, net of allowance ($1,148 and $910)                                           |                           |                | 89,808  |       |         |   | 80,499 |      
|                                     |             | Premises and equipment, net                                                         |                           |                | 2,072   |       |         |   | 2,091  |      
|                                     |             | Intangible assets, net                                                              |                           |                | 119     |       |         |   | 163    |      
|                                     |             | Cash surrender value of life insurance                                              |                           |                | 2,293   |       |         |   | 2,189  |      
|                                     |             | Accrued interest receivable and other assets                                        |                           |                | 928     |       |         |   | 888    |      
|                                     |             |                                                                                     |                           |                |         |      
|                                     |             | $                                                                                   | 128,113                   |                |         | $     | 106,436 |  
|                                     |             |                                                                                     |                           |                |         |      
|LIABILITIES AND SHAREHOLDERS EQUITY
|                                     | Liabilities |                                                                                     |                           |                |         |       |         |   |       
|                                     |             | Noninterest-bearing deposits                                                        |                           | $              | 11,253  |       |         | $ | 10,177 |      
|                                     |             | Interest-bearing deposits                                                           |                           |                | 100,122 |       |         |   | 80,531 |      
|                                     |             |                                                                                     |                           |                |         |      
|                                     |             |                                                                                     |                           | Total deposits |         |       | 111,375 |   |        |       | 90,708 | 
|                                     |             | Federal Home Loan Bank advances                                                     |                           |                | 3,000   |       |         |   | 4,300  |      
|                                     |             | Federal funds purchased                                                             |                           |                |        |       |         |   | 2,600  |      
|                                     |             | Repurchase agreements                                                               |                           |                | 4,211   |       |         |   |       |      
|                                     |             | Note payable                                                                        |                           |                | 1,780   |       |         |   | 1,750  |      
|                                     |             | Accrued interest payable and other liabilities                                      |                           |                | 484     |       |         |   | 479    |      
|                                     |             |                                                                                     |                           |                |         |      
|                                     |             |                                                                                     | 120,850                   |                |         |       | 99,837  |  
|Shareholders equity                 |             |                                                                                     |                           |                |         |       |         |  
|                                     |             | Common stock, $.01 par value: 10,000,000 shares authorized,
1,052,779 shares issued |                           |                | 11      |       |         |   | 11     |      
|                                     |             | Additional paid in capital                                                          |                           |                | 4,674   |       |         |   | 4,674  |      
|                                     |             | Retained earnings                                                                   |                           |                | 2,583   |       |         |   | 1,891  |      
|                                     |             | Accumulated other comprehensive income/(loss)                                       |                           |                | (5      | )     |         |   | 23     |      
|                                     |             |                                                                                     |                           |                |         |      
|                                     |             |                                                                                     | 7,263                     |                |         |       | 6,599   |  
|                                     |             |                                                                                     |                           |                |         |      
|                                     |             | $                                                                                   | 128,113                   |                |         | $     | 106,436 |  
|                                     |             |                                                                                     |                           |                |         |      

See accompanying notes.

3



---



##### 



FIRST SHARES BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

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

|                                                    |                                                    |   |       |       |  |      |       |       |      |   |       |       |  
|--------------------------------------------------- | -------------------------------------------------- | - | ----- | ----- |  | ---- | ----- | ----- | ---- | - | ----- | ----- | -
|                                                    |                                                    |   | 2001  |       |  | 2000 |       |       | 1999 |  
|                                                    |                                                    |   |       |       |  |      |       |       |      |  
|Interest income                                     |                                                    |   |       |       |  |      |       |       |      |   |       |      
|                                                    | Loans, including related fees                      |   | $     | 7,755 |  |      | $     | 6,353 |      |   | $     | 3,157 |  
|                                                    | Taxable securities                                 |   |       | 1,313 |  |      |       | 1,105 |      |   |       | 555   |  
|                                                    | Nontaxable securities                              |   |       | 41    |  |      |       | 51    |      |   |       | 77    |  
|                                                    | Other                                              |   |       | 55    |  |      |       | 87    |      |   |       | 122   |  
|                                                    |                                                    |   |       |       |  |      |       |       |     
|                                                    |                                                    |   | 9,164 |       |  |      | 7,596 |       |      |   | 3,911 |      
|Interest expense                                    |                                                    |   |       |       |  |      |       |       |      |   |       |      
|                                                    | Deposits                                           |   |       | 4,456 |  |      |       | 3,936 |      |   |       | 1,785 |  
|                                                    | Other                                              |   |       | 348   |  |      |       | 399   |      |   |       | 32    |  
|                                                    |                                                    |   |       |       |  |      |       |       |     
|                                                    |                                                    |   | 4,804 |       |  |      | 4,335 |       |      |   | 1,817 |      
|Net interest income                                 |                                                    |   | 4,360 |       |  |      | 3,261 |       |      |   | 2,094 |      
|Provision for loan losses                           |                                                    |   | 331   |       |  |      | 417   |       |      |   | 280   |      
|                                                    |                                                    |   |       |       |  |      |       |       |     
|Net interest income after provision for loan losses |                                                    |   | 4,029 |       |  |      | 2,844 |       |      |   | 1,814 |      
|Noninterest income                                  |                                                    |   |       |       |  |      |       |       |      |   |       |      
|                                                    | Service charges on deposit accounts                |   |       | 317   |  |      |       | 187   |      |   |       | 128   |  
|                                                    | Mortgage banking activity                          |   |       | 451   |  |      |       | 143   |      |   |       | 8     |  
|                                                    | Increase in cash surrender value of life insurance |   |       | 117   |  |      |       | 93    |      |   |       | 27    |  
|                                                    | Net gain on sale of securities                     |   |       | 63    |  |      |       |      |      |   |       |      |  
|                                                    | Other                                              |   |       | 154   |  |      |       | 83    |      |   |       | 35    |  
|                                                    |                                                    |   |       |       |  |      |       |       |     
|                                                    |                                                    |   | 1,102 |       |  |      | 506   |       |      |   | 198   |      
|Noninterest expenses                                |                                                    |   |       |       |  |      |       |       |      |   |       |      
|                                                    | Salaries and employee benefits                     |   |       | 2,559 |  |      |       | 2,334 |      |   |       | 1,615 |  
|                                                    | Occupancy                                          |   |       | 355   |  |      |       | 362   |      |   |       | 151   |  
|                                                    | Equipment and data processing                      |   |       | 378   |  |      |       | 384   |      |   |       | 253   |  
|                                                    | Core deposit amortization                          |   |       | 44    |  |      |       | 44    |      |   |       | 44    |  
|                                                    | Postage, freight and express                       |   |       | 88    |  |      |       | 67    |      |   |       | 44    |  
|                                                    | Advertising                                        |   |       | 87    |  |      |       | 125   |      |   |       | 117   |  
|                                                    | Stationery and office supplies                     |   |       | 79    |  |      |       | 93    |      |   |       | 57    |  
|                                                    | Telephone                                          |   |       | 117   |  |      |       | 123   |      |   |       | 64    |  
|                                                    | Committee and director fees                        |   |       | 44    |  |      |       | 45    |      |   |       | 46    |  
|                                                    | Other                                              |   |       | 688   |  |      |       | 631   |      |   |       | 303   |  
|                                                    |                                                    |   |       |       |  |      |       |       |     
|                                                    |                                                    |   | 4,439 |       |  |      | 4,208 |       |      |   | 2,694 |      
|                                                    |                                                    |   |       |       |  |      |       |       |     
|Income (loss) before income taxes                   |                                                    |   | 692   |       |  |      | (858  | )     |      |   | (682  | )    
|Income tax benefit                                  |                                                    |   |      |       |  |      |      |       |      |   | (73   | )    
|                                                    |                                                    |   |       |       |  |      |       |       |     
|Net income (loss)                                   |                                                    | $ | 692   |       |  | $    | (858  | )     |      | $ | (609  | )    
|                                                    |                                                    |   |       |       |  |      |       |       |     
|Earnings/(loss) per share:                          |                                                    |   |       |       |  |      |       |       |      |   |       |      
|                                                    | Basic                                              |   | $     | 0.66  |  |      | $     | (1.08 | )    |   | $     | (.97  | )
|                                                    | Diluted                                            |   |       | 0.65  |  |      |       | (1.08 | )    |   |       | (.97  | )

See accompanying notes.

4



---



##### 



FIRST SHARES BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY

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

|                             |                                   |                  |                  |                            |   |        |       |   |         |            |       |          |     |   |               |      |       |             |     |   |               |   |       |       |     |       |      |  
|---------------------------- | --------------------------------- | ---------------- | ---------------- | -------------------------- | - | ------ | ----- | - | ------- | ---------- | ----- | -------- | --- | - | ------------- | ---- | ----- | ----------- | --- | - | ------------- | - | ----- | ----- | --- | ----- | ---- | -
|                             |                                   |                  |                  |                            |   |        |       |   |         |            |       |          |     |   |               |      |       | Accumulated |     |   |               |   |       |       |     |       |     
|                             |                                   |                  |                  |                            |   |        |       |   |         | Additional |       |          |     |   |               |      | Other |             |     |   |               |   |       | Total |    
|                             |                                   |                  |                  |                            |   | Common |       |   | Paid-in |            |       | Retained |     |   | Comprehensive |      |       | Treasury    |     |   | Shareholders' |  
|                             |                                   |                  |                  |                            |   | Stock  |       |   | Capital |            |       | Earnings |     |   | Income (Loss) |      |       | Stock       |     |   | Equity        |  
|                             |                                   |                  |                  |                            |   |        |       |   |         |            |       |          |     |   |               |      |       |             |     |   |               |  
|Balance at January 1, 1999   |                                   | $                | 6                |                            |   | $      | 1,089 |   |         | $          | 3,447 |          |     | $ | 27            |      |       |             | (84 | ) |               | $ | 4,485 |      
|Comprehensive loss:          |                                   |                  |                  |                            |   |        |       |   |         |            |       |          |     |   |               |      |       |             |     |   |               |   |       |      
|                             | Net loss                          |                  |                  |                           |   |        |       |  |         |            |       | (609     | )   |   |               |     |       |             |     |  |               |   |       | (609  | )  
|                             | Changes in unrealized
gain/(loss) |                  |                  |                           |   |        |       |  |         |            |       |         |     |   |               | (174 | )     |             |     |  |               |   |       | (174  | )  
|                             |                                   |                  |                  | Total comprehensive
loss   |   |        |       |   |         |            |       |          |     |   |               |      |       |             |     |   |               |   |       |       |     |       | (783 | )
|Cash dividends               |                                   |                  |                  |                            |   |        |       |   |         |            |       |          |     |   |               |      |       |             |     |   |               |   |       |      
|                             |                                   | ($.13 per share) |                  |                            |  |        |       |   |        |            |       |          | (89 | ) |               |      |      |             |     |   |              |   |       |       | (89 | )    
|Sale of 121,830 shares at    |                                   |                  |                  |                            |   |        |       |   |         |            |       |          |     |   |               |      |       |             |     |   |               |   |       |      
|                             |                                   | $8.19 per share  |                  |                            | 1 |        |       |   | 996     |            |       |          |    |   |               |      |      |             |     |   |              |   |       |       | 997 |      
|Purchase of treasury stock   |                                   |                  |                  |                            |   |        |       |   |         |            |       |          |     |   |               |      |       |             |     |   |               |   |       |      
|                             |                                   | (2,898 shares)   |                  |                            |  |        |       |   |        |            |       |          |    |   |               |      |      |             |     |   | (23           | ) |       |       | (23 | )    
|Retirement of treasury
stock |                                   |                  |                  |                            |   |        | (107  | ) |         |            |      |          |     |   |              |      |       |             | 107 |   |               |   |      |      
|Stock options outstanding    |                                   |                  |                 |                            |   |        | 10    |   |         |            |      |          |     |   |              |      |       |             |    |   |               |   | 10    |      
|                             |                                   |                  |                  |                            |   |        |       |   |         |            |       |          |     |   |               |      |       |             |     |   |               |  
|Balance at December 31, 1999 |                                   |                  | 7                |                            |   |        | 1,988 |   |         |            | 2,749 |          |     |   | (147          | )    |       |             |    |   |               |   | 4,597 |      
|Comprehensive loss:          |                                   |                  |                  |                            |   |        |       |   |         |            |       |          |     |   |               |      |       |             |     |   |               |   |       |      
|                             | Net loss                          |                  |                  |                           |   |        |       |  |         |            |       | (858     | )   |   |               |     |       |             |     |  |               |   |       | (858  | )  
|                             | Change in unrealized
gain/(loss)  |                  |                  |                           |   |        |       |  |         |            |       |         |     |   |               | 170  |       |             |     |  |               |   |       | 170   |    
|                             |                                   |                  |                  | Total comprehensive
loss   |   |        |       |   |         |            |       |          |     |   |               |      |       |             |     |   |               |   |       |       |     |       | (688 | )
|Proceeds from sale of stock  |                                   |                  |                  |                            |   |        |       |   |         |            |       |          |     |   |               |      |       |             |     |   |               |   |       |      
|                             |                                   |                  | (388,267 shares) |                            |   | 4      |       |   |         | 2,686      |       |          |     |  |               |      |       |            |     |   |               |  |       |       |     | 2,690 |     
|                             |                                   |                  |                  |                            |   |        |       |   |         |            |       |          |     |   |               |      |       |             |     |   |               |  
|Balance at December 31, 2000 |                                   |                  | 11               |                            |   |        | 4,674 |   |         |            | 1,891 |          |     |   | 23            |      |       |             |    |   |               |   | 6,599 |      
|Comprehensive income:        |                                   |                  |                  |                            |   |        |       |   |         |            |       |          |     |   |               |      |       |             |     |   |               |   |       |      
|                             | Net income                        |                  |                  |                           |   |        |       |  |         |            |       |         |     |   |               | 692  |       |             |     |  |               |   |       | 692   |    
|                             | Change in unrealized
gain/(loss)  |                  |                  |                           |   |        |       |  |         |            |       |         |     |   |               | (28  | )     |             |     |  |               |   |       | (28   | )  
|                             |                                   |                  |                  | Total comprehensive
income |   |        |       |   |         |            |       |          |     |   |               |      |       |             |     |   |               |   |       |       |     |       | 664  |  
|                             |                                   |                  |                  |                            |   |        |       |   |         |            |       |          |     |   |               |      |       |             |     |   |               |  
|Balance at December 31, 2001 |                                   | $                | 11               |                            |   | $      | 4,674 |   |         | $          | 2,583 |          |     | $ | (5            | )    |       | $           |    |   |               | $ | 7,263 |      
|                             |                                   |                  |                  |                            |   |        |       |   |         |            |       |          |     |   |               |      |       |             |     |   |               |  

See accompanying notes.

5



---



##### 



FIRST SHARES BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31, 2001, 2000 and 1999
(Dollar amounts in thousands)

|                                                  |                                                                                   |                                                |                                        |                                    |         |        |       |         |         |      |        |         |         |      |      |  
|------------------------------------------------- | --------------------------------------------------------------------------------- | ---------------------------------------------- | -------------------------------------- | ---------------------------------- | ------- | ------ | ----- | ------- | ------- | ---- | ------ | ------- | ------- | ---- | ---- | -
|                                                  |                                                                                   |                                                |                                        |                                    |         | 2001   |       |         | 2000    |      |        | 1999    |        
|                                                  |                                                                                   |                                                |                                        |                                    |         |        |       |         |         |      |        |         |        
|Cash flows from operating activities              |                                                                                   |                                                |                                        |                                    |         |        |       |         |         |      |        |        
|                                                  | Net income (loss)                                                                 |                                                | $                                      | 692                                |         |        | $     | (858    | )       |      | $      | (609    | )      
|                                                  | Adjustments to reconcile net income (loss)
to net cash from operating activities: |                                                |                                        |                                    |         |        |       |         |         |      |        |         |        
|                                                  |                                                                                   | Depreciation and amortization                  |                                        |                                    | 295     |        |       |         | 311     |      |        |         | 171     |     
|                                                  |                                                                                   | Provision for loan losses                      |                                        |                                    | 331     |        |       |         | 417     |      |        |         | 280     |     
|                                                  |                                                                                   | Stock option compensation expense              |                                        |                                    |        |        |       |         |        |      |        |         | 10      |     
|                                                  |                                                                                   | Discount (accretion) and premium amortization  |                                        |                                    | 4       |        |       |         | (3      | )    |        |         | 13      |     
|                                                  |                                                                                   | Amortization of intangible asset               |                                        |                                    | 44      |        |       |         | 43      |      |        |         | 44      |     
|                                                  |                                                                                   | Net realized loss on disposal of fixed assets  |                                        |                                    |        |        |       |         | 25      |      |        |         |        |     
|                                                  |                                                                                   | Net realized (gain) loss on sale of securities |                                        |                                    | (63     | )      |       |         |        |      |        |         |        |     
|                                                  |                                                                                   | Changes in assets and liabilities:             |                                        |                                    |         |        |       |         |         |      |        |         |         |     
|                                                  |                                                                                   |                                                | Loans held for sale                    |                                    |         | (2,265 | )     |         |         | 107  |        |         |         | (601 | )   
|                                                  |                                                                                   |                                                | Interest receivable and other assets   |                                    |         | (40    | )     |         |         | (425 | )      |         |         | 85   |     
|                                                  |                                                                                   |                                                | Interest payable and other liabilities |                                    |         | 24     |       |         |         | 82   |        |         |         | 126  |     
|                                                  |                                                                                   |                                                |                                        |                                    |         |        |       |         |        
|                                                  |                                                                                   |                                                |                                        | Net cash from operating activities |         |        | (978  | )       |         |      | (301   | )       |         |      | (481 | )
|Cash flows from investing activities              |                                                                                   |                                                |                                        |                                    |         |        |       |         |         |      |        |        
|                                                  | Proceeds from sales, maturities and paydowns of securities
available for sale     |                                                |                                        | 23,734                             |         |        |       | 18,050  |         |      |        | 5,941   |        
|                                                  | Proceeds from maturities of securities held to maturity                           |                                                |                                        |                                   |         |        |       | 343     |         |      |        | 715     |        
|                                                  | Purchases of securities available for sale                                        |                                                |                                        | (30,830                            | )       |        |       | (16,665 | )       |      |        | (14,579 | )      
|                                                  | Purchase of Federal Home Loan Bank stock                                          |                                                |                                        |                                   |         |        |       | (541    | )       |      |        | (3      | )      
|                                                  | Loans made to customers net of payments received                                  |                                                |                                        | (9,640                             | )       |        |       | (35,920 | )       |      |        | (18,971 | )      
|                                                  | Premises and equipment purchases                                                  |                                                |                                        | (276                               | )       |        |       | (731    | )       |      |        | (1,212  | )      
|                                                  | Purchase of life insurance                                                        |                                                |                                        |                                   |         |        |       | (1,751  | )       |      |        |        |        
|                                                  | Increase on cash surrender value of life insurance                                |                                                |                                        | (104                               | )       |        |       |        |         |      |        |        |        
|                                                  |                                                                                   |                                                |                                        |                                    |         |        |       |         |        
|                                                  |                                                                                   | Net cash from investing activities             |                                        |                                    | (17,116 | )      |       |         | (37,215 | )    |        |         | (28,109 | )   
|Cash flows from financing activities              |                                                                                   |                                                |                                        |                                    |         |        |       |         |         |      |        |        
|                                                  | Change in deposit accounts                                                        |                                                |                                        | 20,667                             |         |        |       | 27,721  |         |      |        | 24,880  |        
|                                                  | Change in repurchase agreements                                                   |                                                |                                        | 4,211                              |         |        |       |        |         |      |        |        |        
|                                                  | Proceeds from Federal Home Loan Bank advances                                     |                                                |                                        | 2,000                              |         |        |       | 3,500   |         |      |        | 2,300   |        
|                                                  | Payments on Federal Home Loan Bank advance                                        |                                                |                                        | (3,300                             | )       |        |       |        |         |      |        | (1,500  | )      
|                                                  | Dividends paid                                                                    |                                                |                                        |                                   |         |        |       |        |         |      |        | (89     | )      
|                                                  | Sale of common stock                                                              |                                                |                                        |                                   |         |        |       | 2,690   |         |      |        | 997     |        
|                                                  | Net purchase/reissue of treasury stock                                            |                                                |                                        |                                   |         |        |       |        |         |      |        | (23     | )      
|                                                  | Change in federal funds purchased                                                 |                                                |                                        | (2,600                             | )       |        |       | 2,600   |         |      |        |        |        
|                                                  | Draws on note payable                                                             |                                                |                                        | 30                                 |         |        |       | 1,750   |         |      |        |        |        
|                                                  |                                                                                   |                                                |                                        |                                    |         |        |       |         |        
|                                                  |                                                                                   | Net cash from financing activities             |                                        |                                    | 21,008  |        |       |         | 38,261  |      |        |         | 26,565  |     
|                                                  |                                                                                   |                                                |                                        |                                    |         |        |       |         |        
|Net change in cash and cash equivalents           |                                                                                   |                                                | 2,914                                  |                                    |         |        | 745   |         |         |      | (2,025 | )      
|Cash and cash equivalents at beginning of year    |                                                                                   |                                                | 3,394                                  |                                    |         |        | 2,649 |         |         |      | 4,674  |        
|                                                  |                                                                                   |                                                |                                        |                                    |         |        |       |         |        
|Cash and cash equivalents at end of year          |                                                                                   | $                                              | 6,308                                  |                                    |         | $      | 3,394 |         |         | $    | 2,649  |        
|                                                  |                                                                                   |                                                |                                        |                                    |         |        |       |         |        
|Supplemental disclosures of cash flow information |                                                                                   |                                                |                                        |                                    |         |        |       |         |         |      |        |        
|                                                  | Cash paid during the year for:                                                    |                                                |                                        |                                    |         |        |       |         |         |      |        |         |        
|                                                  |                                                                                   | Interest                                       |                                        | $                                  | 4,814   |        |       | $       | 4,289   |      |        | $       | 1,724   |     
|                                                  |                                                                                   | Income taxes paid/(received)                   |                                        |                                    |        |        |       |         | (128    | )    |        |         | 34      |     

See accompanying notes.

6



---



##### 



FIRST SHARES BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2001 and 2000
(Dollar amounts in thousands, except per share data)

NOTE 1  Summary of Significant Accounting Policies

Nature of Operations and Principles of Consolidation: The accompanying
consolidated financial statements include the accounts of First Shares Bancorp,
Inc. (the Company) and its wholly-owned subsidiary, First Bank (the Bank).
Intercompany balances and transactions are eliminated in consolidation. The
Bank operates from six locations which generate commercial, mortgage and
installment loans, and receive deposits from customers located primarily in
Johnson, Morgan and Brown Counties of Indiana. The majority of the Banks
income is derived from commercial and retail lending activities and
investments. The majority of the Banks loans are secured by specific items of
collateral including business assets, real property and consumer assets.

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

Securities: Securities are classified as 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 carried at fair
value, with unrealized holding gains and losses reported in other comprehensive
income (loss). Other securities such as Federal Home Loan Bank stock are
carried at cost. Interest and dividend income, adjusted by amortization of
purchase premium or discount, is included in earnings. Gains and losses on
sales are based on the amortized cost of the security sold. Securities are
written down to fair value when a decline in fair value is not temporary.

Loans: Loans that management has the intent and ability to hold for the
foreseeable future or until maturity or payoff are reported at the principal
balance outstanding, net of unearned interest, deferred loan fees and costs,
and an allowance for loan losses. Loans held for sale are reported at the lower
of cost or market, on an aggregate basis. Interest income is reported on the
interest method and includes amortization of net deferred loan fees and costs
over the loan term.

Interest income is not reported when full loan repayment is in doubt,
typically when payments are past due over 90 days. Payments received on such
loans are reported as principal reductions.

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 based on past loan loss experience, known and
inherent risks in 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 the loan is confirmed.

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

7



---



##### 



FIRST SHARES BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

December 31, 2001 and 2000
(Dollar amounts in thousands, except per share data)

NOTE 1  Continued

Premises and Equipment: Asset cost is reported net of accumulated
depreciation. Depreciation expense is calculated on the straight-line method
over asset useful lives.

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

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

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

Intangible Assets: Intangible assets consist entirely of a core deposit
intangible from a 1995 branch acquisition which is being amortized over its
estimated 10 year life.

Cash Flows: Cash and cash equivalents include cash, deposits with other
financial institutions under 90 days, and federal funds sold. Net cash flows
are reported for customer loan and deposit transactions.

Stock Compensation: Expense for employee compensation under stock option
plans is reported when options are granted below market price at grant date. In
addition, pro forma disclosures of net income and earnings per share are shown
using the fair value method to measure expense for options granted, using an
option pricing method to estimate fair value.

Earnings Per Share: Earnings per share is based on weighted-average common
shares outstanding. Diluted earnings per share includes the dilutive effect of
additional potential shares issuable under outstanding options. Earnings and
dividends per share, and other financial information, are restated for all
stock splits and dividends through the date of issue of the financial
statements.

Equity Transactions: On January 21, 2000, the Company declared a 6:1 stock
split. On February 11, 2000, the shareholders approved a change in authorized
shares to 10,000,000 and set a par value at $.01 per share. In June 2000, the
Company initiated its first public offering of common shares, issuing 388,267
shares at $8.50 per share, raising gross proceeds of $3,300 and net proceeds of
$2,690 after $610 of expenses.

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

8



---



##### 



FIRST SHARES BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

December 31, 2001 and 2000
(Dollar amounts in thousands, except per share data)

NOTE 1  Continued

Fair Value of Financial Instruments: Fair values of financial instruments
are estimated using relevant market information and other assumptions, as more
fully disclosed in a separate note. 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.

Dividend Restriction: Banking regulations require the maintenance of
certain capital levels that may limit the amount of dividends which may be paid
by the Bank to the Company or by the Company to its shareholders.

Operating Segment: While the Companys chief decision-makers monitor the
revenue streams of the various Company products and services, the identifiable
segments are not material and operations are managed and financial performance
is evaluated on a Company-wide basis. Accordingly, all of the Companys
financial service operations are considered by management to be aggregated in
one reportable operating segment.

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.

Financial Instruments: Financial instruments include off-balance sheet
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 represent the exposure to loss, before considering customer collateral or
ability to repay. Such financial instruments are recorded when they are funded.

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

NOTE 2  Securities

The fair values of available for sale securities and the related gains and
losses recognized in accumulated other comprehensive income (loss) were as
follows at December 31:

9



---



##### 



FIRST SHARES BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

December 31, 2001 and 2000
(Dollar amounts in thousands, except per share data)

NOTE 2  Continued

|     |                                                  |   |        |        |  |            |       |     |            |       |      |      |  
|---- | ------------------------------------------------ | - | ------ | ------ |  | ---------- | ----- | --- | ---------- | ----- | ---- | ---- | -
|     |                                                  |   |        |        |  |            | Gross |     |            | Gross |     
|     |                                                  |   | Fair   |        |  | Unrealized |       |     | Unrealized |      
|     |                                                  |   | Value  |        |  | Gains      |       |     | Losses     |      
|     |                                                  |   |        |        |  |            |       |     |            |      
|2001 |                                                  |   |        |        |  |            |       |     |            |       |      |     
|     | U.S. Treasury and government
agency securities   |   | $      | 12,547 |  |            | $     | 156 |            |       | $    | (112 | )
|     | Obligations of states and
political subdivisions |   |        | 616    |  |            |       |    |            |       |      | (11  | )
|     | Other securities                                 |   |        | 1,792  |  |            |       | 6   |            |       |      | (14  | )
|     | Mortgage backed securities                       |   |        | 7,926  |  |            |       | 37  |            |       |      | (72  | )
|     |                                                  |   |        |        |  |            |       |     |           
|     |                                                  | $ | 22,881 |        |  | $          | 199   |     |            | $     | (209 | )   
|     |                                                  |   |        |        |  |            |       |     |           
|2000 |                                                  |   |        |        |  |            |       |     |            |       |      |     
|     | U.S. Treasury and government
agency securities   |   | $      | 12,974 |  |            | $     | 71  |            |       | $    | (14  | )
|     | Obligations of states and
political subdivisions |   |        | 721    |  |            |       |    |            |       |      | (18  | )
|     | Other securities                                 |   |        | 1,477  |  |            |       | 18  |            |       |      | (15  | )
|     | Mortgage backed securities                       |   |        | 600    |  |            |       |    |            |       |      | (4   | )
|     |                                                  |   |        |        |  |            |       |     |           
|     |                                                  | $ | 15,772 |        |  | $          | 89    |     |            | $     | (51  | )   
|     |                                                  |   |        |        |  |            |       |     |           

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

|                                                 |  |          |     |  |            |       |   |            |       |   |       |  |  |   |     | 
|------------------------------------------------ |  | -------- | --- |  | ---------- | ----- | - | ---------- | ----- | - | ----- |  |  | - | --- | 
|                                                 |  |          |     |  |            | Gross |   |            | Gross |   |       |  |  |  
|                                                 |  | Carrying |     |  | Unrealized |       |   | Unrealized |       |   | Fair  | 
|                                                 |  | Value    |     |  | Gains      |       |   | Losses     |       |   | Value | 
|                                                 |  |          |     |  |            |       |   |            |       |   |       | 
|2001                                             |  |          |     |  |            |       |   |            |       |   |       |  |  |   |     | 
|Obligations of states and
political subdivisions |  | $        | 275 |  |            | $     | 2 |            |       | $ |      |  |  | $ | 277 | 
|                                                 |  |          |     |  |            |       |   |            |       |   |       | 
|2000                                             |  |          |     |  |            |       |   |            |       |   |       |  |  |   |     | 
|Obligations of states and
political subdivisions |  | $        | 276 |  |            | $     | 1 |            |       | $ |      |  |  | $ | 277 | 
|                                                 |  |          |     |  |            |       |   |            |       |   |       | 

The carrying value and fair value of debt securities, if different, at
December 31, 2001, by contractual maturity, are shown below. Securities not due
at a single maturity date, primarily mortgage backed securities, are shown
separately.

|                                       |  |   |                    |  |  |                  |     |  |       |   |     |  | 
|-------------------------------------- |  | - | ------------------ |  |  | ---------------- | --- |  | ----- | - | --- |  | 
|                                       |  |   | Available for Sale |  |  | Held to Maturity |    
|                                       |  |   |                    |  |  |                  |    
|                                       |  |   | Fair               |  |  | Carrying         |     |  | Fair  |  
|                                       |  |   | Value              |  |  | Value            |     |  | Value |  
|                                       |  |   |                    |  |  |                  |     |  |       |  
|Due in one year or less                |  | $ | 1,032              |  |  | $                | 275 |  |       | $ | 277 | 
|Due after one year through five years  |  |   | 4,122              |  |  |                  |    |  |       |   |    | 
|Due after five years through ten years |  |   | 5,688              |  |  |                  |    |  |       |   |    | 
|Due after ten years                    |  |   | 4,113              |  |  |                  |    |  |       |   |    | 
|Mortgage backed securities             |  |   | 7,926              |  |  |                  |    |  |       |   |    | 
|                                       |  |   |                    |  |  |                  |     |  |      
|                                       |  | $ | 22,881             |  |  | $                | 275 |  |       | $ | 277 | 
|                                       |  |   |                    |  |  |                  |     |  |      

10



---



##### 



FIRST SHARES BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

December 31, 2001 and 2000
(Dollar amounts in thousands, except per share data)

NOTE 2  Continued

Information about the sales of securities available for sale follows:

|                      |  |      |       |  |      |   |       |      |  |   |       | 
|--------------------- |  | ---- | ----- |  | ---- | - | ----- | ---- |  | - | ----- | 
|                      |  | 2001 |       |  | 2000 |   |       | 1999 | 
|                      |  |      |       |  |      |   |       |      | 
|Proceeds              |  | $    | 6,113 |  |      | $ | 5,315 |      |  | $ | 1,192 | 
|Gross realized gains  |  |      | 65    |  |      |   | 1     |      |  |   | 7     | 
|Gross realized losses |  |      | 2     |  |      |   | 1     |      |  |   | 7     | 

Securities pledged at year-end 2001 and 2000 had a carrying value of
$8,543 and $2,506 and were pledged to secure repurchase agreements and federal
funds purchased.

NOTE 3  Loans

Total loans are comprised of the following at December 31:

|                                |            |   |        |        |  |      |        |        | 
|------------------------------- | ---------- | - | ------ | ------ |  | ---- | ------ | ------ | 
|                                |            |   | 2001   |        |  | 2000 |       
|                                |            |   |        |        |  |      |       
|Commercial                      |            | $ | 19,606 |        |  | $    | 19,047 |       
|Commercial Real Estate          |            |   | 12,725 |        |  |      | 6,902  |       
|Residential Real Estate         |            |   | 24,537 |        |  |      | 20,227 |       
|Construction                    |            |   | 10,292 |        |  |      | 12,148 |       
|Consumer                        |            |   | 23,796 |        |  |      | 23,085 |       
|                                |            |   |        |        |  |     
|                                |            |   | 90,956 |        |  |      | 81,409 |       
|Less: allowance for loan losses |            |   | (1,148 | )      |  |      | (910   | )     
|                                |            |   |        |        |  |     
|                                | Loans, net |   | $      | 89,808 |  |      | $      | 80,499 | 
|                                |            |   |        |        |  |     

NOTE 4  Allowance For Loan Losses

An analysis of the allowance for loan losses follows:

|                                |  |      |       |   |      |   |      |      |  |   |      |  
|------------------------------- |  | ---- | ----- | - | ---- | - | ---- | ---- |  | - | ---- | -
|                                |  | 2001 |       |   | 2000 |   |      | 1999 | 
|                                |  |      |       |   |      |   |      |      | 
|Balance, January 1              |  | $    | 910   |   |      | $ | 549  |      |  | $ | 346  |  
|Provision charged to operations |  |      | 331   |   |      |   | 417  |      |  |   | 280  |  
|Loans charged off               |  |      | (167  | ) |      |   | (139 | )    |  |   | (169 | )
|Recoveries                      |  |      | 74    |   |      |   | 83   |      |  |   | 92   |  
|                                |  |      |       |   |      |   |      |      | 
|Balance, December 31            |  | $    | 1,148 |   |      | $ | 910  |      |  | $ | 549  |  
|                                |  |      |       |   |      |   |      |      | 

11



---



##### 



FIRST SHARES BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

December 31, 2001 and 2000
(Dollar amounts in thousands, except per share data)

NOTE 4  Continued

Impaired loans were as follows.

|                                                           |  |      |     |  |      |   |   | 
|---------------------------------------------------------- |  | ---- | --- |  | ---- | - | - | 
|                                                           |  | 2001 |     |  | 2000 |  
|                                                           |  |      |     |  |      |  
|Year-end loans with no allowance for loan losses allocated |  | $    | 214 |  |      | $ |  | 
|Year-end loans with allowance for loan losses allocated    |  |      | 32  |  |      |   |  | 
|Amount of the allowance allocated                          |  |      | 15  |  |      |   |  | 
|Average of impaired loans during the year                  |  |      | 211 |  |      |   |  | 
|Interest income recognized during impairment               |  |      |    |  |      |   |  | 
|Cash-basis interest income recognized                      |  |      |    |  |      |   |  | 

NOTE 5  Premises and Equipment

Premises and equipment consists of the following at December 31:

|                           |       |   |        |       |  |      |       |       | 
|-------------------------- | ----- | - | ------ | ----- |  | ---- | ----- | ----- | 
|                           |       |   | 2001   |       |  | 2000 |      
|                           |       |   |        |       |  |      |      
|Land                       |       | $ | 26     |       |  | $    | 26    |      
|Buildings and improvements |       |   | 770    |       |  |      | 755   |      
|Leasehold improvements     |       |   | 581    |       |  |      | 573   |      
|Furniture and equipment    |       |   | 1,914  |       |  |      | 1,664 |      
|                           |       |   |        |       |  |     
|                           | Total |   |        | 3,291 |  |      |       | 3,018 | 
|Accumulated depreciation   |       |   | (1,219 | )     |  |      | (927  | )    
|                           |       |   |        |       |  |     
|                           |       | $ | 2,072  |       |  | $    | 2,091 |      
|                           |       |   |        |       |  |     

Depreciation expense was $295, $311 and $149 for 2001, 2000 and 1999.

NOTE 6  Deposits

Certificates of deposit in denominations of $100 or more totaled $28,861
and $20,615 at December 31, 2001 and 2000.

At year-end 2001, scheduled maturities of time deposits were as follows:

|           |  |   |        | 
|---------- |  | - | ------ | 
|2002       |  | $ | 42,914 | 
|2003       |  |   | 20,065 | 
|2004       |  |   | 729    | 
|2005       |  |   | 1,044  | 
|2006       |  |   | 563    | 
|Thereafter |  |   | 106    | 
|           |  |   |       
|           |  | $ | 65,421 | 
|           |  |   |       

Deposits from principal officers, directors, and their affiliates at year
end 2001 and 2000 were $4,021 and $4,123.

12



---



##### 



FIRST SHARES BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

December 31, 2001 and 2000
(Dollar amounts in thousands, except per share data)

NOTE 7  Federal Home Loan Bank Advances and Note Payable

At year-end, advances from the Federal Home Loan Bank were as follows:

|                   |  |               |  |  |      |       |       |      |   |       |       | 
|------------------ |  | ------------- |  |  | ---- | ----- | ----- | ---- | - | ----- | ----- | 
|                   |  | Fixed         |  |  |      |       |       |      |   |       |      
|Maturity Date      |  | Interest Rate |  |  | 2001 |       |       | 2000 |  
|                   |  |               |  |  |      |       |       |      |  
|September 10, 2001 |  | 6.88%         |  |  | $    |      |       |      | $ | 800   |      
|April 2, 2001      |  | 6.30%         |  |  |      |      |       |      |   | 1,000 |      
|June 19, 2001      |  | 6.30%         |  |  |      |      |       |      |   | 1,500 |      
|January 23, 2006   |  | 4.73%         |  |  |      | 1,000 |       |      |   |      |      
|March 7, 2007      |  | 4.75%         |  |  |      | 1,000 |       |      |   |      |      
|December 27, 2010  |  | 5.30%         |  |  |      | 1,000 |       |      |   | 1,000 |      
|                   |  |               |  |  |      |       |       |      |   |      
|                   |  |               |  |  |      | $     | 3,000 |      |   | $     | 4,300 | 
|                   |  |               |  |  |      |       |       |      |   |      

The advances are due at maturity, but may be repaid at various dates
without penalty, require monthly interest payments and are collateralized by
first mortgage loans under a blanket lien arrangement. The only required
principal payment during the next five years is $1,000 for the January 23, 2006
advance.

The Company maintains a line of credit with a financial institution. The
Company has $2,000 available under the line, with $1,780 and $1,750 outstanding
at December 31, 2001 and 2000. The outstanding balance accrues interest at
LIBOR plus 1.75% (the interest rate was 3.9175% at December 31, 2001). The line
matures July 31, 2002 and is secured by the Banks stock and other assets of
the Company and carries the secured personal guaranty of a director.

NOTE 8  Employee Benefit Plans

The Bank maintains a 401(k) retirement plan in which substantially all
employees may participate. Employee contributions are limited to a maximum of
15% of their salary. The Plan allows for employer matching contributions up to
6% of an employees compensation and employer discretionary contributions. The
Banks contributions to the Plan become 20% vested after each year of service
and are fully vested after 5 years. Total 401(k) contributions charged to
expense were $43, $47 and $18 in 2001, 2000 and 1999.

The Bank has 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 $161 and
$128 at December 31, 2001 and 2000. The Bank purchased life insurance on the
directors. The cash surrender value of that insurance was $456 and $447 at
December 31, 2001 and 2000.

13



---



##### 



FIRST SHARES BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

December 31, 2001 and 2000
(Dollar amounts in thousands, except per share data)

NOTE 9  Income Taxes

Income tax expense/(benefit) consists of the following:

|                              |                              |   |      |   |  |      |      |   |      |   |      |     |  
|----------------------------- | ---------------------------- | - | ---- | - |  | ---- | ---- | - | ---- | - | ---- | --- | -
|                              |                              |   | 2001 |   |  | 2000 |      |   | 1999 |  
|                              |                              |   |      |   |  |      |      |   |      |  
|Current payable/(receivable)  |                              | $ |     |   |  | $    |     |   |      | $ | (74  | )  
|Deferred income tax           |                              |   | 208  |   |  |      | (418 | ) |      |   | (193 | )  
|Change in valuation allowance |                              |   | (208 | ) |  |      | 418  |   |      |   | 194  |    
|                              |                              |   |      |   |  |      |      |   |     
|                              | Income tax expense/(benefit) |   | $    |  |  |      | $    |  |      |   | $    | (73 | )
|                              |                              |   |      |   |  |      |      |   |     

The following is a reconciliation of income taxes and the amount computed
by applying the statutory federal income tax rate of 34% to income/(loss)
before income taxes for December 31:

|                                                            |                                    |   |      |     |   |      |      |     |      |   |      |     |  
|----------------------------------------------------------- | ---------------------------------- | - | ---- | --- | - | ---- | ---- | --- | ---- | - | ---- | --- | -
|                                                            |                                    |   | 2001 |     |   | 2000 |      |     | 1999 |  
|                                                            |                                    |   |      |     |   |      |      |     |      |  
|Statutory rate applied to income/(loss) before income taxes |                                    | $ | 235  |     |   | $    | (292 | )   |      | $ | (232 | )  
|Add (deduct)                                                |                                    |   |      |     |   |      |      |     |      |   |      |    
|                                                            | Tax-exempt interest income, net    |   |      | (12 | ) |      |      | (14 | )    |   |      | (22 | )
|                                                            | Life insurance                     |   |      | (40 | ) |      |      | (27 | )    |   |      | (14 | )
|                                                            | Other                              |   |      | 27  |   |      |      | (85 | )    |   |      | 1   |  
|Valuation Allowance                                         |                                    |   | (210 | )   |   |      | 418  |     |      |   | 194  |    
|                                                            |                                    |   |      |     |   |      |      |     |     
|                                                            | Total income tax expense/(benefit) |   | $    |    |   |      | $    |    |      |   | $    | (73 | )
|                                                            |                                    |   |      |     |   |      |      |     |     

Deferred tax assets and liabilities as of December 31, 2001 and 2000, are
comprised of the following components:

|                          |                                                      |                            |      |      |      |   |      |      |      |  
|------------------------- | ---------------------------------------------------- | -------------------------- | ---- | ---- | ---- | - | ---- | ---- | ---- | -
|                          |                                                      |                            |      | 2001 |      |   | 2000 |     
|                          |                                                      |                            |      |      |      |   |      |     
|Deferred tax assets:      |                                                      |                            |      |      |      |   |      |     
|                          | Allowance for loan losses                            |                            | $    | 370  |      |   | $    | 276  |     
|                          | Core deposit                                         |                            |      | 53   |      |   |      | 45   |     
|                          | Net unrealized loss on securities available for sale |                            |      | 4    |      |   |      |     |     
|                          | Net operating loss carryforward                      |                            |      | 253  |      |   |      | 590  |     
|                          | Deferred compensation                                |                            |      | 63   |      |   |      |     |     
|                          | Other                                                |                            |      | 27   |      |   |      | 26   |     
|                          |                                                      |                            |      |      |      |  
|                          |                                                      | Total deferred tax assets  |      |      | 770  |   |      |      | 937  |  
|Deferred tax liabilities: |                                                      |                            |      |      |      |   |      |     
|                          | Depreciation                                         |                            |      | (194 | )    |   |      | (132 | )   
|                          | Accrual to cash                                      |                            |      | (168 | )    |   |      | (193 | )   
|                          | Net unrealized gain on securities available for sale |                            |      |     |      |   |      | (15  | )   
|                          |                                                      |                            |      |      |      |  
|                          |                                                      | Total deferred liabilities |      |      | (362 | ) |      |      | (340 | )
|Valuation allowance       |                                                      |                            | (404 | )    |      |   | (612 | )   
|                          |                                                      |                            |      |      |      |  
|                          | Net deferred tax asset/(liability)                   |                            | $    | 4    |      |   | $    | (15  | )   
|                          |                                                      |                            |      |      |      |  

A net operating loss of approximately $599 is being carried forward which
expires in 2015.

14



---



##### 



FIRST SHARES BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

December 31, 2001 and 2000
(Dollar amounts in thousands, except per share data)

NOTE 10  Commitments and Contingencies

In the ordinary course of business, the Bank has guarantees and
commitments to extend credit which are not reflected in the balance sheet. The
Banks exposure to credit loss in the event of nonperformance by the other
party to the financial instrument is represented by the contractual amount of
those instruments. The Bank uses the same credit policy to make such
commitments as it does for on-balance sheet items. At December 31, 2001 and
2000, unused lines of credit and standby letters of credit totaled $9,441 and
$11,392. Interest rates on these commitments are primarily variable. 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.

At year-end 2001 and 2000, reserves of $317 and $316 were required as
deposits with the Federal Reserve or as cash on hand. These reserves do not
earn interest.

The Bank leases branch facilities under operating leases expiring in
various years through 2006. Expense for leased premises was $139, $124 and $48
for 2001, 2000 and 1999.

During 2001, the Bank entered into a lease agreement with an entity owned
by a director for a branch facility. The lease terms require annual payments of
$56, with the lease expiring 2006. Amounts paid to related parties under this
lease totaled $4 for 2001.

Future minimum lease payments are as follows:

|      |  |   |     | 
|----- |  | - | --- | 
|2002  |  | $ | 119 | 
|2003  |  |   | 104 | 
|2004  |  |   | 68  | 
|2005  |  |   | 56  | 
|2006  |  |   | 52  | 
|      |  |   |    
|Total |  | $ | 399 | 
|      |  |   |    

During 1999, the Company entered into employment contracts with certain
executive officers. The contracts have an initial term of three years, with the
expiration extended an additional year at each annual anniversary date. The
contracts provide for severance payments and other benefits, the amount of
which depends upon the nature of the separation. No amount is accrued at
December 31, 2001 or 2000 under these agreements.

NOTE 11  Capital Requirements and Restrictions on Retained Earnings

The Bank is subject to regulatory capital requirements administered by
federal 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.

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

15



---



##### 



FIRST SHARES BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

December 31, 2001 and 2000
(Dollar amounts in thousands, except per share data)

NOTE 11  Continued

The Bank was categorized as well capitalized as of December 31, 2001.

|                                         |  |        |        |  |                   |  |       |                    |  |                  |       |  |                   |        |       |  |       |  |      |   |  |                  |  |  |  |   |       |  |  |  |       |  
|---------------------------------------- |  | ------ | ------ |  | ----------------- |  | ----- | ------------------ |  | ---------------- | ----- |  | ----------------- | ------ | ----- |  | ----- |  | ---- | - |  | ---------------- |  |  |  | - | ----- |  |  |  | ----- | -
|                                         |  | 2001   |       
|                                         |  |        |       
|                                         |  |        |        |  |                   |  |       |                    |  |                  |       |  |                   |        |       |  |       |  |      |   |  | Minimum Required | 
|                                         |  |        |        |  |                   |  |       |                    |  |                  |       |  |                   |        |       |  |       |  |      |   |  | To Be Well       | 
|                                         |  |        |        |  |                   |  |       |                    |  | Minimum Required |       |  | Capitalized Under |       
|                                         |  |        |        |  |                   |  |       |                    |  | For Capital      |       |  | Prompt Corrective |       
|                                         |  | Actual |        |  | Adequacy Purposes |  |       | Action Regulations | 
|                                         |  |        |        |  |                   |  |       |                    | 
|                                         |  | Amount |        |  | Ratio             |  |       | Amount             |  |                  | Ratio |  |                   | Amount |       |  | Ratio | 
|                                         |  |        |        |  |                   |  |       |                    |  |                  |       |  |                   |        |       |  |       | 
|Total capital (to risk weighted assets)  |  | $      | 10,048 |  |                   |  | 10.18 | %                  |  |                  |       |  |                   | $      | 7,892 |  |       |  | 8.00 | % |  |                  |  |  |  | $ | 9,866 |  |  |  | 10.00 | %
|Tier 1 capital (to risk weighted assets) |  | $      | 8,900  |  |                   |  | 9.02  | %                  |  |                  |       |  |                   | $      | 3,946 |  |       |  | 4.00 | % |  |                  |  |  |  | $ | 5,919 |  |  |  | 6.00  | %
|Tier 1 capital (to average assets)       |  | $      | 8,900  |  |                   |  | 6.95  | %                  |  |                  |       |  |                   | $      | 5,121 |  |       |  | 4.00 | % |  |                  |  |  |  | $ | 6,401 |  |  |  | 5.00  | %

|                                         |  |        |       |  |                   |  |       |                    |  |                  |       |  |                   |        |       |  |       |  |      |   |  |                  |  |  |  |   |       |  |  |  |       |  
|---------------------------------------- |  | ------ | ----- |  | ----------------- |  | ----- | ------------------ |  | ---------------- | ----- |  | ----------------- | ------ | ----- |  | ----- |  | ---- | - |  | ---------------- |  |  |  | - | ----- |  |  |  | ----- | -
|                                         |  | 2000   |      
|                                         |  |        |      
|                                         |  |        |       |  |                   |  |       |                    |  |                  |       |  |                   |        |       |  |       |  |      |   |  | Minimum Required | 
|                                         |  |        |       |  |                   |  |       |                    |  |                  |       |  |                   |        |       |  |       |  |      |   |  | To Be Well       | 
|                                         |  |        |       |  |                   |  |       |                    |  | Minimum Required |       |  | Capitalized Under |       
|                                         |  |        |       |  |                   |  |       |                    |  | For Capital      |       |  | Prompt Corrective |       
|                                         |  | Actual |       |  | Adequacy Purposes |  |       | Action Regulations | 
|                                         |  |        |       |  |                   |  |       |                    | 
|                                         |  | Amount |       |  | Ratio             |  |       | Amount             |  |                  | Ratio |  |                   | Amount |       |  | Ratio | 
|                                         |  |        |       |  |                   |  |       |                    |  |                  |       |  |                   |        |       |  |       | 
|Total capital (to risk weighted assets)  |  | $      | 8,892 |  |                   |  | 10.14 | %                  |  |                  |       |  |                   | $      | 7,018 |  |       |  | 8.00 | % |  |                  |  |  |  | $ | 8,773 |  |  |  | 10.00 | %
|Tier 1 capital (to risk weighted assets) |  | $      | 7,982 |  |                   |  | 9.10  | %                  |  |                  |       |  |                   | $      | 3,509 |  |       |  | 4.00 | % |  |                  |  |  |  | $ | 5,264 |  |  |  | 6.00  | %
|Tier 1 capital (to average assets)       |  | $      | 7,982 |  |                   |  | 7.87  | %                  |  |                  |       |  |                   | $      | 4,055 |  |       |  | 4.00 | % |  |                  |  |  |  | $ | 5,069 |  |  |  | 5.00  | %

NOTE 12  Stock Options

The Company has established two separate stock option plans, the 1996 plan
and the 1999 plan, which provide for the issue of up to 141,000 total options.
At grant date, 25% of the options granted to employees are available for
immediate exercise with the balance vesting at 25% per year over the next three
years. The options granted to directors were fully vested at grant date. The
options expire either five or seven years from the grant date. Compensation
cost recognized for stock options was $0, $0, and $10 for 2001, 2000 and 1999.

16



---



##### 



FIRST SHARES BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

December 31, 2001 and 2000
(Dollar amounts in thousands, except per share data)

NOTE 12  Continued

A summary of the activity in the plan is as follows.

|                                                               |  |        |         |   |       |          |      |        |  |   |         |   |          |        |      |  |       |   |         |          |  |   |      | 
|-------------------------------------------------------------- |  | ------ | ------- | - | ----- | -------- | ---- | ------ |  | - | ------- | - | -------- | ------ | ---- |  | ----- | - | ------- | -------- |  | - | ---- | 
|                                                               |  | 2001   |         |   | 2000  |          |      | 1999   | 
|                                                               |  |        |         |   |       |          |      |        | 
|                                                               |  |        |         |   |       | Weighted |      |        |  |   |         |   | Weighted |        |      |  |       |   |         | Weighted | 
|                                                               |  |        |         |   |       | Average  |      |        |  |   |         |   | Average  |        |      |  |       |   |         | Average  | 
|                                                               |  |        |         |   |       | Exercise |      |        |  |   |         |   | Exercise |        |      |  |       |   |         | Exercise | 
|                                                               |  | Shares |         |   | Price |          |      | Shares |  |   | Price   |   |          | Shares |      |  | Price |  
|                                                               |  |        |         |   |       |          |      |        |  |   |         |   |          |        |      |  |       |  
|Outstanding at beginning of year                               |  |        | 72,000  |   |       | $        | 7.97 |        |  |   | 108,000 |   |          | $      | 7.54 |  |       |   | 48,000  |          |  | $ | 6.67 | 
|Granted                                                        |  |        | 37,000  |   |       |          | 6.50 |        |  |   |        |   |          |        |     |  |       |   | 60,000  |          |  |   | 8.23 | 
|Exercised                                                      |  |        |        |   |       |          |     |        |  |   |        |   |          |        |     |  |       |   |        |          |  |   |     | 
|Forfeited                                                      |  |        | (3,000  | ) |       |          | 6.67 |        |  |   | (36,000 | ) |          |        | 6.67 |  |       |   |        |          |  |   |     | 
|                                                               |  |        |         |   |       |          |      |        |  |   |         |   |          |        |      |  |       |  
|Outstanding at end of year                                     |  |        | 106,000 |   |       | $        | 7.49 |        |  |   | 72,000  |   |          | $      | 7.97 |  |       |   | 108,000 |          |  | $ | 7.54 | 
|                                                               |  |        |         |   |       |          |      |        |  |   |         |   |          |        |      |  |       |  
|Weighted average fair value per
option granted during the year |  | $      | 1.95    |   |       |          |      |        |  | $ |        |   |          |        |      |  |       | $ | 1.75    |          |  |   |      | 
|                                                               |  |        |         |   |       |          |      |        |  |   |         |   |          |        |      |  |       |   |         |          | 

Options outstanding at year-end 2001 were as follows.

|                        |       |        |             |        |      |             |                  |        |        |        |       |  |          |          |  |  | 
|----------------------- | ----- | ------ | ----------- | ------ | ---- | ----------- | ---------------- | ------ | ------ | ------ | ----- |  | -------- | -------- |  |  | 
|                        |       |        | Outstanding |        |      | Exercisable |                 
|                        |       |        |             |        |      |             |                 
|                        |       |        |             |        |      |             | Weighted Average |        |        |        |       |  |          | Weighted | 
|                        |       |        |             |        |      |             | Remaining        |        |        |        |       |  |          | Average  | 
|Exercise                |       |        |             |        |      | Contractual |                  |        |        |        |       |  | Exercise |         
|Prices                  |       | Number |             |        | Life |             |                  | Number |        |        | Price | 
|                        |       |        |             |        |      |             |                  |        |        |        |       | 
|                        | $6.67 |        |             | 9,000  |      |             | 1.9 years        |        |        | 9,000  |       |  | $        | 6.67     | 
|                        | $8.23 |        |             | 60,000 |      |             | 2.4 years        |        |        | 45,000 |       |  |          | 8.23     | 
|                        | $6.50 |        |             | 37,000 |      |             | 6.3 years        |        |        | 25,000 |       |  |          | 6.50     | 
|                        |       |        |             |        |      |             |                  |        |        |        |       |  |          |         
|Outstanding at year end |       |        | 106,000     |        |      | 3.7 years   |                  |        | 79,000 |        |       |  | 7.33     |         
|                        |       |        |             |        |      |             |                  |        |        |        |       |  |          |         

Had compensation cost for stock options been measured using the fair value
method, net income and earnings per share would have been the pro forma amounts
indicated below. The pro forma effect may increase in the future if more
options are granted.

|                                            |  |      |     |  |      |   |       |      |  |   |       |  
|------------------------------------------- |  | ---- | --- |  | ---- | - | ----- | ---- |  | - | ----- | -
|                                            |  | 2001 |     |  | 2000 |   |       | 1999 | 
|                                            |  |      |     |  |      |   |       |      | 
|Pro forma net income (loss)                 |  | $    | 647 |  |      | $ | (874  | )    |  | $ | (644  | )
|Pro forma basic earnings (loss) per share   |  |      | .61 |  |      |   | (1.10 | )    |  |   | (1.03 | )
|Pro forma diluted earnings (loss) per share |  |      | .61 |  |      |   | (1.10 | )    |  |   | (1.03 | )

The pro forma effects are computed using option pricing models, using the
following weighted-average assumptions as of grant date. There were no options
granted in 2000.

17



---



##### 



FIRST SHARES BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

December 31, 2001 and 2000
(Dollar amounts in thousands, except per share data)

NOTE 12  Continued

|                                |  |         |      |   |      |  |  |      |  |  |   |         |  |  |      |  
|------------------------------- |  | ------- | ---- | - | ---- |  |  | ---- |  |  | - | ------- |  |  | ---- | -
|                                |  | 2001    |      |   | 2000 |  |  | 1999 | 
|                                |  |         |      |   |      |  |  |      | 
|Risk-free interest rate         |  |         | 5.11 | % |      |  |  |      |  |  |  | %       |  |  | 5.66 | %
|Expected option life            |  | 7 years |      |   |     |  |  |      |  |  |   | 7 years
|Expected stock price volatility |  |         |     |   |      |  |  |      |  |  |  |         |  |  |     |  
|Dividend yield                  |  |         |     | % |      |  |  |      |  |  |  | %       |  |  | 1.63 | %

NOTE 13  Earnings (Loss) Per Share

A reconciliation of the numerators and denominators used to compute earnings per share is presented below:

|                                         |                                                                                |                           |     |           |      |   |       |         |       |      |      |         |      |  
|---------------------------------------- | ------------------------------------------------------------------------------ | ------------------------- | --- | --------- | ---- | - | ----- | ------- | ----- | ---- | ---- | ------- | ---- | -
|                                         |                                                                                |                           |     | 2001      |      |   | 2000  |         |       | 1999 |     
|                                         |                                                                                |                           |     |           |      |   |       |         |       |      |     
|Earnings (loss) per share                |                                                                                |                           |     |           |      |   |       |         |       |      |      |        
|                                         | Net income (loss)                                                              |                           | $   | 692       |      |   | $     | (858    | )     |      | $    | (609    | )   
|                                         |                                                                                |                           |     |           |      |   |       |         |      
|                                         | Weighted average shares outstanding                                            |                           |     | 1,052,779 |      |   |       | 793,823 |       |      |      | 627,372 |     
|                                         |                                                                                |                           |     |           |      |   |       |         |      
|                                         |                                                                                | Earnings (loss) per share |     | $         | 0.66 |   |       | $       | (1.08 | )    |      | $       | (.97 | )
|                                         |                                                                                |                           |     |           |      |   |       |         |      
|Diluted                                  |                                                                                |                           |     |           |      |   |       |         |       |      |      |        
|                                         | Net income (loss)                                                              |                           | $   | 692       |      |   | $     | (858    | )     |      | $    | (609    | )   
|                                         |                                                                                |                           |     |           |      |   |       |         |      
|                                         | Weighted average common shares
outstanding for basic earnings per
common share |                           |     | 1,052,779 |      |   |       | 793,823 |       |      |      | 627,372 |     
|                                         | Add: Dilutive effects of assumed
exercises of stock options                    |                           |     | 9,061     |      |   |       |        |       |      |      |        |     
|                                         |                                                                                |                           |     |           |      |   |       |         |      
|                                         | Average shares and dilutive potential
common shares                            |                           |     | 1,061,840 |      |   |       | 793,823 |       |      |      | 627,372 |     
|                                         |                                                                                |                           |     |           |      |   |       |         |      
|Diluted earnings (loss) per common share |                                                                                | $                         | .65 |           |      | $ | (1.08 | )       |       | $    | (.97 | )      
|                                         |                                                                                |                           |     |           |      |   |       |         |      

Stock options for 60,000, 72,000 and 108,000 shares of common stock were
not considered in computing diluted earnings (loss) per common share for 2001,
2000 and 1999 because they were antidilutive.

18



---



##### 



FIRST SHARES BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

December 31, 2001 and 2000
(Dollar amounts in thousands, except per share data)

NOTE 14  Other Comprehensive Income

Other comprehensive income components and related taxes were as follows:

|                                                                                  |                                   |   |      |     |   |      |      |     |      |   |      |      |  
|--------------------------------------------------------------------------------- | --------------------------------- | - | ---- | --- | - | ---- | ---- | --- | ---- | - | ---- | ---- | -
|                                                                                  |                                   |   | 2001 |     |   | 2000 |      |     | 1999 |  
|                                                                                  |                                   |   |      |     |   |      |      |     |      |  
|Unrealized holding gains (losses) on
securities available-for-sale                |                                   | $ | 15   |     |   | $    | 281  |     |      | $ | (287 | )   
|Less reclassification adjustments for gains
and losses later recognized in income |                                   |   | (63  | )   |   |      |     |     |      |   |     |     
|                                                                                  |                                   |   |      |     |   |      |      |     |     
|                                                                                  | Net unrealized gains (losses)     |   |      | (48 | ) |      |      | 281 |      |   |      | (287 | )
|Tax effect                                                                        |                                   |   | 20   |     |   |      | (111 | )   |      |   | 113  |     
|                                                                                  |                                   |   |      |     |   |      |      |     |     
|                                                                                  | Other comprehensive income (loss) |   | $    | (28 | ) |      | $    | 170 |      |   | $    | (174 | )
|                                                                                  |                                   |   |      |     |   |      |      |     |     

NOTE 15  Fair Values of Financial Instruments

Carrying amount and estimated fair values of financial instruments were as
follows at year-end.

|                      |                                 |  |          |          |   |       |   |          |          |  |   |         |   |  |   |         |  
|--------------------- | ------------------------------- |  | -------- | -------- | - | ----- | - | -------- | -------- |  | - | ------- | - |  | - | ------- | -
|                      |                                 |  | 2001     |          |   | 2000  |  
|                      |                                 |  |          |          |   |       |  
|                      |                                 |  | Carrying |          |   | Fair  |   |          | Carrying |  |   | Fair    |  
|                      |                                 |  | Amount   |          |   | Value |   |          | Amount   |  |   | Value   |  
|                      |                                 |  |          |          |   |       |   |          |          |  |   |         |  
|Financial assets      |                                 |  |          |          |   |       |   |          |          |  |   |         |   |  |   |        
|                      | Cash and cash equivalents       |  | $        | 6,308    |   |       | $ | 6,308    |          |  | $ | 3,394   |   |  | $ | 3,394   |  
|                      | Securities available for sale   |  |          | 22,881   |   |       |   | 22,881   |          |  |   | 15,772  |   |  |   | 15,772  |  
|                      | Securities held to maturity     |  |          | 275      |   |       |   | 277      |          |  |   | 276     |   |  |   | 277     |  
|                      | Loans held for sale             |  |          | 2,759    |   |       |   | 2,761    |          |  |   | 494     |   |  |   | 506     |  
|                      | Loans, net                      |  |          | 89,808   |   |       |   | 92,557   |          |  |   | 80,499  |   |  |   | 81,254  |  
|                      | Federal Home Loan Bank stock    |  |          | 670      |   |       |   | 670      |          |  |   | 670     |   |  |   | 670     |  
|                      | Accrued interest receivable     |  |          | 713      |   |       |   | 713      |          |  |   | 784     |   |  |   | 784     |  
|Financial liabilities |                                 |  |          |          |   |       |   |          |          |  |   |         |   |  |   |        
|                      | Deposits                        |  |          | (111,375 | ) |       |   | (112,555 | )        |  |   | (90,708 | ) |  |   | (90,889 | )
|                      | Federal Home Loan Bank advances |  |          | (3,000   | ) |       |   | (2,874   | )        |  |   | (4,300  | ) |  |   | (4,300  | )
|                      | Accrued interest payable        |  |          | (220     | ) |       |   | (220     | )        |  |   | (234    | ) |  |   | (234    | )
|                      | Federal funds purchased         |  |          |         |   |       |   |         |          |  |   | (2,600  | ) |  |   | (2,600  | )
|                      | Other borrowings                |  |          | (5,991   | ) |       |   | (5,991   | )        |  |   | (1,750  | ) |  |   | (1,750  | )

The methods and assumptions used to estimate fair value are described as
follows:

Carrying amount is the estimated fair value for cash and cash equivalents,
short-term borrowings, Federal Home Loan Bank stock, accrued interest
receivable and payable, demand deposits, short-term debt, and variable rate
loans or deposits that reprice frequently and fully. Security fair values are
based on market prices or dealer quotes, and if no such information is
available, on the rate and term of the security and information about the
issuer. For fixed rate loans or deposits and for variable rate loans or
deposits with infrequent repricing and repricing limits, fair value is based on
discounted cash flows using current market rates applied to the estimated life
and credit risk. Fair values for impaired loans are estimated using discounted
cash flow analysis or underlying collateral values. Fair value of

19



---



##### 



FIRST SHARES BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

December 31, 2001 and 2000
(Dollar amounts in thousands, except per share data)

NOTE 15  Continued

loans held for sale is based on market quotes. Fair value of debt is based on
current rates for similar financing. The fair value of off-balance-sheet items
is based on the current fees or cost that would be charged to enter into or
terminate such arrangements.

NOTE 16  Parent Company Only Condensed Financial Information

Condensed financial information of First Shares Bancorp, Inc. follows:

CONDENSED BALANCE SHEETS
December 31, 2001 and 2000

|                                 |                                            |   |       |       |  |      |       |       | 
|-------------------------------- | ------------------------------------------ | - | ----- | ----- |  | ---- | ----- | ----- | 
|                                 |                                            |   | 2001  |       |  | 2000 |      
|                                 |                                            |   |       |       |  |      |      
|ASSETS                           |                                            |   |       |       |  |      |       |      
|Cash and cash equivalents        |                                            | $ | 25    |       |  | $    | 176   |      
|Investment in banking subsidiary |                                            |   | 9,013 |       |  |      | 8,168 |      
|Other assets                     |                                            |   | 5     |       |  |      | 5     |      
|                                 |                                            |   |       |       |  |     
|                                 | Total assets                               |   | $     | 9,043 |  |      | $     | 8,349 | 
|                                 |                                            |   |       |       |  |     
|LIABILITIES AND EQUITY           |                                            |   |       |       |  |      |       |      
|Note payable                     |                                            | $ | 1,780 |       |  | $    | 1,750 |      
|Shareholders equity             |                                            |   | 7,263 |       |  |      | 6,599 |      
|                                 |                                            |   |       |       |  |     
|                                 | Total liabilities and shareholders equity |   | $     | 9,043 |  |      | $     | 8,349 | 
|                                 |                                            |   |       |       |  |     

CONDENSED STATEMENTS OF OPERATIONS
December 31, 2001, 2000 and 1999

|                                                                    |  |      |      |   |      |   |      |      |  |   |      |  
|------------------------------------------------------------------- |  | ---- | ---- | - | ---- | - | ---- | ---- |  | - | ---- | -
|                                                                    |  | 2001 |      |   | 2000 |   |      | 1999 | 
|                                                                    |  |      |      |   |      |   |      |      | 
|Dividends from banking subsidiaries                                 |  | $    |     |   |      | $ | 100  |      |  | $ | 89   |  
|Interest expense on other borrowings                                |  |      | 113  |   |      |   | 82   |      |  |   |     |  
|Other income                                                        |  |      | 3    |   |      |   |     |      |  |   | 2    |  
|Other expense                                                       |  |      | 71   |   |      |   | 33   |      |  |   | (25  | )
|                                                                    |  |      |      |   |      |   |      |      | 
|Income (loss) before income tax and undistributed
subsidiary income |  |      | (181 | ) |      |   | (15  | )    |  |   | 66   |  
|Income tax expense (benefit)                                        |  |      |     |   |      |   |     |      |  |   |     |  
|Equity in undistributed subsidiary income                           |  |      | 873  |   |      |   | (843 | )    |  |   | (675 | )
|                                                                    |  |      |      |   |      |   |      |      | 
|Net income (loss)                                                   |  | $    | 692  |   |      | $ | (858 | )    |  | $ | (609 | )
|                                                                    |  |      |      |   |      |   |      |      | 

20



---



##### 



FIRST SHARES BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

December 31, 2001 and 2000
(Dollar amounts in thousands, except per share data)

NOTE 16  Continued

CONDENSED STATEMENTS OF CASH FLOWS
December 31, 2001, 2000 and 1999

|                                        |                                        |                                           |                                    |     |      |      |     |        |     |     |      |        |      |    | 
|--------------------------------------- | -------------------------------------- | ----------------------------------------- | ---------------------------------- | --- | ---- | ---- | --- | ------ | --- | --- | ---- | ------ | ---- | -- | 
|                                        |                                        |                                           |                                    |     | 2001 |      |     | 2000   |     |     | 1999 |       
|                                        |                                        |                                           |                                    |     |      |      |     |        |     |     |      |       
|Cash flows from operating activities    |                                        |                                           |                                    |     |      |      |     |        |     |     |      |       
|                                        | Net income/(loss)                      |                                           | $                                  | 692 |      |      | $   | (858   | )   |     | $    | (609   | )   
|                                        | Adjustments:                           |                                           |                                    |     |      |      |     |        |     |     |      |        |     
|                                        |                                        | Stock option compensation expense         |                                    |     |     |      |     |        |    |     |      |        | 9    |   
|                                        |                                        | Equity in undistributed subsidiary income |                                    |     | (873 | )    |     |        | 843 |     |      |        | 675  |   
|                                        |                                        | Change in other assets                    |                                    |     |     |      |     |        | 53  |     |      |        | (19  | ) 
|                                        |                                        | Change in other liabilities               |                                    |     |     |      |     |        | (64 | )   |      |        | 33   |   
|                                        |                                        |                                           |                                    |     |      |      |     |        |    
|                                        |                                        |                                           | Net cash from operating activities |     |      | (181 | )   |        |     | (26 | )    |        |      | 89 | 
|Cash flows from financing activities    |                                        |                                           |                                    |     |      |      |     |        |     |     |      |       
|                                        | Contribution to subsidiary             |                                           |                                    |    |      |      |     | (4,275 | )   |     |      | (1,000 | )   
|                                        | Draws on note payable                  |                                           |                                    | 30  |      |      |     | 1,750  |     |     |      |       |     
|                                        | Issuance of common stock               |                                           |                                    |    |      |      |     | 2,690  |     |     |      | 997    |     
|                                        | Net purchase/reissue of treasury stock |                                           |                                    |    |      |      |     |       |     |     |      | (23    | )   
|                                        | Dividends paid                         |                                           |                                    |    |      |      |     |       |     |     |      | (89    | )   
|                                        |                                        |                                           |                                    |     |      |      |     |        |    
|                                        |                                        | Net cash from financing activities        |                                    |     | 30   |      |     |        | 165 |     |      |        | (115 | ) 
|                                        |                                        |                                           |                                    |     |      |      |     |        |    
|Net change in cash and cash equivalents |                                        |                                           | (151                               | )   |      |      | 139 |        |     |     | (26  | )     
|Beginning cash and cash equivalents     |                                        |                                           | 176                                |     |      |      | 37  |        |     |     | 63   |       
|                                        |                                        |                                           |                                    |     |      |      |     |        |    
|Ending cash and cash equivalents        |                                        | $                                         | 25                                 |     |      | $    | 176 |        |     | $   | 37   |       
|                                        |                                        |                                           |                                    |     |      |      |     |        |    

NOTE 17  Proposed Public Offering

During the first quarter of 2002, the Company initiated a public offering
of Debentures and Stock Purchase Contracts. The Company is seeking to raise a
minimum of $2,500 (and a maximum of $5,000) through the sale of the
securities. The Debentures are unsecured and subordinated, have a term of
approximately 9 years, and accrue interest at 8% per annum payable quarterly in
arrears. The Debentures mature on July 1, 2011, but are redeemable by the
Company at any time prior to their maturity. The Stock Purchase Contracts
require a purchaser to buy common shares of the Company at $10 per share on
January 1, 2011. A purchaser may elect to purchase the common shares of the
Company at any time prior to that date at the same price per share. The Stock
Purchase Contracts will be cancelled in the event the Debentures are redeemed.
The offering is being made on a best efforts basis.

21